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As filed with the Securities and Exchange Commission
on September 6, 1996
Registration No. 811-6415
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
AMENDMENT NO. 9 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)
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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
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EXPLANATORY NOTE
This Amendment No. 9 to the Registration Statement on Form N-1A is
being filed to register the Small Cap Master Portfolio, a new master portfolio
of Master Investment Trust (the "Trust"). The Small Cap Fund of Stagecoach
Funds, Inc. (SEC File Nos. 33-42927; 811-6419) and the Small Cap Strategy Fund
of Overland Express Funds, Inc. (SEC File Nos. 33-16296; 811-8275) will each
invest substantially all of their assets in the Small Cap 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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Master Investment Trust
Cross Reference Sheet
Form N-1A Item Number
Part A Prospectus Caption
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4 General Description of Registrant; Investment Objectives; Additional
Information About Permitted Investment Activities of the Master
Portfolios; Other Investment Policies
5 Management of the Master Portfolios; Management of the Trust;
Investment Adviser, Custodian and Transfer Agent; Sponsor,
Administrator and Placement Agent; Expenses
6 Capital Stock and Other Securities; Organization and Interests;
Dividends and Distributions
7 Purchase of Securities; Determination of Net Asset Value;
8 Redemption or Repurchase
9 Not Applicable
Part B Statement of Additional Information
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10 Cover Page
11 Table of Contents
12 General Information and History
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
17 Brokerage Allocation and Other Practices
18 Capital Stock and Other Securities
19 Purchase, Redemption and Pricing of Securities
20 Tax Status
21 Underwriters
22 Calculation of Performance Data
23 Financial Information
Part C Other Information
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24-32 Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of this Document.
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MASTER INVESTMENT TRUST
PART A
DATED SEPTEMBER 6, 1996
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.
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 the following diversified portfolios: the Asset Allocation Master
Portfolio, Capital Appreciation Master Portfolio, Cash Investment Trust Master
Portfolio (the "CIT Master Portfolio"), Corporate Stock Master Portfolio,
Short-Term Municipal Income Master Portfolio (the "Municipal Income Master
Portfolio"), Short-Term Government-Corporate Income Master Portfolio (the
"Government-Corporate Income Master Portfolio"), Small Cap Master Portfolio,
Tax-Free Money Market Master Portfolio and the U.S. Government Allocation
Master Portfolio (each, a "Master Portfolio," and collectively, the "Master
Portfolios"). Each Master Portfolio is treated as a separate entity for
certain matters under the Investment Company Act of 1940, as amended (the "1940
Act"), and for other purposes. An interestholder of one Master Portfolio is
not deemed to be an interestholder of any other Master Portfolio. As described
below, for certain matters Trust interestholders 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 National Tax-Free
Institutional Money Market, Overland Sweep, Short-Term Municipal Income,
Short-Term Government-Corporate Income, Small Cap Strategy and
Strategic Growth Funds of Overland Express and the Aggressive Growth, Asset
Allocation, Corporate Stock, National Tax-Free Money Market Mutual, Small Cap
and U.S. Government Allocation Funds of Stagecoach 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 will correspond 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).
The Strategic Growth Fund of Overland Express was previously a
"stand-alone" fund and did not invest its assets in a single master portfolio.
On February 20, 1996, the Strategic Growth Fund converted to a master/feeder
structure and began investing substantially all of its assets in the Capital
Appreciation Master Portfolio. The Aggressive Growth Fund of Stagecoach Funds
also invests substantially all its assets in the Capital Appreciation Master
Portfolio. The Asset Allocation, Corporate Stock and U.S. Government
Allocation Funds of Stagecoach Funds,
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converted to feeder funds in a master master/feeder structure on April 29,
1996, and invest substantially all of their assets in the Asset Allocation,
Corporate Stock and U.S. Government Allocation Master Portfolios, respectively.
The Small Cap Strategy Fund of Overland Express and the Small Cap Fund of
Stagecoach Funds are newly created feeder Funds that invest substantially all
of their assets in the Small Cap Master Portfolio.
Wells Fargo Bank, N.A. ("Wells Fargo Bank") serves as each Master
Portfolio's investment adviser. BZW Barclays Global Fund Advisors ("BGFA")
serves as investment sub-adviser to the Corporate Stock, Asset Allocation and
U.S. Government Allocation Master Portfolios. The other Master Portfolios do
not retain an investment sub-adviser. Stephens Inc. ("Stephens") serves as
each Master Portfolio's sponsor, administrator and placement agent. Beneficial
interests in the Trust are issued solely in private placement transactions that
do not involve any "public offering" within the meaning of Section 4(2) of the
Securities Act of 1933, as amended (the "1933 Act"). Investments in the Trust
may only be made by registered broker/dealers or by investment companies,
insurance company separate accounts, common or commingled trust funds, group
trusts or similar organizations or entities that are "accredited investors"
within the meaning of Regulation D under the 1933 Act. This registration
statement, as amended, does not constitute an offer to sell, or the
solicitation of an offer to buy, any "security" within the meaning of the 1933
Act.
A. INVESTMENT OBJECTIVES
1. ASSET ALLOCATION MASTER PORTFOLIO
The Asset Allocation Master Portfolio's investment objective is to
seek over the long term a high level of total return, including net realized
and unrealized capital gains and net investment income, consistent with
reasonable risk. The Master Portfolio seeks to achieve its objective by
pursuing an asset allocation strategy. This strategy is based upon the premise
that these asset classes, from time to time, are undervalued or overvalued
relative to each other by the market and that undervalued asset classes
represent relatively better long-term, risk-adjusted investment opportunities.
Timely, low-cost shifts among common stocks, U.S. Treasury bonds and money
market instruments (as determined by their perceived relative overvaluation or
undervaluation) can therefore produce attractive investment returns. Using
this strategy, BGFA, as sub-adviser to the Master Portfolio, regularly
determines the appropriate mix of asset classes, and the portfolio of the
Master Portfolio is periodically adjusted to achieve this mix.
In determining the recommended mix, BGFA uses an investment model
developed over the past 17 years, which is presently used as a basis for
managing large employee benefit trust funds and other institutional accounts.
The Asset Allocation Model, which is proprietary to BGFA, analyzes extensive
financial data from numerous sources and recommends a portfolio allocation
among common stocks, U.S. Treasury bonds and money market instruments. As
further described in "Additional Information About Permitted Investment
Activities of the Master Portfolios," BGFA bases its investment decisions on
the Asset Allocation Model's recommendations. At any given time, substantially
all of the Master Portfolio's assets may be
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invested in a single asset class and the relative allocation among the asset
classes may shift significantly from time to time.
The Asset Allocation Master Portfolio's assets will be invested as
follows:
Stock Investments. In making its stock investments, the Master
Portfolio invests in the common stocks which comprise the S&P 500 Index(1)
using, to the extent feasible, the same weighting formula used by that index.
The Master Portfolio does not individually select common stocks on the basis of
traditional investment analysis.
Bond Investments. The Master Portfolio purchases U.S. Treasury bonds
with maturities greater than 20 years. The bond portion of the portfolio of
the Master Portfolio is generally managed to attain an average maturity of
between 22 and 28 years for the U.S. Treasury bonds held. This form of debt
instrument has been selected by BGFA because of the relatively low transaction
costs of buying and selling U.S. Treasury bonds and because of the low default
risk associated with such instruments.
Money Market Investments. The money market instrument portion of the
portfolio of the Master Portfolio generally will be invested in high-quality
money market instruments, including U.S. Government obligations, obligations of
domestic and foreign banks, short-term corporate debt instruments and
repurchase agreements.
A more complete description of the Asset Allocation Model, certain
trading policies relating to the implementation of the model's recommendations,
and the Master Portfolio's investments is contained in the "Additional
Information About Permitted Investment Activities of the Master Portfolios" and
in Part B.
2. CAPITAL APPRECIATION MASTER PORTFOLIO
The investment objective of the Capital Appreciation Master Portfolio
is to provide investors with an above- average level of capital appreciation.
The Capital Appreciation Master Portfolio seeks to achieve its investment
objective through the active management of a broadly diversified portfolio of
equity securities of companies expected to experience strong growth in
revenues, earnings and assets.
The Master Portfolio invests primarily in common stocks that Wells
Fargo Bank, as the Master Portfolio's investment adviser, believes have
better-than-average prospects for appreciation. These stocks may have some of
the following characteristics:
- Low or no dividends
- Smaller market capitalizations
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(1) The Asset Allocation Master Portfolio is not sponsored, endorsed, sold or
promoted by Standard & Poor s, and Standard & Poor s makes no representation
regarding the advisability of investing in the Master Portfolio.
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- Less market liquidity
- Relatively short operating histories
- Aggressive capitalization structures (including high debt levels)
- Involvement in rapidly growing/changing industries and/or new
technologies
Under normal market conditions, the Master Portfolio will hold at
least 20 common stock issues spread across multiple industry groups, with the
majority of these holdings consisting of established growth companies,
turnaround or acquisition candidates, or attractive larger capitalization
companies.
Additionally, it is expected that the Master Portfolio will from time
to time acquire securities through initial public offerings, and will acquire
and hold common stocks of smaller and newer issuers. It is expected that no
more than 40% of the Master Portfolio's assets will be invested in these highly
aggressive issues at one time. There may be some additional risks associated
with investments in smaller and/or newer companies because their shares tend to
be less liquid than securities of larger companies. Further, shares of small
and new companies are generally more sensitive to purchase and sale
transactions and changes in the issuer's financial condition and, therefore,
the prices of such stocks may be more volatile than those of larger company
stocks.
From time to time Wells Fargo Bank may determine that conditions in
the securities markets make pursuing the Master Portfolio's basic investment
strategy inconsistent with the best interests of the Master Portfolio's
investors. At such times, Wells Fargo Bank may use temporary alternative
strategies, primarily designed to reduce fluctuations in the value of the
Master Portfolio's assets. In implementing these temporary "defensive"
strategies, the Master Portfolio may invest in preferred stock or
investment-grade debt securities that are convertible into common stock and in
money market securities. It is expected that these temporary "defensive"
investments will not exceed 30% of the Master Portfolio's total assets.
The Master Portfolio pursues an active trading investment strategy,
and the length of time the Master Portfolio has held a particular security is
not generally a consideration in investment decisions. Accordingly, the Master
Portfolio's portfolio turnover rate may be higher than that of other funds that
do not pursue an active trading investment strategy. Portfolio turnover
generally involves some expense to the Master Portfolio, including brokerage
commissions or dealer mark-ups and other transactions costs on the sale of
securities and the reinvestment in other securities. Portfolio turnover also
can generate short-term capital gains tax consequences.
Though the Master Portfolio will hold a number of larger
capitalization stocks, under normal market conditions, and subject to the
additional risks described above, more than 50% of the Master Portfolio's total
assets will be invested in companies with smaller to medium capitalizations.
The Master Portfolio will invest primarily in companies with a market
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capitalization of $50 million or greater, but may invest in companies with a
market capitalization under $50 million if the investment adviser to the Master
Portfolio believes such investments to be in the best interests of the Master
Portfolio. It is currently expected that the majority of the Master
Portfolio's investments will be in companies with market capitalizations, at
the time of acquisition, of up to $750 million.
Under ordinary market conditions, at least 65% of the value of the
total assets of the Master Portfolio will be invested in common stocks and in
securities which are convertible into common stocks that Wells Fargo Bank, as
investment adviser, believes have better-than-average prospects for
appreciation. The Master Portfolio also may invest in convertible debt
securities. At most, 5% of the Master Portfolio's net assets will be invested
in convertible debt securities that are not either rated in the four highest
rating categories by one or more nationally recognized statistical rating
organizations ("NRSROs"), such as Moody's, S&P, or unrated securities
determined by Wells Fargo Bank to be of comparable quality. Securities rated
in the fourth lowest rating category (i.e., rated "BBB" by S&P or "Baa" by
Moody's are regarded by S&P as having an adequate capacity to pay interest and
repay principal, but changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make such repayments. Moody's
considers such securities as having speculative characteristics.
3. CASH INVESTMENT TRUST MASTER PORTFOLIO
The investment objective of the CIT Master Portfolio is to provide its
investors with a high level of current income, while preserving capital and
liquidity. The CIT Master Portfolio seeks to achieve its investment objective
by investing only in U.S. dollar-denominated "Eligible Securities" with
remaining maturities not exceeding 397 days (13 months), as defined in Rule
2a-7 under the 1940 Act, and seeks to maintain a dollar-weighted average
portfolio maturity of 90 days or less. An Eligible Security is a security that
is determined to present minimal credit risks and is rated in one of the two
highest rating categories by the required number of nationally recognized
statistical rating organizations or, if unrated, is determined to be of
comparable quality to such rated securities. These determinations are made by
Wells Fargo Bank, as the Master Portfolio's investment adviser, under
guidelines adopted by the Trust's Board of Trustees, although in certain
instances, the Board of Trustees must approve or ratify the Master Portfolio's
investments. The Board of Trustees of the Trust (or Wells Fargo Bank under
authority delegated to it as investment adviser to the Master Portfolio)
determines on an ongoing basis that any Eligible Securities purchased present
minimal credit risks. The CIT Master Portfolio endeavors to maintain a stable
net asset value of $1.00 per share; however, there is no assurance that this
objective can be achieved.
The Eligible Securities in which the CIT Master Portfolio may invest
are:
(i) obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities
(including government-sponsored enterprises) ("U.S.
Government obligations");
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(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
(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.
4. CORPORATE STOCK MASTER PORTFOLIO
The investment objective of the Corporate Stock Master Portfolio is to
approximate to the extent practicable the total rate of return of substantially
all the common stocks comprising the Standard & Poor's 500 Composite Stock
Price Index (the "S&P 500 Index").(2)
The Master Portfolio seeks to create, to the extent feasible, a
portfolio which substantially replicates the total return of the securities
comprising the S&P 500 Index, taking into consideration redemptions, sales of
additional shares and other adjustments described below. The Master Portfolio
is not managed through traditional methods of fund management, which typically
involve frequent changes in a portfolio of securities on the basis of economic,
financial and market analyses. Therefore, brokerage costs, transfer taxes and
certain other transaction costs for the Master Portfolio may be lower than
those incurred by non-index, traditionally managed funds. Precise replication
of the holdings of the Master Portfolio and the capitalization weighting of the
securities in the S&P 500 Index is not feasible, but the Master Portfolio seeks
correlation between the price and total return performance of securities
comprising the S&P Index and the investment results of the Master Portfolio.
The Master Portfolio will attempt to achieve, in both rising and falling
markets, a correlation of at least 95% between the total return of its net
assets before
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(2) The S&P 500 Index is an unmanaged index of stocks comprised of 500
companies, including industrial, financial, utility and transportation
companies. Standard & Poor s , S&P , S&P 500 , Standard & Poor s 500 ,
and 500 are trademarks of McGraw-Hill, Inc. The Corporate Stock Master
Portfolio is not sponsored, endorsed, sold or promoted by Standard & Poor s,
and Standard & Poor s makes no representation regarding the advisability of
investing in the Master Portfolio.
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expenses and the total return of the S&P 500 Index. There can be no assurance
that the Master Portfolio will achieve this correlation.
The Master Portfolio may invest some of its assets in high-quality
money market instruments, which include U.S. Government obligations,
obligations of domestic and foreign banks, repurchase agreements, commercial
paper (including variable amount master demand notes) and short-term corporate
debt obligations. Such investments are made on an ongoing basis to provide
liquidity and, to a greater extent on a temporary basis, when there is an
unexpected or abnormal level of investor purchases or redemptions of Master
Portfolio shares or because of unusual market conditions which limit the Master
Portfolio's ability to invest effectively its assets in accordance with its
investment strategies. In addition, the Master Portfolio may engage in
securities lending to increase its income and may use stock index futures and
option thereon as a substitute for a comparable market position in the
underlying securities.
5. SHORT-TERM GOVERNMENT-CORPORATE INCOME MASTER PORTFOLIO
The investment objective of the 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 securities
that the Master Portfolio may purchase include U.S. Treasury bonds, notes and
bills; obligations of the U.S. Government, its agencies and instrumentalities,
(including government-sponsored enterprises); corporate bonds and notes,
asset-backed securities and money market instruments. The Master Portfolio
seeks to manage principal volatility by diversifying its assets among
permissible investments based, in part, on their duration, maturity or other
characteristics that affect the sensitivity of such investments to changes in
market interest rates. There can, of course, be no assurance that the Master
Portfolio will achieve its investment objective.
The portfolio turnover rate for the Government-Corporate Income Master
Portfolio for the year ended December 31, 1995 was 227.0%. 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.
6. 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.
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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 (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 Municipal Income Master
Portfolio seeks to manage principal volatility by diversifying its assets among
permissible investments based, in part, on their duration, maturity or other
characteristics that affect their sensitivity to changes in market interest
rates. There can, of course, be no assurance that the Master Portfolio will
achieve its investment objective.
As a fundamental policy, at least 80% of the net assets of the
Municipal Income Master Portfolio are invested (under normal market conditions)
in municipal obligations that pay interest which is exempt from federal income
tax. However, as a matter of general operating policy, the Municipal Income
Master Portfolio seeks to have substantially all of its assets invested in such
municipal obligations. The Municipal Income Master Portfolio's investment
adviser may rely either on the opinion of counsel to the issuer of the
municipal obligations or bond counsel or on IRS rulings regarding the tax
treatment of these obligations. In addition, the Municipal Income Master
Portfolio may invest 25% or more of its assets in municipal obligations that
are related in such a way that an economic, business or political development
or change affecting one such obligation could also affect the other
obligations. For example, the Municipal Income Master Portfolio may own
different municipal obligations which pay interest based on the revenues of
similar types of projects. The Municipal Income Master Portfolio may also
invest in certain U.S. government obligations and money market instruments.
The portfolio turnover rate of the Municipal Income Master Portfolio
for the year ended December 31, 1995 was 46.0%. 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.
7. SMALL CAP MASTER PORTFOLIO
The Small Cap Master Portfolio's investment objective is to seek
above-average long-term capital appreciation in order to provide investors with
a rate of total return exceeding that of the Russell 2000 Index (before fees
and expenses) over a time horizon of three to five years. The Master Portfolio
seeks to provide above-average capital growth for investors willing to assume
above-average risk.
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The Small Cap Master Portfolio seeks to achieve this investment objective
through the active management of a broadly diversified portfolio of
growth-oriented common stocks. The Master Portfolio invests primarily in
companies with market capitalizations between $50 million and $1 billion at the
time of acquisition, although it may sometimes invest in companies with
capitalizations greater or less than these amounts. The Master Portfolio
invests primarily in common stocks of domestic and foreign companies believed
by Wells Fargo Bank, as investment adviser to be characterized by new or
innovative products, services or processes and to have above-average prospects
for capital appreciation. The Master Portfolio will sell the common stock of
any company in its investment portfolio after such company's market
capitalization exceeds $2 billion.
EQUITY SECURITIES -- The equity securities in the Master Portfolio's
investment portfolio may have some of the following characteristics:
- Low or no dividends
- Smaller market capitalizations (less than $1 billion)
- Less market liquidity
- Newly public companies (i.e., recent initial public offering)
- Relatively short operating histories
- Aggressive capitalization structures (including high debt levels)
- Involvement in rapidly growing/changing industries and/or new
technologies
Under normal market conditions, the Master Portfolio holds at least 20 common
stock issues spread across multiple industry groups and sectors of the economy.
The majority of these holdings consist of smaller capitalization companies,
established growth companies and turnaround or acquisition candidates. The
Master Portfolio may invest in securities through initial public offerings of
companies whose securities have been offered to the general public for three
months or less ("IPOs") and may invest in securities of start-up companies and
other newer issuers. It is expected that no more than 20% of the Master
Portfolio's assets will be invested in these highly aggressive issues at one
time.
Under ordinary market conditions, up to 5% of the Master Portfolio's net
assets will be invested in convertible debt securities that are not either
rated in the four highest rating categories by one or more nationally
recognized statistical rating organizations ("NRSROs"), such as Moody's
Investor Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P"), or
unrated securities determined by Wells Fargo to be of comparable quality.
Securities rated in the fourth highest rating category (i.e., rated "BBB" by
S&P or "Baa" by Moody's) are regarded by S&P as having an adequate capacity to
pay interest and repay principal, but changes in economic
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conditions or other circumstances are more likely to lead to a weakened
capacity to make such repayments. Moody's considers such securities as having
speculative characteristics.
From time to time Wells Fargo may determine that conditions in the securities
markets make pursuing the Master Portfolio's basic investment strategy
inconsistent with the best interests of the Master Portfolio's investors. At
such times, Wells Fargo may use temporary alternative strategies, primarily
designed to reduce fluctuations in the value of the Master Portfolio's assets.
In implementing these temporary "defensive" strategies, the Master Portfolio
may invest in preferred stock or investment-grade debt securities and in money
market securities. It is expected that these temporary "defensive" investments
will not exceed 35% of the Master Portfolio's total assets.
The Master Portfolio pursues an active trading investment strategy, and the
length of time the Master Portfolio has held a particular security is not
generally a consideration in investment decisions. Accordingly, the Master
Portfolio's portfolio turnover rate may be higher than that of other funds that
do not pursue an active trading investment strategy. Portfolio turnover
generally involves some expense to the Master Portfolio, including brokerage
commissions or dealer mark-ups and other transactions costs on the sale of
securities and the reinvestment in other securities. Portfolio turnover also
can generate capital gains tax consequences.
There may be some additional risks associated with investments in smaller
capitalization companies, IPOs and start-up companies or other newer issuers.
Such companies tend to have limited operating histories and their securities
tend to be less liquid than securities of larger companies. Further, the
market price of such companies' securities is generally more sensitive to
changes in the issuer's financial condition and current economic trends and,
therefore, the prices of such companies' securities may be more volatile than
those of larger companies.
8. 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 seeks to maintain a stable net asset value of $1.00 per share;
however, there can be no assurance that this objective will be achieved
Wells Fargo Bank, as investment adviser to the Tax-Free Money Market
Master Portfolio, pursues the objective of the Master Portfolio by investing
(under normal market conditions) 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
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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, including cash reserves, U.S. Government
obligations, obligations of domestic banks, commercial paper, taxable municipal
obligations and repurchase agreements. The Master Portfolio also may invest in
U.S. dollar-denominated obligations of foreign banks and foreign securities.
Such temporary investments would most likely be made when there is an
unexpected or abnormal level of investor purchases or redemptions of Interests
in the Master Portfolio or because of unusual market conditions. The income
from these temporary investments and investment activities may be subject to
federal income tax. However, as stated above, Wells Fargo Bank seeks to invest
substantially all of the Master Portfolio's assets in securities exempt from
such tax. A more complete description of tax-free municipal obligations,
taxable money market instruments and other investment activities is contained
in the "Appendix -- Additional Investment Policies."
As a matter of fundamental policy, at least 80% of the net assets of
the Master Portfolio are invested (under normal market conditions) in municipal
obligations that pay interest which is exempt from federal income tax and is
not subject to the federal alternative minimum tax. However, as a matter of
general operating policy, the Master Portfolio seeks to have substantially all
of its assets invested in such municipal obligations. The Master Portfolio's
investment adviser may rely either on the opinion of bond counsel or of counsel
to the issuer of the municipal 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. These
municipal obligations may include obligations which pay interest based on the
revenues of similar types of projects, such as pollution control bonds,
electric and gas utilities bonds and water authority bonds. Adverse economic
conditions or conditions or developments affecting a particular state,
municipality or issuing authority could impact the obligations issued by such
entities and decrease the value of the Master Portfolio's investments in such
obligations.
9. U.S. GOVERNMENT ALLOCATION MASTER PORTFOLIO
The U.S. Government Allocation Master Portfolio's investment objective
is to seek over the long term a high level of total return, including net
realized and unrealized capital gains and net investment income, consistent
with reasonable risk. The Master Portfolio seeks to achieve its objective by
pursuing a strategy of allocating and reallocating its investments among the
following three classes of debt instruments: long-term U.S. Treasury bonds,
intermediate-term U.S. Treasury notes, and short-term money market instruments.
This strategy is based upon the premise that these asset classes from time to
time are overvalued or undervalued relative to each other by the market and
that undervalued asset classes represent relatively better long-term investment
opportunities. Timely, low-cost shifts among such securities (as determined by
their perceived relative overvaluation or undervaluation) can therefore produce
attractive long-term
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investment returns. Using this strategy, BGFA regularly determines the
recommended mix of asset classes, and the portfolio of the Master Portfolio is
periodically adjusted to achieve this mix. Under normal market conditions, the
Master Portfolio will invest at least 65% of the value of its total assets in
U.S. Government obligations.
In determining the recommended mix, BGFA uses an investment model
which is presently used as a basis for managing large employee benefit trust
funds and other institutional accounts. The model, which is proprietary to
BGFA, analyzes risk, correlation and expected return data and recommends a
portfolio allocation among the three classes of debt instruments. As further
described in the "Additional Information About Permitted Investment Activities
of the Master Portfolios," BGFA bases its investment decisions on the model's
recommendations. At any given time, substantially all of the Master
Portfolio's assets may be invested in a single asset class, and the relative
allocation among the asset classes may shift significantly from time to time.
The Master Portfolio is not designed to profit from short-term market changes.
Instead, it is designed for investors with investment horizons of five years
and greater.
The U.S. Government Allocation Fund's assets will be invested and
reinvested in the following types of debt instruments:
Long-Term Investments. The Master Portfolio purchases U.S. Treasury
bonds with maturities greater than 20 years. This portion of the portfolio of
the Master Portfolio is generally managed to attain an average maturity of
between 22 and 28 years.
Intermediate-Term Investments. The Master Portfolio purchases U.S.
Treasury notes with maturities generally ranging from 5 to 7 years. This
portion of the portfolio of the Master Portfolio is generally managed to attain
an average maturity of approximately 6 years.
Short-Term Investments. The Master Portfolio purchases short-term
money market instruments with remaining maturities of one year or less. This
portion of the portfolio of the Master Portfolio may be invested in various
types of short-term money market instruments, including U.S. Government
obligations, commercial paper, bankers' acceptances, certificates of deposit,
fixed time deposits, and repurchase agreements. Obligations of both domestic
and foreign banks may be included.
U.S. Government obligations have been selected as the Fund's principal
investments because of their relatively low purchase and sale transaction costs
and because of the low default risk associated with them (i.e., they are issued
or guaranteed as to principal and interest by the U.S. Government, its agencies
or instrumentalities, including government-sponsored enterprises). The Master
Portfolio may use interest rate futures and options thereon as a substitute for
a comparable market position.
A key component of the U.S. Government Allocation model is a set of
assumptions concerning expected risk and return and investor attitudes toward
risk, which are incorporated into the allocation decision. The principal
inputs of financial data to the model currently are: (i) yields on 90-day U.S.
Treasury bills, 5-year U.S. Treasury notes, and 30-year U.S. Treasury
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bonds; (ii) the expected statistical standard deviation in investment returns
for each class of fixed income instrument; and (iii) the expected statistical
correlation of investment return among the various classes of fixed income
instruments. Using these and other data, the model is run daily to determine
the recommended allocation. The model's recommendations are presently
implemented in 10% increments. Because the Master Portfolio may shift its
investment allocations significantly from time to time, its performance may
differ from funds which invest in one asset class or from funds with a constant
mix of assets.
A more complete description of the model and the Master Portfolio's
investments and investment activities is contained in "Additional Information
About Permitted Investment Activities of the Master Portfolios" and in the Part
B.
B. ADDITIONAL PERMITTED INVESTMENT ACTIVITIES FOR ALL MASTER PORTFOLIOS
Set forth below, except where otherwise indicated, is a description of
certain permitted investments for each Master Portfolio.
U.S. Government Obligations
Each of the Master Portfolios may invest in U.S. Government obligations.
U.S. Government obligations include securities issued or guaranteed as to
principal and interest by the U.S. Government and supported by the full faith
and credit of the U.S. Treasury. U.S. Treasury obligations differ mainly in
the length of the maturity. Treasury bills, the most frequently issued
marketable government securities, have a maturity of up to one year and are
issued on a discount basis. U.S. Government obligations also include
securities issued or guaranteed by federal agencies or instrumentalities,
including government-sponsored enterprises. Some obligations of agencies or
instrumentalities of the U.S. Government are supported by the full faith credit
of the United States or U.S. Treasury guarantees; others, by the right of the
issuer or guarantor to borrow from the U.S. Treasury; still others, by the
discretionary authority of the U.S. Government to purchase certain obligations
of the agency or instrumentality; and others, only by the credit of the agency
or instrumentality issuing 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 instrumentally 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 will
provide financial support to its agencies or instrumentalities where it is not
obligated to do so. 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 provided the remaining maturities of such
obligations do not exceed thirteen months.
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Floating- and Variable-Rate Instruments
Certain of the debt instruments that each Master Portfolio 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 thirteen 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
(or, if applicable, BGFA, as investment sub- adviser to certain of 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 (or BGFA, as applicable), in accordance with
guidelines approved by the Trust's Board of Trustees, determines the liquidity
of any instruments which have a demand feature that is not exercisable within
seven days, provided that an active secondary market exists.
The Municipal Income Master Portfolio may invest in variable-rate
instruments with a maximum final maturity of up to 30 years, provided the
period remaining until the next readjustment of the instrument's interest rate,
or the period remaining until the principal amount can be recovered through
demand, is less than 5 years.
A Master Portfolio may, in accordance with policies of the Securities
and Exchange Commission ("Commission"), account for these instruments as
maturing at the next interest-rate readjustment date or the date at which such
Master Portfolio may tender the instrument back to the issuer, whichever is
later. The Tax-Free Money Market Master Portfolio may invest in floating- and
variable-rate obligations even if they carry stated maturities in excess of
thirteen 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 thirteen months.
Repurchase Agreements
Each Master Portfolio may enter into repurchase agreements wherein the
seller of a security to such Master Portfolio agrees to repurchase that
security from the Master Portfolio at a mutually agreed-upon time and price.
The period of maturity is usually quite short, often overnight or a few days,
although it may extend over a number of months. Each Master Portfolio may
enter into repurchase agreements only with respect to obligations that could
otherwise be purchased by such Master Portfolio. All repurchase agreements
will be fully collateralized based on values that are marked to market daily.
While the maturities of the underlying securities in a
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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 such Master Portfolio's adviser
or sub-adviser. The Master Portfolios may enter into pooled repurchase
agreement transactions with other funds advised by Wells Fargo Bank.
The Municipal Income, Government-Corporate Income and Capital
Appreciation Master Portfolios may not enter into a repurchase agreement with a
maturity of more than seven days, if, as a result, more than 15% of the market
value of such Master Portfolio's total net assets will be invested in
repurchase agreements with maturities of more than seven days and securities
that are illiquid by virtue of the absence of a readily available market or
legal or contractual restrictions on resale. The CIT and Tax-Free Money Market
Master Portfolios may not enter into a repurchase agreement with a maturity of
more than seven days, if, as a result, more than 10% of the market value of
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.
Foreign Obligations and Securities
The Asset Allocation, Capital Appreciation, Corporate Stock, Tax-Free
Money Market and U.S. Government Allocation Master Portfolios may each invest
up to 25%, and the CIT Master Portfolio may invest up to 5%, of its assets in
high-quality, short-term (13 months or less) debt obligations of foreign
branches of U.S. banks or U.S. branches of foreign banks that are denominated
in and pay interest in U.S. dollars. The Small Cap Fund may invest up to 25%
of its assets in securities of foreign governmental and private issuers that
are denominated in and pay interest in U.S. dollars. These securities may
take the form of American Depositary Receipts ("ADRs"), Canadian Depositary
Receipts ("CDRs"), European Depositary Receipts ("EDRs"), International
Depositary Receipts ("IDRs") and Global Depositary Receipts ("GDRs") or other
similar securities convertible into securities of foreign issuers. These
securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. ADRs (sponsored or unsponsored)
are receipts typically issued by a U. S. bank or trust company and traded on a
U.S. stock exchange, and CDRs are receipts typically issued by a Canadian bank
or trust company, that evidence ownership of underlying foreign securities.
Issuers of unsponsored ADRs are not contractually obligated to disclose
material information in the U.S. and, therefore, such information may not
correlate to the market value of the unsponsored ADR. EDRs and IDRs are
receipts typically issued by European banks and trust companies, and GDRs are
receipts issued by either a U.S. or non- U.S. banking institution, that
evidence ownership of the underlying foreign securities. Generally, ADRs in
registered form are designed for use in U.S. securities markets and EDRs and
IDRs in bearer form are designed primarily for use in Europe.
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Investments in foreign obligations and securities involve certain
considerations that are not typically associated with investing in domestic
securities. There may be less publicly available information about a foreign
issuer than about a domestic issuer. Foreign issuers also are not generally
subject to the same accounting, auditing and financial reporting standards or
governmental supervision as domestic issuers. In addition, with respect to
certain foreign countries, interest may be withheld at the source under foreign
income tax laws, and there is a possibility of expropriation or confiscatory
taxation, political, social and monetary 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.
Bonds
Certain of the debt instruments purchased by the Municipal Income
Master Portfolio and the Government-Corporate Income Master Portfolio may be
bonds. A bond is an interest-bearing security issued by a company or
governmental unit. The issuer of a bond has a contractual obligation to pay
interest at a stated rate on specific dates and to repay principal (the bond's
face value) periodically or on a specified maturity date. An issuer may have
the right to redeem or "call" a bond before maturity, in which case the
investor may have to reinvest the proceeds at lower market rates.
Most bonds bear interest income at a "coupon" rate that is fixed for
the life of the bond. The value of a fixed rate bond usually rises when market
interest rates fall, and falls when market interest rates rise. Accordingly, a
fixed rate bond's yield (income as a percent of the bond's current value) may
differ from its coupon rate as its value rises or falls.
Other types of bonds bear income at an interest rate that is adjusted
periodically. Because of their adjustable interest rates, the value of
"floating-rate" or "variable-rate" bonds fluctuates much less in response to
market interest rate movements than the value of fixed rate bonds. Also, the
Master Portfolios may treat some of these bonds as having a shorter maturity
for purposes of calculating the weighted average maturity of their investment
portfolios.
Bonds may be senior or subordinated obligations. Senior obligations
generally have the first claim on a corporation's earnings and assets and, in
the event of liquidation, are paid before subordinated debt. Bonds may be
unsecured (backed only by the issuer's general creditworthiness) or secured
(also backed by specified collateral).
Money Market Instruments
Each Master Portfolio, as part of its overall investment strategy or for
temporary defensive purposes, may invest in various kinds of money market
instruments. Investments in money market instruments by each Master Portfolio
(other than the Tax-Free Money Market Master Portfolio) will generally account
for less than 5% of each Master Portfolio's net assets and may be held to,
among other things, maintain cash balances on account of new purchases,
dividends, interest and reserves for redemptions. Each Master Portfolio may
invest in the
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following high-quality money market instruments: (i) short-term obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, including government-sponsored enterprises ("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 Investors
Service, Inc. ("Moody's") or "A-1+" or "A-1" by S&P, or, if unrated, of
comparable quality as determined by Wells Fargo Bank, as investment adviser (or
BGFA, as sub-adviser, as applicable); (iv) non-convertible corporate debt
securities (e.g., bonds and debentures) with remaining maturities at the date
of purchase of no more than one year that are rated at least "Aa" by Moody's or
"AA" by S&P; (v) repurchase agreements; and (vi) short-term, U.S.
dollar-denominated obligations of foreign banks (including U.S. branches) that,
at the time of investment: (a) have more than $10 billion, or the equivalent
in other currencies, in total assets; (b) are among the 75 largest foreign
banks in the world as determined on the basis of assets; (c) have branches or
agencies in the United States; and (d) in the opinion of Wells Fargo Bank, as
investment adviser (or BGFA, as sub-adviser, as applicable), are of comparable
quality to obligations of U.S. banks which may be purchased by the Master
Portfolios.
Asset-backed Securities
The Government-Corporate Income Master Portfolio may invest in various
types of asset-backed securities. Asset-backed securities are typically backed
by an underlying pool of assets (such as credit card or automobile trade
receivables or corporate loans or bonds) which provides the interest and
principal payments to investors. Credit quality depends primarily on the
quality of the underlying assets and the level of credit support, if any,
provided by the issuer. The underlying assets may be subject to prepayment
which can shorten the life of asset-backed securities and may lower their
return. The value of asset-backed securities may change because of actual or
perceived changes in the creditworthiness of the originator, servicing agent,
or of the financial institution providing the credit support.
Letters of Credit
The CIT Master Portfolio and the Tax-Free Money Market Master
Portfolio may purchase debt obligations, certificates of participation,
commercial paper and other short-term obligations backed by an unconditional
and irrevocable letter of credit of a bank, savings and loan association or
insurance company which assumes the obligation for payment of principal and
interest in the event of default by the issuer. Only banks, savings and loan
associations and insurance companies that, in the opinion of the investment
adviser, are comparable in quality to issuers of other permitted high-quality
investments of the Master Portfolios may be used for letter of credit-backed
investments. Letters of credit issued by domestic bank issuers will be
considered to be obligations of domestic banks excluded from each Master
Portfolio's fundamental investment restriction and the 25% limitation regarding
industry concentration .
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Municipal Obligations
The Municipal Income and Tax-Free Money Market Master Portfolios may
invest in various types of municipal securities, subject to their respective
investment objectives and policies. 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 Master Portfolios 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.
The Tax-Free Money Market Master Portfolio may invest up to 25% or more of the
current value of its total assets in revenue bonds.
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 a Master Portfolio, it 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 a 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
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backed by the taxing authority of the issuers and may have limited
marketability or may be marketable only by virtue of a provision requiring
repayment following demand by the lender. Any such loans made by the Master
Portfolios may have a demand provision permitting the Master Portfolios 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 a 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 and Tax-Free Money
Market Master Portfolios will not purchase any unrated municipal leases unless
the adviser, following procedures approved by the Trust's Board of Trustees,
determines that such leases are of comparable quality to municipal obligations
rated in the top four rating categories by the requisite NRSROs, that otherwise
may be purchased by the Master Portfolios.
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.
The Master Portfolio may invest in the following municipal obligations
with remaining maturities not exceeding 13 months:
(i) long-term municipal bonds rated at the date of purchase
"Aa" or better by Moody's or "AA" or better by S&P;
(ii) municipal notes rated at the date of purchase "MIG1" or
"MIG2" (or "VMIG1" or "VMIG2" in the case of an issue
having a variable rate with a demand feature) by Moody's
or "SP-1+", "SP-1" or "SP-2" by S&P; and
(iii) short-term municipal commercial paper rated at the date
of purchase "P-1" by Moody's or "A-1+", "A-1" or "A-2"
by S&P.
If a municipal obligation ceases to be rated or is downgraded below an
investment grade rating after purchase by the Municipal Income Master
Portfolio, it may retain or dispose of such security. In any event, the
Municipal Income Master Portfolio does not intend to purchase or retain any
municipal security that is rated below the top four ratings categories by a
nationally recognized statistical rating organization ("NRSRO"), or, if
unrated, is considered by the investment adviser to be of comparable quality.
Securities rated in the fourth highest category are considered to have
speculative characteristics. A description of ratings is contained in the
Appendix to the Part B.
In addition, the Master Portfolios 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
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facilitate portfolio liquidity and without intending to exercise its rights
thereunder for trading purposes.
When-Issued Securities
The Asset Allocation, Government-Corporate Income, Municipal Income
and U.S. Government Allocation Master Portfolios may purchase securities on a
when-issued basis, in which case delivery and payment normally take place after
the date of the commitment to purchase. For the Asset Allocation and U.S.
Government Allocation Master Portfolios delivery and payment normally take place
within 45 days of the commitment date. For the Municipal Income and Government-
Corporate Income Master Portfolios delivery and payment normally take place
within 120 days of the commitment date. The Master Portfolios 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.
Taxable Investments by the Tax-Free Money Market Master Portfolio
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
The Capital Appreciation and Small Cap Master Portfolio's may invest
in shares of other open-end, management investment companies, subject to the
limitations of Section 12(d)(1) of the Investment Company Act of 1940 (the
"1940 Act"), and provided that (i) any such purchases will be limited to
temporary investments in shares of unaffiliated investment companies and (ii)
the investment adviser will waive its advisory fees for that portion of each
such Master Portfolio's assets so invested, except when such purchase is part
of a plan of merger, consolidation, reorganization or acquisition. Subject to
the limitations of the 1940 Act, the Master Portfolios may purchase shares of
exchange-listed closed-end funds consistent with pursuing its investment
objective. The Master Portfolios do not intend to invest more than 5% of their
respective net assets in such securities during the coming year.
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.
Privately Issued Securities (Rule 144A)
The Capital Appreciation and Small Cap Master Portfolios may invest in
privately issued securities that may be resold in accordance with Rule 144A
under the Securities Act of 1933 ("Rule 144A Securities"). Rule 144A Securities
are restricted securities that are not publicly traded. Accordingly, the
liquidity of the market for specific Rule 144A Securities may vary. Wells
Fargo, using guidelines approved by the Trust's Board of Trustees, will
evaluate the liquidity characteristics of each Rule 144A Security proposed for
purchase by the Capital Appreciation and Small Cap Master Portfolios on a
case-by-case basis and will consider the following factors, among others, in
their evaluation: (1) the frequency of trades and quotes for the Rule 144A
Security; (2) the number of dealers willing to purchase or sell the Rule 144A
Security and the number of other potential purchasers; (3) dealer undertakings
to make a market in the Rule 144A Security; and (4) the nature of the Rule 144A
Security and the nature of the marketplace trades (e.g., the time needed to
dispose of the Rule 144A Security, the method of soliciting offers and
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the mechanics of transfer). Privately issued securities that are determined by
Wells Fargo to be "illiquid" will be subject to such Master Portfolios' policy
of not investing more than 15% of its net assets in illiquid securities.
Options
The Capital Appreciation and Small Cap Master Portfolios may purchase
or sell options on individual securities and options on indices of securities
as a means of achieving additional return or of hedging the value of the Master
Portfolio's investment portfolio.
Call and Put Options on Specific Securities - The Capital Appreciation
and Small Cap Master Portfolios may each invest up to 15% of their respective
assets, represented by the premium paid, in the purchase of call and put
options in respect of specific securities (or groups of "baskets" of specific
securities). A call option gives the purchaser of the option the right to buy,
and obligates the writer to sell, an underlying security at the exercise price
at any time during the option period. Conversely, a put option gives the
purchaser of the option the right to sell, and obligates the writer to buy, an
underlying security at the exercise price at any time during the option period.
Investments by such Master Portfolios in off-exchange options will be treated
as "illiquid" and therefore subject to the Master Portfolios' policy of not
investing more than 15% of its net assets in illiquid securities.
The Capital Appreciation and Small Cap Master Portfolios may write
covered call option contracts to the extent of 15% of the value of each of
their respective net assets at the time such option contracts are written. A
covered call option is a call option for which the writer of the option owns
the security covered by the option. Covered call options written by such
Master Portfolio expose the Master Portfolios during the term of the option (i)
to the possible loss of opportunity to realize appreciation in the market price
of the underlying security or (ii) to possible loss caused by continued holding
of a security which might otherwise have been sold to protect against
depreciation in the market price of the security.
To close out a covered call option it has written, each Master
Portfolio makes a "closing purchase transaction" by purchasing an option on the
same security or securities with the same exercise price and expiration date as
the covered call option it has written. To close out an option it has
purchased, each Master Portfolio simply sells it. The Master Portfolios will
realize a profit or loss from a closing purchase transaction based upon the
difference between the amount paid to purchase an option and the amount
received from the sale thereof.
Stock Index Options - The Capital Appreciation and Small Cap Master
Portfolios may purchase call and put options and write covered call options on
stock indices listed on national securities exchanges or traded in the over-
the-counter market to the extent of 15% of the value of their respective net
assets.
The effectiveness of purchasing or writing stock index options will
depend upon the extent to which price movements in the Master Portfolios'
investment portfolio correlate with price movements of the stock index
selected. Because the value of a stock index option depends upon
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changes to the price of all stocks comprising the index rather than the price
of a particular stock, whether the Master Portfolios will realize a gain or
loss from the purchase or writing of options on an index depends upon movements
in the price of all stocks in the index, rather than movements in the price of
a particular stock. Accordingly, successful use by the Master Portfolios of
options on stock indices will be subject to Wells Fargo's ability to correctly
analyze movements in the direction of the stock market generally or of
particular industry or market segments.
Warrants
The Capital Appreciation and Small Cap Master Portfolios may invest no
more than 5% of their respective net assets at the time of purchase in warrants
(other than those that have been acquired in units or attached to other
securities) and not more than 2% of their net assets in warrants which are not
listed on the New York or American Stock Exchange. Warrants represent rights to
purchase securities at a specific price valid for a specific period of time.
The prices of warrants do not necessarily correlate with the prices of the
underlying securities. The Master Portfolios may only purchase warrants on
securities in which the respective Master Portfolios may invest directly.
Emerging Markets
The Capital Appreciation and Small Cap Master Portfolios may each
invest up to 15% of their respective assets in equity securities of companies in
"emerging markets." The Master Portfolio consider countries with emerging
markets to include the following: (i) countries with an emerging stock market
as defined by the International Finance Corporation; (ii) countries with low-
to- middle-income economies according to the International Bank for
Reconstruction and Development (more commonly referred to as the World Bank);
and (iii) countries listed in World Bank publications as developing. The
adviser may invest in those emerging markets that have a relatively low gross
national product per capita, compared to the world's major economies, and which
exhibit potential for rapid economic growth. The adviser believes that
investment in equity securities of emerging market issuers offers significant
potential for long-term capital appreciation.
Equity securities of emerging market issuers may include common stock,
preferred stocks (including convertible preferred stocks) and warrants; bonds,
notes and debentures convertible into common or preferred stock; equity
interests in foreign investment funds or trusts and real estate investment
trust securities. The Capital Appreciation and Small Cap Master Portfolios may
invest in ADRs, CDRs, GDRs, EDRs, and IDRs of such issuers.
Emerging market countries include, but are not limited to: Argentina,
Brazil, Chile, China, the Czech Republic, Columbia, Ecuador, Greece, Hong Kong,
Indonesia, India, Malaysia, Mexico, the Philippines, Poland, Portugal, Peru,
Russia, Singapore, South Africa, Thailand, Taiwan and Turkey. A company is
considered in a country, market or region if it conducts its principal business
activities there, namely, if it derives a significant portion (at least 50%) of
its
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revenues or profits from goods produced or sold, investments made, or services
performed therein or has at least 50% of its assets situated in such country,
market or region.
There are special risks involved in investing in emerging-market
countries. Most are heavily dependent on international trade, and some are
especially vulnerable to recessions in other countries. Many of these
countries are also sensitive to world commodity prices. Some countries may
still have obsolete financial systems, economic problems or archaic legal
systems. In addition, many of these nations are experiencing political and
social uncertainties. Many investments in emerging markets can be considered
speculative, and their prices can be much more volatile than in the more
developed nations of the world. This difference reflects the greater
uncertainties of investing in less established markets and economies. The
financial markets of emerging markets countries are generally less well
capitalized and thus securities of issuers based in such countries may be less
liquid.
Corporate Reorganizations
The Capital Appreciation and Small Cap Master Portfolios may invest in
securities for which a tender or exchange offer has been made or announced, and
in securities of companies for which a merger, consolidation, liquidation or
similar reorganization proposal has been announced if, in the judgment of Wells
Fargo, there is a reasonable prospect of capital appreciation significantly
greater than the added portfolio turnover expenses inherent in the short term
nature of such transactions. The principal risk associated with such
investments is that such offers or proposals may not be consummated within the
time and under the terms contemplated at the time of the investment, in which
case, unless such offers or proposals are replaced by equivalent or increased
offers or proposals which are consummated, the Master Portfolios may sustain a
loss.
Short-Term Corporate Debt Instruments
Each of Corporate Stock Master Portfolio, Asset Allocation Master
Portfolio, and U.S. Government Allocation Master Portfolios may invest in
commercial paper (including variable amount master demand notes), which refers
to short-term, unsecured promissory notes issued by corporations to finance
short-term credit needs. Commercial paper is usually sold on a discount basis
and has a maturity at the time of issuance not exceeding nine months. Variable
amount master demand notes are demand obligations that permit the investment of
fluctuating amounts at varying market rates of interest pursuant to
arrangements between the issuer and a commercial bank acting as agent for the
payee of such notes whereby both parties have the right to vary the amount of
the outstanding indebtedness on the notes.
Each such Master Portfolio also may invest in non-convertible corporate
debt securities (e.g., bonds and debentures) with no more than one year
remaining to maturity at the date of settlement. Each such Master Portfolio
will invest only in such corporate bonds and debentures that are rated at the
time of purchase at least "Aa" by Moody's or "AA" by S&P.
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Futures Contracts and Options Transactions
General. Each of Corporate Stock Master Portfolio, Asset Allocation
Master Portfolio, and U.S. Government Allocation Master Portfolio may engage in
futures contracts and options transactions. A futures transaction involves a
firm agreement to buy or sell a commodity or financial instrument at a
particular price on a specified future date, while an option transaction
generally involves a right, which may or may not be exercised, to buy or sell a
commodity or financial instrument at a particular price on a specified future
date. Futures contracts and options are standardized and exchange-traded,
where the exchange serves as the ultimate counterparty for all contracts.
Consequently, the only credit risk on futures contracts is the creditworthiness
of the exchange. Futures contracts, however, are subject to market risk (i.e.,
exposure to adverse price changes).
Such Master Portfolios may trade futures contracts and options on futures
contracts in U.S. domestic markets, such as the Chicago Board of Trade and the
International Monetary Market of the Chicago Mercantile Exchange.
Such Master Portfolios' futures transactions must constitute permissible
transactions pursuant to regulations promulgated by the Commodity Futures
Trading Commission. In addition, the Master Portfolios may not engage in
futures transactions if the sum of the amount of initial margin deposits and
premiums paid for unexpired options on futures contracts, other than those
contracts entered into for bona fide hedging purposes, would exceed 5% of the
liquidation value of such Master Portfolio's assets, after taking into account
unrealized profits and unrealized losses on such contracts; provided, however,
that in the case of an option on a futures contract that is in-the-money at the
time of purchase, the in-the-money amount may be excluded in calculating the 5%
liquidation amount. Pursuant to regulations and/or published positions of the
SEC, such Master Portfolio may be required to segregate cash or high quality
money market instruments in connection with its futures transactions in an
amount generally equal to the entire value of the underlying position.
Initially, when purchasing or selling futures contracts a Master
Portfolio will be required to deposit with such Master Portfolio's custodian in
the broker's name an amount of cash or cash equivalents up to approximately 10%
of the contract amount. This amount is subject to change by the exchange or
board of trade on which the contract is traded, and members of such exchange or
board of trade may impose their own higher requirements. This amount is known
as "initial margin" and is in the nature of a performance bond or good faith
deposit on the contract that is returned to the Master Portfolio upon
termination of the futures position, assuming all contractual obligations have
been satisfied. Subsequent payments, known as "variation margin", to and from
the broker will be made daily as the price of the index or securities
underlying the futures contract fluctuates, making the long and short positions
in the futures contract more or less valuable. At any time prior to the
expiration of a futures contract, a Master Portfolio may elect to close the
position by taking an opposite position, at the then prevailing price, thereby
terminating its existing position in the contract.
Although the Master Portfolios intend to purchase or sell futures
contracts only if there is an active market for such contracts, no assurance
can be given that a liquid market will exist for any
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particular contract at any particular time. Many futures exchanges and boards
of trade limit the amount of fluctuation permitted in futures contract prices
during a single trading day. Once the daily limit has been reached in a
particular contract, no trades may be made that day at a price beyond that
limit or trading may be suspended for specified periods during the trading day.
Futures contracts prices could move to the limit for several consecutive
trading days with little or no trading, thereby preventing prompt liquidation
of futures positions and potentially subjecting such Master Portfolios to
substantial losses. If it is not possible, or the Master Portfolio determines
not, to close a futures position in anticipation of adverse price movements,
such Master Portfolio will be required to make daily cash payments of variation
margin.
An option on a futures contract gives the purchaser the right, in return
for the premium paid, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put)
at a specified exercise price at any time during the option exercise period.
The writer (i.e., seller) of the option is required upon exercise to assume an
offsetting futures position (a short position if the option is a call and a
long position if the option is a put). Upon exercise of the option, the
assumption of offsetting futures positions by both the writer and the holder of
the option will be accompanied by delivery of the accumulated cash balance in
the writer's futures margin account in the amount by which the market price of
the futures contract, at exercise, exceeds (in the case of a call) or is less
than (in the case of a put) the exercise price of the option on the futures
contract.
Stock Index Options. Such Master Portfolios may purchase and write
(i.e., sell) put and call options on stock indices as a substitute for
comparable market positions in the underlying securities. A stock index
fluctuates with changes in the market values of the stocks included in the
index. The aggregate premiums paid on all options purchased may not exceed 20%
of such Master Portfolio's total assets, and the value of the options written
may not exceed 10% of the value of such Master Portfolio's total assets.
The effectiveness of purchasing or writing stock index options will
depend upon the extent to which price movements in such Master Portfolio's
portfolio correlate with price movements of the stock index selected. Because
the value of an index option depends upon movements in the level of the index
rather than the price of a particular stock, whether such Master Portfolio will
realize a gain or loss from purchasing or writing stock index options depends
upon movements in the level of stock prices in the stock market generally or,
in the case of certain indices, in an industry or market segment, rather than
movements in the price of particular stock.
When a Master Portfolio writes an option on a stock index, such Master
Portfolio will place in a segregated account with the Master Portfolio's
custodian cash or liquid securities in an amount at least equal to the market
value of the underlying stock index and will maintain the account while the
option is open or otherwise will cover the transaction.
Stock Index Futures and Options on Stock Index Futures. Such Master
Portfolios may invest in stock index futures and options on stock index futures
as a substitute for a comparable market position in the underlying securities.
A stock index future obligates the seller to deliver (and the purchaser to
take), effectively, an amount of cash equal to a specific dollar amount times
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the difference between the value of a specific stock index at the close of the
last trading day of the contract and the price at which the agreement is made.
No physical delivery of the underlying stocks in the index is made. With
respect to stock indices that are permitted investments, such Master Portfolios
intend to purchase and sell futures contracts on the stock index for which it
can obtain the best price with consideration also given to liquidity.
Interest-Rate Futures Contracts and Options on Interest-Rate Futures
Contracts. Such Master Portfolios may invest in interest-rate futures
contracts and options on interest rate futures contracts as a substitute for a
comparable market position in the underlying securities. Such Master
Portfolios may also sell options on interest-rate futures contracts as part of
closing purchase transactions to terminate its options positions. No assurance
can be given that such closing transactions can be effected or the degree of
correlation between price movements in the options on interest rate futures and
price movements in a Master Portfolio's portfolio securities which are the
subject of the transaction.
Interest-Rate and Index Swaps. Such Master Portfolios may enter into
interest-rate and index swaps in pursuit of its investment objective.
Interest-rate swaps involve the exchange by a Master Portfolio with another
party of their respective commitments to pay or receive interest (for example,
an exchange of floating-rate payments for fixed-rate payments). Index swaps
involve the exchange by such Master Portfolio with another party of cash flows
based upon the performance of an index of securities or a portion of an index
of securities that usually include dividends or income. In each case, the
exchange commitments can involve payments to be made in the same currency or in
different currencies. A Master Portfolio will usually enter into swaps on a
net basis. In so doing, the two payment streams are netted out, with a Master
Portfolio receiving or paying, as the case may be, only the net amount of the
two payments. If a Master Portfolio enters into a swap, it will maintain a
segregated account on a gross basis, unless the contract provides for a
segregated account on a net basis. If there is a default by the other party to
such a transaction, such Master Portfolio will have contractual remedies
pursuant to the agreements related to the transaction.
The use of interest-rate and index swaps is a highly specialized activity
which involves investment techniques and risks different from those associated
with ordinary portfolio security transactions. There is no limit, except as
provided below, on the amount of swap transactions that may be entered into by
such Master Portfolios. These transactions generally do not involve the
delivery of securities or other underlying assets or principal. Accordingly,
the risk of loss with respect to swaps generally is limited to the net amount
of payments that a Master Portfolio is contractually obligated to make. There
is also a risk of a default by the other party to a swap, in which case such
Master Portfolio may not receive net amount of payments that such Master
Portfolio contractually is entitled to receive.
The permissible investments described herein are considered "derivative"
securities because their value is derived, at least in part, from the price of
another security or a specified asset, index or rate. The futures contracts
and options on futures contracts that such Master Portfolios may purchase are
considered derivatives. Such Master Portfolio may only purchase or sell these
contracts or options as substitutes for comparable market positions in the
underlying securities.
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Also, asset-backed securities issued or guaranteed by U.S. Government agencies
or instrumentalities and certain floating- and variable-rate instruments can be
considered derivatives. Some derivatives may be more sensitive than direct
securities to changes in interest rates or sudden market moves. Some
derivatives also may be susceptible to fluctuations in yield or value due to
their structure or contract terms.
Wells Fargo Bank and BGFA use a variety of internal risk management
procedures to ensure that derivatives use is consistent with a Master
Portfolio's investment objective, does not expose such Master Portfolio to
undue risk and is closely monitored. These procedures include providing
periodic reports to the Board of Trustees or Directors of the Trust and
Stagecoach Funds, Inc. concerning the use of derivatives. Also, cash
maintained by such Master Portfolio for short-term liquidity needs (e.g., to
meet anticipated redemption requests) will, as a general matter, only be
invested in U.S. Treasury bills, shares of other mutual funds and repurchase
agreements.
The use of derivatives by such Master Portfolios also is subject to
broadly applicable investment policies. For example, a Master Portfolio may
not invest more than a specified percentage of its assets in "illiquid
securities," including those derivatives that do not have active secondary
markets. Nor may such Master Portfolio use certain derivatives without
establishing adequate "cover" in compliance with SEC rules limiting the use of
leverage.
Loans of Portfolio Securities
The Corporate Stock Master Portfolio, Asset Allocation Master Portfolio,
and the U.S. Government Allocation Master Portfolio may each 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
instruments equal to at least 100% of the current market value of the
securities loan (including accrued interest thereon) plus the interest payable
to the Fund with respect to the loan is maintained with the Master Portfolio.
In determining whether to lend a security to a particular broker, dealer or
financial institution, the Master Portfolio's investment adviser will consider
all relevant facts and circumstances, including the creditworthiness of the
broker, dealer or financial institution. Any loans of portfolio securities
will be fully collateralized based on values that are marked to market daily.
Any securities that a Master Portfolio may receive as collateral will not
become part of the Master Portfolio's investment portfolio at the time of the
loan and, in the event of a default by the borrower, the Master Portfolio, if
permitted by law, will 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 additional income or receive an agreed-upon
fee from a borrower that has delivered cash-equivalent collateral. Each Master
Portfolio will not lend securities having a value that exceeds 30% of the
current value of its total assets. Loans of securities by a Master Portfolio
will be subject to termination at the Master Portfolios's or the borrower's
option. A Master Portfolio may pay reasonable administrative and custodial
fees in connection with a securities loan and may pay a negotiated portion of
the interest or fee earned with respect to the collateral to the borrower or
the placing broker. Borrowers and placing
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brokers may not be affiliated, directly or indirectly, with the Company, the
Trust, the investment adviser, or the Distributor.
Temporary Investments of the Short-Term Municipal Income
Master Portfolio
The 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 Municipal Income Master Portfolio may invest temporarily in
shares of other open-end, management investment companies, subject to the
limitations of Section 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 Municipal Income Master Portfolio's assets in
securities exempt from such tax. A more complete description of tax-free
municipal obligations, taxable money market instruments and other investment
activities is contained in the section entitled "Additional Information About
Permitted Investment Activities of the Master Portfolios".
C. 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
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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.
As a matter of fundamental policy, each of the Municipal Income Master
Portfolio and the 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
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
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 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 Government-Corporate Income Master
Portfolio may invest in obligations of any maturity.
As a matter of fundamental policy the Tax-Free Money Market Master
Portfolio may (i) 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
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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 Tax-Free Money Market
Master Portfolio may invest up to 10% of the current value of its net assets in
repurchase agreements having maturities of more than seven days, illiquid
securities, fixed time deposits that are subject to withdrawal penalties and
that have maturities of more than seven days, and restricted securities (which
are securities that must be registered under the Securities Act of 1933 before
they may be offered or sold to the public), unless a state imposes a lower
limit.
As matters of fundamental policy, the Capital Appreciation Master
Portfolio may: (i) not purchase securities of any issuer (except U.S.
Government obligations) if as a result, with respect to 75% of the Master
Portfolio's assets, more than 5% of the value of the Master Portfolio's total
assets would be invested in the securities of such issuer or the Master
Portfolio would own more than 10% of the outstanding voting securities of such
issuer; (ii) borrow from banks up to 10% of the current value of its net assets
for temporary purposes only in order to meet redemptions, and these borrowings
may be secured by the pledge of up to 10% of the current value of its net
assets (but investments may not be purchased while any such outstanding
borrowings exceed 5% of its net assets); (iii) make loans of portfolio
securities in accordance with its investment policies; and (iv) not invest 25%
or more of its assets (i.e., concentrate) in any particular industry, except
that the Master Portfolio may invest 25% or more of its assets in U.S.
Government obligations. With respect to fundamental investment policy (iii)
above, the Master Portfolio does not intend to make loans of its portfolio
securities during the coming year.
As a matter of non-fundamental policy, the Capital Appreciation Master
Portfolio may invest up to 15% of the current value of its net assets in
illiquid securities. For this purpose, illiquid securities include, among
others, (a) securities that are illiquid by virtue of the absence of a readily
available market or legal or contractual restrictions on resale, (b) fixed time
deposits that are subject to withdrawal penalties and that have maturities of
more than seven days, and (c) repurchase agreements not terminable within seven
days. Disposing of illiquid or restricted securities may involve additional
costs and require additional time.
In addition, as matters of fundamental policy, the Corporate Stock
Master Portfolio may: (i) not purchase securities of any issuer (except
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities) if as a result more than 5% of the value of the total assets
of the Master Portfolio would be invested in the securities of such issuer or
the Master Portfolio would own more than 10% of the outstanding voting
securities of such issuer, provided that a Master Portfolio may invest all its
assets in a diversified, open-end management investment company, or a series
thereof, with the same investment objective, policies and restrictions as such
Master Portfolio, without regard to the limitations set forth in this clause
(i); (ii) borrow from banks up to 20% 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 20% of the
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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); (iii)
make loans of portfolio securities in accordance with its investment policies;
and (iv) not invest 25% or more of its assets (i.e., concentrate) in any
particular industry, except that (a) the Master Portfolio is permitted to
concentrate its assets in any one industry for the same period as does the S&P
500 Index and (b) the Master Portfolio may invest 25% or more of its assets in
obligations of the U.S. Government, its agencies or instrumentalities. With
respect to Fundamental Policy (ii) above, the Master Portfolio presently does
not intend to put at risk more than 5% of its assets during the coming year.
With respect to Fundamental Policy (i), it may be possible that the Trust would
own more than 10% of the outstanding voting securities of an issuer.
As a matter of non-fundamental policy, the Corporate Stock Master
Portfolio may not invest more than 15% of its net assets in illiquid
securities, including repurchase agreements having maturities of more than
seven days.
As matters of fundamental policy, each of the Asset Allocation Master
Portfolio and the U.S. Government Allocation Master Portfolio may: (i) not
purchase securities of any issuer (except securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities) if as a result more
than 5% of the value of such Master Portfolio's total assets would be invested
in the securities of such issuer or such Master Portfolio would own more than
10% of the outstanding voting securities of such issuer, provided that such
Master Portfolio may invest all its assets in a diversified, open-end
management investment company, or a series thereof, with the same investment
objective, policies and restrictions as such Master Portfolio, without regard
to the limitations set forth in this clause (i); (ii) borrow from banks up to
20% 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
20% of the current value of its net assets (but investments may not be
purchased while any such outstanding borrowings exceed 5% of its net assets);
(iii) make loans of portfolio securities in accordance with its investment
policies; and (iv) not invest 25% or more of its assets (i.e., concentrate) in
any particular industry, except that (a) each such Master Portfolio may invest
25% or more of its assets in obligations of the U.S. Government, its agencies
or instrumentalities, and (b) the Asset Allocation Master Portfolio is
permitted to concentrate its assets in any industry for the same period as does
the S&P 500 Index, (c) the Asset Allocation Master Portfolio's money market
investments may be invested in the banking industry and in obligations of the
U.S. Government, its agencies or instrumentalities, and (d) such investments
may, from time to time, represent 25% or more of the Asset Allocation Master
Portfolio's total assets. However, the Asset Allocation Master Portfolio's
money market investments in the banking industry will not represent 25% or more
of its total assets unless the SEC staff has confirmed that it does not object
to the Fund reserving freedom of action to concentrate investments in the
banking industry. With respect to paragraph (ii) above, each Master Portfolio
presently does not intend to put at risk more than 5% of its assets during the
coming year. With respect to paragraph (iii) above, the Asset Allocation
Master Portfolio presently does not intend to put at risk more than 5% of its
assets during the coming year. With respect to paragraph (i), it may be
possible that the Trust would own more than 10% of the outstanding voting
securities of an issuer.
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As a matter of nonfundamental policy, each of the Asset Allocation
Master Portfolio and the U.S. Government Allocation Master Portfolio may not
invest more than 15% of its net assets in illiquid securities, including
repurchase agreements having maturities of more than seven days.
In addition, as matters of fundamental policy, the Small Cap Master
Portfolio may, among other things: (i) not purchase securities of any issuer
(except U.S. Government obligations) if as a result, with respect to 75% of the
Master Portfolio's assets, more than 5% of the value of the Master Portfolio's
total assets would be invested in the securities of such issuer or the Master
Portfolio would own more than 10% of the outstanding voting securities of such
issuer; (ii) borrow from banks up to 10% of the current value of its net assets
for temporary purposes only in order to meet redemptions, and these borrowings
may be secured by the pledge of up to 10% of the current value of its net
assets (but investments may not be purchased while any such outstanding
borrowings exceed 5% of its net assets); (iii) not make loans of portfolio
securities having a value that exceeds 33 1/3% of the current value of its net
assets; and (iv) not invest 25% or more of its assets (i.e., concentrate) in
any particular industry, except that the Master Portfolio may invest 25% or
more of its assets in U.S. Government obligations.
As a matter of non-fundamental policy, the Small Cap Master Portfolio
may invest up to 15% of the current value of its net assets in illiquid
securities. For this purpose, illiquid securities include, among others: (i)
securities that are illiquid by virtue of the absence of a readily available
market or legal or contractual restrictions on resale; (ii) fixed time deposits
that are subject to withdrawal penalties and that have maturities of more than
seven days; and (iii) repurchase agreements not terminable within seven days.
Disposing of illiquid or restricted securities may involve additional costs and
require additional time.
D. THE ASSET ALLOCATION AND U.S. GOVERNMENT ALLOCATION MODELS
Asset Allocation Model. BGFA, as sub-adviser to the Asset Allocation
Master Portfolio, manages the investments of the Master Portfolio using a
computer model developed over the past seventeen years. BGFA compares the Asset
Allocation Master Portfolio's investments daily to the Asset Allocation Model's
recommended allocation. The investment model recommends allocations among each
asset class in 10% increments only. Recommended reallocations are implemented
in accordance with trading policies that have been designed to take advantage
of market opportunities and to reduce transaction costs. Under current trading
policies employed by BGFA, recommended reallocations may be implemented
promptly upon receipt of recommendations or may not be acted upon for as long
as two or three months thereafter depending on factors such as the percentage
change from previous recommendations and the consistency of recommended
reallocations over a period of time.
The Asset Allocation Master Portfolio generally invests the net proceeds
from the sale of interests in the Master Portfolio and liquidates existing
Master Portfolio investments to meet net redemption requirements in a manner
that best allows the Fund's existing asset allocation to follow that
recommended by the Model. Notwithstanding any recommendation of the model to
the contrary, the Asset Allocation Master Portfolio generally maintains at
least that portion of its assets in money market instruments reasonably
considered necessary to meet redemption
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requirements. In general, cash maintained for short-term liquidity needs is
only invested in U.S. Treasury bills, shares of other mutual funds and
repurchase agreements. There is no requirement that the Fund maintain
positions in any particular asset class or classes.
BGFA manages other portfolios which also invest in accordance with the
Asset Allocation Model. The performance of each of those other portfolios is
likely to vary among themselves and from the performance of the Master
Portfolio. Such variation in performance is primarily due to different
equilibrium asset mix assumptions used for the various portfolios, timing
differences in the implementation of the model's recommendations and
differences in expenses and liquidity requirements.
There are 500 common stocks, including Wells Fargo & Company stock, which
make up the S&P 500 Index. S&P occasionally makes changes in the S&P 500 Index
based on its criteria for inclusion of stocks in the S&P 500 Index. The S&P
500 Index is market-capitalization-weighted so that each stock in the S&P 500
Index represents its proportion of the total market value of all stocks in the
S&P 500 Index. In making its stock investments, the policy of the Asset
Allocation Fund is to invest its assets in substantially the same stocks, and
in substantially the same percentages, as the S&P 500 Index, including Wells
Fargo & Company stock.
U.S. Government Allocation Model. BGFA, as sub-adviser to the U.S. Government
Asset Allocation Master Portfolio, manages the investments of the Master
Portfolio using a computer model developed over the past seventeen years. BGFA
compares the U.S. Government Allocation Master Portfolio's investments daily to
the U.S. Government Allocation Model's recommended allocation. Recommended
reallocations will be implemented in accordance with trading policies that have
been designed to take advantage of market opportunities and to reduce
transaction costs. Under current trading policies employed by BGFA,
recommended reallocations may be implemented promptly upon receipt of
recommendations or may not be acted upon for as long as two to three months
thereafter depending on factors such as the percentage change from previous
recommendations and the consistency of recommended reallocations over a period
of time.
The U.S. Government Allocation Master Portfolio generally invests the net
proceeds from the sale of interests in the Master Portfolio and liquidates
existing Master Portfolio investments to meet net redemption requirements in a
manner that best allows the Master Portfolio's existing asset allocation to
follow the allocation recommended by the computer Model. Notwithstanding any
recommendation of the computer Model to the contrary, the Master Portfolio will
generally maintain at least that portion of its assets in money market
instruments reasonably considered necessary to meet redemption requirements.
In general, cash maintained for short-term liquidity needs is only invested in
U.S. Treasury bills, shares of other mutual funds and repurchase agreements.
There is no requirement that the Master Portfolio maintain positions in any
particular asset class or classes.
BGFA manages other funds which invest in accordance with a substantially
similar version of the Model. The performance of each of those other funds is
likely to vary among themselves and from the performance of the Master
Portfolio. Such variation in performance is primarily due to timing
differences in the implementation of the Model's recommendations; differences
in expenses
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and liquidity requirements, and the ability of other funds to invest a higher
portion of their assets in short-term investments that may generate a higher
yield, but are not issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
Although BGFA uses the Asset Allocation and U.S. Government Allocation
Models as bases for its investment decisions with respect to the Asset
Allocation Master Portfolio and U.S. Government Allocation Master Portfolio,
BGFA may change from time to time the criteria and methods it uses to implement
the Model's recommendations if it believes such a change is desirable for a
Master Portfolio. Nevertheless, Wells Fargo Bank has continuing and exclusive
authority over the management of the Master Portfolios, the conduct of their
affairs and the disposition of the Master Portfolios' assets, and Wells Fargo
Bank has the right to reject BGFA's investment decisions for a Master Portfolio
if Wells Fargo Bank determines that any such decision is not consistent with
the best interests of a Master Portfolio.
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,
Municipal Income, Government-Corporate Income, National Tax-Free
Institutional Money Market, Strategic Growth and Small Cap Strategy Funds of
Overland Express and the National Tax-Free Money Market Mutual, the Aggressive
Growth, the Corporate Stock, the Asset Allocation, U.S. Government Allocation
and Small Cap of Stagecoach Funds each 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 each Master Portfolio,
and Stephens as sponsor, administrator and placement agent. The Board of
Trustees is responsible for the general management of the Master Portfolios and
supervises the actions of Wells Fargo Bank and Stephens in their capacities as
adviser, sponsor, administrator and placement agent. 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 is advised by Wells Fargo Bank, 420 Montgomery Street, San Francisco,
California 94105, a wholly owned subsidiary of Wells Fargo & Company. Wells
Fargo Bank, one of the largest banks in the United States, was founded in 1852
and is the oldest bank in the western United States. As of June 30, 1996,
Wells Fargo Bank and its affiliates provided investment advisory services for
over
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$56 billion of assets of individuals, trusts, estates and institutions.
Currently, Wells Fargo Bank serves as investment adviser or sub-adviser to five
other registered open-end management investment companies, each of which
consists of several separately managed investment portfolios.
Ms. Tamyra Thomas assumed responsibility as portfolio co-manager for the
day-to-day management of the portfolio of the Government-Corporate Income
Master Portfolio as of July 16, 1996. Ms. Thomas is a senior vice-president
and the chief fixed income investment officer of the Investment Management
Group Policy Committee. Ms. Thomas has managed bond portfolios for over a
decade. She currently manages in excess of 1 billion of long-term taxable bond
portfolios for various foundations, defined benefit plans and other clients.
Prior to joining Wells Fargo Bank in early 1988, she held a number of senior
investment positions for the Valley Bank & Trust Company of Utah including vice
president and manager of the investment department and chairman of the Trust
Investment Committee. She holds a B.S. from the University of Utah and was
past president of the Utah Bond Club. Ms. Thomas is a chartered financial
analyst.
Ms. Madeline Gish also assumed responsibility as portfolio co-manager for
the day-to-day management of the portfolio of the Government-Corporate Income
Master Portfolio as of July 16, 1996. Ms. Gish joined Wells Fargo Bank in 1989
as the portfolio coordinator for the Mutual Funds Division and played an
integral part in the rapid growth of the Overland Express Funds. Since joining
the fixed-income group in 1992, Madeline has assisted in the research and
trading for the adjustable-rate mortgage fund and is currently managing taxable
liquidity portfolios. She holds a bachelor of science degree in business
administration from the University of Kansas and is a chartered financial
analyst candidate.
Mr. Scott Smith also assumed responsibility as portfolio co-manager for the
day-to-day management of the portfolio of the Government-Corporate Income
Master Portfolio as of July 16, 1996. He joined Wells Fargo Bank in 1988 as a
taxable money market portfolio specialist. His experience includes a position
with a private money management firm with mutual fund investment operations.
Mr. Smith holds a B.A. degree from the University of San Diego and is a
chartered financial analyst.
Mr. Jeff L. Weaver has acted as portfolio co-manager to the
Government-Corporate Income Master Portfolio since May 1, 1996. Mr. Weaver
joined Wells Fargo Bank after three years as a short-term fixed income trader
and portfolio manager in the investment management group of Bankers Trust
Company in New York. He holds a B.A. in economics from the University of
Colorado and is a chartered financial analyst candidate. Mr. Weaver also
co-manages the Money Market Fund of Overland Express Funds, Inc.
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.
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Mr. David 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.
Mr. Jon Hickman is primarily responsible for the day-to-day management of
the Capital Appreciation Master Portfolio and has performed such duties since
the Predecessor Fund's inception. In addition, he also manages equity and
balanced portfolios for individuals and employee benefit plans. He has
approximately ten years of experience in the investment management field and is
a member of Wells Fargo Bank's Equity Strategy Committee. Mr. Hickman has a
B.A. and an M.B.A. in finance from Brigham Young University and has been with
Wells Fargo Bank since the merger with Crocker National Bank in 1986.
Mr. Robert Bissell is also primarily responsible for the day-to-day
management of the Capital Appreciation Master Portfolio and has performed such
duties since the Predecessor Fund's inception. Mr. Bissell joined Wells Fargo
Bank at the time of the merger with Crocker Bank and has been with the combined
organization for over 20 years. Prior to joining Wells Fargo Bank, he was a
vice president and investment counselor with M.H. Edie Investment Counseling,
where he managed institutional and high-net-worth portfolios. Mr. Bissell
holds a finance degree from the University of Virginia. He is a chartered
financial analyst and a member of the Los Angeles Society of Financial
Analysts.
Ms. Sandra Thornton, as portfolio co-manager of the Small Cap Master
Portfolio, is primarily responsible for the day-to-day management of the Master
Portfolio. Ms. Thornton has been co-manager of the Master Portfolio since its
inception in September of 1996. Ms. Thornton co-managed the Small
Capitalization Growth Fund, from November, 1994 until the sale of its assets to
the Master Portfolio in September 1996. Ms. Thornton manages other equity
portfolios for Wells Fargo Bank and is a member of the Wells Fargo Growth Equity
Team. Ms. Thornton joined Wells Fargo in 1993. Prior to this, she worked in
the research department of RCM Capital Management beginning in 1991. She
obtained her license as a Certified Public Accountant from the State of
California while performing tax/financial planning services at Price
Waterhouse. She holds a B.A. from Albertus Magnus College and is a Chartered
Financial Analyst.
Mr. Steve Enos, as portfolio co-manager of the Small Cap Master Portfolio,
also is primarily responsible for the day-to-day management of the Master
Portfolio. Mr. Enos has been co-manager of the Master Portfolio since its
inception in September of 1996. Mr. Enos co-managed the Small Capitalization
Growth Fund since November 1994 until the sale of its assets to the small Cap
Master Portfolio in September 1996. Mr. Enos joined Wells Fargo in 1993 and is
a member of the Wells Fargo Bank Growth Equity Team. He began his career with
First Interstate Bank, where he was assistant vice president and portfolio
manager. From 1991 to 1993, Mr. Enos was a principal at Dolan Capital
Management where he managed both personal
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and pension portfolios. Mr. Enos received his undergraduate degree in
economics from the University of California at Davis. Mr. Enos is a Chartered
Financial Analyst and a member of the Association for Investment Management and
Research.
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.
For its services under the applicable Advisory Contracts, Wells Fargo
Bank is entitled to a monthly advisory fee at the annual rate of 0.25% of the
average daily net assets of the CIT Master Portfolio, 0.50% of the average
daily net assets of the Capital Appreciation Master Portfolio, 0.50% of the
average daily net assets of the Municipal Income Master Portfolio, 0.50% of the
average daily net assets of the Government-Corporate Income Master Portfolio,
0.60% of the average daily net assets of the Small Cap Master Portfolio, and
0.30% of the average daily net assets of the Tax- Free Money Market Master
Portfolio. For its services under the Advisory Contracts to the Corporate
Stock, Asset Allocation and U.S. Government Allocation Master Portfolios, Wells
Fargo Bank is entitled to a monthly advisory fee at the annual rate of 0.50% of
the first $250 million of each such Master Portfolio's average daily net
assets, 0.40% of the next $250 million, and 0.30% of each such Master
Portfolio's average daily net assets in excess of $500 million. 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.
With respect to the Corporate Stock, Asset Allocation and U.S. Government
Allocation Master Portfolios, Wells Fargo Bank has delegated certain advisory
responsibilities to BGFA. Nevertheless, Wells Fargo Bank has retained
continuing and exclusive authority over the management of such Master
Portfolios, and the investment and disposition of such Master Portfolio's
assets, and Wells Fargo Bank may reject any investment recommendations or
decisions for such Master Portfolios if Wells Fargo Bank determines that such
recommendations or decisions are not consistent with the best interests of the
Master Portfolios. Wells Fargo Bank has agreed to pay BGFA for its
sub-advisory services an annual fee equal to (i) $40,000 plus 0.08% of the
average daily net assets of the Corporate Stock Fund, and (ii) 0.20% of the
average daily net assets of the Asset Allocation Master Portfolio, and $40,000
plus 0.15% of the average daily net asset of the U.S. Government Allocation
Master Portfolio. BGFA, located at 45 Fremont Street, San Francisco,
California 94105, serves as sub-adviser to the Corporate Stock Master
Portfolio, the Asset Allocation Master Portfolio, and the U.S. Government
Allocation Master Portfolio. BGFA is a wholly owned subsidiary of BZW Barclays
Global Investors, N.A. ("BGI") and an indirect subsidiary of Barclays Bank
PLC. As of January 1, 1996, BGFA and its affiliates provided investment
advisory services for over $220 billion of assets. BGFA was created by the
reorganization of Wells Fargo Nikko Investment Advisors ("WFNIA"), a former
affiliate of Wells Fargo Bank, with and into an affiliate of Wells Fargo
Institutional Trust Company, N.A. Pursuant to a Sub-Investment Advisory
Agreement with Wells Fargo Bank relating to such Master Portfolios, BGFA,
subject to the supervision and approval of Wells Fargo
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Bank, provides investment advisory assistance and the day-to-day management of
such Master Portfolios' assets, subject to the overall authority of the Trust's
Board of Trustees and in conformity with Delaware law and the stated policies
of such Master Portfolios.
The CIT Master Portfolio paid an amount equal to 0.22% of its average
daily net assets to Wells Fargo Bank for advisory services during the year
ended December 31, 1995. Wells Fargo Bank waived all advisory fees paid to it
by the Municipal Income Master Portfolio and the Government-Corporate Income
Master Portfolio for advisory services during the year ended December 31, 1995.
Prior to the conversion to a master-feeder structure by the Strategic
Growth Fund of Overland Express (the "predecessor fund" to the Capital
Appreciation Master Portfolio), Wells Fargo Bank provided advisory services
directly to the Strategic Growth Fund. Wells Fargo Bank was entitled to
receive a monthly advisory fee at the annual rate of 0.50% of the average daily
net assets of such Fund as compensation for its advisory services. For the
year ended December 31, 1995, the Fund paid to Wells Fargo Bank an amount equal
to 0.50% of its average daily net assets.
Prior to the conversion by the Asset Allocation, Corporate Stock and
U.S. Government Allocation Funds of Stagecoach Funds, (the "predecessor funds"
to the Asset Allocation, Corporate Stock and U.S. Government Allocation Master
Portfolios) to master-feeder structure, Wells Fargo Bank was entitled to
receive a monthly advisory fee at the annual rate of 0.50% of the first $250
million of each such Fund's average daily net assets, 0.40% of the next $250
million, and 0.30% of each such Fund's assets in excess of $500 million. For
the year ended December 31, 1995 Wells Fargo Bank was paid amounts equal to
0.37% , 0.50% and 0.50% of the average daily net assets of the Asset
Allocation, Corporate Stock and U.S. Government Allocation Funds, respectively,
as compensation for advisory services to such Funds.
For the year ended December 31, 1995, Wells Fargo Bank paid to WFNIA
for its sub-advisory services amounts equal to 0.20%, 0.09% and 0.18% of the
average daily net assets of the Asset Allocation, Corporate Stock and U.S.
Government Allocation Funds, respectively.
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.
CUSTODIAN AND TRANSFER AGENT -- Wells Fargo Bank has been retained to act as
the custodian (the "Custodian") for each Master Portfolio of the Trust other
than the Corporate Stock, Asset
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Allocation and U.S. Government Allocation Master Portfolios, for which BGI acts
as Custodian. 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 Master Portfolio 0.05% of such Master Portfolio its
average daily net assets. The other Master Portfolios do not pay a fee for
administrative services. From time to time, Stephens may waive fees from the
CIT Master Portfolio and/or the Tax-Free Money Market Master Portfolio in whole
or in part. Any such waiver will reduce expenses of the relevant Master
Portfolio and, accordingly, have a favorable impact on the yield or return of
such Master Portfolio.
The Administration Agreements state that Stephens shall provide as
administrative services, among other things: (i) general supervision of the
operation of each Master Portfolio, including coordination of the services
performed by the investment adviser, transfer agent, custodian, independent
auditors and legal counsel; (ii) in connection with regulatory compliance,
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 (iii) 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. Stephens is located at 111
Center Street, Little Rock, Arkansas 72201 and also serves as placement agent
for each Master Portfolio's shares.
EXPENSES -- Each Master Portfolio's Advisory Contract and Administration
Agreement provide that if, in any fiscal year, the total aggregate expenses of
a Master Portfolio incurred by, or allocated to, the Master Portfolio and other
investment companies investing in a Master Portfolio (excluding taxes,
interest, brokerage commissions and other portfolio transaction expenses,
expenditures that are capitalized in accordance with generally accepted
accounting principles, extraordinary expenses and amounts accrued or paid under
any distribution plan) exceed the most restrictive expense limitation
applicable to such investment companies imposed by the securities
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<PAGE> 44
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.
For the year ended December 31, 1995, the CIT Master Portfolio's,
Government-Corporate Income Master Portfolio's and Municipal Income Master
Portfolio's total expenses, before and after waivers and reimbursements,
expressed as a percentage of its average daily net assets was as follows:
<TABLE>
<CAPTION>
Before After
Waivers Waivers
------- -------
<S> <C> <C>
CIT Master Portfolio 0.33% 0.30%
Government-Corporate Income Master Portfolio 1.72% 0.00%
Municipal Income Master Portfolio 0.80% 0.00%
</TABLE>
For the year ended December 31, 1995, the Asset Allocation, Corporate
Stock, Strategic Growth and U.S. Government Allocation Funds' total expenses
expressed as a percentage of the average daily net assets of each were as
follows:
<TABLE>
<CAPTION>
Before After
Waivers Waivers
------- -------
<S> <C> <C> <C>
Asset Allocation Fund Class A 0.84% 0.84%
Class B 1.76% 1.53%
Corporate Stock Fund 1.00% 0.96%
Strategic Growth Fund Class A 1.38% 1.28%
Class D 2.09% 2.02%
U.S. Government Allocation Fund Class A 1.07% 1.04%
Class B 2.36% 1.65%
</TABLE>
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.
A-41
<PAGE> 45
ORGANIZATION AND INTERESTS
The Trust is organized as a Business Trust under the laws of Delaware.
The Trust's Declaration of Trust permits the Board of Trustees to issue
beneficial interests in a Master Portfolio of the Trust, and to permit
investors to increase or decrease their holdings in the Master Portfolios of
the Trust. The Trust has no intention of holding annual meetings of investors
but will hold special meetings of investors when, in the judgment of the
Trustees, it is necessary or desirable to submit matters for an investor vote.
Investors are entitled to call a meeting of investors for purposes of voting on
removal of a Trustee or Trustees of the Trust.
Each investor is entitled to vote in proportion to the amount of the
investor's investment in a Master Portfolio of the Trust. As described below,
for certain matters interestholders vote together as a group; as to others,
they vote separately by Master Portfolio. Interests in a Master Portfolio of
the Trust may not be transferred, but an investor may withdraw all or any
portion of its investment at any time at net asset value. All Interests in the
Trust, when issued, will be fully 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, the
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. As of the same date, 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 Government-Corporate Income Master Portfolio,
respectively. Similarly, the Aggressive Growth Fund of Stagecoach Funds and
the Strategic Growth Fund of Overland Express each owned at least 25% of the
outstanding interests in the Capital Appreciation Master Portfolio. As of the
same date, the Corporate Stock Fund, the Asset Allocation Fund, and the U.S.
Government Allocation Fund of Stagecoach Funds owned at least 25% of the
outstanding interests, respectively, in the Corporate Stock Master Portfolio,
the Asset Allocation Master Portfolio, and the U.S. Government Allocation
Master Portfolio. As of the same date, the National Tax-Free Money Market Fund
of Overland Express and the National Tax-Free Money Market Mutual Fund of
Stagecoach Funds each owned at least 25% of the outstanding interests of the
Tax-Free Money Market Master Portfolio. As of the date of this Amendment, the
Small Cap 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 nine separate
Master Portfolios. The previously single Master Portfolio is now referred to
as the CIT Master Portfolio. The Trust also offers eight other Master
Portfolios -- the Capital Appreciation Master Portfolio, the Municipal Income
Master Portfolio, the Government-Corporate Income Master Portfolio, the Small
Cap Master
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<PAGE> 46
Portfolio, the Tax-Free Money Market Master Portfolio, the Corporate Stock
Master Portfolio, the Asset Allocation Master Portfolio and the U.S. Government
Allocation Master Portfolio.
All consideration received by the Trust for interests in a Master
Portfolio and all assets in which such consideration is invested belong to that
Master Portfolio (subject only to the rights of creditors of the Trust) and are
subject to the liabilities related thereto. The income attributable to, and
the expenses of, one Master Portfolio are treated separately from those of the
other Master Portfolios.
Interests in the Master Portfolios are not deposits or obligations of,
or guaranteed or endorsed by, any bank, and are not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board or any other
agency. Master Portfolios Interests involve certain investment risks,
including the possible loss of principal. The price and investment return of
each interest in a Master Portfolio will fluctuate and are not guaranteed.
DIVIDENDS AND DISTRIBUTIONS
CIT MASTER PORTFOLIO -- The Net Income (as defined below) of the CIT
Master Portfolio is allocated daily to all investors of record as of 12:00 Noon
(Eastern Standard 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 9:00 a.m. (Pacific time) on the
previous Bank Business Day.
The Net Income of the CIT Master Portfolio (from the time of the
immediately preceding determination thereof) consists of (i) all income
accrued, less the amortization of any premium, on the assets of the CIT Master
Portfolio, less (ii) all actual and accrued expenses of the CIT Master
Portfolio determined in accordance with generally accepted accounting
principles. Interest income includes discount earned (including both original
issue and market discount) on discount paper accrued ratably to the date of
maturity and any net realized short-term gains or losses on the assets of the
CIT Master Portfolio.
Dividends and any capital gain distributions paid by the CIT Master
Portfolio will be reinvested in additional Interests in that Master Portfolio
at net asset value and credited to an investor's account on the payment date.
OTHER MASTER PORTFOLIOS-- The net investment income of the Asset
Allocation, Capital Appreciation, Corporate Stock, Government-Corporate Income,
Municipal Income, Small Cap and U.S. Government Allocation Master Portfolios
is allocated daily to all investors of record in such Master Portfolios as of
1:00 p.m. (Pacific time) on any day the New York Stock Exchange is open (a
"Business Day").
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<PAGE> 47
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. The net investment income of
the Tax-Free Money Market Master Portfolio is allocated to all investors of
record on each Business Day and also on Good Friday. Net investment income for
a Saturday, Sunday or Holiday is allocated to investors of record as of 1:00
p.m. (Pacific time) on the preceding business day.
Dividends and any capital gains distributions paid by a Master
Portfolio will be reinvested in the investor's interest in that Master
Portfolio of the Trust at net asset value and credited to the investor's
account on the payment date.
TAXES
Based on the method of operation of the Trust, the Trust believes that
it will qualify for federal income tax purposes as a partnership. The Trust
therefore believes that it will not be subject to any federal income tax on its
income and any net capital gains. However, each investor in a Master Portfolio
of the Trust will be taxed on its allocable share of that Master Portfolio's
ordinary income and any capital gain in determining its federal income tax
liability. The determination of such share will be made in accordance with the
Internal Revenue Code of 1986, as amended, ("Code") and regulations promulgated
thereunder.
It is intended that each Master Portfolio's assets, income and
distributions be managed in such a way that a regulated investment company
investing in a Master Portfolio will be able to 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 Asset Allocation, Capital Appreciation,
Corporate Stock, Municipal Income, Government-Corporate Income, Small Cap,
Tax-Free Money Market, and U.S. Government Allocation Master Portfolios may
be purchased on any Business Day. Interests in the Tax-Free Money Market
Master Portfolio may also be purchased on Good Friday.
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 nine Master Portfolios: the Asset Allocation,
Capital Appreciation, CIT, Corporate Stock, Short-Term
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<PAGE> 48
Government-Corporate Income, Short-Term Municipal Income, Small Cap, Tax-Free
Money Market, and U.S. Government Allocation Master Portfolios,
each of which is a diversified investment portfolio. 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 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 and Tax-Free Money Market
Master Portfolios are effected if received by 9:00 a.m. (Pacific time) on any
Bank Business Day or Business Day, respectively. Purchase orders for Interests
in the Municipal Income and Government-Corporate Income Master Portfolios are
effected if received by 1:00 p.m. (Pacific 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 and the Tax-Free Money Market Master Portfolio is
determined as of 12:00 noon and 1:00 p.m. (Pacific time) on each Bank Business
Day or Business Day, respectively. The net asset value of each of the CIT
Master Portfolio and the Tax-Free Money Market Master Portfolio is determined
by adding the value of the respective Master Portfolio's investments plus cash
and other assets,
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<PAGE> 49
deducting liabilities and their dividing the result by the number of
outstanding interests in such Master Portfolio. 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.
OTHER MASTER PORTFOLIOS -- The net asset value of each of the Capital
Appreciation, Municipal Income, Government-Corporate Income, Small Cap,
Corporate Stock, Asset Allocation and the U.S. Government Allocation Master
Portfolios 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 net assets of the Master Portfolio by the total number of
outstanding Interests.
The value of the net 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 1:00 p.m. (Pacific 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 Trust's 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 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> 50
MASTER INVESTMENT TRUST
TELEPHONE: (800) 643-9691
PART B
DATED SEPTEMBER 6, 1996
---------------------------------
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 the following diversified portfolios: the Asset Allocation Master
Portfolio, the Capital Appreciation Master Portfolio, the Cash Investment Trust
Master Portfolio (the "CIT Master Portfolio"), the Corporate Stock Master
Portfolio, the Short-Term Government-Corporate Income Master Portfolio (the
"Government-Corporate Income Master Portfolio"), the Short-Term Municipal
Income Master Portfolio (the "Municipal Income Master Portfolio"), the Small
Cap Master Portfolio, the Tax-Free Money Market Master Portfolio and the U.S.
Government Allocation 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 September 6, 1996. All terms
used in this Part B that are defined in Part A have the meanings assigned in
Part A. A copy of Part A may be obtained without charge by writing Stephens
Inc. ("Stephens"), the Trust's sponsor, administrator and placement agent, at
111 Center Street, Little Rock, Arkansas 72201, or calling Stephens at the
telephone number indicated above.
The Trust's Registration Statement, as amended, including the Trust's Part
A, the Part B and any exhibits filed therewith, may be examined at the office
of the Securities and Exchange Commission ("SEC") in Washington, D.C.
Statements contained in the Trust's Part A or Part B as to the contents of any
contract or other document referred to herein or in the Part A are not
necessarily complete, and, in each instance, reference is made to the copy of
such contract or other document filed as exhibits to the Trust's Registration
Statements, each such statement being qualified in all respects by such
reference.
<PAGE> 51
ITEM 11. TABLE OF CONTENTS.
<TABLE>
<CAPTION>
PAGE
<S> <C>
Item 10. Cover Page . . . . . . . . . . . . . . . . . . . . . . . 1
Item 11. Table Of Contents . . . . . . . . . . . . . . . . . . . 2
Item 12. General Information and History . . . . . . . . . . . . 3
Item 13. Investment Objectives and Policies . . . . . . . . . . . 3
Item 14. Management of the Trust . . . . . . . . . . . . . . . . 18
IteM 15. Control Persons and Principal Holders of Securities . . 27
Item 16. Investment Advisory and Other Services . . . . . . . . 27
Item 17. Brokerage Allocation and Other Practices . . . . . . . . 32
Item 18. Capital Stock and Other Securities . . . . . . . . 35
Item 19. Purchase, Redemption and Pricing of Securities . . . . . 36
Item 20. Tax Status . . . . . . . . . . . . . . . . . . . . . . . 38
Item 21. Underwriters . . . . . . . . . . . . . . . . . . . . . . 39
Item 22. Calculations of Performance Data . . . . . . . . . . . . 39
Item 23. Financial Information . . . . . . . . . . . . . . . . . 39
Financial Statements . . . . . . . . . . . . . . . . . . . . . . F-1
</TABLE>
2
<PAGE> 52
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. ASSET ALLOCATION, CORPORATE STOCK AND U.S. GOVERNMENT ALLOCATION MASTER
PORTFOLIOS
The investment objective of each of the Asset Allocation, Corporate Stock
and U.S. Government Allocation Master Portfolios is as described in Part A.
The investment restrictions and additional permitted investment activities
applicable to each such Master Portfolio are as described below.
INVESTMENT RESTRICTIONS
Each Master Portfolio has adopted the following investment restrictions,
all of which are fundamental policies; that is, they may not be changed without
approval by the vote of the holders of a majority (as defined in the Investment
Company Act of 1940, as amended (the "1940 Act") of the outstanding voting
securities of such Master Portfolio.
None of the Master Portfolios may:
(1) purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after the purchase and
as a result thereof, the value of any Master Portfolio's investments in that
industry would be 25% or more of the current value of its total assets,
provided that there is no limitation with respect to investments in (i)
obligations of the United States Government, its agencies or instrumentalities,
(ii) in the case of the Corporate Stock Master Portfolio and the Asset
Allocation Master Portfolio, any industry in which the S&P 500 Index becomes
concentrated to the same degree during the same period, and (iii) in the case
of the Asset Allocation Master Portfolio, money market instruments invested in
the banking industry (but the Master Portfolio will not do so unless the SEC
staff confirms that it does not object to the Master Portfolio reserving
freedom of action to concentrate investments in the banking industry);
(2) purchase or sell real estate or real estate limited partnerships
(other than securities secured by real estate or interests therein or
securities issued by companies that invest in real estate or interests
therein);
(3) purchase or sell commodities or commodity contracts; except that each
Master Portfolio may purchase and sell (i.e., write) options, forward
contracts, futures
3
<PAGE> 53
contracts, including those relating to indices, and options on futures
contracts or indices, and may participate in interest rate and index swaps;
(4) purchase interests, leases, or limited partnership interests in oil,
gas, or other mineral exploration or development programs;
(5) purchase securities on margin (except for short-term credits
necessary for the clearance of transactions and except for margin payments in
connection with transactions in options, forward contracts, futures contracts,
including those relating to indices, and options on futures contracts or
indices) or make short sales of securities;
(6) 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;
(7) make investments for the purpose of exercising control or management;
(8) issue senior securities, except to the extent the activities
permitted in Investment Restrictions Nos. 3 and 5 may be deemed to give rise to
a senior security but do not violate the provisions of section 18 of the 1940
Act, and except that each Master Portfolio may borrow up to 20% of the current
value of each such Master Portfolio's net assets for temporary purposes only in
order to meet redemptions, and these borrowings may be secured by the pledge of
up to 20% of the current value of each such Master Portfolio's net assets (but
investments may not be purchased by such Master Portfolios while any such
outstanding borrowings exceed 5% of the respective Master Portfolio's net
assets);
(9) write, purchase or sell puts, calls, straddles, spreads, warrants,
options or any combination thereof, except that each Master Portfolio may
engage in options transactions to the extent permitted in Investment
Restrictions Nos. 3 and 5, and except that each Master Portfolio may purchase
securities with put rights in order to maintain liquidity; or
(10) purchase securities of any issuer (except securities issued or
guaranteed by the U.S. Government, its agencies and instrumentalities) if, as a
result, more than 5% of the value of the Master Portfolio's total assets would
be invested in the securities of any one issuer or the Master Portfolio's
ownership would be more than 10% of the outstanding voting securities of such
issuer.
Each Master Portfolio may make loans in accordance with their investment
policies.
NON-FUNDAMENTAL INVESTMENT POLICIES. Each of the Corporate Stock, Asset
Allocation and U.S. Government Allocation Master Portfolios is subject to the
following
4
<PAGE> 54
non-fundamental policies which may be changed by a majority vote of the Board
of Trustees of the Trust at any time and without approval of the shareholders.
No Master Portfolio may:
(1) purchase or retain securities of any issuer if the officers or
Trustees of the Trust or Wells Fargo Bank owning beneficially more than
one-half of one percent (0.50%) of the securities of the issuer together owned
beneficially more than 5% of such securities;
(2) 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;
(3) 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 its aggregate investment in such classes of securities
will exceed 5% of its total assets; or
(4) invest more than 15% of its net assets in illiquid securities,
including repurchase agreements maturing in more than seven days.
In addition, the Master Portfolios 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 and Wells Fargo Bank
will waive its advisory fees for that portion of the Master Portfolios' assets
so invested, except when such purchase is part of a plan of merger,
consolidation, reorganization or acquisition.
The Trust may make commitments more restrictive than the restrictions
listed above, so as to permit the sale of shares of a feeder fund that invests
in the Master Portfolio in certain states. Should the Trust determine that a
commitment is no longer in the best interest of the Master Portfolio and its
shareholders, the Trust reserves the right to revoke the commitment by
terminating the sale of such Master Portfolio's shares in the state involved.
B. CAPITAL APPRECIATION MASTER PORTFOLIO
As discussed in Part A, the investment objective of the Capital
Appreciation Master Portfolio is to provide investors with an above- average
level of capital appreciation. It seeks to achieve this objective through the
active management of a broadly diversified portfolio of equity securities of
companies expected to experience strong growth in revenues, earnings and
assets.
5
<PAGE> 55
INVESTMENT RESTRICTIONS
As a matter of fundamental investment policy, the Capital Appreciation
Master Portfolio may not:
(1) purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after the purchase and
as a result thereof, the value of the Master Portfolio's investments in that
industry would equal or exceed 25% of the current value of the Master
Portfolio's total assets, provided that there is no limitation with respect to
investments in securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities;
(2) purchase or sell real estate or real estate limited partnerships
(other than securities secured by real estate or interests therein or
securities issued by companies that invest in real estate or interests
therein), commodities or commodity contracts, or interests in oil, gas, or
other mineral exploration or development programs;
(3) purchase securities on margin (except for short-term credits
necessary for the clearance of transactions) or make short sales of securities;
(4) underwrite securities of other issuers, except to the extent that the
purchase of permitted investments directly from the issuer thereof or from an
underwriter for an issuer and the later disposition of such securities in
accordance with the Master Portfolio's investment program may be deemed to be
an underwriting;
(5) make investments for the purpose of exercising control or management;
(6) issue senior securities except that the Master Portfolio may borrow
from banks up to 10% of the current value of its net assets for temporary
purposes only in order to meet redemptions, and these borrowings may be secured
by the pledge of up to 10% of the current value of its net assets (but
investments may not be purchased while any such outstanding borrowings exceed
5% of its net assets);
(7) make loans of portfolio securities having a value that exceeds 50% of
the current value of its total assets, provided that, this restriction does not
apply to the purchase of fixed time deposits, repurchase agreements, commercial
paper and other types of debt instruments commonly sold in a public or private
offering; nor
(8) purchase securities of any issuer (except securities issued by the
U.S. Government, its agencies or instrumentalities ) if, as a result, with
respect to 75% of its total assets, more than 5% of the value of its total
assets would be invested in the securities of any one issuer or, with respect
to 100% of its total assets the Master Portfolio's ownership would be more than
10% of the outstanding voting securities of such issuer.
6
<PAGE> 56
With respect to fundamental investment policy (7), the Master Portfolio does
not intend to loan its portfolio securities during the coming year.
NON-FUNDAMENTAL INVESTMENT POLICIES. The Capital Appreciation Master
Portfolio is subject to the following non-fundamental investment policies.
These restrictions may be changed by a vote of a majority of the Trustees of
the Trust at any time. The Master Portfolio may not:
(1) purchase or retain securities of any issuer if the officers or
Trustees of the Master Portfolio or its investment adviser owning beneficially
more than one-half of one percent (0.5%) of the securities of the issuer
together owned beneficially more than 5% of such securities;
(2) purchase or sell real estate limited partnership interests;
(3) write, purchase or sell puts, calls or options or any combination
thereof, except to the extent described in Part A and except that the Master
Portfolio may purchase securities with put rights in order to maintain
liquidity;
(4) invest in securities of issuers who, with their predecessors, have
been in existence less than three years, unless the securities are fully
guaranteed or insured by the U.S. Government if, by reason thereof, the value
of its aggregate investment in such securities will exceed 5% of its total
assets;
(5) purchase securities of any issuer (except securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if, as a
result, more than 5% of the value of the Master Portfolio's total assets would
be invested in the securities of any one issuer; nor
(6) invest more than 15% of the Master Portfolio's net assets in illiquid
securities. For this purpose, illiquid securities include, among others, (a)
securities that are illiquid by virtue of the absence of a readily available
market or legal or contractual restrictions on resale, (b) fixed time deposits
that are subject to withdrawal penalties and that have maturities of more than
seven days, and (c) repurchase agreements not terminable within seven days.
(7) In addition, as a matter of non-fundamental investment policy, the
Master Portfolio may invest in shares of other open-end, management investment
companies, subject to the limitations of Section 12(d)(1) of the Act, provided
that any such purchases will be limited to temporary investments in shares of
unaffiliated investment companies and the investment adviser will waive its
advisory fees for that portion of the Master Portfolio's assets so invested,
except when such purchase is part of a plan of merger, consolidation,
reorganization or acquisition. The Master Portfolio does not intend to invest
more than 5% of its net assets in such securities during the coming year.
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As a matter of non-fundamental policy, the Master Portfolio may invest up
to 25% of their respective net assets in the securities of foreign governmental
issuers that are denominated in and pay interest in U.S. dollars.
C. CASH INVESTMENT TRUST MASTER PORTFOLIO
As described in Part A, the investment objective of the CIT Master
Portfolio is to provide its investors with a high level of current income,
while preserving capital and liquidity. The CIT Master Portfolio seeks to
achieve its investment objective by investing in high-quality, short-term
instruments. There can, of course, be no assurance that the CIT Master
Portfolio will achieve its investment objective. The investment objective of
the CIT Master Portfolio may not be changed without the approval of the
investors in the Master Portfolio.
INVESTMENT RESTRICTIONS
The CIT Master Portfolio is subject to the following investment
restrictions, all of which are fundamental policies. The CIT Master Portfolio
may not:
(1) purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after the purchase and
as a result thereof, the value of the CIT Master Portfolio's investments in
that industry would exceed 25% of the current value of its respective total
assets, provided that there is no limitation with respect to investments in (i)
obligations of the United States Government, its agencies or instrumentalities,
and (ii) obligations of domestic banks (for purposes of this restriction,
domestic bank obligations do not include obligations of U.S. branches of
foreign banks or obligations of foreign branches of U.S. banks);
(2) purchase or sell real estate or real estate limited partnership
interests (other than money market securities secured by real estate or
interests therein or securities issued by companies that invest in real estate
or interests therein), commodities or commodity contracts;
(3) purchase securities on margin (except for short-term credits
necessary for the clearance of transactions) or make short sales of securities;
(4) underwrite securities of other issuers, except to the extent that the
purchase of permitted investments directly from the issuer thereof or from an
underwriter for an issuer and the 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
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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.
NON-FUNDAMENTAL INVESTMENT POLICIES. 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, or
trustees of the Trust or the CIT Master Portfolio's investment adviser owning
beneficially more than one-half of one percent (0.5%) of the securities of the
issuer together owned beneficially more than 5% of such securities;
(2) purchase interests, leases, or limited partnership interests in oil,
gas, or other mineral exploration or development programs;
(3) invest in securities of issuers who, with their predecessors, have
been in existence less than three years, unless the securities are fully
guaranteed or insured by the U.S. Government, a state, commonwealth,
possession, territory, the District of Columbia or by an entity in existence at
least three years, or the securities are backed by the assets and revenues of
any of the foregoing if, by reason thereof, the value of the CIT Master
Portfolio's aggregate investments in such securities will exceed 5% of its
total assets; or
(4) invest more than 10% of the current value of its net assets in
repurchase agreements maturing in more than seven days, fixed time deposits
that are subject to withdrawal penalties and that have maturities of more than
seven days, restricted securities (which are securities that must be registered
under the Securities Act of 1933 before they may be offered or sold to the
public), and illiquid securities.
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
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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.
C. SHORT-TERM MUNICIPAL INCOME MASTER PORTFOLIO AND SHORT-TERM
GOVERNMENT-CORPORATE INCOME MASTER PORTFOLIO
INVESTMENT RESTRICTIONS
As described in Part A, the investment objective of the
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 Municipal Income
Master Portfolio is to provide investors with a high level of income exempt
from federal income tax, while managing principal volatility. The 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 Municipal Income Master Portfolio and the 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 Municipal Income Master
Portfolio and the Government-Corporate Income Master Portfolio may not:
(1) purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after the purchase and
as a result thereof, the value of such Master Portfolio's investments in that
industry would exceed 25% of the current value of the Master Portfolio's total
assets, provided that there is no limitation with respect to: (1) investments
in securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities; and (2) municipal securities (for the purpose of this
restriction, private activity bonds and notes shall not be deemed municipal
securities if the payment of principal and interest on such bonds or notes is
the ultimate responsibility of non-governmental issuers); and provided further
that there is no limitation with respect to investments by the Master Portfolio
in securities issued by registered investment companies;
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(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.
NON-FUNDAMENTAL INVESTMENT POLICIES. The Municipal Income Master
Portfolio and the Government-Corporate Income Master Portfolio are subject to
the following non-fundamental policies. These restrictions may be changed by
vote of a majority of the Trustees of the Trust at any time. The Municipal
Income Master Portfolio and the Government- Corporate Income Master Portfolio
may not:
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(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 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.
D. SMALL CAP MASTER PORTFOLIO
The investment objective of the Small Cap Master Portfolio is as described
in Part A. The investment restrictions and additional permitted investment
activities applicable to such Master Portfolio are as described below.
INVESTMENT RESTRICTIONS
The Small Cap Master Portfolio has adopted the following investment
restrictions, all of which are fundamental policies; that is, they may not be
changed without approval by the vote of the holders of a majority (as defined
in the Investment Company Act of 1940, as amended (the "1940 Act") of the
outstanding voting securities of such Master Portfolio.
The Small Cap Master Portfolio may not:
(1) purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after the purchase and
as a result thereof, the value of the Master Portfolio's investments in that
industry would equal or exceed 25% of the current value of the Master
Portfolio's total assets, provided that there is no limitation
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with respect to investments in securities issued or guaranteed by the United
States Government, its agencies or instrumentalities; and provided further,
that the Master Portfolio may invest all its assets in a diversified, open-end
management investment company, or a series thereof, with substantially the same
investment objective, policies and restrictions as the Master Portfolio,
without regard to the limitations set forth in this paragraph (1);
(2) purchase or sell real estate (other than securities secured by real
estate or interests therein or securities issued by companies that invest in
real estate or interests therein, including mortgage passthrough securities),
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; and provided further, that the purchase by the Master
Portfolio of securities issued by a diversified, open-end management investment
company, or a series thereof, with substantially the same investment objective,
policies and restrictions as the Master Portfolio shall not constitute an
underwriting for purposes of this paragraph (4);
(5) make investments for the purpose of exercising control or
management; provided that the Master Portfolio may invest all its assets in a
diversified, open-end management company, or a series thereof, with
substantially the same investment objective, policies and restrictions as the
Master Portfolio, without regard to the limitations set forth in this paragraph
(5);
(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 borrowings
exceed 5% of its net assets);
(7) make loans of portfolio securities having a value that exceeds 33
1/3% of the current value of its total assets, provided that, this restriction
does not apply to the purchase of fixed time deposits, repurchase agreements,
commercial paper and other types of debt instruments commonly sold in a public
or private offering; nor
(8) purchase securities of any issuer (except securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if, as a
result, with respect to 75% of its total assets, more than 5% of the value of
its total assets would be invested in
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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, provided that the Master Portfolio may invest
all its assets in a diversified, open-end management investment company, or a
series thereof, with substantially the same investment objective, policies and
restrictions as such Master Portfolio, without regard to the limitations set
forth in this paragraph (8).
With respect to fundamental investment policy (7), the Master Portfolio
does not intend to loan its portfolio securities during the coming year.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. The Small Cap Master
Portfolio is subject to the following investment restrictions, all of which are
non-fundamental policies. These restrictions may be changed by a vote of a
majority of the Trustees of MIT at any time.
The Small Cap Master Portfolio may not:
(1) purchase or retain securities of any issuer if the officers or
trustees of the Master Portfolio or its Investment Adviser owning beneficially
more than one-half of one percent (0.5%) of the securities of the issuer
together own beneficially more than 5% of such securities;
(2) purchase or sell real estate limited partnership interests;
(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 if, by reason thereof, the value
of its aggregate investment in such securities will exceed 5% of its total
assets;
(4) purchase securities of any issuer (except securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if, as a
result, more than 5% of the value of the Master Portfolio's total assets would
be invested in the securities of any one issuer;
(5) invest more than 15% of the Master Portfolio's net assets in
illiquid securities. For this purpose, illiquid securities include, among
others, (a) securities that are illiquid by virtue of the absence of a readily
available market or legal or contractual restrictions on resale, (b) fixed time
deposits that are subject to withdrawal penalties and that have maturities of
more than seven days, and (c) repurchase agreements not terminable within seven
days;
(6) In addition, as a matter of non-fundamental policy, the Master
Portfolio may invest in shares of other open-end, management investment
companies, subject to the limitations of Section 12(d)(1) of the Act, provided
that any such purchases will be limited
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to temporary investments in shares of unaffiliated investment companies and the
Investment Adviser will waive its advisory fees for that portion of the Master
Portfolio's assets so invested, except when such purchase is part of a plan of
merger, consolidation, reorganization or acquisition; nor
(7) invest more than 25% of their respective net assets in securities
of foreign governmental and foreign private issues that are denominated in and
pay interest in U.S. dollars.
Notwithstanding any other investment policy or limitation (whether or
not fundamental), the Master Portfolio may invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies and
limitations as the Master Portfolio. A decision to so invest all of its assets
may, depending on the circumstances applicable at the time, require approval of
shareholders.
E. TAX-FREE MONEY MARKET MASTER PORTFOLIO
As described in Part A, the investment objective of the Tax-Free Money
Market Master Portfolio is to provide investors with a high level of income
exempt from federal income tax, while preserving capital and liquidity. The
Master Portfolio seeks to achieve its investment objective by investing in
high-quality, short-term U.S. dollar denominated money market instruments,
primarily municipal obligations, with remaining maturities not exceeding 13
months. There can, of course, be no assurance that the Tax-Free Money Market
Master Portfolio will achieve its investment objective. The investment
objective of the Tax-Free Money Market Master Portfolio may not be changed
without the approval of the investors in such Master Portfolio.
INVESTMENT RESTRICTIONS
The Tax-Free Money Market Master Portfolio is subject to the following
investment restrictions, all of which are fundamental policies. The Tax-Free
Money Market Master Portfolio may not:
(1) purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after the purchase and
as a result thereof, the value of the Master Portfolio's investments in that
industry would be 25% or more of the current value of the Master Portfolio's
total assets, provided that there is no limitation with respect to investments
in (i) municipal securities (for the purpose of this restriction, private
activity bonds and notes shall not be deemed municipal securities if the
payment of principal and interest on such bonds or notes is the ultimate
responsibility of non- governmental entities), (ii) obligations of the United
States Government, its agencies or instrumentalities (including government-
sponsored enterprises), and (iii) the obligations of domestic banks (for the
purpose of this restriction, domestic bank obligations do not
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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.
With regard to fundamental investment restriction number (1) above, the
Master Portfolio intends to reserve freedom of action to have in excess of 25%
of the value of its total assets invested in obligations of the banking
industry. Regarding this fundamental concentration policy, the Master
Portfolio may hold in excess of 25% of the value of its
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assets in obligations of the banking industry to the extent that the Master
Portfolio holds obligations with such credit enhancements as letters of credit
issued by domestic bank issuers, which will be considered to be obligations of
domestic banks. The SEC staff's position is that the exclusion with respect to
banks may only be applied to domestic banks. For this purpose, the staff also
takes the position that U.S. branches of foreign banks and foreign branches of
domestic banks may, if certain conditions are met, be treated as "domestic
banks". The Trust currently intends to consider only obligations of "domestic
banks" to be within the exclusion with respect to bank obligations.
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.
NON-FUNDAMENTAL INVESTMENT POLICIES. 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
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policy of investing at least 80% of their net assets in obligations that are
exempt from federal income tax and are not subject to the federal alternative
minimum tax.
In addition, the Master Portfolio reserves the right to invest up to 10%,
of the current value of its net assets in fixed time deposits that are subject
to withdrawal penalties and that have maturities of more than seven days,
repurchase agreements maturing in more than seven days or other illiquid
securities and restricted securities. However, as long as the shares of an
investment company investing in the Master Portfolio are registered for sale in
a state that imposes a lower limit on the percentage of an investment company's
assets that may be so invested, the Master Portfolio will comply with such
lower limit. The Master Portfolio presently is limited to investing 10% of its
net assets in such securities due to limits applicable in several states.
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
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."
Unrated and Downgraded Investments. The Asset Allocation, CIT, Corporate
Stock, Tax-Free Money Market and U.S. Government Allocation Master Portfolios
may purchase instruments that are not rated if, in the opinion of the
investment adviser, such obligations are of comparable quality to other rated
investments that are permitted to be purchased by the Master Portfolio. After
purchase a security may cease to be rated or its rating may be reduced below
the minimum required for purchase by the Master Portfolio. Neither event
requires an immediate sale of such security when a security ceases to be rated,
provided that the Board of Trustees determines that such security presents
minimal credit risks and, provided further that when a security rating is
downgraded below the eligible quality for investment or no longer presents
minimal credit risks, the board finds that disposal of the portfolio security
would not be in the best interests of the Master Portfolio. To the extent the
ratings given by Moody's or S&P may change as a result of changes in such
organizations or their rating systems, the Master Portfolio will attempt to use
comparable ratings as standards for investments in accordance with the
investment policies contained in its Part A and in this Part B. The ratings of
Moody's and S&P are more fully described in the Appendix to this Part B.
When-Issued Securities. The 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. Certain of the
securities in which the U.S. Government Allocation Master Portfolio and the
Asset Allocation Master Portfolio may
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invest also will be purchased on a when-issued basis, in which case delivery
and payment normally take place within 45 days after the date of the commitment
to purchase. The 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.
Each such Master Portfolio will segregate cash, U.S. Government
obligations or other high-quality debt instruments in an amount at least equal
in value to the Master Portfolio's commitments to purchase when-issued
securities. If the value of these assets declines, the Master Portfolio will
segregate additional liquid assets on a daily basis so that the value of the
segregated assets 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 Tax-Free Money Market Master
Portfolio and the 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. The Tax-Free Money Market
Master Portfolio may not invest more than 25% of its assets in industrial
development bonds. Assessment bonds, wherein a specially created district or
project area levies a tax (generally on its taxable property) to pay for an
improvement or project may be considered a variant of either category. There
are, of course, other variations in the types of municipal bonds, both within a
particular classification and between classifications, depending on numerous
factors. Subject to their investment objectives and policies, the Tax-Free
Money Market Master Portfolio and the Municipal Income Master Portfolio are not
limited with respect to which category of municipal bonds they may acquire.
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<PAGE> 69
Municipal Notes. The Municipal Income Master Portfolio and the Tax-Free
Money Market 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 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 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 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 Municipal Income Master Portfolio and the Tax-Free Money Market
Master Portfolio arising from these or other factors will cause changes in the
net asset value per share of such Master Portfolios.
Letters of Credit. Certain of the debt obligations (including municipal
securities, certificates of participation, commercial paper and other
short-term obligations) which the Asset Allocation, Corporate Stock, U.S.
Government Allocation and Tax Free Money Market Master Portfolios 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
20
<PAGE> 70
permitted investments of such Master Portfolios may be used for letter of
credit-backed investments, provided that the Trust's Board approves or ratifies
such investments. For purposes of the Tax Free Money Market Master Portfolio's
fundamental policy on concentrations, letters of credit issued by domestic bank
issuers will be considered to be obligations of domestic banks excluded from
the 25% limitation regarding industry concentration (see fundamental investment
restriction number (1) above).
Loans of Portfolio Securities. Each of the Asset Allocation, Corporate
Stock, U.S. Government Allocation and Tax Free Money Market Master Portfolios
may lend securities from their portfolios to brokers, dealers and financial
institutions (but not individuals) if cash, U.S. Government obligations or
other high-quality debt instruments equal to at least 100% of the current
market value of the securities loan (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 to lend a
security to a particular broker, dealer or financial institution, Wells Fargo
Bank will consider all relevant facts and circumstances, including the
creditworthiness of the broker, dealer, or financial institution. Any loans of
portfolio securities will be fully collateralized based on values that are
marked to market daily. The Master Portfolios will not enter into any
portfolio security lending arrangement having a duration of longer than one
year. Any securities that such Master Portfolio may receive as collateral will
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 additional income or receive an agreed-upon fee from a
borrower that has delivered cash-equivalent collateral. None of the Master
Portfolios will lend securities having a value that exceeds 33 1/3% of the
current value of its total assets. Loans of securities by any of the Master
Portfolios will be subject to termination at the Master Portfolio's or the
borrower's option. The Master Portfolios may pay reasonable administrative and
custodial fees in connection with a securities loan and may pay a negotiated
portion of the interest or fee earned with respect to the collateral to the
borrower or the placing broker. Borrowers and placing brokers may not be
affiliated, directly or indirectly, with the Company, the Trust, Wells Fargo
Bank, or Stephens.
ADDITIONAL PERMITTED INVESTMENT ACTIVITIES - PERTAINING ONLY TO
THE CORPORATE STOCK, ASSET ALLOCATION AND U.S. GOVERNMENT ALLOCATION FUNDS
Asset Allocation Model. A key component of the Asset Allocation Model is
a set of assumptions concerning expected risk and return and investor attitudes
toward risk which are incorporated into the asset allocation decision. The
principal inputs of financial data to the Asset Allocation Model currently are
(i) consensus estimates of the earnings, dividends and payout ratios on a broad
cross-section of common stocks as reported by independent financial reporting
services which survey a broad cross-section of Wall Street
21
<PAGE> 71
analysts, (ii) the estimated current yield to maturity on new long-term
corporate bonds rated "AA" by S&P, (iii) the present yield on money market
instruments, (iv) the historical statistical standard deviation in investment
return for each class of asset, and (v) the historical statistical correlation
of investment returns among the various asset classes in which the Asset
Allocation Master Portfolio invests. Using these data, the Asset Allocation
Model is run daily to determine the recommended asset allocation. The model's
recommendations are presently made in 10% increments.
Pass-Through Obligations. The Master Portfolios may invest in
pass-through obligations that are supported by the full faith and credit of the
U.S. Government (such as those issued by the Government National Mortgage
Association) or those that are guaranteed by an agency or instrumentality of
the U.S. Government or government- sponsored enterprise (such as the Federal
National Mortgage Association or the Federal Home Loan Mortgage Corporation) or
bonds collateralized by any of the foregoing.
Futures Contracts and Options Transactions --
Stock Index Options. The Master Portfolios may purchase and write (i.e.,
sell) put and call options on stock indices as a substitute for comparable
market positions in the underlying securities. Options on stock indices are
similar to options on stock except that (a) the expiration cycles of stock
index options are monthly, while those of stock options are currently
quarterly, and (b) the delivery requirements are different. Instead of giving
the right to take or make delivery of stock at a specified price, an option on
a stock index gives the holder the right to receive a cash "exercise settlement
amount" equal to (i) the amount , if any, by which the fixed exercise price of
the option exceeds, in the case of a put, or is less than, in the case of a
call, the closing value of the underlying index on the date of exercise,
multiplied by (ii) a fixed "index multiplier." Receipt of this cash amount
depends upon the closing level of the stock index upon which the option is
based being greater than, in the case of a call, or less than, in the case of a
put, the exercise price of the option. The amount of cash received is equal to
such difference between the closing price of the index and the exercise price
of the option expressed in dollars multiplied by a specified multiplier. The
writer of the option is obligated, in return for the premium received, to make
delivery of this amount. The writer may offset a position in stock index
options prior to expiration by entering into a closing transaction on an
exchange, or the writer may let the option expire unexercised.
Futures Contracts and Options on Futures Contracts. Each Master Portfolio
may enter into futures contracts and may purchase and write options thereon.
Upon the exercise of an option on a futures contract, the writer of the option
delivers to the holder of the option the futures position and the accumulated
balance in the writer's futures margin account, which represents the amount by
which the market price of the futures contract exceeds, in the case of a call,
or is less than, in the case of a put, the exercise price of the option on the
futures contract. The potential loss related to the purchase of options on
futures contracts is limited to the premium paid for the option (plus
transaction costs). Because the value of the option is fixed at the time of
sale, there are no daily cash
22
<PAGE> 72
payments to reflect changes in the value of the underlying contract; however,
the value of the option may change daily, and that change would be reflected in
the net asset value of the relevant Master Portfolio.
Foreign Currency Transactions. If a Master Portfolio enters into a
foreign currency transaction or forward contract, such Master Portfolio
deposits, if required by applicable regulations, with the Trust's custodian
cash or highgrade debt securities in a segregated account of the Master
Portfolio in an amount at least equal to the value of the Master Portfolio's
total assets committed to the consummation of the forward contract. If the
value of the securities placed in the segregated account declines, additional
cash or securities are placed in the account so that the value of the account
equals the amount of the Master Portfolio's commitment with respect to the
contract.
At or before the maturity of a forward contract, a Master Portfolio either
may sell a portfolio security and make delivery of the currency, or may retain
the security and offset its contractual obligation to deliver the currency by
purchasing a second contract pursuant to which such Master Portfolio obtains,
on the same maturity date, the same amount of the currency which it is
obligated to deliver. If the Master Portfolio retains the portfolio security
and engages in an offsetting transaction, such Master Portfolio, at the time of
execution of the offsetting transaction, incurs a gain or a loss to the extent
that movement has occurred in forward contract prices. Should forward prices
decline during the period between the Master Portfolio's entering into a
forward contract for the sale of a currency and the date it enters into an
offsetting contract for the purchase of the currency, the Master Portfolio will
realize a gain to the extent the price of the currency it has agreed to sell
exceeds the price of the currency it has agreed to purchase. Should forward
prices increase, the Master Portfolio will suffer a loss to the extent the
price of the currency it has agreed to purchase exceeds the price of the
currency it has agreed to sell.
The cost to a Master Portfolio of engaging in currency transactions varies
with factors such as the currency involved, the length of the contract period
and the market conditions then prevailing. Because transactions in currency
exchange usually are conducted on a principal basis, no fees or commissions are
involved. Wells Fargo Bank (or BGFA, as applicable) considers on an ongoing
basis the creditworthiness of the institutions with which a Master Portfolio
enters into foreign currency transactions. The use of forward currency
exchange contracts does not eliminate fluctuations in the underlying prices of
the securities, but it does establish a rate of exchange that can be achieved
in the future. If a devaluation generally is anticipated, the Master Portfolio
may not be able to contract to sell the currency at a price above the
devaluation level it anticipates.
The purchase of options on currency futures allows a Master Portfolio, for
the price of the premium it must pay for the option, to decide whether or not
to buy (in the case of a call option) or to sell (in the case of a put option)
a futures contract at a specified price at any time during the period before
the option expires.
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<PAGE> 73
Future Developments. Each Master Portfolio may take advantage of
opportunities in the areas of options and futures contracts and options on
futures contracts and any other derivative investments which are not presently
contemplated for use by such Master Portfolio or which are not currently
available but which may be developed, to the extent such opportunities are both
consistent with a Master Portfolio's investment objective and legally
permissible for the Master Portfolio. Before entering into such transactions
or making any such investment, a Master Portfolio would provide appropriate
disclosure in Part A or this Part B.
Wells Fargo Bank and BGFA use a variety of internal risk management
procedures to ensure that derivatives use is consistent with a Master
Portfolio's investment objective, does not expose the Master Portfolio to undue
risk and is closely monitored. These procedures include providing periodic
reports to the Board of Trustees concerning the use of derivatives.
The use of derivatives by the Master Portfolios also is subject to broadly
applicable investment policies. For example, a Master Portfolio may not invest
more than a specified percentage of its assets in "illiquid securities,"
including those derivatives that do not have active secondary markets. Nor may
a Master Portfolio use certain derivatives without establishing adequate
"cover" in compliance with SEC rules limiting the use of leverage.
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 principal executive officer of the Trust are listed
below. The address of each, unless otherwise indicated, is 111 Center Street,
Little Rock, Arkansas 72201. Trustees deemed to be "interested persons" of
the Trust for purposes of the Investment Company Act of 1940 (the "1940 Act")
are indicated by an asterisk.
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION PRINCIPAL OCCUPATIONS
DURING PAST 5 YEARS
<S> <C> <C>
Jack S. Euphrat, 74 Trustee Private Investor.
415 Walsh Road
Atherton, CA 94027.
</TABLE>
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<PAGE> 74
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION PRINCIPAL OCCUPATIONS
DURING PAST 5 YEARS
<S> <C> <C>
*R. Greg Feltus, 45 Trustee, Chairman Senior Vice President
and President of Stephens; Manager
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, 54 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
of Finance of the
School of Business
and Accounting at
Wake Forest
University since
1983.
*Zoe Ann Hines, 47 Trustee Senior Vice President
of Stephens and
Director of Brokerage
Accounting; and
Secretary of Stephens
Resource Management.
*W. Rodney Hughes, 70 Trustee Private Investor.
31 Dellwood Court
San Rafael, CA 94901
Robert M. Joses, 78 Trustee Private Investor.
47 Dowitcher Way
San Rafael, CA 94901
*J. Tucker Morse, 52 Trustee Private Investor; Real
10 Legrae Street Estate Developer;
Charleston, SC 29401 Chairman of Renaissance
Properties Ltd.; President
of Morse Investment
Corporation; and Co-Managing
Partner of Main Street
Ventures.
Richard H. Blank, Jr., 40 Chief Operating Associate of Financial
Officer, Secretary Services Group of Stephens;
and Treasurer Director of Stephens
Sports Management Inc.;
and Director of Capo Inc.
</TABLE>
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<PAGE> 75
COMPENSATION TABLE
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
TOTAL COMPENSATION FROM
AGGREGATE COMPENSATION REGISTRANT AND FUND
NAME AND POSITION FROM REGISTRANT COMPLEX
<S> <C> <C>
Jack S. Euphrat $0 $39,750
Trustee
*R Greg Feltus 0 $0
Trustee
Thomas S. Goho 0 $39,750
Trustee
*Zoe Ann Hines 0 $0
Trustee
*W. Rodney Hughes 0 $37,000
Trustee
Robert M. Joses 0 $39,000
Trustee
*J. Tucker Morse 0 $33,250
Trustee
</TABLE>
Trustees of the Trust who are officers or employees of Stephens or Wells Fargo
Bank are not compensated by the Trust for their services but are reimbursed for
all out-of-pocket expenses relating to attendance at board meetings. Trustees
who are affiliated with Stephens or Wells Fargo Bank also do not receive
compensation from the Trust and also are reimbursed for all out-of-pocket
expenses relating to attendance at board meetings. Each of the Officers and
Trustees of the Trust serves in the identical capacity as Officers and
Directors of Overland Express Funds, Inc., Stagecoach Funds, Inc. and
MasterWorks Funds, 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, prior to January 1, 1996 and the reorganization of WFNIA,
was considered to be in the same "fund complex," as such term is defined in
Form N-1A under the 1940 Act, as the Company. Effective January 1, 1996,
MasterWorks Funds Inc., Master Investment Portfolio and Managed Series
Investment Trust are considered to be members of the same fund complex and are
no longer part of the same fund complex as Master Investment Trust, Stagecoach
Funds, Inc., Overland Express Funds, Inc., Stagecoach Trust and Life & Annuity
Trust. The Trustees are compensated by other companies and trusts within the
fund complex for their services as directors/trustees to such companies and
trusts.
26
<PAGE> 76
Currently the Trustees do not receive any retirement benefits or deferred
compensation from the Trust or any other member of the fund complex.
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
As of the date of this Part B, the Overland Sweep, Short-Term Municipal
Income, Short-Term Government-Corporate Income, Small Cap Strategy and
Strategic Growth Funds of Overland Express Funds, Inc. each owns at least 25%
of the outstanding interests in the CIT, Municipal Income, Government-Corporate
Income, Small Cap and Capital Appreciation Master Portfolios of the Trust,
respectively. Therefore, each such Fund could be considered to be a
"controlling person" of the respective Master Portfolio for purposes of the
1940 Act. Overland Express Funds, Inc. is a Maryland corporation and a
registered open-end management investment company. The address of Overland
Express is 111 Center Street, Little Rock, Arkansas 72201.
As of the date of this Part B, the Aggressive Growth, Asset Allocation,
Corporate Stock, Small Cap and U.S. Government Allocation Funds of Stagecoach
Funds, Inc. each owns more than 25% of the outstanding interests of the Capital
Appreciation, Asset Allocation, Corporate Stock, Small Cap and U.S. Government
Allocation Master Portfolios of the Trust, respectively. Therefore, each such
fund could be considered a "controlling person" of the respective Master
Portfolio for purposes of the 1940 Act. Stagecoach Funds, Inc. is a Maryland
corporation and a registered open-end management investment company. The
address of Stagecoach Funds is 111 Center Street, Little Rock, Arkansas 72201.
ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES.
INVESTMENT ADVISER -- Pursuant to separate advisory contracts ("Investment
Advisory Agreements"), between the Trust and Wells Fargo Bank, each Master
Portfolio is advised by Wells Fargo Bank. Each Investment Advisory Agreement
provides that Wells Fargo Bank will 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 Agreements,
Wells Fargo Bank furnishes the Board of Trustees with periodic reports on the
investment strategy and performance of each Master Portfolio.
Wells Fargo Bank has agreed to provide to each Master Portfolio, among
other things, money market and fixed-income research, analysis and statistical
and economic data and information concerning interest rate and security market
trends, portfolio composition, credit conditions and average maturities of the
investments of each Master Portfolio.
Each Investment Advisory Agreement 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 the applicable Master Portfolio's
outstanding proportionate
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<PAGE> 77
interests or by the Board of Trustees of the Trust and (ii) by a majority of
the Trustees of the Trust who are not parties to the Investment Advisory
Agreement or "interested persons" (as defined in the Act) of any such party.
Each Investment Advisory Agreement may be terminated on 60 days' written notice
by either party and terminates automatically by its terms if assigned.
BGFA serves as investment sub-adviser to the Asset Allocation, Corporate
Stock and U.S. Government Allocation Master Portfolios. Wells Fargo Bank has
agreed to pay BGFA for its sub-advisory services an annual fee equal to (i)
$40,000 plus 0.08% of the average daily net assets of the Corporate Stock
Master Portfolio; (ii) 0.20% of the average daily net assets of the Asset
Allocation Master Portfolio; and (iii) $40,000 plus 0.15% of the average daily
net assets of the U.S. Government Master Portfolio. Such sub-advisory
services are provided by BGFA pursuant to a Sub-Investment Advisory Agreement
(the "Sub- Advisory Agreement") dated April 30, 1996 with Wells Fargo Bank.
Subject to the direction of the Trust's Board of Trustees and the overall
supervision and control of Wells Fargo Bank and the Trust, BGFA is responsible
for investing and reinvesting such Master Portfolio's assets. BGFA shall
furnish to Wells Fargo Bank periodic reports on the investment activity and
performance of the Master Portfolios, and such additional reports and
information as Wells Fargo Bank and the Trust's Board of Trustees and officers
shall reasonably request. As to each Master Portfolio, the Sub-Advisory
Agreement has an initial two-year term, and will thereafter be subject to
annual approval by (i) the Trust's Board of Trustees or (ii) vote of a majority
(as defined in the 1940 Act) of the outstanding securities of such Master
Portfolio, provided that in either event the continuance also is approved by a
majority of the Trust's Board of Trustees who are not interested persons (as
defined in the 1940 Act) of the Master Portfolio or BGFA, by vote cast in
person at a meeting called for the purpose of voting on such approval. As to
each Master Portfolio, the Sub-Advisory Agreement is terminable without
penalty, on 60 days' written notice, by the Trust's Board of Trustees or by
vote of the holders of a majority of such Master Portfolio's interests. The
Sub-Advisory Agreement terminates automatically upon an assignment (as defined
in the 1940 Act).
BGFA was created by the reorganization of Wells Fargo Nikko Investment
Advisors ("WFNIA"), a former affiliate of Wells Fargo Bank, with and into an
affiliate of Wells Fargo Institutional Trust Company N.A. Subject to the
direction of the Trust's Board of Trustees and the overall supervision and
control of Wells Fargo Bank and the Trust, BGFA is responsible for investing
and reinvesting the Master Portfolios' assets. BGFA has agreed to furnish to
Wells Fargo Bank periodic reports on the investment activity and performance of
the Master Portfolios, and such additional reports and information as Wells
Fargo Bank and the Trust's Board of Trustees and officers shall reasonably
request.
For the years ended December 31, 1993, 1994 and 1995, the CIT Master
Portfolio, the Municipal Income Master Portfolio and the Government-Corporate
Income Master Portfolio paid to Wells Fargo Bank the advisory fees indicated
below and Wells Fargo Bank waived the indicated amounts:
28
<PAGE> 78
<TABLE>
<CAPTION>
1993 1994 1995
Fees Fees Fees Fees Fees Fees
Fund Paid Waived Paid Waived Paid Waived
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash Investment Trust $861,200 $0 $1,245,341 $ 181,344 $1,902,572 $ 255,082
Government-Corporate* N/A N/A $ 0 $ 131 $ 0 $ 11,944
Municipal Income* N/A N/A $ 0 $ 7,879 $ 0 $ 62,512
- -------------------------------
</TABLE>
*The Government Corporate Income Master Portfolio and the Municipal Income
Master Portfolio commenced operations on September 19, 1994 and June 3, 1994,
respectively.
For the years ended December 31, 1993, 1994 and 1995, the Asset
Allocation, Corporate Stock, Strategic Growth and U.S. Government Allocation
Funds paid to Wells Fargo Bank the advisory fees indicated below and Wells
Fargo Bank waived the indicated amounts:
<TABLE>
<CAPTION>
1993 1994 1995
Fees Fees Fees Fees Fees Fees
Fund Paid Waived Paid Waived Paid Waived
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Asset Allocation $3,136,581 $0 $3,907,880 $0 $3,814,364 $0
Corporate Stock $1,248,207 $0 $1,259,739 $0 $1,398,439 $0
Strategic Growth $0 $ 68,217 $ 197,689 $9,550 $ 302,821 $0
U.S. Government $1,090,400 $0 $1,034,079 $0 $ 680,049 $0
Allocation
</TABLE>
For the years ended December 31, 1993, 1994 and 1995, Wells Fargo Bank
paid to WFNIA the sub-advisory fees indicated below with respect to such Funds:
<TABLE>
<CAPTION>
1993 1994 1995
Fees Fees Fees
Fund Paid Paid Paid
- ------------------------------------------------------------------
<S> <C> <C> <C>
Asset Allocation $1,586,982 $2,106,980 $2,043,249
Corporate Stock $ 239,319 $ 241,489 $ 269,787
</TABLE>
29
<PAGE> 79
<TABLE>
<S> <C> <C> <C>
U.S. Government $ 366,951 $ 353,761 $ 244,478
Allocation
</TABLE>
Morrison & Foerster LLP, counsel to the Company and the Trust and special
counsel to Wells Fargo Bank, BGFA, and BZW Barclays Global Investors, N.A.
("BGI"), has advised the Company, the Trust, Wells Fargo Bank, BGFA, BGI and
each Master Portfolio that (i) Wells Fargo Bank should be able to perform the
services contemplated by the Investment Advisory Contracts, the Agency
Agreements and the applicable Custody Agreements without violation of the
Glass-Steagall Act, (ii) BGFA should be able to perform the services
contemplated in the Sub- Advisory Agreement and Part A relating to certain of
the Master Portfolios, and (iii) BGI should be able to perform the services
contemplated in the applicable Custodian Agreement and Part A. 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 -- The Trust has retained Stephens to serve as administrator on
behalf of each Master Portfolio. Under the Administration Agreement, Stephens,
in connection therewith, furnishes each Master Portfolio of the Trust with
office facilities, together with those ordinary clerical and bookkeeping
services that are not being furnished by Wells Fargo Bank.
The Asset Allocation, Capital Appreciation, Corporate Stock,
Government-Corporate Income, Municipal Income, Small Cap and U.S. Government
Allocation Master Portfolios are not charged administrative fees so long as
Stephens is entitled to administrative fees payable by a feeder fund that
invests substantially all of its assets in the applicable Master Portfolio.
The CIT and Tax-Free Money Market Master Portfolios pay Stephens a monthly fee
at the annual rate of 0.025% and 0.05% of their respective average daily net
assets as compensation for providing administrative services.
As compensation for administrative services, Stephens is entitled to
receive monthly fees calculated from the average daily net assets of each of
the following Funds at the indicated annual percentage rates: 0.03% for the
Aggressive Growth, Asset Allocation, Corporate Stock and U.S. Government
Allocation Funds; 0.15% for the Government-Corporate Income, Municipal Income
and Strategic Growth Funds; 0.05% and 0.10% respectively, for the Small Cap
Fund and Small Cap Strategy Fund. For the
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<PAGE> 80
Short-Term Government-Corporate Income and Short-Term Municipal Income Funds,
the fee decreases from 0.15% to 0.10% for assets in excess of $200 million.
For the years ended December 31, 1993, 1994 and 1995, the CIT Master
Portfolio and the Asset Allocation, Corporate Stock, Government- Corporate
Income, Municipal Income, Strategic Growth and U.S. Government Allocation
Funds paid administrative fees to Stephens as follows:
ADMINISTRATIVE FEES
<TABLE>
<CAPTION>
Fund/ 1993 1994 1995
Master Fees Fees Fees
Portfolio Paid Paid Paid
--------------------------------------------------------------
<S> <C> <C> <C>
CIT Master Portfolio $ 86,120 $142,669 $215,765
Asset Allocation $238,347 $315,787 $306,436
Corporate Stock $74,804 $75,748 $92,555
Strategic Growth $20,483 $62,623 $91,128
Short-Term Government- N/A $39* $3,560
Corporate Income
Short-Term Municipal N/A $2,497* $19,436
Income
U.S. Government $65,395 $62,168 $40,803
Allocation
</TABLE>
*The Short-Term Municipal Income Fund and the Short-Term Government- Corporate
Income Fund commenced operations on June 3, 1994 and September 19, 1994,
respectively.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT -- Wells Fargo Bank acts
as Custodian to all of the Trust's Master Portfolios other than the Corporate
Stock, Asset Allocation, and U.S. Government Allocation Master Portfolios, for
which BGI acts as Custodian.
The applicable Custodian, among other things, maintains a custody account
or accounts in the name of each Master Portfolio under its service arrangement;
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
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assets of each such Master Portfolio and pays all expenses of each such 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 to which it provides services, plus certain fees on a
transaction basis.
For the year ended December 31, 1995, the CIT Master Portfolio paid Wells
Fargo Bank $149,559 for its services as custodian. For the year ended December
31, 1995, Wells Fargo Bank waived all of the custodian fees payable to it by
the Municipal Income and Government- Corporate Income Master Portfolios. For
the year ended December 31, 1995, the Strategic Growth Fund paid Wells Fargo
Bank $22,191 for its services as custodian to such Fund. For the year ended
December 31, 1995, the Asset Allocation, Corporate Stock and U.S. Government
Allocation Funds did not pay Wells Fargo Bank or WFITC any fee for providing
custodial services.
Wells Fargo Bank has been retained to act as Transfer and Dividend
Disbursing Agent for each Master Portfolio of the Trust. 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. For the
year ended December 31, 1995, Wells Fargo Bank waived all fees payable to it by
the CIT, Municipal Income and Government-Corporate Master Portfolios.
INDEPENDENT AUDITORS -- KPMG Peat Marwick LLP has been selected as the
independent auditors for the Master Portfolios. KPMG Peat Marwick LLP provides
audit services, tax return preparation and assistance and consultation in
connection with review of certain SEC filings. KPMG Peat Marwick LLP's address
is Three Embarcadero Center, San Francisco, California 94111.
ITEM 17. BROKERAGE ALLOCATION AND OTHER PRACTICES.
None of the Master Portfolios of the Trust has an obligation to deal with
any dealer or group of dealers in the execution of transactions in portfolio
securities. Subject to policies established by the Trust's Board of Trustees,
Wells Fargo Bank is responsible for each Master Portfolio's investment
decisions and the placing of portfolio transactions. In placing orders, it is
the policy of each Master Portfolio to obtain the best results taking into
account the dealer's general execution and operational facilities, the type of
transaction involved and other factors such as the dealer's risk in positioning
the securities involved. While Wells Fargo Bank generally seeks reasonably
competitive spreads or commissions, the Master Portfolio will not necessarily
be paying the lowest spread or commission available.
As to the Asset Allocation Master Portfolio, the Capital Appreciation
Master Portfolio and the Corporate Stock Master Portfolio, purchases and sales
of equity securities on a securities exchange are effected through brokers who
charge a negotiated commission for their services. Commission rates are
established pursuant to negotiations with the broker based on the quality and
quantity of execution services provided by the
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<PAGE> 82
broker in light of generally prevailing rates. Orders may be directed to any
broker including, to the extent and in the manner permitted by applicable law,
Stephens or Wells Fargo Securities Inc. In the over- the-counter-market,
securities are generally traded on a "net" basis with dealers acting as
principal for their own accounts without a stated commission, although the
price of the security usually includes a profit to the dealer. In underwritten
offerings, securities are purchased at a fixed price that includes an amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount.
Debt securities normally are purchased or sold from or to dealers serving
as market makers for the securities at a net price. A Master Portfolio also
may purchase portfolio securities in underwritten offerings or directly from an
issuer. Generally debt obligations are traded on a net basis and do not
involve brokerage commissions. The cost of executing the portfolio securities
transactions consists primarily of dealer spreads and underwriting commissions.
Under the 1940 Act, persons affiliated with the Trust are prohibited from
dealing with the Trust as a principal in the purchase and sale of securities
unless an exemptive order is obtained from the SEC or an exemption is otherwise
available. A Master Portfolio may purchase securities from underwriting
syndicates of which Stephens or Wells Fargo Bank is a member under certain
conditions in accordance with the provisions of a rule adopted under the 1940
Act and in compliance with procedures adopted by the Master Portfolio's Board
of Trustees.
Except for the portfolio securities of the Asset Allocation Master
Portfolio, Capital Appreciation Master Portfolio, and the Corporate Stock
Master Portfolio, purchases and sales of the investment securities of the
Master Portfolios usually are principal transactions. Securities of each
Master Portfolio normally are purchased or sold from or to dealers serving as
market makers for the securities at a net price. Each Master Portfolio also
may purchase portfolio securities in underwritten offerings and may purchase
securities directly from the issuer. Generally, taxable money market
securities are traded on a net basis and do not involve brokerage commissions.
The cost of executing securities transactions of the Master Portfolios consists
primarily of dealer spreads and underwriting commissions.
Wells Fargo Bank, as the investment adviser to the Master Portfolios, may,
in circumstances in which two or more dealers are in a position to offer
comparable results for a portfolio transaction, give preference to a dealer
that has provided statistical or other research services to Wells Fargo Bank.
By allocating transactions in this manner, Wells Fargo Bank is able to
supplement its research and analysis with the views and information of
securities firms. Information so received is in addition to, and not in lieu
of, the services required to be performed by Wells Fargo Bank under the
Investment Advisory Contracts, and the expenses of Wells Fargo Bank are not
necessarily reduced as a result of the receipt of this supplemental research
information. Furthermore, research services furnished by dealers through which
Wells Fargo Bank places securities transactions for the
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<PAGE> 83
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.
BROKERAGE COMMISSIONS -- For the years ended December 31, 1994 and 1995,
the CIT Master Portfolio, Government-Corporate Income Master Portfolio and
Municipal Income Master Portfolio did not pay any brokerage commissions.
For the years ended December 31, 1994 and 1995 the Strategic Growth Fund
paid brokerage commissions in the amount of $171,356 and $190,359,
respectively. Brokerage commissions were not paid to any affiliated brokers.
For the year ended December 31, 1993, the Asset Allocation Fund and the
Corporate Stock Fund paid brokerage commissions in the amounts of $294,861 and
$30,123, respectively. For the year ended December 31, 1994, the Asset
Allocation Fund and the Corporate Stock Fund paid brokerage commissions in the
amounts of $99,002 and $31,896, respectively. For the year ended December 31,
1995, the Asset Allocation Fund and Corporate Stock Fund paid brokerage
commissions in the amounts of $34,488 and $8,697, respectively. The U.S.
Government Allocation Fund did not pay any brokerage commissions during 1995
and none of these Funds paid brokerage commissions to affiliated brokers.
SECURITIES OF REGULAR BROKER/DEALERS -- As of December 31, 1995, the
Master Portfolios owned securities of their "regular brokers or dealers" or
their parents, as defined in the 1940 Act as follows: the CIT Master Portfolio
and the Government-Corporate Income Master Portfolio held debt securities of
Goldman Sachs in amounts equal to $52,415,000 and $93,000, respectively.
As of December 31, 1995, the Capital Appreciation Master Portfolio's
predecessor fund, the Strategic Growth Fund of Overland Express Funds, Inc.
held a Goldman Sachs Pooled Repurchase Agreement in an amount of $1,638,000.
As of the same date, the predecessor funds to the Asset Allocation, Corporate
Stock and U.S. Government Allocation Master Portfolios owned securities of
their "regular brokers or dealers" or their parents as defined in the 1940 Act
as follows: the Asset Allocation Fund owned securities of J.P. Morgan & Co.,
Inc., in the amount of $1,895,104. The Corporate Stock and U.S. Government
Allocation Funds did not own such securities as of said date.
PORTFOLIO TURNOVER -- Portfolio turnover generally involves some expense
to a Master Portfolio, including brokerage commissions or dealer mark-ups and
other transaction costs on the sale of securities and the reinvestment in other
securities. To the extent the Master Portfolios invest in government and
municipal securities, a high portfolio turnover rate should not result in the
Master Portfolios paying substantially more brokerage commissions, since most
transactions in government securities and municipal securities are effected on
a principal basis. In addition, a high portfolio turnover rate should not
adversely affect the CIT or Tax-Free Money Market Master Portfolios that
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<PAGE> 84
generally consist of obligations with relatively short maturities because
portfolio transactions for these Master Portfolios ordinarily are made directly
with principals on a net basis and, consequently, neither Master Portfolio
typically incurs brokerage expenses.
Portfolio turnover also can generate short-term capital gains tax
consequences. The portfolio turnover rate is not a limiting factor when Wells
Fargo Bank deems portfolio changes appropriate.
ITEM 18. CAPITAL STOCK AND OTHER SECURITIES.
The Trust is a business trust organized under the laws of Delaware. In
accordance with Delaware law and in connection with the tax treatment sought by
the Trust, its Declaration of Trust provides that investors will be personally
responsible for liabilities and obligations of each Master Portfolio of the
Trust, but only to the extent the Trust property is insufficient to satisfy
such liabilities and obligations. The Declaration of Trust also provides for
the Trustees to maintain appropriate insurance (for example, fidelity bonding
and errors and omissions insurance) for the protection of the Trust, the
investors, Trustees, officers, employees and agents covering possible tort and
other liabilities, and that investors will be indemnified to the extent they
are held liable for a disproportionate share of a Master Portfolio's
obligations. Thus, the risk of an investor incurring financial loss on account
of personal liability is limited to circumstances in which the investor's
liability is disproportionate to its investment and inadequate insurance
exists.
The Declaration of Trust further provides that obligations of the Trust
are not binding upon the Trustees individually but only upon the property of
the Trust and that the Trustees will not be liable for any action or failure to
act. Nothing in the Declaration of Trust protects a Trustee against any
liability to which the Trustee would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of the Trustee's office.
As used in Part A and Part B, the term "majority," when referring to
approvals to be obtained from investors in each Master Portfolio of the Trust,
means the vote of the lesser of (i) 67% of the Master Portfolio's outstanding
proportionate interests represented at a meeting if the holders of more than
50% of the Master Portfolio's outstanding proportionate interests are present
in person or by proxy, or (ii) more than 50% of the Master Portfolio's
outstanding proportionate interests.
The Trust may dispense with annual meetings of investors in any year in
which it is not required to elect Trustees under the 1940 Act. However, the
Trust is required to hold a special meeting of its investors for the purpose of
voting on the question of removal of a Trustee or Trustees if requested in
writing by the holders of at least 10% of the Master Portfolios of the Trust's
outstanding proportionate interests, and to assist in communicating with other
investors as required by Section 16(c) of the 1940 Act.
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<PAGE> 85
A Master Portfolio of the Trust may enter into a merger or consolidation,
or sell all or substantially all of its assets, if approved by the vote of
two-thirds of its investors (with the vote of each being in proportion to their
respective percentages of the beneficial interests in the Trust), except that
if the Trustees of the Trust recommend such sale of assets, the approval by
vote of a majority of the investors of a Master Portfolio (with the vote of
each being in proportion to their respective percentages of the beneficial
interests in the Master Portfolio) will be sufficient. A Master Portfolio of
the Trust may also be terminated (i) upon liquidation and distribution of its
assets, if approved by the vote of two-thirds of its investors (with the vote
of each being in proportion to the amount of their investment) or (ii) by the
Trustees of the Trust by written notice to the Master Portfolio's investors.
In the event of the liquidation or dissolution of a Master Portfolio, investors
are entitled to receive their pro rata share of all assets available for
distribution.
ITEM 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES.
Beneficial interests in the Trust are issued solely in private placement
transactions that do not involve any "public offering" within the meaning of
Section 4(2) of the Securities Act of 1933, as amended (the "1933 Act").
Investments in a Master Portfolio of the Trust may only be made by registered
broker/dealers or by investment companies, insurance company separate accounts,
common or commingled trust funds, group trusts or similar organizations or
entities that are "accredited investors" within the meaning of Regulation D
under the 1933 Act. This registration statement does not constitute an offer
to sell, or the solicitation of an offer to buy, any "security" within the
meaning of the 1933 Act.
Net asset value per interest of the CIT Master Portfolio of the Trust is
determined by the Custodian of the Trust on each Bank Business Day. Net asset
value per interest of the Capital Appreciation Master Portfolio, the
Government-Corporate Income Master Portfolio, the Municipal Income Master
Portfolio, the Tax-Free Money Market Master Portfolio, the Corporate Stock
Master Portfolio, the Asset Allocation Master Portfolio, and the U.S.
Government Allocation 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
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<PAGE> 86
Master Portfolio's portfolio on a particular day, a prospective investor in the
Master Portfolio would be able to obtain a somewhat higher yield than would
result from investment in a fund using solely market values, and existing
Master Portfolio investors would receive correspondingly less income. The
converse would apply during periods of rising interest rates.
Rule 2a-7 provides that, in order to value its portfolio using the
amortized cost method, the Master Portfolio must maintain a dollar- weighted
average portfolio maturity of 90 days or less, purchase securities having
remaining maturities (as defined in Rule 2a-7) of thirteen months or less, and
invest only in Eligible Securities determined by the Board of Trustees to
present minimal credit risks. The maturity of an instrument is generally
deemed to be the period remaining until the date when the principal amount
thereof is due or the date on which the instrument is to be redeemed. However,
Rule 2a-7 provides that the maturity of an instrument may be deemed shorter in
the case of certain instruments, including certain variable- and floating-rate
instruments subject to demand features. Pursuant to the Rule, the Board has
established procedures designed to stabilize, to the extent reasonably
possible, the Master Portfolio's net asset value. Such procedures include
review of a Master Portfolio's holdings by the Board of Trustees at such
intervals as it may deem appropriate to determine whether the Master
Portfolio's net asset value calculated by using available market quotations
deviates within 1/2 of the 1% of the value based on amortized cost. The extent
of any deviation is examined by the Board of Trustees. If such deviation
exceeds 1/2 of 1%, the Board promptly considers what action, if any, will be
initiated. In the event the Board determines that a deviation exists that may
result in material dilution or other unfair results to investors, the Board
will take such corrective action as it regards as necessary and appropriate,
including the sale of portfolio instruments prior to maturity to realize
capital gains or losses or to shorten average portfolio maturity, withholding
dividends or establishing a net asset value by using available market
quotations.
OTHER MASTER PORTFOLIOS -- The net asset value of , the Asset Allocation,
Capital Appreciation, Corporate Stock, Government-Corporate Income, Municipal
Income, Small Cap and U.S. Government Allocation Master Portfolios is
determined on each Business Day.
The net asset value per interest for these Master Portfolios is determined
by dividing the value of the total assets of a Master Portfolio less the Master
Portfolio's liabilities by the total number of outstanding interests. The
value of assets of these Master Portfolios (other than debt obligations
maturing in 60 days or less) is determined at the close of regular trading on
the New York Stock Exchange, which is currently 1:00 p.m. Pacific 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.
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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 federal 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 taxable income in determining the investor's income tax
liability. The determination of such share will be made in accordance with the
Internal Revenue Code of 1986, as amended, ("Code") and regulations promulgated
thereunder. Each Master Portfolio's taxable year-end is December 31.
Although, as described above, the Master Portfolios will not be subject to
federal income tax, each will file appropriate income tax returns.
It is intended that each Master Portfolio's assets, income and
distributions will be managed in such a way that a regulated investment company
investing in a Master Portfolio of the Trust will be able to satisfy the
requirements of Subchapter M of the Code, assuming that the investment company
invested substantially all of its assets in a Master Portfolio. Each Master
Portfolio 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. 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 or
gains without receipt of any corresponding distribution. However, each Master
Portfolio will seek to minimize recognition by investors of interest, dividends
or gains without a corresponding distribution.
Investors' capital accounts will be adjusted on a daily basis to reflect
additional investments or withdrawals and any increase or decrease in net asset
value. For purposes of determining fair market value of the CIT Master
Portfolio's and the Tax-Free Money Market Master Portfolio's assets, such
Master Portfolios use the amortized cost method of valuation under Rule 2a-7
under the Act. The investments of other Master Portfolios are valued each
business day using available market quotations or at fair value as determined
by one or more independent primary services (collectively the "Service")
approved by the Trust's Board of Trustees. The Service may use available
market quotations, employ electronic data processing techniques and/or a matrix
system to determine valuations. The Service's procedures are reviewed by the
Trust's officers under the general supervision of the Trust's Board of
Trustees. Expenses and fees, including advisory fees, are accrued daily and
are taken into account for the purpose of determining the net asset value of a
Master Portfolio's shares.
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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 INFORMATION.
The unaudited financial statements and portfolio of investments for the
Capital Appreciation, Cash Investment Trust, Short-Term Government-Corporate
Income, Short-Term Municipal Income and Tax-Free Money Market Master Portfolios
and for certain of the funds of Overland Express Funds, Inc. ("Overland") are
hereby incorporated by reference to the Overland Semi-Annual Reports dated June
30, 1996, as filed with the SEC on September 6, 1996.
The unaudited financial statements and portfolio of investments for the
Asset Allocation, Corporate Stock and U.S. Government Allocation Master
Portfolios and for certain of the funds of Stagecoach Funds, Inc.
("Stagecoach") are hereby incorporated by reference to the Stagecoach
Semi-Annual Reports dated June 30, 1996, as filed with the SEC on September 6,
1996.
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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.
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:
The unaudited financial statements and portfolio of investments
for the Capital Appreciation, Cash Investment Trust, Short-Term
Municipal Income, Short-Term Government-Corporate Income and Tax-Free
Money Market Master Portfolios are hereby incorporated by reference to
the Overland Express Funds, Inc. Semi-Annual Reports dated June 30,
1996, as filed with the SEC on September 6, 1996.
The unaudited financial statements and portfolio of investments
for the Asset Allocation, Corporate Stock and U.S. Government Allocation
Master Portfolios are hereby incorporated by reference to the Stagecoach
Funds, Inc. Semi-Annual Reports dated June 30, 1996, as filed with the
SEC on September 6, 1996.
(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.
1(b) - Certificate of Amendment to the Declaration of Trust, incorporated by reference to
Amendment No. 3 filed on May 2, 1994.
1(c) - Amendment to the Declaration of Trust, incorporated by reference to Amendment No. 6
filed on November 29, 1995.
1(d) - Form of 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) - 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.
5(b) - Advisory Contract with Wells Fargo Bank, N.A. on behalf of the Short-Term Municipal
Income Master Portfolio, incorporated by reference to Amendment No. 6 filed on November
29, 1995.
5(c) - Advisory Contract with Wells Fargo Bank, N.A. on behalf of the Short-Term Government-
Corporate Income Master Portfolio, incorporated by reference to Amendment No. 6 filed on
November 29, 1995.
5(d) - Investment Advisory Contract with Wells Fargo Bank, N.A. on behalf of the Tax-Free Money
Market Master Portfolio, incorporated by reference to Amendment No. 8 filed on March 21,
1996.
5(e) - Investment Advisory Contract with Wells Fargo Bank, N.A. on behalf of the Capital
Appreciation Master Portfolio, incorporated by reference to Amendment No. 8 filed on
March 21, 1996.
</TABLE>
C-1
<PAGE> 92
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C> <C>
5(f)(i) - Investment Advisory Contract with Wells Fargo Bank, N.A. on behalf of the Asset
Allocation Master Portfolio, incorporated by reference to Amendment No. 8 filed on March
21, 1996.
5(f)(ii) - Sub-Advisory Contract with BZW Barclays Global Fund Advisors on behalf of the Asset
Allocation Master Portfolio, incorporated by reference to Amendment No. 8 filed on March
21, 1996.
5(g)(i) - Investment Advisory Contract with Wells Fargo Bank, N.A. on behalf of the Corporate
Stock Master Portfolio, incorporated by reference to Amendment No. 8 filed on March 21,
1996.
5(g)(ii) - Sub-Advisory Contract with BZW Barclays Global Fund Advisors on behalf of the Corporate
Stock Master Portfolio, incorporated by reference to Amendment No. 8 filed on March 21,
1996.
5(h)(i) - Investment Advisory Contract with Wells Fargo Bank, N.A. on behalf of the U.S.
Government Allocation Master Portfolio, incorporated by reference to Amendment No. 8
filed on March 21, 1996.
5(h)(ii) - Sub-Advisory Contract with BZW Barclays Global Fund Advisors on behalf of the U.S.
Government Allocation Master Portfolio, incorporated by reference to Amendment No. 8
filed on March 21, 1996.
5(i) - Form of Investment Advisory Contract with Wells Fargo Bank, N.A. on behalf of the Small
Cap Master Portfolio, filed herewith.
6 - Amended Placement Agency Agreement, filed herewith.
7 - Not Applicable.
8(a) - Custody Agreement with Wells Fargo Bank, N.A., filed herewith.
8(b) - Amendment No. 1 to the Custody Agreement with Wells Fargo Bank, N.A., incorporated by
reference to Amendment No. 7, filed on December 22, 1995.
9(a) - Amended Agency Agreement with Wells Fargo Bank, N.A., filed herewith.
9(b) - Amended Administration Agreement with Stephens Inc. filed herewith.
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.
</TABLE>
C-2
<PAGE> 93
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C><C>
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.
Item 26. Number of Holders of Securities.
As of August 30, 1996, the number of record holders of each
Master Portfolio of the Registrant was as follows:
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
Cash Investment Trust Master Portfolio 2
Short-Term Municipal Income Master Portfolio 2
Short-Term Government-Corporate Income Master Portfolio 2
Tax-Free Money Market Master Portfolio 3
Capital Appreciation Master Portfolio 3
Asset Allocation Master Portfolio 2
Corporate Stock Master Portfolio 2
U.S. Government Allocation Master Portfolio 2
</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 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.
C-3
<PAGE> 94
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 Master
Portfolios of the Registrant and to several other registered open-end
management investment companies. Wells Fargo Bank's business is that of a
national banking association with respect to which it conducts a variety of
commercial banking and trust activities.
To the knowledge of Registrant, none of the directors or executive
officers of Wells Fargo Bank, except those set forth below, is or has been at
any time during the past two fiscal years engaged in any other business,
profession, vocation or employment of a substantial nature, except that certain
executive officers also hold various positions with and engage in business for
Wells Fargo & Company. Set forth below are the names and principal businesses
of the directors and executive officers of Wells Fargo Bank who are or during
the past two fiscal years have been engaged in any other business, profession,
vocation or employment of a substantial nature for their own account or in the
capacity of director, officer, employee, partner or trustee. All the directors
of Wells Fargo Bank also serve as directors of Wells Fargo & Company.
<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
Director Properties and 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
</TABLE>
C-4
<PAGE> 95
<TABLE>
<S> <C>
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
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
</TABLE>
C-5
<PAGE> 96
<TABLE>
<S> <C>
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
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
</TABLE>
C-6
<PAGE> 97
<TABLE>
<S> <C>
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
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
</TABLE>
C-7
<PAGE> 98
<TABLE>
<S> <C>
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>
BZW Barclays Global Fund Advisors ("BGFA"), a wholly-owned subsidiary of
BZW Barclays Global Investors, N.A. ("BGI", formerly, Wells Fargo
Institutional Trust Company), serves as sub-adviser to the Asset Allocation,
Corporate Stock and U.S. Government Allocation Master Portfolios of the Trust
and as adviser or sub-adviser to certain other open- end management investment
companies
The directors and officers of BGFA consist primarily of persons who
during the past two years have been active in the investment management
business of the former sub-adviser to the Predecessor Funds, Wells Fargo Nikko
Investment Advisors ("WFNIA") and, in some cases, the service business of BGI.
With the exception of Irving Cohen, each of the directors and executive
officers of BGFA will also have substantial responsibilities as directors
and/or officers of BGI. To the knowledge of the Registrant, except as set
forth below, none of the directors or executive officers of BGFA is or has been
at any time during the past two fiscal years engaged in any other business,
profession, vocation or employment of a substantial nature.
<TABLE>
<CAPTION>
Name and Position Principal Business(es) During at
at BGFA Least the Last Two Fiscal Years
- --------------------- --------------------------------
<S> <C>
Frederick L.A. Grauer Chairman and Director of WFNIA and WFITC+
Chairman, Director
Donald L. Luskin Chief Executive Officer of WFNIA's Defined Contribution Group+
Vice Chairman & Director
</TABLE>
C-8
<PAGE> 99
<TABLE>
<S> <C>
Irving Cohen Chief Financial Officer and Chief Operating Officer of Barclays Bank
Director PLC, New York Branch and Chief Operating Officer of Barclays Group, Inc.
(USA)*: previously Chief Financial Officer of Barclays de Zoete Wedd
Securities Inc. (1994)*
Andrea M. Zolberti Chief Financial Officer of WFNIA and WFITC+
Chief Financial Officer
Vincent J. Bencivenga Previously Vice President at State Street Bank & Trust Company++
Chief Fiduciary Officer
</TABLE>
* 222 Broadway, New York, New York, 10038.
+ 45 Fremont Street, San Francisco, California 94105.
++ One Financial Center, Boston, Massachusetts 02111.
Item 29. Principal Underwriters.
(a) Stephens Inc., placement agent for the Registrant, does not
presently act as investment adviser for any registered investment companies,
but does act as principal underwriter for Overland Express Funds, Inc.,
MasterWorks Funds 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.
(a) The Registrant maintains accounts, books and other
documents required by Section 31(a) of the Investment Company Act of 1940 and
the rules thereunder (collectively, "Records") at the offices of Stephens Inc.,
111 Center Street, Little Rock, Arkansas 72201.
C-9
<PAGE> 100
(b) Wells Fargo Bank maintains all Records relating to its
services as investment adviser, custodian and transfer and dividend disbursing
agent at 525 Market Street, San Francisco, California 94105.
(c) BGFA maintains all Records relating to its services as
sub-adviser to the Asset Allocation, Corporate Stock and U.S. Government
Allocation Master Portfolios at 45 Fremont Street, San Francisco, California
94105.
(d) Stephens maintains all Records relating to its services as
sponsor, administrator and placement agent at 111 Center Street, Little Rock,
Arkansas 72201.
Item 31. Management Services.
Other than as set forth under the captions "Item 5 Management of
the Master Portfolios" 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) 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-10
<PAGE> 101
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 5th day of
September, 1996.
MASTER INVESTMENT TRUST
By: /s/ Richard H. Blank, Jr.
------------------------------
Richard H. Blank, Jr.
Secretary and Treasurer
(Principal Financial Officer)
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
* Chairman, President (Principal
- ------------------------------- Executive Officer) and Trustee
(R. Greg Feltus)
/s/ Richard H. Blank, Jr. Chief Operating Officer,
- -------------------------------
(Richard H. Blank, Jr.) Secretary and Treasurer
(Principal Financial Officer)
* Trustee
- -------------------------------
(Jack S. Euphrat)
* Trustee
- -------------------------------
(Thomas S. Goho)
* Trustee
- -------------------------------
(Zoe Ann Hines)
* Trustee
- -------------------------------
(W. Rodney Hughes)
* Trustee
- -------------------------------
(Robert M. Joses)
* Trustee
- -------------------------------
(J. Tucker Morse)
September 5, 1996
*By: /s/ Richard H. Blank, Jr.
---------------------------
(Richard H. Blank, Jr.)
As Attorney-in-Fact
</TABLE>
<PAGE> 102
MASTER INVESTMENT TRUST
File No. 811-6415
Amendment No. 9 to the
Registration Statement on Form N-1A
Under the Investment Company Act of 1940
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
NUMBER
<S> <C>
EX-99.B1(d) Form of Amendment to the Declaration of Trust
EX-99.B5(i) Form of Investment Advisory Contract on behalf of the Small Cap
Master Portfolio
EX-99.B6 Amended Placement Agency Agreement with Wells Fargo Bank, N.A.
EX-99.B8(a) Custody Agreement with Wells Fargo Bank, N.A.
EX-99.B9(a) Amended Agency Agreement with Wells Fargo Bank, N.A.
EX-99.B9(b) Amended Administration Agreement with Stephens Inc.
</TABLE>
<PAGE> 1
EXHIBIT 99.B1(d)
FORM OF 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;
WHEREAS, the Trustees have, in October of 1995, previously approved
new series of the Trust through their granted powers; namely, the Asset
Allocation Master Portfolio, Corporate Stock Master Portfolio, Tax-Free Money
Market Master Portfolio and U.S. Government Allocation Master Portfolio;
WHEREAS, the Trustees have, in November of 1995, previously approved a
new series of the Trust through their granted powers; namely, the Capital
Appreciation Master Portfolio,
NOW THEREFORE:
The undersigned, being all of the Trustees of Master Investment Trust
(the "Trust"), hereby adopt the following resolutions to establish a new series
to serve as a master portfolio for corresponding feeder funds of Overland
Express Funds, Inc. and Stagecoach Funds, Inc.:
1
<PAGE> 2
RESOLVED, that pursuant to the powers vested in the Trustees, a new
series of Interests be, and hereby is, established and designated as the "Small
Cap Master Portfolio" (the "New Series"); and
FURTHER RESOLVED, that the New Series shall have exactly the same
preferences, privileges, limitations, and rights, including voting and dividend
rights, as the previously existing series; and
FURTHER RESOLVED, that only the Interests in the New Series shall be
subject to the expenses and fees of the New Series; and further, the 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, CAPITAL APPRECIATION 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), SMALL CAP MASTER PORTFOLIO, TAX-FREE
MONEY MARKET MASTER PORTFOLIO, AND U.S. GOVERNMENT ALLOCATION
MASTER PORTFOLIO. "
; and
FURTHER RESOLVED, that the appropriate Officers of the 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
2
<PAGE> 3
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
3
<PAGE> 4
FURTHER RESOLVED, that this instrument is to be filed with the minutes
of the Trust's Board of Trustees.
Dated: AS of September, 1996
----------------------------------
Jack S. Euphrat
Dated: AS of September, 1996
----------------------------------
R. Greg Feltus
Dated: AS of September, 1996
----------------------------------
Thomas S. Goho
Dated: AS of September, 1996
----------------------------------
Zoe Ann Hines
Dated: AS of September, 1996
----------------------------------
W. Rodney Hughes
Dated: AS of September, 1996
----------------------------------
Robert M. Joses
Dated: AS of September, 1996
----------------------------------
J. Tucker Morse
4
<PAGE> 1
EXHIBIT-99.B5(i)
FORM OF
INVESTMENT ADVISORY CONTRACT
MASTER INVESTMENT TRUST
111 Center Street
Little Rock, Arkansas 72201
September, 1996
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 Small Cap 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 nine investment portfolios, but
which may from time to time consist of a greater or lesser number of investment
portfolios (the "Master Portfolios"). The Small Cap Master Portfolio is one of
the nine Master Portfolios. The Trust proposes to engage in the business of
investing and reinvesting the assets of the Master Portfolio in the manner and
in accordance with the investment objective and restrictions specified in the
Trust's Registration Statement, as amended from time to time (the "Registration
Statement"), filed by the Trust under the Investment Company Act of 1940 (the
"Act"). Copies of the Registration Statement have been furnished to the
Adviser. Any amendments to the Registration Statement shall be furnished to
the Adviser promptly.
2. The Trust is engaging the Adviser to manage the
investing and reinvesting of the Master Portfolio's assets and to provide the
advisory services specified elsewhere in this contract to the Master Portfolio,
subject to the overall supervision of the Board of Trustees of the Trust.
Pursuant to an administration agreement between the Trust and an administrator
(the "Administrator") on behalf of the Master Portfolios, the Trust has engaged
the Administrator to provide the administrative services specified therein.
3. (a) The Adviser shall make investments for the
account of the Master Portfolio in accordance with the Adviser's best judgment
and consistent with the investment objective and restrictions set forth in the
Trust's Registration Statement, the Act and the provisions of the Internal
Revenue Code of 1986, as amended, relating to regulated investment companies,
subject to policy decisions adopted by the Trust's Board of Trustees. The
Adviser shall advise the Trust's officers and Board of Trustees, at such times
as the Trust's Board of Trustees may
<PAGE> 2
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 Trust understands that the Adviser, in rendering
its services to the Master Portfolio 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 Trust at
least 60 days' prior written notice thereof.
5. Except as provided in the Trust's advisory contracts
and administration agreement, the Trust shall bear all costs of its operations,
including the compensation of its trustees who are not affiliated with the
Adviser, the Administrator or any of their affiliates; advisory and
administration fees; governmental fees; interest charges; taxes; fees and
expenses of its independent auditors, legal counsel, transfer agent and
dividend disbursing agent; expenses of redeeming Interests; expenses of
preparing and printing Part As, Holders' reports, notices, proxy statements and
reports to regulatory agencies; travel expenses of trustees, officers and
employees; office supplies; insurance premiums and certain expenses relating to
insurance coverage; trade association membership dues; brokerage and other
expenses connected with the execution of portfolio securities transactions;
fees and expenses of any custodian, including those for keeping books and
accounts and calculating the net asset value per share of the Master Portfolio;
expenses of Holders' meetings; expenses relating to the issuance, and any
registration and qualification of, Interests of the Master Portfolio; pricing
services, if any; organizational expenses; and any extraordinary expenses.
Expenses attributable to one or more, but not all, of the Master Portfolios are
to be charged against the assets of the relevant Master Portfolios. General
expenses of the Trust are allocated among the Master Portfolios in a manner
proportionate to the net assets of each Master Portfolio, on a transactional
basis or on such other basis as the Board of Trustees deems equitable.
2
<PAGE> 3
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
0.60% of the average daily value (as determined on each day that such value is
determined for the Master Portfolio at the time set forth in the Registration
Statement for determining net asset value per share) of the Master Portfolio's
net assets during the preceding month. If the fee payable to the Adviser
pursuant to this paragraph 7 begins to accrue after the beginning of any month
or if this contract terminates before the end of any month, the fee for the
period from the effective date to the end of that month or from the beginning
of that month to the termination date, respectively, shall be prorated
according to the proportion that the period bears to the full month in which
the effectiveness or termination occurs. For purposes of calculating each such
monthly fee, the value of the Master Portfolio's net assets shall be computed
in the manner specified in the Registration Statement and the Trust's
Declaration of Trust for the computation of the value of the Master Portfolio's
net assets in connection with the determination of the net asset value of
Master Portfolio Interests.
8. If in any fiscal year the total expenses of the
Master Portfolio or any registered investment company investing in the Master
Portfolio ("Investing Company") incurred by, or allocated to, the Master
Portfolio or any Investing Company, excluding taxes, interest, brokerage
commissions and other portfolio transaction expenses, other expenditures that
are capitalized in accordance with generally accepted accounting principles,
extraordinary expenses and amounts accrued or paid under any Rule 12b-1 Plan,
but including the fees provided for in paragraph 7 and those provided for
pursuant to the Master Portfolio's and/or Investing Company's administration
agreement ("includable expenses"), exceed the most restrictive expense
limitation applicable to the Master Portfolio and/or Investing Company imposed
by state securities laws or regulations thereunder, as these limitations may be
raised or lowered from time to time, the Adviser shall waive or reimburse that
portion of the excess derived by multiplying the excess by a fraction, the
numerator of which shall be the percentage at which the excess portion
attributable to the fee payable pursuant to this contract is calculated under
paragraph 7 hereof, and the denominator of which shall be the sum of such
percentage plus the percentage at which the excess portion attributable to the
fee payable pursuant to the Master Portfolio's and/or Investing Company's
administration agreement is calculated (the "Applicable Ratio"), but only to
the extent of the fee hereunder for the fiscal year. If the fees payable under
this contract and/or the Master Portfolio's and/or Investing Company's
administration agreement contributing to such excess portion are calculated at
more than one percentage rate, the Applicable Ratio shall be calculated
separately on
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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 on 60 days' written notice to the Trust. This
contract shall terminate automatically in the event of its assignment (as
defined in the Act).
10. Except to the extent necessary to perform the
Adviser's obligations under this contract, nothing herein shall be deemed to
limit or restrict the right of the Adviser, or any affiliate of the Adviser, or
any employee of the Adviser, to engage in any other business or to devote time
and attention to the management or other aspects of any other business, whether
of a similar or dissimilar nature, or to render services of any kind to any
other corporation, firm, individual or association.
11. Pursuant to Article V of the Trust's Declaration of
Trust, no Trustee, officer, employee or agent of the Trust shall be subject to
any personal liability whatsoever, in his or her official or individual
capacity to any person, other than to the Trust or its Holders, in connection
with Trust property or the affairs of the Trust, save only that arising from
his or her bad faith, willful misfeasance, gross negligence or reckless
disregard of his or her duty to such person; and all such persons shall look
solely to the Trust property (which may include any applicable insurance) for
satisfaction of claims of any nature against a Trustee, officer, employee or
agent of the Trust arising in connection with the affairs of the Trust. Each
Holder shall be jointly and severally liable (with rights of contribution inter
se in proportion to their respective Interests in the
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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.
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If the foregoing correctly sets forth the agreement between
the Trust and the Adviser, please so indicate by signing and returning to the
Trust the enclosed copy hereof.
Very truly yours,
MASTER INVESTMENT TRUST,
on behalf of the Small Cap 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
<PAGE> 1
EXHIBIT-99.B6
AMENDED PLACEMENT AGENT AGREEMENT
MASTER INVESTMENT TRUST
45 Fremont Street
San Francisco, California 94105
May 4, 1994
Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
Gentlemen:
This is to confirm that, in consideration of the agreements
hereinafter contained, the undersigned, MASTER INVESTMENT TRUST (the "Trust"),
an open-end, diversified management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), organized as a
Delaware business trust and consisting of the Master Portfolios named on
Schedule 1, as such Schedule may be revised from time to time, has agreed that
Stephens Inc. ("Stephens") shall be the exclusive placement agent (the
"Placement Agent") of beneficial interests of the Trust ("Interests").
1. Services as Placement Agent.
1.1 Stephens will act as Placement Agent of the Interests
covered by the registration statement then in effect under the 1940 Act. In
acting as Placement Agent under this Placement Agent Agreement ("Agreement"),
neither Stephens nor its employees or agents shall make any offer or sale of
Interests in a manner which would require the Interests to be registered under
the Securities Act of 1933, as amended (the "1933 Act").
1.2 All activities by Stephens (and its employees and agents)
as Placement Agent of Interests shall comply with all applicable laws, rules
and regulations, including without limitation, all rules and regulations
adopted pursuant to the 1940 Act by the Securities and Exchange Commission (the
"Commission").
1.3 The Trust shall sell through Stephens, as the Trust's
Placement Agent, and deliver, upon the terms set forth herein, Interests that
the Placement Agent orders from the Trust and for which the Placement Agent has
received and confirmed unconditional purchase orders. All orders from the
Placement Agent shall be subject to acceptance and confirmation by the Trust.
The Trust reserves the right to sell Interests to investors to the extent that
it or the Placement Agent for its Interests receives purchase applications
therefor. The Placement Agent's right to accept purchase orders for Interests
or to make sales thereof shall not apply to Interests that may be offered by
the Trust to its Interest holders in connection with the reinvestment of cash
distributed to its Interest holders by the Trust, unless the Placement Agent is
otherwise notified by the Trust.
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1.4 The Trust shall furnish from time to time for use in
connection with the sale of Interests such information with respect to the
Trust and Interests as Stephens may reasonably request. The Trust shall also
furnish Stephens upon request with: (a) unaudited semiannual statements of the
Trust's books and accounts prepared by the Trust, and (b) from time to time
such additional information regarding the Trust's financial or regulatory
condition as Stephens may reasonably request.
1.5 The Trust represents to Stephens that all registration
statements filed by the Trust with the Commission under the 1940 Act with
respect to Interests have been prepared in conformity with the requirements of
such statute and the rules and regulations of the Commission thereunder. As
used in this Agreement, the term "registration statement" shall mean any
registration statement filed with the Commission, as modified by any amendments
thereto that at any time shall have been filed with the Commission by or on
behalf of the Trust. The Trust represents and warrants to Stephens that any
registration statement will contain all statements required to be stated
therein in conformity with such statute and the rules and regulations of the
Commission; that all statements of fact contained in any registration statement
will be true and correct in all material respects at the time of filing of such
registration statement or amendment thereto; and that no registration statement
will include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading to a purchaser of Interests. The Trust may, but shall not be
obligated to, prepare and file from time to time such amendment and/or
supplement to any registration statement as in the light of future developments
may, in the opinion of the Trust's counsel, be necessary or advisable. If the
Trust does not prepare and file such amendment and/or supplement within fifteen
days after receipt by the Trust of a written request from Stephens to do so,
Stephens may, at its option, terminate this Agreement. The Trust shall not
file any amendment and/or supplement to any registration statement without
giving Stephens reasonable notice thereof in advance; provided, however, that
nothing contained in this Agreement shall in any way limit the Trust's right to
file at any time such amendment and/or supplement to any registration statement
as the Trust may deem necessary, such right being in all respects absolute and
unconditional.
1.6 The Trust agrees to indemnify, defend and hold Stephens,
its several officers and directors, and any person who controls Stephens within
the meaning of Section 15 of the 1933 Act or Section 20 of the Securities and
Exchange Act of 1934, as amended (the "1934 Act") (for purposes of this
paragraph 1.6, collectively, "Covered Persons"), free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which any Covered Person may
incur under the 1933 Act, the 1934 Act, or otherwise, arising out of or based
on any untrue statement of a material fact contained in any registration
statement, private placement memorandum or other offering material ("Offering
Material") or arising out of or based on any omission to state a material fact
required to be stated in any Offering Material or necessary to make the
statements contained in any Offering Material not misleading; provided,
however, that the Trust's agreement to indemnify Covered Persons shall not be
deemed to cover any claims, demands, liabilities or expenses arising out of any
financial and other statements as are furnished in writing to the Trust by
Stephens in its capacity as Placement
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Agent for use in the answers to any items of any registration statement or in
any statements made in any Offering Material, or arising out of or based on any
omission or alleged omission to state a material fact in connection with the
giving of such information required to be stated in such answers or necessary
to make the answers not misleading; and further provided that the Trust's
agreement to indemnify Stephens and the Trust's representations and warranties
hereinbefore set forth in paragraph 1.5 shall not be deemed to cover any
liability to the Trust or its investors to which a Covered Person would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of a Covered Person's
reckless disregard of its obligations and duties under this Agreement. The
Trust should be notified of any action brought against a Covered Person, such
notification to be given by letter or by telegram addressed to the Trust at is
principal office promptly after the summons or other first legal process shall
have been duly and completely served upon such Covered Person. The failure to
so notify the Trust of any such action shall not relieve the Trust from any
liability, except to the extent the Trust shall have been prejudiced by such
failure, or from any liability that the Trust may have to the Covered Person
against whom such action is brought by reason of any such untrue statement or
omission, otherwise than on account of the Trust's indemnity agreement
contained in this paragraph. The Trust will be entitled to assume the defense
of any suit brought to enforce any such claim, demand or liability, but in such
case such defense shall be conducted by counsel of good standing chosen by the
Trust and approved by Stephens, which approval shall not be unreasonably
withheld. In the event the Trust elects to assume the defense of any such suit
and retain counsel of good standing approved by Stephens, the defendant or
defendants in such suit shall bear the fees and expenses of any additional
counsel retained by any of them; but in case the Trust does not elect to assume
the defense of any such suit, or in case Stephens reasonably does not approve
of counsel chosen by the Trust, the Trust will reimburse the Covered Person
named as defendant in such suit, for the fees and expenses of any counsel
retained by Stephens or the Covered Persons. The Trust's indemnification
agreement contained in this paragraph and the Trust's representations and
warranties in this Agreement shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of Covered Persons,
and shall survive the delivery of any Interests. This agreement of indemnity
will inure exclusively to Covered Persons and their successors. The Trust
agrees to notify Stephens promptly of the commencement of any litigation or
proceedings against the Trust or any of its officers or Trustees in connection
with the issue and sale of any Interests.
1.7 Stephens agrees to indemnify, defend and hold the Trust,
its several officers and trustees, and any person who controls the Trust within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act (for
purposes of this paragraph 1.7, collectively, "Covered Persons") free and
harmless from and against any and all claims, demands, liabilities and expenses
(including the costs of investigating or defending such claims, demands,
liabilities and any counsel fees incurred in connection therewith) that Covered
Persons may incur under the 1933 Act, the 1934 Act or common law or otherwise,
but only to the extent that such liability or expense incurred by a Covered
Person resulting from such claims or demands shall arise out of or be based on
any untrue statement of a material fact contained in information furnished in
writing by Stephens in its capacity as Placement Agent to the Trust for use in
the answers to any of the items of any registration statement or in any
statements in any other Offering Material or shall arise out of or be based on
any omission to state a material fact in connection with such information
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furnished in writing by Stephens to the Trust required to be stated in such
answers or necessary to make such information not misleading. Stephens shall
be notified of any action brought against a Covered Person, such notification
to be given by letter or telegram addressed to Stephens at its principal office
promptly after the summons or other first legal process shall have been duly
and completely served upon such Covered Person. Stephens shall have the right
of first control of the defense of the action with counsel of its own choosing
satisfactory to the Trust if such action is based solely on such alleged
misstatement or omission on Stephens' part, and in any other event each Covered
Person shall have the right to participate in the defense or preparation of the
defense of any such action. The failure to so notify Stephens of any such
action shall not relieve Stephens from any liability, except to the extent the
Trust shall have been prejudiced by such failure, or from any liability that
Stephens may have to Covered Persons by reason of any such untrue or alleged
untrue statement, or omission or alleged omission, otherwise than on account of
Stephens' indemnity agreement contained in this paragraph.
1.8 No Interests shall be offered by either Stephens or the
Trust under any of the provisions of this Agreement and no orders for the
purchase or sale of Interests hereunder shall be accepted by the Trust if and
so long as the effectiveness of the registration statement or any necessary
amendments thereto shall be suspended under any of the provisions of the 1940
Act; provided, however, that nothing contained in this paragraph shall in any
way restrict or have an application to or bearing on the Trust's obligation to
redeem Interests from any investor in accordance with the provisions of the
Trust's registration statement or Declaration of Trust, as amended from time to
time.
1.9 The Trust agrees to advise Stephens as soon as reasonably
practical by a notice in writing delivered to Stephens or its counsel:
(a) of any request by the Commission for amendments to
the registration statement then in effect or for additional information;
(b) in the event of the issuance by the Commission of
any stop order suspending the effectiveness of the registration statement then
in effect or the initiation by service of process on the Trust of any
proceeding for that purpose;
(c) of the happening of any event that makes untrue any
statement of a material fact made in the registration statement then in effect
or that requires the making of a change in such registration statement in order
to make the statements therein not misleading; and
(d) of all action of the Commission with respect to any
amendment to any registration statement that may from time to time be filed
with the Commission.
For purposes of this paragraph 1.9, informal requests by or acts
of the Staff of the Commission shall not be deemed actions of or requests by
the Commission.
1.10 Stephens agrees on behalf of itself and its employees to
treat confidentially and as proprietary information of the Trust all records
and other information not otherwise publicly
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available relative to the Trust and its prior, present or potential investors
and not to use such records and information for any purpose other than
performance of its responsibilities and duties hereunder, except after prior
notification to and approval in writing by the Trust, which approval shall not
be unreasonably withheld and may not be withheld where Stephens may be exposed
to civil or criminal contempt proceedings for failure to comply, when requested
to divulge such information by duly constituted authorities, or when so
requested by the Trust.
1.11 In addition to Stephens' duties as Placement Agent, the
Trust understands that Stephens may, in its discretion, perform additional
functions in connection with transactions in Interests.
The processing of Interest transactions may include, but is not
limited to, compilation of all transactions from Stephens' various offices;
creation of a transaction tape and timely delivery of it to the Trust's
transfer agent for processing; reconciliation of all transactions delivered to
the Trust's transfer agent; the recording and reporting of these transactions
executed by the Trust's transfer agent in customer statements; rendering of
periodic customer statements; and the reporting of IRS Form 1099 information at
year end, if required.
Stephens may also provide other investor services, such as
communicating with Trust investors and other functions in administering
customer accounts for Trust investors.
Stephens understands that these services may result in cost
savings to the Trust or to the Trust's investment adviser and neither the Trust
nor the Trust's investment adviser will compensate Stephens for all or a
portion of the costs incurred in performing functions in connection with
transactions in Interests. Nothing herein is intended, nor shall be construed,
as requiring Stephens to perform any of the foregoing functions.
2. Term.
This Agreement shall become effective on the date first above
written and, unless sooner terminated as provided herein, shall continue until
its second anniversary and thereafter shall continue automatically for
successive annual periods, provided such continuance is specifically approved
at least annually by (i) the Trust's Board of Trustees or (ii) by a vote of a
majority (as defined in the 1940 Act) of the Trust's outstanding voting
securities, provided that in either event the continuance is also approved by
the majority of the Trust's Trustees who are not interested persons (as defined
in the 1940 Act) of the Trust and who have no direct or indirect financial
interest in this Agreement, by vote cast in person at a meeting called for the
purpose of voting on such approval. This Agreement is terminable without
penalty, on not less than 60 days' notice, by the Board, by vote of a majority
(as defined in the 1940 Act) of the Trust's outstanding voting securities, or
by Stephens. This Agreement also will terminate automatically in the event of
its assignment (as defined in the 1940 Act and the rules thereunder).
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3. Representations and Warranties.
Stephens and the Trust each hereby represents and warrants to the
other that it has all requisite authority to enter into, execute, deliver and
perform its obligations under this Agreement and that, with respect to it, this
Agreement is legal, valid and binding, and enforceable in accordance with its
terms.
4. Concerning Applicable Provisions of Law, etc.
This Agreement shall be subject to all applicable provisions of
law, including the applicable provisions of the 1940 Act, and to the extent
that any provisions herein contained conflict with any such applicable
provisions of law, the latter shall control.
This Agreement is executed and delivered in Little Rock, Arkansas
and the laws of the State of Arkansas shall, except to the extent that any
applicable provisions of federal law shall be controlling, govern the
construction, validity and effect of this Agreement, without reference to
principles of conflicts of law.
If the contract set forth herein is acceptable to you, please so
indicate by executing the enclosed copy of this Agreement and returning the
same to the undersigned, whereupon this Agreement shall constitute a binding
contract between the parties hereto effective at the closing of business on the
date hereof.
Yours very truly,
MASTER INVESTMENT TRUST
By: /s/Richard H. Blank, Jr.
------------------------
Name: Richard H. Blank, Jr.
---------------------
Title: Chief Operating Officer
-----------------------
Accepted:
STEPHENS INC.
By: /s/Richard H. Blank, Jr.
------------------------
Name: Richard H. Blank, Jr.
---------------------
Title: Vice President
--------------
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SCHEDULE 1
Asset Allocation Master Portfolio
Capital Appreciation Master Portfolio
Cash Investment Trust Master Portfolio
Corporate Stock Master Portfolio
Short-Term Municipal Income Master Portfolio
Short-Term Government-Corporate Income Master Portfolio
Small Cap Master Portfolio
Tax-Free Money Market Master Portfolio
U.S. Government Allocation Master Portfolio
Dated: May 4, 1994
As Amended: October 10, 1995
As Amended: August 28-29, 1996
<PAGE> 1
EXHIBIT-99.B8(a)
CUSTODY AGREEMENT
This Agreement is made as of the 4th day of May, 1994 (the
"Agreement"), by and between MASTER INVESTMENT TRUST, on behalf of the Master
Portfolios listed on the attached Appendix A (each a "Series"), and WELLS FARGO
BANK, N.A. (the "Custodian").
W I T N E S S E T H :
That for and in consideration of the mutual promises hereinafter set forth the
Series and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meaning:
1. "Authorized Person" shall be deemed to include the treasurer,
the controller or any other person, whether or not any such person is an
Officer or employee of the Trust, duly authorized by the Board of Trustees
("Trustees") of the Trust to give Oral Instructions and Written Instructions on
behalf of the Trust and listed in the Certificate attached hereto as Appendix B
or such other Certificate as may be received from time to time by the
Custodian.
2. "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and Federal agency securities, its
successor(s) and its nominee(s).
3. "Certificate" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement to be given to
the Custodian, which is actually received by the Custodian and signed on behalf
of the Series by any two Officers of the Trust.
4. "Clearing Member" shall mean a registered broker-dealer which
is a member of a national securities exchange qualified to act as a custodian
for an investment company, or any broker-dealer reasonably believed by the
Custodian to be such a clearing member.
5. "Depository" shall mean The Depository Trust Company ("DTC"),
a clearing agency registered with the Securities and Exchange Commission, its
successor or successors and its nominee or nominees, provided the Custodian has
received a certified copy of a resolution of the Trust's Trustees specifically
approving deposits in DTC. The term "Depository" shall further mean and
include any person authorized to act as a depository under the Investment
Company Act of 1940, its successor(s) and its nominee(s), specifically
identified in a certified copy of a resolution of the Trust's Trustees
specifically approving deposits therein by the Custodian.
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6. "Margin Account" shall mean a segregated account in the name
of a broker, dealer, or Clearing Member, or in the name of the Series for the
benefit of a broker, dealer, or Clearing Member, or otherwise, in accordance
with an agreement between the Series, the Custodian and a broker, dealer, or
Clearing Member (a "Margin Account Agreement"), separate and distinct from the
custody account, in which certain Securities and/or money of the Series shall
be deposited and withdrawn from time to time in connection with such
transactions as the Series may from time to time determine. Securities held in
the Book-Entry System or the Depository shall be deemed to have deposited in,
or withdrawn from, a Margin Account upon the Custodian's effecting an
appropriate entry on its books and records.
7. "Money Market Securities" shall be deemed to include, without
limitation, debt obligations issued or guaranteed as to principal and interest
by the government of the United States or agencies or instrumentalities
thereof, commercial paper, certificates of deposit and bankers' acceptances,
repurchase and reverse repurchase agreements with respect to the same and bank
time deposits, where the purchase and sale of such securities normally requires
settlement in Federal funds on the same date as such purchase or sale.
8. "Officers" shall be deemed to include the President, and Vice
President, the Secretary, the Treasurer, the Controller, any Assistant
Secretary, any Assistant Treasurer or any other person or persons duly
authorized by the Trustees of the Trust to execute any Certificate,
instruction, notice or other instrument on behalf of the Series and listed in
the Certificate attached hereto as Appendix C or such other Certificate as may
be received by the Custodian from time to time.
9. "Oral Instructions" shall mean verbal instructions actually
received by the Custodian from an Authorized Person or from a person reasonably
believed by the Custodian to be an Authorized Person.
10. "Reverse Repurchase Agreement" shall mean an agreement
pursuant to which the Series sells Securities and agrees to repurchase such
Securities at a described or specified date and price.
11. "Security" or "Securities" shall be deemed to include,
without limitation, Money Market Securities, Reverse Repurchase Agreements,
common stock and other instruments or rights having characteristics similar to
common stocks, preferred stocks, debt obligations issued by state or municipal
governments and by public authorities (including, without limitation, general
obligations bonds), bonds, debentures, notes, mortgages or other obligations,
and any certificates, receipts, warrants or other instruments representing
rights to receive, purchase, sell or subscribe for the same, or evidencing or
representing any other rights or interest therein, or any property or assets.
12. "Segregated Security Account" shall mean an account
maintained under the terms of this Agreement as a segregated account, by
recordation or otherwise, within the custody account in which certain
Securities and/or other assets of the Series shall be deposited and
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withdrawn from time to time in accordance with Certificates received by the
Custodian in connection with such transactions as the Series may from time to
time determine.
13. "Shares" shall mean the shares of beneficial interest of the
Trust, each of which, in the case of a Trust having Series, is allocated to a
particular Series.
14. "Written Instructions" shall mean written communications
actually received by the Custodian from an Authorized Person or from a person
reasonably believed by the Custodian to be an Authorized Person by telex or any
other such system whereby the receiver of such communications is able to verify
by codes or otherwise with a reasonable degree of certainty the authenticity of
the sender of such communication.
ARTICLE II
APPOINTMENT OF A CUSTODIAN
15. The Trust hereby constitutes and appoints the Custodian as
custodian of all the Securities and moneys at any time owned by the Series
during the term of this Agreement.
16. The Custodian hereby accepts appointment as such custodian
and agrees to perform all the duties thereof as set forth in this Agreement.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
17. Except as otherwise provided in Article V, the Series will
deliver or cause to be delivered to the Custodian all Securities and all moneys
owned by it, including cash received for the issuance of its Shares, at any
time during the term of this Agreement. The Custodian will not be responsible
for such Securities and such moneys until actually received by it. The
Custodian will be entitled to reverse any credits made on the Series behalf
where such credits have been previously made and moneys are not finally
collected. The Series shall deliver to the Custodian a certified resolution of
the Trustees of the Trust authorizing and instructing the Custodian on a
continuous and ongoing basis to deposit in the Book-Entry System all Securities
eligible for deposit therein and to utilize the Book-Entry System to the extent
possible in connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and sales of
Securities, loans of Securities, and deliveries and returns of Securities
collateral. Prior to a deposit of Securities of the Series in the Depository,
the Series shall deliver to the Custodian a certified resolution of the
Trustees of the Trust approving, authorizing and instructing the Custodian on a
continuous and ongoing basis until instructed to the contrary by a Certificate
actually received by the Custodian to deposit in the Depository all Securities
eligible for deposit therein and to utilize the Depository to the extent
possible in connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and sales of
Securities, loans of Securities, and deliveries and returns of Securities
collateral. Securities and moneys of the Series deposited in either the
Book-Entry System or the Depository
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will be represented in accounts which include only assets held by the Custodian
for customers, including, but not limited to, accounts in which the Custodian
acts in a fiduciary or representative capacity.
18. The Custodian shall credit to a separate account in the name
of the Series all moneys received by it for the account of the Series, and
shall disburse the same only:
(a) In payment for Securities purchased, as provided in Article
IV hereof;
(b) In payment of dividends or distributions, as provided in
Article VIII hereof;
(c) In payment of original issue or other taxes, as provided in
Article IX hereof;
(d) In payment for Shares redeemed by it, as provided in Article
IX hereof;
(e) Pursuant to Certificates setting forth the name and addresses
of the person to whom the payment is to be made, and the purpose for which
payment is to be made; or
(f) In payment of the fees and in reimbursement of the expenses
and liabilities of the Custodian, as provided in Article XII hereof.
19. Promptly after the close of business on each day, the
Custodian shall furnish the Series with confirmations and a summary of all
transfers to or from the account of the Series during said day. Where
Securities are transferred to the account of the Series, the Custodian shall
also by book-entry or otherwise identify as belonging to the Series a quantity
of Securities in a fungible bulk of Securities registered in the name of the
Custodian (or its nominee) or shown on the Custodian's account on the books of
the Book-Entry System or the Depository. The Custodian shall furnish the
Series at least monthly with a detailed statement of the Securities and moneys
held for the Series under this Agreement.
20. Except as otherwise provided in Article V, all Securities
held for the Series, which are issued or issuable only in bearer form, except
such Securities as are held in the Book-Entry System, shall be held by the
Custodian in that form; all other Securities held for the Series may be
registered in the name of the Series, in the name of any duly appointed
registered nominee of the Custodian as the Custodian may from time to time
determine, or in the name of the Book-Entry System or the Depository or their
successor(s) or their nominee(s). The Series agrees to furnish to the
Custodian appropriate instruments to enable the Custodian to hold or deliver in
proper form for transfer, or to register in the name of its registered nominee
or in the name of the Book-Entry System or the Depository, any Securities which
it may hold for the account of the Series and which may from time to time be
registered in the name of the Series. The Custodian shall hold all such
Securities which are not held in the Book-Entry System or in the Depository in
a separate account in the name of the Series physically segregated at all times
from those of any other person or persons.
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5. Except as otherwise provided in this Agreement and unless
otherwise instructed to the contrary by a Certificate, the Custodian by itself,
or through the use of the Book-Entry System or the Depository with respect to
the Securities therein deposited, shall with respect to all Securities held for
the Series in accordance with this Agreement:
(a) Collect all income due or payable;
(b) Present for payment and collect the amount payable upon such
Securities which are called, but only if either (i) the Custodian receives a
written notice of such call, or (ii) notice of such call appears in one or more
of the publications listed in Appendix D annexed hereto, which may be amended
at any time by the Custodian upon five business days' prior notifications to
the Series;
(c) Present for payment and collect the amount payable upon all
Securities which mature;
(d) Surrender Securities in temporary form for definitive
Securities;
(e) Execute, as Custodian, any necessary declarations or
certificates of ownership under the Federal income tax laws or the laws or
regulations of any other taxing authority now or hereafter in effect; and
(f) Hold directly, or through the Book-Entry System or the
Depository with respect to Securities therein deposited, for the account of the
Series all rights and similar securities issued with respect to any Securities
held by the Custodian hereunder.
6. Upon receipt of a Certificate and not otherwise, the
Custodian, directly or through the use of the Book-Entry System or the
Depository, shall:
(a) Execute and deliver to such persons as may be designated in
such Certificate proxies, consents, authorizations, and any other instruments
whereby the authority of the Series as owner of any Securities may be
exercised;
(b) Deliver any Securities held for the Series in exchange for
other Securities or cash issued or paid in connection with the liquidation,
reorganization, refinancing, merger, consolidation or recapitalization of any
corporation, or the exercise of any conversion privilege;
(c) Deliver any Securities held for the Series to any protective
committee, reorganization committee or other person in connection with the
reorganization, refinancing, merger, consolidation, recapitalization or sale of
assets of any corporation, and receive and hold under the terms of this
Agreement such certificates of deposit, interim receipts or other instruments
or documents as may be issued to it to evidence such delivery;
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(d) Make such transfer or exchanges of the assets of the Series
and take such other steps as shall be stated in said order to be for the
purpose of effectuating any duly authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of the Series; and
(e) Present for payment and collect the amount payable upon
Securities not described in preceding paragraph 5(b) of this Article which may
be called as specified in the Certificate.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE MASTER PORTFOLIO
21. Promptly after each purchase or sale (as applicable) of
Securities by the Series, other than a purchase or sale of any Reverse
Repurchase Agreement, the Series shall deliver to the Custodian (i) with
respect to each purchase or sale of Securities which are not Money Market
Securities, a Certificate; and (ii) with respect to each purchase or sale of
Money Market Securities, a Certificate, Oral Instructions or Written
Instructions, specifying with respect to each such purchase or sale: (a) the
name of the issuer and the title of the Securities; (b) the number of shares or
the principal amount purchased or sold and accrued interest, if any; (c) the
date of purchase or sale and settlement date; (d) the purchase or sale price
per unit; (e) the total amount payable upon such purchase or sale; (f) the name
of the person from whom or the broker through whom the purchase or sale was
made, and the name of the clearing broker, if any; (g) in the case of a
purchase, the name of the broker to which payment is to be made; and (h) in the
case of a sale, the name of the broker to whom the Securities are to be
delivered. In the case of a purchase, the Custodian shall, upon receipt of
Securities purchased by or for the Series, pay out of the moneys held for the
account of the Series the total amount payable to the person from whom, or the
broker through whom, the purchase was made, provided that the same conforms to
the total amount payable as set forth in such Certificate, Oral Instructions or
Written Instructions. In the case of a sale, the Custodian shall deliver the
Securities upon receipt of the total amount payable to the Series upon such
sale, provided that the same conforms to the total amount payable as set forth
in such Certificate, Oral Instructions or Written Instructions. Subject to the
foregoing, the Custodian may accept payment in such form as shall be
satisfactory to it, and may deliver Securities and arrange for payment in
accordance with the customs prevailing among dealers in securities.
ARTICLE V
SHORT SALES
22. Promptly after any short sale, the Series shall deliver to
the Custodian a Certificate specifying: (a) the name of the issuer and the
title of the Security; (b) the number of shares or principal amount sold, and
accrued interest or dividends, if any; (c) the dates of the sale and
settlement; (d) the sale price per unit; (e) the total amount credited to the
Series upon such sales, if any (f) the amount of cash and/or the amount and
kind of Securities, if any, which are to be deposited in a Margin Account and
the name in which such Margin Account has been or is to be established; (g) the
amount of cash and/or the amount and kind of Securities, if any, to be
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deposited in a Segregated Security Account; and (h) the name of the broker
through which such short sale was made. The Custodian shall upon its receipt
of a statement from such broker confirming such sale and that the total amount
credited to the Series upon such sale, if any, as specified in the Certificate
is held by such broker for the account of the Custodian (or any nominee of the
Custodian) as custodian of the Series, issue a receipt or make the deposits
into the Margin Account and the Segregated Security Account specified in the
Certificate.
23. In connection with the closing-out of any short sale, the
Series shall promptly deliver to the Custodian a Certificate specifying with
respect to each such closing-out: (a) the name of the issuer and the title of
the Security; (b) the number of shares or the principal amount, and accrued
interest or dividends, if any, required to effect such closing-out to be
delivered to the broker; (c) the dates of the closing-out and settlement; (d)
the purchase price per unit; (e) the net total amount payable to the Series
upon such closing-out; (f) the net total amount payable to the broker upon such
closing-out; (g) the amount of cash and the amount and kind of Securities, if
any, to be withdrawn, from the Margin Account; (h) the amount of cash and/or
the amount and kind of Securities, if any, to be withdrawn from the Segregated
Security Account; and (i) the name of the broker through which the Series is
effecting such closing-out. The Custodian shall, upon receipt of the net total
amount payable to the Series upon such closing-out and the return and/or
cancellation of the receipts, if any, issued by the Custodian with respect to
the short sale being closed-out, pay out the moneys held for the account of the
Series to the broker the net total amount payable to the broker, and make the
withdrawals from the Margin Account and the Segregated Security Account, as the
same are specified in the Certificate.
ARTICLE VI
REVERSE REPURCHASE AGREEMENTS
24. Promptly after the Series enters into a Reverse Repurchase
Agreement with respect to Securities and money held by the Custodian hereunder,
the Series shall deliver to the Custodian a Certificate, or in the event such
Reverse Repurchase Agreement is a Money Market Security, a Certificate, Oral
Instructions or Written Instructions specifying: (a) the total amount payable
to the Series in connection with such Reverse Repurchase Agreement; (b) the
broker or dealer through or with which the Reverse Repurchase Agreement is
entered; (c) the amount and kind of Securities to be delivered by the Series to
such broker or dealer; (d) the date of such Reverse Repurchase Agreement; and
(e) the amount of cash and/or the amount and kind of Securities, if any, to be
deposited in a Segregated Security Account in connection with such Reverse
Repurchase Agreement. The Custodian shall, upon receipt of the total amount
payable to the Series specified in the Certificate, Oral Instructions or
Written Instructions make the delivery to the broker or dealer, and the
deposits, if any, to the Segregated Security Account, specified in such
Certificate, Oral Instructions or Written Instructions.
25. Upon the termination of a Reverse Repurchase Agreement
described in paragraph 1 of this Article VI, the Series shall promptly deliver
a Certificate or, in the event such Reverse Repurchase Agreement is a Money
Market Security, a Certificate, Oral Instructions or Written Instructions to
the Custodian specifying: (a) the Reverse Repurchase Agreement being
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terminated; (b) the total amount payable by the Series in connection with such
termination; (c) the amount and kind of Securities to be received by the Series
in connection with such termination; (d) the date of termination; (e) the name
of the broker or dealer with or through which the Reverse Repurchase Agreement
is to be terminated; and (f) the amount of cash and/or the amount and kind of
Securities to be withdrawn from the Segregated Security Account. The Custodian
shall, upon receipt of the amount and kind of Securities to be received by the
Series specified in the Certificate, Oral Instructions or Written Instructions,
make the payment to the broker or dealer, and the withdrawals, if any, from the
Segregated Security Account, specified in such Certificate, Oral Instructions
or Written Instructions.
ARTICLE VII
MARGIN ACCOUNTS, SEGREGATED SECURITY
ACCOUNTS AND COLLATERAL ACCOUNTS
26. The Custodian shall, from time to time, make such deposits
to, or withdrawals from, a Segregated Security Account as specified in a
Certificate received by the Custodian. Such Certificate shall specify the
amount of cash and/or the amount and kind of Securities to be deposited in, or
withdrawn from, the Segregated Security Account. In the event that the Series
fails to specify in a Certificate the name of the issuer, the title and the
number of shares or the principal amount of any particular Securities to be
deposited by the Custodian into, or withdrawn from, a Segregated Securities
Account, the Custodian shall be under no obligation to make any such deposit or
withdrawal and shall so notify the Series.
27. The Custodian shall make deliveries or payments from a Margin
Account to the broker, dealer or Clearing Member in whose name, or for whose
benefit, the account was established as specified in the Margin Account
Agreement.
28. Amounts received by the Custodian as payments or
distributions with respect to Securities deposited in any Margin Account shall
be dealt with in accordance with the terms and conditions of the Margin Account
Agreement.
29. The Custodian shall have a continuing lien and security
interest in and to any property at any time held by the Custodian in any
Collateral Account described herein.
30. On each business day, the Custodian shall furnish the Series
with a statement with respect to each Margin Account in which money or
Securities are held specifying as of the close of business on the previous
business day: (a) the name of the Margin Account; (b) the amount and kind of
Securities held therein; and (c) the amount of money held therein. The
Custodian shall make available upon request to any broker or dealer specified
in the name of a Margin Account a copy of the statement furnished the Series
with respect to such Margin Account.
31. Promptly after the close of business on each business day in
which cash and/or Securities are maintained in a Collateral Account, the
Custodian shall furnish the Series with a statement with respect to such
Collateral Account specifying the amount of cash and/or the
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amount and kind of Securities held therein. No later than the close of
business next succeeding the delivery to the Series of such statement, the
Series shall furnish to the Custodian a Certificate or Written Instructions
specifying the then market value of the Securities described in such statement.
ARTICLE VIII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
32. The Series shall furnish to the Custodian a copy of the
resolution of the Trustees of the Trust, certified by the Secretary or any
Assistant Secretary, either (i) setting forth the date of the declaration of a
dividend or distribution, the date of payment thereof, the record date as of
which shareholders entitled to payment shall be determined, the amount payable
per share to the shareholders of record as of that date and the total amount
payable to the Dividend Agent of the Series on the payment date, or (ii)
authorizing the declaration of dividends and distributions on a daily basis or
some other periodic basis and authorizing the Custodian to rely on Oral
Instructions, Written Instructions or a Certificate setting forth the date of
the declaration of such dividend or distribution, the date of payment thereof,
the record date as of which shareholders entitled to payment shall be
determined, the amount payable per share to the shareholders of record as of
that date and the total amount payable to the Dividend Agent on the payment
date.
33. Upon the payment date specified in such resolution, Oral
Instructions, Written Instructions or Certificate, the Custodian shall pay out
the moneys held for the account of the Series the total amount payable to the
Dividend Agent of the Series.
ARTICLE IX
SALE AND REDEMPTION OF SHARES
34. Whenever the Series shall sell any of its Shares, it shall
deliver to the Custodian a Certificate duly specifying the number of Shares
sold, trade date, price and the amount of money to be received by the Custodian
for the sale of such Shares.
35. Upon receipt of such money from the Transfer Agent or
Co-Transfer Agent, the Custodian shall credit such money to the account of the
Series.
36. Upon issuance of any of the Series Shares in accordance with
the foregoing provisions of this Article IX, the Custodian shall pay, out of
the money held for the account of the Series, all original issue or other taxes
required to be paid by the Series in connection with such issuance upon the
receipt of a Certificate specifying the amount to be paid.
37. Except as provided hereinafter, whenever the Series shall
redeem any of its Shares, it shall furnish to the Custodian a Certificate
specifying the number of Shares redeemed and the amount to be paid for the
Shares redeemed.
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38. Upon receipt from the Transfer Agent or Co-Transfer Agent of
an advice setting forth the number of Shares received by the Transfer Agent or
Co-Transfer Agent, for redemption and that such Shares are valid and in good
form for redemption, the Custodian shall make payment to the Transfer Agent as
the case may be, out of the moneys held for the account of the Series of the
total amount specified in the Certificate issued pursuant to paragraph 4 of
this Article IX.
39. Notwithstanding the above provisions regarding the
redemption of any of the Series Shares, whenever its Shares are redeemed
pursuant to any check redemption privilege which may from time to time be
offered by the Series, the Custodian, unless otherwise instructed by a
Certificate, shall, upon receipt of an advice from the Series or its agent
setting forth that the redemption is in good form for redemption in accordance
with the check redemption procedure, honor the check presented as part of such
check redemption privilege out of the money held in the account of the Series
for such purposes.
ARTICLE X
OVERDRAFTS OR INDEBTEDNESS
40. If the Custodian should in its sole discretion advance funds
on behalf of the Series which results in an overdraft because the moneys held
by the Custodian for the account of the Series shall be insufficient to pay the
total amount payable upon a purchase of Securities as set forth in a
Certificate or Oral Instructions issued pursuant to Article IV, or which
results in an overdraft for some other reason, or if the Series is, for any
other reason, indebted to the Custodian (except a borrowing for investment or
for temporary or emergency purposes using Securities as collateral pursuant to
a separate agreement and subject to the provisions of paragraph 2 of this
Article X), such overdraft or indebtedness shall be deemed to be a loan made by
the Custodian to the Series payable on demand and shall bear interest from the
date incurred at a rate per annum (based on a 360-day year for the actual
number of days involved) equal to 1/2% over the Custodian's prime commercial
lending rate in effect from time to time, such rate to be adjusted on the
effective date of any change in such prime commercial lending rate but in no
event to be less than 6% per annum. Any such overdraft or indebtedness shall
be reduced by an amount equal to the total of all amounts due the Series which
have not been collected by the Custodian on behalf of the Series when due
because of the failure of the Custodian to make timely demand or presentment
for payment. In addition, the Series hereby agrees that the Custodian shall
have a continuing lien and security interest in and to any property at any time
held by it for the benefit of the Series or in which the Series may have an
interest which is then in the Custodian's possession or control or in
possession or control of any third party acting in the Custodian's behalf. The
Series authorizes the Custodian, in its sole discretion, at any time to charge
any such overdraft or indebtedness together with interest due thereon against
any balance of account standing to the Series credit on the Custodian's books.
41. The Series will cause to be delivered to the Custodian by any
bank (including, if the borrowing is pursuant to a separate agreement, the
Custodian) from which it borrows money for investment or for temporary or
emergency purposes using Securities as collateral for such
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borrowings, a notice or undertaking in the form currently employed by any such
bank setting forth the amount which such bank will loan to the Series against
delivery of a stated amount of collateral. The Series shall promptly deliver
to the Custodian a Certificate specifying with respect to each such borrowing:
(a) the name of the bank; (b) the amount and terms of the borrowing, which may
be set forth by incorporating by reference an attached promissory note, duly
endorsed by the Series, or other loan agreement; (c) the time and date, if
known, on which the loan is to be entered into; (d) the date on which the loan
becomes due an payable; (e) the total amount payable to the Series on the
borrowing date; (f) the market value of Securities to be delivered as
collateral for such loan, including the name of the issuer, the title and the
number of shares or the principal of any particular Securities; and (g) a
statement specifying whether such loan is for investment purposes or for
temporary or emergency purposes and that such loan is in conformance with the
Investment Company Act of 1940 and the Series prospectus. The Custodian shall
deliver on the borrowing date specified in a Certificate the specified
collateral and the executed promissory note, if any, against delivery by the
lending bank of the total amount of the loan payable, provided that the same
conforms to the total amounts payable as set forth in the Certificate. The
Custodian may, at the option of the lending bank, keep such collateral in its
possession, but such collateral shall be subject to all rights therein given
the lending bank by virtue of any promissory note or loan agreement. The
Custodian shall deliver such Securities as additional collateral as may be
specified in a Certificate to collateralize further any transaction described
in this paragraph. The Series shall cause all Securities released from
collateral status to be returned directly to the Custodian, and the Custodian
shall receive from time to time such return of collateral as may be tendered to
it. In the event that the Series fails to specify in a Certificate the name of
the issuer, the title and number of shares or the principal amount of any
particular Securities to be delivered as collateral by the Custodian, the
Custodian shall not be under any obligation to deliver any Securities.
ARTICLE XI
LOAN OF PORTFOLIO SECURITIES OF THE MASTER PORTFOLIO
42. If the Series is permitted by the terms of the Trust's
Declaration of Trust and as disclosed in its most recent and currently
effective prospectus to lend its portfolio securities, within twenty-four (24)
hours after each loan of portfolio Securities the Series shall deliver or cause
to be delivered to the Custodian a Certificate specifying with respect to each
such loan; (a) the name of the issuer and the title of the Securities; (b) the
number of shares or the principal amount loaned; (c) the date of loan and
delivery; (d) the total amount to be delivered to the Custodian against the
loan of the Securities, including the amount of cash collateral and the
premium, if any, separately identified; and (e) the name of the broker, dealer
or financial institution to which the loan was made. The Custodian shall
deliver the Securities thus designated to the broker, dealer or financial
institution to which the loan was made upon receipt of the total amount
designated as to be delivered against the loan of Securities The Custodian
may accept payment in connection with a delivery otherwise than through the
Book-Entry System or Depository only in the form of a certified or bank
cashier's check payable to the order of the fund or the Custodian drawn on New
York Clearing House funds and may deliver Securities in accordance with the
customs prevailing among dealers in securities.
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43. Promptly after each termination of the loan of Securities by
the Series, the Series shall deliver or cause to be delivered to the Custodian
a Certificate specifying with respect to each such loan termination and return
of Securities: (a) the name of the issuer and the title of the Securities to
be returned; (b) the number of shares or the principal amount to be returned;
(c) the date of termination; (d) the total amount to be delivered by the
Custodian (including the cash collateral for such Securities minus any
offsetting credits as described in said Certificate); and (e) the name of the
broker, dealer or financial institution from which the Securities will be
returned. The Custodian shall receive all Securities returned from the broker,
dealer, or financial institution to which such Securities were loaned and upon
receipt thereof shall pay, out of the moneys held for the account of the
Series, the total amount payable upon such return of Securities as set forth in
the Certificate.
ARTICLE XII
THE CUSTODIAN
44. Except as hereinafter provided, neither the Custodian nor its
nominee shall be liable for any loss or damage, including attorney's fees,
resulting from its action or omission to act or otherwise, either hereunder or
under any Margin Account Agreement, except for any such loss or damage arising
out of its own negligence or willful misconduct. The Custodian may, with
respect to questions of law arising hereunder or under any Margin Account
Agreement, apply for and obtain the advice and opinion of counsel to the Trust
and its Series or of its own counsel, at the expense of the Series, and shall
be fully protected with respect to anything done or omitted by it in good faith
in conformity with such advice or opinion. The Custodian shall be liable to
the Trust and its Series for any loss or damage resulting from the use of the
Book-Entry System or any Depository arising by reason of any negligence,
misfeasance or willful misconduct on the part of the Custodian or any of its
employees or agents.
45. Without limiting the generality of the foregoing, the
Custodian shall be under no obligation to inquire into, and shall not be liable
for:
(a) The validity of the issue of any Securities purchased, sold
or written by or for the Series, the legality of the purchase, sale or writing
thereof, or the propriety of the amount paid or received thereof;
(b) The legality of the issue or sale of any of the Series
Shares, or the sufficiency of the amount to be received therefor;
(c) The legality of the redemption of any of the Series Shares,
or the propriety of the amount to be paid therefor;
(d) The legality of the declaration or payment of any dividend by
the Series;
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(e) The legality of any borrowing by the Series using Securities
as collateral;
(f) The legality of any loan of portfolio Securities pursuant to
Article XI of this Agreement, nor shall the Custodian be under any duty or
obligation to see to it that any cash collateral delivered to it by a broker,
dealer or financial institutions or held by it at any time as a result of such
loan of portfolio Securities of the Series is adequate collateral for the
Series against any loss it might sustain as a result of such loan. The
Custodian specifically, but not by way of limitation, shall not be under any
duty or obligation periodically to check or notify the Series that the amount
of such cash collateral held by it for the Series is sufficient collateral for
the Series, but such duty or obligation shall be the sole responsibility of
the Series. In addition, the Custodian shall be under no duty or obligation to
see that any broker, dealer or financial institution to which portfolio
Securities of the Series are lent pursuant to Article XI of this Agreement
makes payment to it of any dividends or interest which are payable to or for
the account of the Series during the period of such loan or at the termination
of such loan, provided, however, that the Custodian shall promptly notify the
Series in the event that such dividends or interest are not paid and received
when due; or
(g) The sufficiency or value of any amounts of money and/or
Securities held in any Margin Account, Segregated Security Account or
Collateral Account in connection with transactions by the Series. In addition,
the Custodian shall be under no duty or obligation to see that any broker,
dealer, or Clearing Member makes payment to the Series of any variation margin
payment or similar payment which the Series may be entitled to receive from
such broker, dealer, or Clearing Member, to see that any payment received by
the Custodian from any broker, dealer, or Clearing Member is the amount the
Series is entitled to receive, or to notify the Series of the Custodian's
receipt or non- receipt of any such payment; provided however that the
Custodian, upon the Series written request, shall as Custodian, demand from any
broker, dealer, or Clearing Member identified by the Series the payment of any
variation margin payment or similar payment that the Series asserts it is
entitled to receive pursuant to the terms of a Margin Account Agreement or
otherwise from such broker, dealer, or Clearing Member.
46. The Custodian shall not be liable for, or considered to be
the Custodian of, any money, whether or not represented by any check, draft or
other instrument for the payment of money, received by it on behalf of the
Series until the Custodian actually receives and collects such money directly
or by the final crediting of the account representing the Series interest at
the Book-Entry System or the Depository.
47. The Custodian shall have no responsibility and shall not be
liable for ascertaining or acting upon any calls, conversions, exchange,
offers, tenders, interest rate changes or similar matters relating to
Securities held in the Depository unless the Custodian shall have actually
received timely notice from the Depository. In no event shall the Custodian
have any responsibility or liability for the failure of the Depository to
collect, or for the late collection or late crediting by the Depository of any
amount payable upon Securities deposited in the Depository which may mature or
be redeemed, retired, called or otherwise become payable. However, upon
receipt of a Certificate from the Series of an overdue amount on Securities
held in the Depository, the Custodian shall make a claim against the Depository
on behalf of the Series,
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except that the Custodian shall not be under any obligation to appear in,
prosecute or defend any action suit or proceeding in respect to any Securities
held by the Depository which in its opinion may involve it in expense or
liability, unless indemnity satisfactory to it against all expense and
liability be furnished as often as may be required.
48. The Custodian shall not be under any duty or obligation to
take action to effect collection of any amount due to the Series from the
Transfer Agent of the Series nor to take any action to effect payment or
distribution by the Transfer Agent of the Series of any amount paid by the
Custodian to the Transfer Agent of the Series in accordance with this
Agreement.
49. The Custodian shall not be under any duty or obligation to
take action to effect collection of any amount, if the Securities upon which
such amount is payable are in default, or if payment is refused after due
demand or presentation, unless and until (i) it shall be directed to take such
action by a Certificate and (ii) it shall be assured to its satisfaction of
reimbursement of its costs and expenses in connection with any such action.
50. The Custodian may appoint one or more banking institutions as
Depository or Depositories or as Sub- Custodian or Sub-Custodians, including,
but not limited to, banking institutions located in foreign countries, of
Securities and moneys at any time owned by the Series, upon terms and
conditions approved in a Certificate, which shall, if requested by the
Custodian, be accompanied by an approving resolution of the Trust's Board of
Trustees adopted in accordance with Rule 17f-5 under the Investment Company Act
of 1940, as amended.
51. The Custodian shall not be under any duty or obligation to
ascertain whether any Securities at any time delivered to or held by it for the
account of the Series are such as properly may be held by the Series under the
provisions of the Trust's Declaration of Trust.
52. The Custodian shall be entitled to receive and the Series
agrees to pay to the Custodian all out-of- pocket expenses and fees as set
forth in Appendix E attached hereto. The Custodian may charge such fees and
any expenses incurred by the Custodian in the performance of its duties against
any money held by it for the account of the Series. The Custodian shall also
be entitled to charge against any money held by it for the account of the
Series the amount of any loss, damage, liability or expense, including
attorney's fees, for which it shall be entitled to reimbursement under the
provisions of this Agreement. The expense which the Custodian may charge
against the account of the Series include, but are not limited to, the
expenses of Sub-Custodians of the Custodian incurred in settling outside of New
York City transactions involving the purchase and sale of Securities of the
Series.
53. The Custodian shall be entitled to rely upon any Certificate,
notice or other instrument in writing received by the Custodian and reasonably
believed by the Custodian to be a Certificate. The Custodian shall be entitled
to rely upon any Oral Instructions and any Written Instructions actually
received by the Custodian pursuant to Article IV or VII hereof. The Series
agrees to forward to the Custodian a Certificate or facsimile thereof,
confirming such Oral Instructions or Written Instructions in such manner so
that such Certificate or facsimile thereof is received by the Custodian,
whether by hand delivery, telex or otherwise, by the close of business
14
<PAGE> 15
of the same day that such Oral Instructions or Written Instructions are given
to the Custodian. The Series agrees that the fact that such confirming
instructions are not received by the Custodian shall in no way affect the
validity of the transactions hereby authorized by the Series. The Series
agrees that the Custodian shall incur no liability to the Series in acting upon
Oral Instructions given to the Custodian hereunder concerning such
transactions, provided such instructions reasonably appear to have been
received from an Authorized Person.
54. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably believed by the
Custodian to be given in accordance with the terms and conditions of any Margin
Account Agreement. Without limiting the generality of the foregoing, the
Custodian shall be under no duty to inquire into, and shall not be liable for,
the accuracy of any statements or representations contained if any such
instrument or other notice including, without limitation, any specification of
any amount to be paid to a broker, dealer, or Clearing Member.
55. The books and records pertaining to the Series which are in
the possession of the Custodian shall be the property of the Series. Such
books and records shall be prepared and maintained as required by the
Investment Company Act of 1940, as amended, and other applicable securities
laws, rules and regulations. The Series, or the Series authorized
representatives, shall have access to such books and records during the
Custodian's normal business hours. Upon the reasonable request of the Series,
copies of any such books and records shall be provided by the Custodian to the
Series or the Series authorized representative at the Series expense.
56. The Custodian shall provide the Series with any report
obtained by the Custodian on the system of internal accounting control of the
Book-Entry System or the Depository and with such reports on its own systems of
internal accounting control as the Series may reasonably request from time to
time.
57. The Series agrees to indemnify the Custodian against and save
the Custodian harmless from all liability, claims, losses and demands
whatsoever, including attorney's fees, howsoever arising or incurred because of
or in connection with the Custodian's payment or non-payment of checks pursuant
to paragraph 6 of Article IX as part of any check redemption privilege program
of the Series, except for any such liability, claim, loss and demand arising
out of the Custodian's own negligence or willful misconduct.
58. Subject to the foregoing provisions of this Agreement, the
Custodian may deliver and receive Securities, and receipts with respect to such
Securities, and arrange for payments to be made and received by the Custodian
in accordance with the customs prevailing from time to time among brokers or
dealers in such Securities.
59. The Custodian shall have no duties or responsibilities
whatsoever except such duties and responsibilities as are specifically set
forth in this Agreement or Appendix F attached hereto, and no covenant or
obligation shall be implied in this Agreement against the Custodian.
15
<PAGE> 16
ARTICLE XIII
TERMINATION
60. This Agreement shall continue until May 4, 1996, and
thereafter shall continue automatically for successive annual periods, provided
such continuance is specifically approved at least annually by (i) the Trust's
Trustees or (ii) vote of a majority (as defined in the Investment Company Act
of 1940) of the Series outstanding voting securities, provided that in either
event its continuance also is approved by a majority of the Trust's Trustees
who are not "interested persons" (as defined in said Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on such approval. This Agreement is terminable without penalty, on sixty (60)
days' notice, by the Trust's Trustees or by vote of holders of a majority of
the Series shares or, upon not less than ninety (90) days' notice, by the
Custodian. In the event such notice is given by the Series, it shall be
accompanied by a copy of a resolution of the Trustees of the Trust, certified
by the Secretary or any Assistant Secretary, electing to terminate this
Agreement and designating a successor custodian or custodians, each of which
shall be a bank or trust company having not less that $2,000,000 aggregate
capital, surplus and undivided profits. In the event such notice is given by
the Custodian, the Series shall, on or before the termination date, deliver to
the Custodian a copy of a resolution of the Trust's Trustees, certified by the
Secretary or any Assistant Secretary, designating a successor custodian or
custodians. In the absence of such designation by the Series, the Custodian
may designate a successor custodian which shall be a bank or trust company
having not less than $2,000,000 aggregate capital, surplus and undivided
profits. Upon the date set forth in such notice, this Agreement shall
terminate and the Custodian shall, upon receipt of a notice of acceptance by
the successor custodian, on that date deliver directly to the successor
custodian all Securities and moneys then owned by the Series of the Trust and
held by it as Custodian, after deducting all fees, expenses, and other amounts
for the payment of reimbursement of which shall then be entitled.
61. If a successor custodian is not designated by the Series or
the Custodian in accordance with the preceding paragraph, the Series shall,
upon the date specified in the notice of termination of this Agreement and upon
the delivery by the Custodian of all Securities (other than Securities held in
the Book-Entry System which cannot be delivered to the Series) and moneys then
owned by the Series, be deemed to be its own custodian, and the Custodian shall
thereby be relieved of all duties and responsibilities pursuant to this
Agreement, other than the duty with respect to Securities held in the
Book-Entry System, in any Depository or by a Clearing Member which cannot be
delivered to the Series, to hold such Securities hereunder in accordance with
this Agreement.
16
<PAGE> 17
ARTICLE XIV
MISCELLANEOUS
62. Annexed hereto as Appendix B is a Certificate signed by an
Officer of the Trust under its seal, setting forth the names and the signatures
of the present Authorized Persons. The Trust agrees to furnish to the
Custodian a new Certificate in similar form in the event that any such present
Authorized Person ceases to be an Authorized Person or in the event that other
or additional Authorized Persons are elected or appointed. Until such new
Certificate shall be received, the Custodian shall be fully protected in acting
under the provisions of this Agreement upon Oral Instructions or signatures of
the present Authorized Persons as set forth in the last delivered Certificate.
63. Annexed hereto as Appendix C is a Certificate signed by two
of the present Officers of the Trust under its seal, setting forth the names
and the signatures of the present Officers of the Trust. The Trust agrees to
furnish to the Custodian a new Certificate in similar form in the event any
such present Officer ceases to be an Officer of the Trust, or in the event that
other or additional Officers are elected or appointed. Until such new
Certificate shall be received, the Custodian shall be fully be protected in
acting under the provisions of this Agreement upon the signatures of the
Officers as set forth in the last delivered Certificate.
64. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Custodian, shall be deemed
sufficiently given if addressed to the Custodian and mailed or delivered to it
at its offices at 420 Montgomery Street, San Francisco, California, 94104, or
at such other place as the Custodian may from time to time designate in
writing.
65. Any notice or other instrument in writing, authorized or
required by this Agreement to be given the Trust or the Series, shall be deemed
sufficiently given if addressed to the Trust or the Series and mailed or
delivered to it at its office at 111 Center Street, Little Rock, Arkansas,
72201, or at such other place as the Trust or the Series may from time to time
designate in writing.
66. This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties to this Agreement and
approved by a resolution of the Trustees of the Trust.
67. This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successor(s) and assign(s); provided,
however, that this Agreement shall not be assignable by the Trust or the Series
of the Trust without the written consent of the Custodian, or by the Custodian
without the written consent of the Trust, authorized or approved by a
resolution of its Trustees.
68. This Agreement shall be construed in accordance with the laws
of the State of California.
17
<PAGE> 18
69. This Agreement may be executed in any number of counterparts,
each which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
70. This Agreement has been executed on behalf of the Trust by
the undersigned officer of the Trust in his capacity as an officer of the
Trust. The obligations of this agreement shall only be binding upon the assets
and property of the relevant Series, as provided for in the Trust's Agreement
and Declaration of Trust, and shall not be binding upon any trustee, officer of
shareholder of the Trust or Series individually.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective Officers, thereunto duly authorized, as of
the day and year first above written.
MASTER INVESTMENT TRUST WELLS FARGO BANK, N.A.
By: /s/Richard H. Blank, Jr. By: /s/Henry J. Cavigli
----------------------------- --------------------------
Name: Richard H. Blank, Jr. Name: Henry J. Cavigli
--------------------------- ------------------------
Title: Chief Operating Officer Title: Vice President
-------------------------- -----------------------
By: /s/Vito P. Limitone
--------------------------
Name: Vito P. Limitone
------------------------
Title: Senior Vice President
-----------------------
18
<PAGE> 19
APPENDIX A
MASTER INVESTMENT TRUST
CAPITAL APPRECIATION MASTER PORTFOLIO
CASH INVESTMENT TRUST MASTER PORTFOLIO
SHORT-TERM GOVERNMENT-CORPORATE MASTER PORTFOLIO
SHORT-TERM MUNICIPAL INCOME MASTER PORTFOLIO
SMALL CAP MASTER PORTFOLIO
TAX-FREE MONEY MARKET MASTER PORTFOLIO
Approved as Amended: August 28-29, 1996
A-1
<PAGE> 20
APPENDIX B
Pursuant to Article I, Paragraph 8, the term "Officers"
does not include any persons other than the President, Vice President,
Secretary, Treasurer, Controller, Assistant Secretary and Assistant Treasurer.
B-1
<PAGE> 21
APPENDIX C-1
OFFICERS
Pursuant to Article I, Para. 8, and Article XIV, Para.
2, of the Custody Agreement, the following persons are Officers of the Capital
Appreciation Master Portfolio ("Master Portfolio") authorized by the Trust's
Board of Trustees to execute any Certificate, instruction, notice or other
instrument on behalf of the Trust and the Master Portfolio.
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
By:
------------------------
Name:
----------------------
Title:
---------------------
By:
------------------------
Name:
----------------------
Title:
---------------------
Seal:
C-1
<PAGE> 22
APPENDIX C-2
OFFICERS
Pursuant to Article I, Para. 8, and Article XIV, Para.
2, of the Custody Agreement, the following persons are Officers of the Cash
Investment Trust Master Portfolio ("Master Portfolio") authorized by the
Trust's Board of Trustees to execute any Certificate, instruction, notice or
other instrument on behalf of the Trust and the Master Portfolio.
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
By:
------------------------
Name:
----------------------
Title:
---------------------
By:
------------------------
Name:
----------------------
Title:
---------------------
Seal:
C-2
<PAGE> 23
APPENDIX C-3
OFFICERS
Pursuant to Article I, Para. 8, and Article XIV, Para.
2, of the Custody Agreement, the following persons are Officers of the
Short-Term Government-Corporate Master Portfolio ("Master Portfolio")
authorized by the Trust's Board of Trustees to execute any Certificate,
instruction, notice or other instrument on behalf of the Trust and the Master
Portfolio.
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
By:
------------------------
Name:
----------------------
Title:
---------------------
By:
------------------------
Name:
----------------------
Title:
---------------------
Seal:
C-3
<PAGE> 24
APPENDIX C-4
OFFICERS
Pursuant to Article I, Para. 8, and Article XIV, Para.
2, of the Custody Agreement, the following persons are Officers of the
Short-Term Municipal Income Master Portfolio ("Master Portfolio") authorized by
the Trust's Board of Trustees to execute any Certificate, instruction, notice
or other instrument on behalf of the Trust and the Master Portfolio.
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
By:
------------------------
Name:
----------------------
Title:
---------------------
By:
------------------------
Name:
----------------------
Title:
---------------------
Seal:
C-4
<PAGE> 25
APPENDIX C-5
OFFICERS
Pursuant to Article I, Para. 8, and Article XIV, Para.
2, of the Custody Agreement, the following persons are Officers of the Small
Cap Master Portfolio ("Master Portfolio") authorized by the Trust's Board of
Trustees to execute any Certificate, instruction, notice or other instrument on
behalf of the Trust and the Master Portfolio.
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
By:
------------------------
Name:
----------------------
Title:
---------------------
By:
------------------------
Name:
----------------------
Title:
---------------------
Seal:
C-5
<PAGE> 26
APPENDIX C-6
OFFICERS
Pursuant to Article I, Para. 8, and Article XIV, Para.
2, of the Custody Agreement, the following persons are Officers of the Tax-Free
Money Market Master Portfolio ("Master Portfolio") authorized by the Trust's
Board of Trustees to execute any Certificate, instruction, notice or other
instrument on behalf of the Trust and the Master Portfolio.
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
Signature:
----------------------------
Name:
---------------------------------
By:
------------------------
Name:
----------------------
Title:
---------------------
By:
------------------------
Name:
----------------------
Title:
---------------------
Seal:
C-6
<PAGE> 27
APPENDIX D
CUSTODY FEES
Net Asset Charge 0.0167% (1./67 bps) annually
Transaction Charges:
Depository Eligible $10.00 ea.
Physical Delivery 20.00 ea.
Principal & Interest Paydown 10.00 ea.
Sweeps 0.00
PORTFOLIO ACCOUNTING
Monthly Base Fee $2,000.00
Net Asset Charge
First $50,000,000 Net Assets 0.070% (7 bps) annually
Next $50,000,000 Net Assets 0.045% (4.5 bps) annually
Net Assets Over $100,000,000 0.020% (2.0 bps) annually
D-1
<PAGE> 28
APPENDIX E
TRUST AND SERIES ACCOUNTING SERVICES:
SCHEDULES OF SERVICES
A. Maintain Trust and Master Portfolio general ledger and journal.
B. Prepare and record disbursements for direct Trust expenses.
C. Prepare daily money transfers.
D. Reconcile all Trust bank and custodian accounts.
E. Assist Trust independent auditors as appropriate.
F. Prepare daily projection of available cash balances.
G. Record trading activity for purposes of determining net asset values and
daily dividend.
H. Prepare daily portfolio evaluation report to value portfolio securities
and determine daily accrued income.
I. Determine the daily net asset value per share.
J. Determine the daily dividend per share.
K. Prepare monthly, quarterly, semi-annual and annual financial statements.
L. Provide financial information for reports to the Securities and Exchange
Commission in compliance with the provisions of the Investment Company
Act of 1940 and the Securities Act of 1933, the Internal Revenue Service
and any other regulatory or governmental agencies as required.
M. Provide financial, yield, net asset value, etc., information to National
Association of Securities Dealers, Inc., and other survey and statistical
agencies as instructed from time to time by the Trust.
E-1
<PAGE> 1
EXHIBIT-99.B9(a)
AMENDED AGENCY AGREEMENT
This agreement is made and entered into as of this 4th day of
May, 1994 (the "Agreement"), by and between MASTER INVESTMENT TRUST, a
registered management investment company organized as a Trust under the laws of
the State of Delaware (the "Trust"), and Wells Fargo Bank, N.A., a national
banking association ("Agent"), for transfer agency and dividend disbursing
services as follows:
I. SERVICES.
A. Appointment of Agent. The Trust hereby appoints
Agent as its transfer and dividend disbursing agent for each of its investment
portfolios named on Schedule A attached hereto, as such Schedule may be revised
from time to time (each, a "Master Portfolio") and Agent accepts such
appointment.
B. Description of Services. As consideration for the
compensation hereinafter described in Section I(C), Agent agrees to provide
each Master Portfolio with the facilities and services described and set forth
on Schedule B attached hereto and incorporated herein by reference.
C. Compensation. As consideration for the services
described in Section I(B), above, the Trust shall pay to Agent a fee at the
annual rates shown on Schedule A of the average daily value of each Master
Portfolio's net assets.
II. EXPENSES. The Trust, on behalf of the relevant Master
Portfolio, shall promptly reimburse Agent for all reasonable out-of-pocket
expenses incurred by Agent in connection with the performance of services under
this Agreement, including, without limitation, the following:
A. Postage, including first class mail insurance in
connection with mailing share certificates, express delivery, etc.;
B. Envelopes, check forms, continuous forms, forms for
reports and statements, stationery and other similar supplies;
C. Fees and costs of outside legal counsel employed by
Agent;
D. Banking services, fees, and costs for wire transfers,
deposit accounts, etc.;
E. Expenses of fidelity and liability insurance and
bonding;
F. Fees and costs relating to the use, licensing,
development or implementation of data processing software used by or for the
Trust;
G. Data transmission expenses;
<PAGE> 2
H. Costs and microfilm/microfiche; and
I. Costs for telephone lines and equipment.
III. TERM. This Agreement shall become effective as of the date
first above written and shall continue until terminated pursuant to its
provisions.
IV. INSURANCE. Agent agrees to procure and maintain such fidelity
bond coverage as may be required by the Investment Company Act of 1940 (the
"1940 Act"), in the amounts and with such deductibles as are required by or
permitted under the 1940 Act, as it may be amended from time to time.
V. REGISTRATION AND COMPLIANCE.
A. Agent represents that it is registered as a transfer
agent with the Securities and Exchange Commission ("SEC") pursuant to Section
17A of the Securities Exchange Act of 1934 (the "Exchange Act") and the rules
and regulations promulgated thereunder, and Agent agrees to maintain said
registration current and comply with all of the requirements of the Exchange
Act, rules and regulations during the term of this Agreement.
B. The Trust represents that it is a management
investment company registered with the SEC in accordance with the 1940 Act and
the rules and regulations promulgated thereunder. The Trust is authorized to
offer and sell Master Portfolio shares pursuant to the 1940 Act, the Securities
Act of 1933, as amended ("1933 Act"), and the rules and regulations promulgated
thereunder. The Trust agrees promptly to advise Agent of any change in or
limitation upon its authority to carry on business as an investment company
pursuant to the 1940 Act, the Exchange Act and the 1933 Act and the statutes,
rules and regulations of each and every jurisdiction to which it is subject.
VI. DOCUMENTATION. The Trust and Agent shall each supply to the
other upon request such documentation as is required by them to carry out their
respective obligations under this Agreement including, but not limited to,
declaration of trust, bylaws, codes of ethics, registration statements,
permits, financial reports, third party audits, certificates of authority,
computer tapes and related items.
VII. PROPRIETARY INFORMATION. It is agreed that all records and
documents, excepting computer data processing programs and any related
documentation used or prepared by, or on behalf of Agent for the performance of
its services hereunder, are the property of the Trust and shall be open to
audit or inspection by the Trust or its agents during the normal business hours
of Agent, shall be maintained in a manner designed to preserve the
confidentiality thereof and to comply with applicable federal and state laws
and regulations, and shall, in whole or any specified part, be surrendered to
the Trust or its duly authorized agents upon receipt by Agent of reasonable
notice of and request therefor.
2
<PAGE> 3
VIII. INDEMNITY. The Trust, on behalf of the relevant Master
Portfolio, shall indemnify and hold Agent harmless against any losses, claims,
damages, liabilities or expenses (including reasonable attorney's fees and
expenses) resulting from any claim, demand, action or suit brought by any
person other than the Trust (including a shareholder naming the Trust or a
Master Portfolio as a party) and not resulting from Agent's bad faith, willful
misfeasance, reckless disregard of its obligations and duties, gross negligence
or breach of this Agreement, and arising out of, or in connection with:
A. Agent's performance hereunder;
B. Any error or omission in any record (including but
not limited to magnetic tapes, computer printouts, hard copies and microfilm or
microfiche copies) delivered, or caused to be delivered, by the Trust to Agent
in connection with this Agreement;
C. Bad faith, willful misfeasance, reckless disregard of
its obligations and duties or negligence of the Trust or Agent's acting upon
any instructions reasonably believed by it to have been properly executed or
communicated by any person duly authorized by the Trust;
D. Agent's acting in reliance upon advice given by
counsel for Agent or upon advice reasonably believed by it to have been given
by counsel for the Trust; or
E. Agent's acting in reliance upon any instrument
reasonably believed by it to have been genuine and signed, countersigned or
executed by the proper person(s) in accordance with the currently effective
certificate(s) of authority delivered to Agent by the Trust.
In the event that Agent requests the Trust to
indemnify or hold it harmless hereunder, agent shall use its best efforts to
inform the Trust of the relevant facts concerning the matter in question.
Agent shall use reasonable care to identify and promptly notify the Trust
concerning any matter which presents, or appears likely to present, a claim for
indemnification against the Trust or a Master Portfolio.
The Trust shall have the election of defending Agent
against any claim which may be the subject of indemnification hereunder. In the
event the Trust so elects, it will so notify Agent and thereupon the Trust
shall take over defense of the claim, and (if so requested by the Trust) Agent
shall incur no further legal limit or other expenses related thereto for which
it would be entitled to indemnify hereunder; provided, however, that nothing
herein contained shall prevent Agent from retaining, at its own expense,
counsel to defend any claim. Except with the Trust's prior consent, Agent
shall in no event confess any claim or make any compromise in any matter in
which the Trust will be asked to indemnify or hold harmless hereunder.
IX. LIABILITY
A. Damages. Agent shall not be liable to the Trust, or
any third party, for punitive, exemplary, indirect, special or consequential
damages (even if Agent has been advised of the possibility of such damages)
arising from its obligations and the services provided under this
3
<PAGE> 4
Agreement, including but not limited to loss of profits, loss of use of the
shareholder accounting system, cost of capital and expenses of substitute
facilities, programs or services.
B. Force Majeure. Anything in this Agreement to the
contrary notwithstanding, Agent shall not be liable for delays or errors
occurring by reason of circumstances beyond its control, including but not
limited to acts or civil or military authority, national emergencies, work
stoppage, fire, flood, catastrophe, earthquake, acts of God, insurrection, war,
riot, data processing and communications downtime (where such downtime occurs
for reasons other than Agent's gross negligence or willful misconduct) or
interruption of power supply.
X. AMENDMENT. This Agreement and the Schedules attached hereto
and made a part hereof may be amended at any time, with or without shareholder
approval (except as otherwise required by law), in writing signed by each of
the parties hereto. Any change in the Trust's registration statements or other
documents of compliance or in the forms relating to any plan, program or
service offered by its current prospectuses which would require a change in
Agent's obligations hereunder shall be subject to Agent's approval, which
approval shall not be unreasonably withheld.
XI. TERMINATION. This Agreement may be terminated by either party
without cause upon one hundred twenty (120) days prior written notice to the
other, and at any time for cause in the event that such cause remains
unremedied for more than thirty (30) days after receipt by the other party of
written specification of such cause.
In the event the Trust designates a successor to any of
Agent's obligations hereunder, Agent shall, at the expense and pursuant to the
direction of the Trust, transfer promptly to such successor all relevant books,
records and other data of the Trust in the possession or under the control of
Agent.
XII. SEVERABILITY. If any clause or provision of this Agreement is
determined to be illegal, invalid or unenforceable under present or future laws
effective during the term hereof, then such clause or provision shall be
considered severed herefrom and the remainder of this Agreement shall continue
in full force and effect.
XIII. APPLICABLE LAW. This Agreement shall be subject to and
construed in accordance with the laws of the State of California.
XIV. ENTIRE AGREEMENT. Except as otherwise provided herein, this
Agreement constitutes the entire and complete agreement of the parties hereto
relating to the subject matter hereof and supersedes and merges all prior
contracts and discussions between the parties.
XV. COUNTERPARTS. This Agreement may be executed in
in his one or more counterparts, all of which shall be considered one and the
same Agreement and each of which shall be deemed an original.
4
<PAGE> 5
XVI. MISCELLANEOUS. This Agreement has been executed on behalf of
the Trust by the undersigned officer of the Trust in his capacity as an officer
of the Trust. The obligations of this Agreement shall only be binding upon the
assets and property of the relevant Master Portfolio, as provided for in the
Trust's Agreement and Declaration of Trust, and shall not be binding on any
director, officer or shareholder of Trust or Master Portfolio individually.
MASTER INVESTMENT TRUST WELLS FARGO BANK, N.A.
By: /s/Richard H. Blank, Jr. By: /s/Henry J. Cavigli
------------------------ -------------------
Name: Richard H. Blank, Jr. Name: Henry J. Cavigli
--------------------- ----------------
Title: Chief Operating Officer Title: Vice President
----------------------- --------------
By: /s/James Nolan
--------------
Name: James Nolan
-----------
Title: Vice President
--------------
5
<PAGE> 6
SCHEDULE A
<TABLE>
<CAPTION>
Annual Fee (as a
% of average daily
Name of Master Portfolio net assets)
- ------------------------ ------------------
<S> <C>
Cash Investment Trust 0.05%
Master Portfolio
Short-Term Government-Corporate 0.05%
Income Master Portfolio
Short-Term Municipal Income 0.05%
Master Portfolio
Tax-Free Money Market 0.05%
Master Portfolio
Capital Appreciation 0.05%
Master Portfolio
Asset Allocation 0.05%
Master Portfolio
Corporate Stock 0.05%
Master Portfolio
U.S. Government Allocation 0.05%
Master Portfolio
Small Cap Master Portfolio 0.05%
</TABLE>
Dated: May 4, 1994
As Amended: October 10, 1995
As Amended: August 28-29, 1996
6
<PAGE> 7
SCHEDULE B
SCHEDULE OF SERVICES
1. Share Transfer and Dividend Disbursing Services
A. Maintenance of shareholder accounts, including processing of
new accounts.
B. Posting address changes and other file maintenance for
shareholder accounts.
C. Posting all transactions to the shareholder file, including:
- Direct purchase
- Wire order purchases
- Telephone redemption
- Wire order redemption
- Direct exchanges
- Dividend payments
- Dividend reinvestments
- Transfers
D. Prepare daily reconciliations of shareholder processing to
money movement instructions.
E. Issuing all checks and stopping and replacing checks.
F. Performing certain of the Trust's other mailings, including:
- Dividend and capital gain distributions
- K-1/year-end shareholder reporting
- Furnish certified list of shareholders
(hard copy of microfilm)
G. Maintaining and retrieving all required past history
for shareholders and provide research capabilities as follows:
- Daily monitoring of all processing
activity to verify back-up documentation
- Provide exception reports
- Microfilming
- Storage, retrieval and archive of
records in accordance with Rules 31a-1, 31a-
2, and 31a-3 under the 1940 Act.
H. Reporting and remitting as necessary for state escheat
requirements.
7
<PAGE> 1
EXHIBIT-99.B9(b)
AMENDED ADMINISTRATION AGREEMENT
MASTER INVESTMENT TRUST
111 Center Street
Little Rock, Arkansas 72201
December 22, 1995
Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
Dear Sirs:
This will confirm the agreement between the undersigned (the
"Trust") on behalf of the master portfolios listed on Exhibit A, as such
Exhibit may be revised from time to time (the "Master Portfolios") and Stephens
Inc. (the "Administrator") as follows:
1. The Trust is a registered open-end, management
investment company currently consisting of four investment portfolios of
shares, but which from time to time may consist of a greater or lesser number
of investment portfolios. The Master Portfolios propose to engage in the
business of investing and reinvesting their assets in the manner and in
accordance with the investment objectives 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"). A copy of the Registration Statement has been furnished to the
Administrator. Any amendments to the Registration Statement shall be furnished
to the Administrator promptly.
2. The Trust is engaging the Administrator to provide
the administrative services specified elsewhere in this agreement to the Master
Portfolios, subject to the overall supervision of the Board of Trustees of the
Trust. Pursuant to investment advisory contracts between the Trust and Wells
Fargo Bank, N.A. (the "Adviser") on behalf of each Master Portfolio, the Trust
has engaged the Adviser to manage the investing and reinvesting of each Master
Portfolio's assets and to provide advisory services.
3. The Administrator shall, at its expense, provide the
following administrative services in connection with the operations of the
Trust and the Master Portfolios: (a) furnishing office space and certain
facilities required for conducting the business of the Master Portfolios; (b)
general supervision of the operation of the Master Portfolios, including
coordination of the services performed by the Master Portfolios' 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 Securities and Exchange
<PAGE> 2
Commission and any state securities commissions; and preparation of proxy
statements and reports for the holders of beneficial interests ("Interests") of
the Master Portfolios ("Holders"); (c) the compensation of the Trust's
trustees, officers and employees who are affiliated with the Administrator; (d)
general supervision relating to the compilation of data required for the
preparation of periodic reports on the performance of its obligations under
this agreement and statements of the Master Portfolios that are distributed to
the Trust's officers and Board of Trustees and the preparation of such
additional reports and information as the Trust's Board of Trustees or officers
shall reasonably request; and (e) all other administrative services reasonably
necessary for the operation of the Master Portfolios, other than those services
that are to be provided by the Adviser pursuant to the investment advisory
contracts and by the Master Portfolios' custodian and transfer and dividend
disbursing agent.
4. Except as provided in the Trust's investment advisory
contracts and this 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 any certificates, 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 Portfolios; expenses of Holders' meetings; expenses relating to the
issuance, and any registration or qualification of Interests of the Master
Portfolios; pricing services, if any; organizational expenses; and any
extraordinary expenses. Expenses attributable to one or more, but not all, of
the Master Portfolios are charged against the assets of the relevant Master
Portfolios. General expenses of the Trust are allocated among the Master
Portfolios in a manner proportionate to the net assets of each Master
Portfolio, on a transactional basis or on such other basis as the Board of
Trustees deems equitable.
5. The Administrator shall give the Trust and the Master
Portfolios the benefit of the Administrator's best judgment and efforts in
rendering services under this agreement. As an inducement to the
Administrator's undertaking to render these services, the Trust agrees that the
Administrator shall not be liable under this agreement for any mistake in
judgment or in any other event whatsoever except for lack of good faith,
provided that nothing in this agreement shall be deemed to protect or purport
to protect the Administrator against any liability to the Trust or its Holders
to which the Administrator would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of the
Administrator's duties under this agreement or by reason of reckless disregard
of its obligations and duties hereunder.
6. In consideration of the services to be rendered to
each Master Portfolio by the Administrator under this agreement, the Trust
shall pay the Administrator on the first business day of each month a monthly
fee at the annual rates shown on Exhibit A of the average daily value (as
determined on each business day at the time set forth for each Master Portfolio
in the Trust's
2
<PAGE> 3
Registration Statement for determining net asset value per share) of each
Master Portfolio's net assets during the preceding month. If any fee payable
to the Administrator pursuant to this paragraph 6 begins to accrue after the
beginning of any month or if this agreement 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 a 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 shares.
The Administrator shall not be entitled to
compensation for providing administrative services to certain of the Trust's
Master Portfolios (listed on Exhibit A and reflecting no annual fee) so long as
the Administrator receives fees for providing similar services to a fund of
another registered investment company which invests all of its assets in each
such Master Portfolio.
7. If in any fiscal year the total expenses of the
Master Portfolios and any registered investment company investing in the Master
Portfolios ("Investing Company") incurred by, or allocated to, the Master
Portfolios and 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 Portfolios' investment advisory contracts ("includable
expenses"), exceed the most restrictive expense limitation applicable to any
Investing Company imposed by state securities laws or regulations thereunder,
as these limitations may be raised or lowered from time to time, the
Administrator 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 fees payable pursuant to the Master
Portfolios' investment advisory contracts are 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 Portfolios' investment
advisory contracts 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 Portfolios'
fiscal year, the Master Portfolios shall review the includable expenses accrued
during that fiscal year to the end of that period and shall estimate the
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 Portfolios, the monthly fees set forth in paragraph 6
payable to the Administrator 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
3
<PAGE> 4
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 Portfolios' net assets shall be computed in
the manner specified in the next to last sentence of paragraph 6, and any
reimbursements required to be made by the Administrator shall be made once a
year promptly after the end of the Master Portfolios' fiscal year.
8. This agreement shall become effective on its
execution date and shall thereafter continue in effect for a period of no less
than two years. Thereafter, this agreement may be terminated at any time,
without the payment of any penalty, by a vote of a majority of the Master
Portfolios' 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 Administrator or by the Administrator on 60 days' written notice
to the Trust.
9. Except to the extent necessary to perform the
Administrator's obligations under this agreement, nothing herein shall be
deemed to limit or restrict the right of the Administrator, or any affiliate of
the Administrator, or any employee of the Administrator 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 Holders, in connection with
Trust property or the affairs of the Trust, save only that arising from his or
her bad faith, willful misfeasance, gross negligence or reckless disregard of
his or her duty to such person; and all such persons shall look solely to the
Trust property (which may include any applicable insurance) for satisfaction of
claims of any nature against a Trustee, officer, employee or agent of the Trust
arising in connection with the affairs of the Trust. Each Holder shall be
jointly and severally liable (with rights of contribution inter se in
proportion to their respective 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 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 Trust's creditors as a legal matter.
4
<PAGE> 5
In addition, no Trustee, officer, employee or agent of the
Trust shall be liable to the Trust, Holders 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 agreement shall be governed by and construed in
accordance with the laws of the State of Arkansas.
If the foregoing correctly sets forth the agreement between
the Trust and the Administrator, please so indicate by signing and returning to
the Trust the enclosed copy hereof.
Very truly yours,
MASTER INVESTMENT TRUST
By: /s/Richard H. Blank, Jr.
-------------------------------
Name: Richard H. Blank, Jr.
-----------------------------
Title: Chief Operating Officer
----------------------------
ACCEPTED as of the date
set forth above:
STEPHENS INC.
By: /s/ Richard H. Blank, Jr.
-------------------------------
Name: Richard H. Blank, Jr.
-----------------------------
Title: Vice President
----------------------------
5
<PAGE> 6
EXHIBIT A
List of Master Portfolios
Annual Fee (as a
% of average daily
Master Portfolio net assets )
---------------- -------------------
Cash Investment Trust Master Portfolio 0.025%
Short-Term Government-Corporate Income
Master Portfolio 0
Short-Term Municipal Income
Master Portfolio 0
Tax-Free Money Market Master Portfolio 0
Capital Appreciation Master Portfolio 0
Asset Allocation Master Portfolio 0
Corporate Stock Master Portfolio 0
U.S. Government Allocation Master Portfolio 0
Small Cap Master Portfolio 0
Dated: May 4, 1994
As Amended: October 10, 1995
As Amended: August 28-29, 1996
6
