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As filed with the Securities and Exchange Commission
on November 29, 1995
Registration No. 811-6415
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM N-1A
AMENDMENT NO. 6 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. 6 to the Registration Statement is being filed to
register a new master portfolio of Master Investment Trust (the "Trust"), the
Tax-Free Money Market Master Portfolio. The National Tax-Free Money Market
Mutual Fund of Stagecoach Funds, Inc. and the National Tax-Free Institutional
Money Market Fund of Overland Express Funds, Inc. will each invest
substantially all of their assets in the Tax-Free Money Market Master
Portfolio. This Amendment does not effect the Registration Statement for the
Trust's Cash Investment Trust Master Portfolio, Short-Term Municipal Income
Master Portfolio or Short-Term Government-Corporate Income 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
Tax-Free Money Market 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 Trust; Investment Advisor, Custodian and Transfer Agent; Sponsor,
Administrator and Placement Agent
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
- ------ -----------------------------------
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 Not Applicable
23 Not Applicable
Part C Other Information
- ------ -----------------
24-32 Information required to be included in Part C is set forth under the appropriate Item, so
numbered, in Part C of this Document.
</TABLE>
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MASTER INVESTMENT TRUST
PART A
DATED NOVEMBER 29, 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 four 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") and the Tax-Free Money Market Master
Portfolio (each a "Master Portfolio", and collectively,
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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") and the National Tax-Free Institutional Money Market Fund of Overland
Express and the National Tax-Free Money Market Mutual 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.
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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 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
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
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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;
(v) certain floating- and variable-rate instruments (discussed below);
(vi) certain repurchase agreements (discussed below); and
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(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.
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
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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
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.
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
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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.
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.
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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) 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."
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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.
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,
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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 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
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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
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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.
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.
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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.
Each 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 is 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 which, in the opinion of Wells Fargo Bank,
are comparable in quality to issuers of other permitted high-quality
investments of the CIT Master Portfolio may be used for letter of credit-backed
investments.
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
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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 Master Portfolio and the Short-Term
Government-Corporate Income Master Portfolio 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 Master
Portfolio 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 CIT
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.
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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 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
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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
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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 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
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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.
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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 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
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(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 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
Portfolio; however, the Master Portfolio's investment adviser has undertaken to
waive its advisory fees with respect to 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. Under Section 12(d)(1) the
Master Portfolio, together with any company or companies controlled by it, is
generally prohibited from owning more than 3% of the total outstanding voting
stock of any such investment company, nor may the Master Portfolio, 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. 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
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adversely affect investments in, the liquidity of, and the ability to enforce
contractual obligations with respect to, securities of issuers located in those
countries.
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
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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, 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.
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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.
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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 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 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.
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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 and
National Tax-Free Institutional Money Market Funds of Overland Express and the
National Tax-Free Money Market Mutual Fund 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 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 three 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 four 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,
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a wholly owned subsidiary of Wells Fargo & Company. Wells Fargo Bank, one of
the largest banks in the United States, was founded in 1852 and is the
oldest bank in the western United States. As of 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
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Klug, portfolio co-manager for the Municipal Income Master Portfolio, has
managed municipal 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.
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 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.
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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 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,
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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
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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 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
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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
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all or any portion of its investment at any time at net asset value. All
Interests in the Trust, when issued, will be fully 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. 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 three other
Master Portfolios -- 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
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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 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
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<PAGE> 38
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
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
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<PAGE> 39
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 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 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 four Master Portfolios: 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.
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<PAGE> 40
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> 41
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 4:00 p.m. (New York 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.
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<PAGE> 42
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 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.
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
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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> 44
MASTER INVESTMENT TRUST
TELEPHONE: (800) 643-9691
PART B
DATED NOVEMBER 29, 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 four 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 (formerly, the 1-3
Year Duration Full Faith and Credit Government Income Master Portfolio) and the
Tax-Free Money Market 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 November 29, 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 ("Commission") 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.
ITEM 11. TABLE OF CONTENTS.
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
Item 12. General Information and History B-2
Item 13. Investment Objectives and Policies B-2
Item 14. Management of the Trust B-15
Item 15. Control Persons and Principal Holders
of Securities B-19
Item 16. Investment Advisory and Other Services B-19
Item 17. Brokerage Allocation and Other
Practices B-21
</TABLE>
B-1
<PAGE> 45
<TABLE>
<S> <C> <C> <C>
Item 18. Capital Stock and Other Securities B-23
Item 19. Purchase, Redemption and Pricing of
Securities B-24
Item 20. Tax Status B-25
Item 21. Underwriters B-26
Item 22. Calculation of Performance Data B-26
Item 23. Financial Statements B-26
Appendix B-28
</TABLE>
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. 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);
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<PAGE> 46
(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 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
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<PAGE> 47
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.
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 a 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
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<PAGE> 48
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.
B. 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 United
States Government, its agencies or instrumentalities; and (2) municipal
securities (for the purpose of this restriction, private
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<PAGE> 49
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;
(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.
B-6
<PAGE> 50
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 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 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
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<PAGE> 51
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 Master Portfolios have established segregated accounts in
which each Master Portfolio maintains liquid assets in an amount at least equal
in value to each Master Portfolio's commitments to purchase when-issued
securities. If the value of these assets declines, the Master Portfolios 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 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
B-8
<PAGE> 52
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 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.
C. 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
B-9
<PAGE> 53
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 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.
B-10
<PAGE> 54
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 taxes 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.
B-11
<PAGE> 55
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, Downgraded and Below Investment Grade Investments.
The Tax-Free Money Market Master Portfolio may purchase instruments that are
not rated if, in the opinion of Wells Fargo Bank, such obligations are of
investment quality comparable to other rated investments that are permitted to
be purchased by the Master Portfolio. The Master Portfolio may purchase
unrated, downgraded or below investment grade instruments only if they are
purchased in accordance with the Master Portfolio's procedures adopted by the
Trust's Board of Trustees in accordance with Rule 2a-7 under the 1940 Act.
After purchase by the Master Portfolio, a security may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Master
Portfolio. Neither event will require a sale of such security by the Master
Portfolio. However, in no event will such securities exceed 5% of the Master
Portfolio's net assets. 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 Tax-Free Money Market 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 Part B. The ratings of Moody's and S&P are
more fully described in the Appendix.
Because the Tax-Free Money Market Master Portfolio is not
required to sell downgraded securities, the Master Portfolio could hold up to
5% of its net assets in debt securities rated below "Baa" by Moody's or below
"BBB" by S&P or, if unrated, low credit quality (below investment grade)
securities. The Master Portfolio may hold such securities even though it is
not permitted to purchase such securities.
Although they may offer higher yields than do higher rated
securities, low rated and unrated low credit quality debt securities generally
involve greater volatility of price and risk of principal and income, including
the possibility of default by, or bankruptcy of, the issuers of the securities.
In addition, the securities markets in which low rated and unrated low credit
quality debt securities are traded are more limited than those in which higher
rated securities are traded. The existence of limited markets for particular
securities may diminish the Master Portfolio's ability to sell the securities
at fair value either to meet redemption requests or to respond to changes in
the economy or in the financial markets and could adversely affect and cause
fluctuations in the daily net asset value of the Master Portfolio's shares.
Adverse publicity and investor perceptions, whether or not
based on fundamental analysis, may decrease the values and liquidity of low
rated or unrated low quality debt securities, especially in a thinly traded
market. Analysis of the creditworthiness of issuers of low rated or unrated
low quality debt securities may be more complex than for issuers of higher
rated securities, and the ability of the Master Portfolio to achieve its
investment objective may, to the extent it holds low rated or unrated low
quality debt securities, be more dependent upon such
B-12
<PAGE> 56
creditworthiness analysis than would be the case if the Master Portfolio held
exclusively higher rated or higher quality debt securities.
Low rated or unrated low quality debt securities may be more
susceptible to real or perceived adverse economic and competitive industry
conditions than investment grade securities. The prices of such debt
securities have been found to be less sensitive to interest rate changes than
higher rated or higher quality investments, but more sensitive to adverse
economic downturns or individual corporate developments. A projection of an
economic downturn or of a period of rising interest rates, for example, could
cause a decline in low rated or unrated low quality debt securities prices
because the advent of a recession could dramatically lessen the ability of a
highly leveraged company to make principal and interest payments on its debt
securities. If the issuer of the debt securities defaults, the Master
Portfolio may incur additional expenses to seek recovery.
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.
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 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
B-13
<PAGE> 57
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. 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 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,
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,
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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
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 Officers. The principal occupations during the
past five years of the Trustees and executive officers of the Trust are listed
below. The address of each, unless
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<PAGE> 59
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.
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
</TABLE>
B-16
<PAGE> 60
<TABLE>
<S> <C> <C>
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-17
<PAGE> 61
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 not 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-18
<PAGE> 62
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
As of the date of this Part B, the Overland Sweep Fund, the
Short-Term Municipal Income Fund and the Short-Term Government-Corporate Income
Fund, each a fund of Overland Express Funds, Inc., owned at least 25% of the
outstanding interests in the CIT Master Portfolio, Short-Term Municipal Income
Master Portfolio and Short-Term Government-Corporate Income Master Portfolio,
respectively, and 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 Master Portfolio 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"), the Master Portfolios of the Trust are each advised by
Wells Fargo Bank. Each Investment Advisory Contract provides that Wells Fargo
Bank shall 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 to the Board of Trustees of the Trust 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 an
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 will terminate automatically if
assigned.
For the period from the Trust's inception (October 1, 1991) to
December 31, 1991, the CIT Master Portfolio paid $88 in advisory fees to Wells
Fargo Bank; $6,006 in advisory fees were waived during the same period. 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
B-19
<PAGE> 63
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 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.
Morrison & Foerster, counsel to the Company and the Trust and
special counsel to Wells Fargo Bank, have 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 Custodian 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 Agreements, 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 period from the Trust's inception to December 31, 1991
and for the year ended December 31, 1992, no administrative fees were paid by
the CIT Master Portfolio. For the year ended December 31, 1993, the CIT
Master Portfolio incurred $86,120 in administrative fees; Stephens did not
waive any fees for this year. For the year ended December 31, 1994, the CIT
Master Portfolio incurred $142,669 in administrative fees; Stephens did not
waive any fees for this year. The Short-Term Municipal Income Master
Portfolio, the Short-Term Government-Corporate Income Master Portfolio and the
Tax-Free Money Market Master Portfolio are not charged administrative fees.
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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 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, Wells Fargo Bank charged the CIT Master
Portfolio $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 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 Commission 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.
Purchases and sales of the investment securities of the Master
Portfolios usually will be principal transactions. Securities of each Master
Portfolio normally will be purchased or sold from or to dealers serving as
market makers for the securities at a net price. Each Master Portfolio also
will 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. Under the 1940 Act,
persons affiliated with any Master Portfolio are prohibited from dealing with
that Master Portfolio as a principal in the purchase and sale of securities
unless an exemptive order
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<PAGE> 65
allowing such transactions is obtained from the Commission or an exemption is
otherwise available. The Master Portfolios 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 the 1940 Act and in
compliance with procedures adopted by the Board of Trustees.
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 will be 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 will not necessarily be 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.
On December 31, 1994, the Master Portfolios owned securities of
their "regular brokers or dealers", as defined in the 1940 Act, or their
parents, as follows: the CIT Master Portfolio and the Government-Corporate
Income Master Portfolio had entered into Repurchase Agreements with Goldman
Sachs in the amount of $18,248,000 and $6,600, respectively.
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 Government- Corporate Income Master Portfolio
Master Portfolio was 8%.
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 Master Portfolio because portfolio transactions
ordinarily will be made directly with principals on a net basis and,
consequently, a CIT Master Portfolio usually will not incur brokerage expenses.
Portfolio turnover also can generate short-term capital gains tax consequences.
The portfolio turnover rate will not be a limiting factor when Wells Fargo Bank
deems portfolio changes appropriate.
Because the portfolios of the Tax-Free Money Market Master Portfolio
consist of securities with relatively short-term maturities, the Master
Portfolio can expect to experience high portfolio turnovers. A high portfolio
turnover rate should not adversely affect the Master Portfolio, however,
because portfolio transactions ordinarily will be made directly with principals
B-22
<PAGE> 66
on a net basis and, consequently, the Tax-Free Money Market Master Portfolio
usually will not incur brokerage expenses.
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, the Trust's Declaration of Trust provides that
its investors would 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, but 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
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 all four 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.
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<PAGE> 67
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 share 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 share of 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 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
B-24
<PAGE> 68
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 is
required to establish 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 will be examined by the Board of Trustees. If such deviation
exceeds 1/2 of 1%, the Board will promptly consider 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 Short-Term Municipal
Income Master Portfolio and the Government- Corporate Income Master Portfolio
is determined on each Business Day.
The net asset value per share for these Master Portfolios is
determined by dividing the value of the total assets of a Master Portfolio less
a Master Portfolio's liabilities by the total number of outstanding shares.
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 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.
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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, the
such Master Portfolios will 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.
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.
ITEM 23. FINANCIAL STATEMENTS.
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
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and consultation in connection with review of certain SEC filings. KPMG Peat
Marwick LLP's address is Three Embarcadero Center, San Francisco, California
94111. The audited financial statements and portfolio of investments for the
CIT Master Portfolio contained in the Annual Report are hereby incorporated by
reference in this Part B.
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<PAGE> 71
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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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.
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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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PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
(1) The following audited Financial Statements for the
Short-Term Municipal Income Master Portfolio, Short-Term Government-Corporate
Income Master Portfolio and Cash Investment Trust Master Portfolio are
incorporated by reference to Amendment No. 5 to the Registration Statement
filed on March 28, 1995:
Portfolio of Investments - December 31, 1994
Statement of Assets and Liabilities - December 31, 1994
Statement of Operations for the period ended December 31, 1994
Statement of Changes in Net Assets for the period ended December
31, 1994
Financial Highlights for the period ended December 31, 1994
Notes to the Financial Statements - December 31, 1994
(2) The following unaudited Financial Statements for the
Short-Term Municipal Income Master Portfolio, Short-Term Government-Corporate
Income Master Portfolio and Cash Investment Trust Master Portfolio are
incorporated by reference to the Semi-Annual Report of Overland Express Funds,
Inc. (SEC File Nos. 33-16296; 811-8275) for the Short-Term Municipal Income
Fund, Short-Term Government-Corporate Income Fund and Overland Sweep Fund,
dated June 30, 1995:
Portfolio of Investments - June 30, 1995
Statement of Assets and Liabilities - June 30, 1995
Statement of Operations for the period ended June 30, 1995
Statement of Changes in Net Assets for the period ended June 30,
1995
Financial Highlights for the period ended June 30, 1995
Notes to the Financial Statements - June 30, 1995
(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, filed herewith.
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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<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"), filed herewith.
(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"), filed herewith.
(iv) - Form of Investment Advisory Contract with Wells Fargo Bank, N.A. on
behalf of the Tax-Free Money Market 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.
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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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 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
Registrant and its four Master Portfolios 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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<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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<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>
C-5
<PAGE> 79
<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>
C-6
<PAGE> 80
<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> 81
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> 82
(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.
C-9
<PAGE> 83
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 28th day of
November, 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> 84
Master Investment Trust
File No. 811-6415
Amendment No. 6 to the
Registration Statement on Form N-1A
Under the Investment Company Act of 1940
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- ------ ----------- --------
<S> <C>
99.B1(c) Amendment to the Declaration of Trust
99.B5(a)(ii) Advisory Contract on behalf of the Short-Term
Municipal Income Master Portfolio
99.B5(a)(iii) Advisory Contract on behalf of the Short-Term
Government-Corporate Master Portfolio
99.B5(a)(iv) Form of Investment Advisory Contract on behalf
of the Tax-Free Money Market Master Portfolio
</TABLE>
<PAGE> 1
EXHIBIT 99.B1(c)
AMENDMENT TO THE DECLARATION OF TRUST
BY THE BOARD OF TRUSTEES
OF
MASTER INVESTMENT TRUST
(A DELAWARE BUSINESS TRUST)
WHEREAS, under the "Trust Property" Section of Article I of the
Declaration of Trust as amended (the "Declaration"), the Trustees are fully
empowered to establish and designate new series of Interests in accordance with
the provisions of Section 9.8; and further, that the Trustees are authorized to
fix and determine the variations in the relative rights and preferences as
between the different series; and
WHEREAS, pursuant to Article IX, Section 9.8(f), of the Declaration,
the establishment and designation of any series of Interests shall become
effective upon the execution by a majority of the current Trustees of an
instrument setting forth the establishment and designation and the relative
rights and preferences of such series, or as otherwise provided in such
instrument; which instrument shall be considered an amendment to the
Declaration; and no vote of the Holders being necessary under Article X,
Sections 10.4(a) and (b), of the Declaration, to make an amendment; and
WHEREAS, the Trustees have, in March of 1994, previously approved new
series of the Trust through their granted powers; namely, 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 (formerly, the 1-3 Year Duration Full Faith and Credit Master
Portfolio), and the now terminated 1-3 Year Duration Government Income Master
Portfolio;
NOW THEREFORE:
The undersigned, being all of the Trustees of Master Investment Trust
(the "Trust"), hereby adopt the following resolutions to establish four new
series to serve as the master portfolios for corresponding feeder funds of
Overland Express Funds, Inc. and Stagecoach Funds, Inc.:
RESOLVED, that pursuant to the powers vested in the Trustees, four new
series of Interests be, and each hereby is, established and designated as the:
"Asset Allocation Master Portfolio", "Corporate Stock Master Portfolio", "Tax-
Free Money Market Master Portfolio", and "U.S. Government Allocation Master
Portfolio" (collectively, the "New Series"); and
FURTHER RESOLVED, that the four New Series shall have exactly the same
preferences, privileges, limitations, and rights, including voting and dividend
rights, as the previously existing series; and
1
<PAGE> 2
FURTHER RESOLVED, that only the Interests in a New Series shall be
subject to the expenses and fees of the New Series; and further, that each of
the four New Series shall be subject to a pro rata portion of the general
expenses and fees of the Trust, as are the previously existing series; and
FURTHER RESOLVED, that the Trustees hereby amend the Declaration by
adding Section 9.8(g) to Article IX under the "Series of Interests" section:
"9.8 SERIES OF INTERESTS
(G) THE SERIES ARE COMPRISED OF THE FOLLOWING PORTFOLIOS:
ASSET ALLOCATION MASTER PORTFOLIO, CASH INVESTMENT TRUST
MASTER PORTFOLIO, CORPORATE STOCK MASTER PORTFOLIO,
SHORT-TERM GOVERNMENT-CORPORATE INCOME MASTER PORTFOLIO
(FORMERLY, 1-3 YEAR DURATION FULL FAITH AND CREDIT MASTER
PORTFOLIO), SHORT-TERM MUNICIPAL INCOME MASTER PORTFOLIO
(FORMERLY, 1-3 YEAR DURATION MUNICIPAL INCOME MASTER
PORTFOLIO), TAX-FREE MONEY MARKET MASTER PORTFOLIO, AND U.S.
GOVERNMENT ALLOCATION MASTER PORTFOLIO. "
; and
FURTHER RESOLVED, that the appropriate Officers of Master Investment
Trust be, and each hereby is, authorized and directed to prepare and file with
the Securities and Exchange Commission, and with such state securities
commissions and authorities as they deem advisable, any material relating to
this Amendment to the Declaration, and an amendment to the Registration
Statement of the Trust on Form N-1A, containing such current information and
revisions as such Officer(s) deems necessary or appropriate to reflect the
changes effected at this meeting, with advice of counsel, in their sole
discretion, and to prepare and file a certificate of amendment or a certificate
of amended and restated Declaration of Trust with the Secretary of State of the
State of Delaware and take any and all such other actions as and when the
Officer taking such action, with advice of counsel, deems necessary or
advisable to effect the purpose and intent of the foregoing resolutions; and
FURTHER RESOLVED, such changes to be effective immediately upon the
filing with the Secretary of State of the State of Delaware of a written
certificate evidencing such clarification to the Declaration of Trust; and
2
<PAGE> 3
FURTHER RESOLVED, that this instrument is to be filed with the minutes
of the Trust's Board of Trustees.
<TABLE>
<S> <C>
Dated: October 10, 1995 /s/Jack S. Euphrat
------------------
Jack S. Euphrat
Dated: October 10, 1995 /s/R. Greg Feltus
-----------------
R. Greg Feltus
Dated: October 10, 1995 /s/Thomas S. Goho
-----------------
Thomas S. Goho
Dated: October 10, 1995 /s/Zoe Ann Hines
----------------
Zoe Ann Hines
Dated: October 10, 1995 /s/W. Rodney Hughes
-------------------
W. Rodney Hughes
Dated: October 10, 1995 /s/Robert M. Joses
------------------
Robert M. Joses
Dated: October 10, 1995 /s/J. Tucker Morse
------------------
J. Tucker Morse
</TABLE>
3
<PAGE> 1
EXHIBIT 99.B5(a)(ii)
ADVISORY CONTRACT
MASTER INVESTMENT TRUST
111 Center Street
Little Rock, Arkansas 72201
May 4, 1994
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 1-3 Year Duration Municipal Income Master Portfolio
(the "Series") 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 Series of shares, but which may from time
to time consist of a greater number of Series of shares. The 1-3 Duration
Municipal Income Master Portfolio is one of the four Series. The Series
proposes to engage in the business of investing and reinvesting its assets in
the manner and in accordance with the investment objective and restrictions
specified in the Trust's currently effective prospectus and statement of
additional information incorporated by reference therein relating to the Trust
(such prospectus and such statement of additional information being
collectively referred to as the "Prospectus") included 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 documents referred to in the preceding sentence have
been furnished to the Adviser. Any amendments to those documents shall be
furnished to the Adviser promptly.
2. The Trust is engaging the Adviser to manage the investing and
reinvesting of the Series' assets and to provide the advisory services
specified elsewhere in this contract to the Series, subject to the overall
supervision of the Board of Trustees of the Trust. Pursuant to an
administration agreement between the Trust and Stephens Inc. (the
"Administrator"), 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
Series in accordance with the Adviser's best judgment and consistent with the
investment objective and restrictions set forth in the Trust's Prospectus, the
Act and the provisions of the Internal Revenue Code 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 Series and
<PAGE> 2
shall, when requested by the Trust's officers or Board of Trustees, supply the
reasons for making particular investments.
(b) The Adviser shall provide to the Series investment
guidance and policy direction in connection with its daily management of the
Series' portfolio, 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 Series 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 Series prepared by it, or prepared
at its request, other than such costs relating to proxy statements,
prospectuses, shareholder reports and other materials distributed to existing
or prospective shareholders on behalf of the Series.
(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. Except as provided in the Trust's Advisory Contract 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 accountants, legal counsel, transfer agent and
dividend disbursing agent; expenses of redeeming shares; expenses of preparing
and printing stock certificates, prospectuses, shareholders' 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 Series; expenses of shareholders' meetings; expenses relating to the
issuance, and any registration and qualification of, shares of the Series;
pricing services, if any; organizational expenses; and any extraordinary
expenses. In the event that additional Series are established, expenses
attributable to one or more, but not all, of the Series of the Trust are to be
charged against the assets of the relevant Series. In addition, general
expenses of the Series are to be allocated among the Series in a manner
proportionate to the net assets of each Series, on a transactional basis or on
such other basis as the Board of Trustees deems equitable.
5. The Adviser shall give the Trust and its Series 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 shareholders to which the Adviser would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the
2
<PAGE> 3
performance of the Adviser's duties under this contract or by reason of
reckless disregard of its obligations and duties hereunder.
6. In consideration of the services to be rendered by the
Adviser under this contract, the Series shall pay the Adviser a monthly fee on
the first business day of each month, at the annual rate of .50% of the average
daily value (as determined on each day that such value is determined for the
Series at the time set forth in the Prospectus for determining net asset value
per share) of the Series' net assets during the preceding month. If the fee
payable to the Adviser pursuant to this paragraph 6 begins to accrue before the
end 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 Series' net assets shall be computed in
the manner specified in the Prospectus and the Trust's Declaration of Trust for
the computation of the value of the Series' net assets in connection with the
determination of the net asset value of Series shares.
7. If in any fiscal year the total expenses of the Series or any
registered investment company investing in the Series ("Investing Company")
incurred by, or allocated to, the Series 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 6 and those provided for pursuant to the Series' Administration
Agreement ("includable expenses"), exceed the most restrictive expense
limitation applicable to the Series 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 agreement is calculated under paragraph 6 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 Series' 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 agreement and/or the Series' 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. At the end of each month of the Series' fiscal year, the Series 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 7 for a fiscal year with respect to the Series,
the monthly fee set forth in paragraph 6 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 7. For purposes of
computing the excess, if any,
3
<PAGE> 4
over the most restrictive applicable expense limitation, the value of the
Series' net assets shall be computed in the manner specified in the last
sentence of paragraph 6, and any reimbursements required to be made by the
Adviser shall be made once a year promptly after the end of the Series' fiscal
year.
8. 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 Series' 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 Series, without the payment of any penalty, by a
vote of a majority of the Series' 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 and the Series. This contract shall terminate
automatically in the event of its assignment (as defined in the Act).
9. 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.
10. 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 the Trust or its beneficial interest 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 beneficial interest holder shall be jointly and severally liable
(with rights of contribution inter se in proportion to their respective
interest in the Trust) for the liabilities and obligations of the Trust in the
event that the Trust fails to satisfy such liabilities and obligations;
provided, however, that, to the extent assets are available in the Trust, the
Trust shall indemnify and hold each beneficial interest 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
beneficial interest holder under Section 5.1 of the Trust's Declaration of
Trust shall not exclude any other right to which
4
<PAGE> 5
such holder may be lawfully entitled, nor shall anything herein contained
restrict the right of the Trust to indemnify or reimburse a beneficial interest
holder in any appropriate situation even though not specifically provided
herein. Notwithstanding the indemnification procedure described above, it is
intended that each beneficial interest holder shall remain jointly and
severally liable to the Trust's creditors as a legal matter.
In addition, no Trustee, officer, employee or agent of the Trust
shall be liable to the Trust, holders of beneficial interests therein, 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.
11. This contract shall be governed by and construed in
accordance with the laws of the State of California.
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 1-3 Year Duration
Municipal Income Master Portfolio
By: /s/Richard H. Blank, Jr.
---------------------------
Name: Richard H. Blank, Jr.
-------------------------
Title: Chief Operating Officer
-------------------------
5
<PAGE> 6
ACCEPTED as of the date
set forth above:
WELLS FARGO BANK, N.A.
By: /s/Henry J. Cavigli, Jr.
---------------------------
Name: Henry J. Cavigli, Jr.
-------------------------
Title: Vice President
-------------------------
By: /s/ M.J. Niedermeyer
---------------------------
Name: M.J. Niedermeyer
-------------------------
Title: Senior Vice President
-------------------------
6
<PAGE> 1
EXHIBIT 99.B5(a)(iii)
ADVISORY CONTRACT
MASTER INVESTMENT TRUST
111 Center Street
Little Rock, Arkansas 72201
May 4, 1994
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 1-3 Year Duration Full Faith and Credit Government
Income 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 Master Portfolio of shares, but which may
from time to time consist of a greater number of Master Portfolio of shares.
The 1-3 Year Duration Full Faith and Credit Government Income Master Portfolio
is one of the four Series. The Series proposes to engage in the business of
investing and reinvesting its assets in the manner and in accordance with the
investment objective and restrictions specified in the Trust's currently
effective prospectus and statement of additional information incorporated by
reference therein relating to the Trust (such prospectus and such statement of
additional information being collectively referred to as the "Prospectus")
included 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 documents referred to in the preceding
sentence have been furnished to the Adviser. Any amendments to those documents
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 Stephens Inc. (the
"Administrator"), 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
Prospectus, the Act and the provisions of the Internal Revenue Code 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
<PAGE> 2
Portfolio and shall, when requested by the Trust's officers or Board of
Trustees, supply the reasons for making particular investments.
(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 portfolio, 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,
prospectuses, shareholder reports and other materials distributed to existing
or prospective shareholders 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. Except as provided in the Trust's Advisory Contract 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 accountants, legal counsel, transfer agent and
dividend disbursing agent; expenses of redeeming shares; expenses of preparing
and printing stock certificates, prospectuses, shareholders' 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 shareholders' meetings; expenses relating to
the issuance, and any registration and qualification of, shares of the Master
Portfolio; pricing services, if any; organizational expenses; and any
extraordinary expenses. In the event that additional Master Portfolio are
established, expenses attributable to one or more, but not all, of the Master
Portfolio of the Trust are to be charged against the assets of the relevant
Master Portfolio. In addition, general expenses of the Master Portfolio are to
be allocated among the Master Portfolio 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.
5. The Adviser shall give the Trust and its 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 shareholders 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.
2
<PAGE> 3
6. 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 .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 Prospectus 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 6 begins to accrue before the end 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 Prospectus 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 shares.
7. 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 6 and those provided for
pursuant to the Master Portfolio'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 agreement is calculated under paragraph 6 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 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 agreement and/or the Master Portfolio'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. 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 7 for a fiscal year with
respect to the Master Portfolio, the monthly fee set forth in paragraph 6
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 7. 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 6, and any
3
<PAGE> 4
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.
8. 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 and
the Master Portfolio. This contract shall terminate automatically in the event
of its assignment (as defined in the Act).
9. 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.
10. 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 the Trust or its beneficial interest 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 beneficial interest holder shall be jointly and severally liable
(with rights of contribution inter se in proportion to their respective
interest in the Trust) for the liabilities and obligations of the Trust in the
event that the Trust fails to satisfy such liabilities and obligations;
provided, however, that, to the extent assets are available in the Trust, the
Trust shall indemnify and hold each beneficial interest 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
beneficial interest 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 beneficial interest holder in any appropriate
situation even though not specifically provided herein. Notwithstanding the
indemnification procedure described
4
<PAGE> 5
above, it is intended that each beneficial interest holder shall remain jointly
and severally liable to the Trust's creditors as a legal matter.
In addition, no Trustee, officer, employee or agent of the Trust
shall be liable to the Trust, holders of beneficial interests therein, 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.
11. This contract shall be governed by and construed in
accordance with the laws of the State of California.
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 1-3 Year Duration Full
Faith and Credit Government Income
Master Portfolio
By: /s/Richard H. Blank, Jr.
-----------------------------
Name: Richard H. Blank, Jr.
---------------------------
Title: Chief Operating Officer
---------------------------
ACCEPTED as of the date
set forth above:
WELLS FARGO BANK, N.A.
By: /s/Henry J. Cavigli, Jr.
--------------------------
Name: Henry J. Cavigli, Jr.
------------------------
Title: Vice President
------------------------
By: /s/ M.J. Niedermeyer
--------------------------
Name: M.J. Niedermeyer
------------------------
Title: Senior Vice President
------------------------
5
<PAGE> 1
EXHIBIT 99.B5(a)(iv)
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 Tax-Free Money Market 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 Tax-Free Money Market Master Portfolio is one
of the four 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
<PAGE> 2
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.
(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
2
<PAGE> 3
net assets of each Master Portfolio, on a transactional basis or on such other
basis as the Board of Trustees deems equitable.
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
0.30% 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
3
<PAGE> 4
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. 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 and
the Master Portfolio. 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
4
<PAGE> 5
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 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.
5
<PAGE> 6
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 Tax-Free Money Market
Master Portfolio
By:________________________________
Name:______________________________
Title:_____________________________
ACCEPTED as of the date
set forth above:
WELLS FARGO BANK, N.A.
By:_____________________________
Name:___________________________
Title:__________________________
By:_____________________________
Name:___________________________
Title:__________________________
6
