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As filed with the Securities and Exchange Commission
on March 21, 1996
Registration No. 811-6415
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM N-1A
AMENDMENT NO. 8 TO THE
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
MASTER INVESTMENT TRUST
(formerly Cash Investment Trust)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
111 Center Street, Little Rock, Arkansas 72201
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
_______________________________________
Registrant's Telephone Number, including Area Code:
(800) 643-9691
Richard H. Blank, Jr.
c/o Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
(NAME AND ADDRESS OF AGENT FOR SERVICE)
WITH A COPY TO:
Robert M. Kurucza, Esq.
Marco E. Adelfio, Esq.
Morrison & Foerster
2000 Pennsylvania Avenue, N.W., Suite 5500
Washington, D.C. 20006-1812
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EXPLANATORY NOTE
This Amendment No. 8 to the Registration Statement is being filed to
register three new master portfolios of Master Investment Trust (the "Trust"),
the Corporate Stock, Asset Allocation and U.S. Government Allocation Master
Portfolios, and to provide the annual update information with respect to the
Trust's existing Master Portfolios. The Corporate Stock, Asset Allocation and
U.S. Government Allocation Funds of Stagecoach Funds, Inc. (SEC File Nos.
33-42927; 811-6419) will invest substantially all of their assets in the
Corporate Stock, Asset Allocation and U.S. Government Allocation Master
Portfolio, respectively.
This Amendment to the Registration Statement has been filed by the
Registrant pursuant to Section 8(b) of the Investment Company Act of 1940.
However, beneficial interests in the Registrant are not being registered under
the Securities Act of 1933 (the "1933 Act") because such interests will be
issued solely in private placement transactions that do not involve any "public
offering" within the meaning of Section 4(2) of the 1933 Act. Investments in
the Registrant may only be made by registered broker/dealers or by investment
companies, insurance company separate accounts, common commingled trust funds,
group trusts or similar organizations or entities that are "accredited
investors" within the meaning of Regulation D under the 1933 Act. This
Registration Statement does not constitute an offer to sell, or the
solicitation of an offer to buy, any beneficial interest in the Registrant.
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Cross Reference Sheet
Form N-1A Item Number
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Part A Prospectus Caption
- ------ ------------------
4 General Description of Registrant; Investment Objectives; Additional
Information About Permitted Investment Activities of the Master
Portfolios; Other Investment Policies
5 Management of the Master Portfolios; Master/Feeder Structure;
Investment Adviser, Custodian and Transfer Agent; Sponsor,
Administrator and Placement Agent; Expenses
6 Capital Stock and Other Securities; Organization and Interests;
Dividends and Distributions; Purchase of Securities; Taxes
7 Purchase of Securities; Determination of Net Asset Value;
8 Redemption or Repurchase
9 Not Applicable
Part B Statement of Additional Information
- ------ -----------------------------------
10 Cover Page
11 Table of Contents
12 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; Custodian and Transfer and
Dividend Disbursing Agent; Independent Auditors
17 Brokerage Allocation and Other Practices
18 Capital Stock and Other Securities
19 Purchase, Redemption and Pricing of Securities
20 Tax Status
21 Underwriters
22 Calculation of Performance Data
23 Financial Information
Part C Other Information
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24-32 Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of this Document.
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MASTER INVESTMENT TRUST
PART A
DATED MARCH 21, 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,19, 1991. The Trust is a "series fund",
which is a mutual fund divided into separate portfolios. The Trust currently
offers five diversified portfolios: the Cash Investment Trust Master Portfolio
(the "CIT Master Portfolio"), the Short-Term Municipal Income Master Portfolio
(the "Municipal Income Master Portfolio"), the Short-Term Government-Corporate
Income Master Portfolio (the "Government- Corporate Income Master Portfolio"),
the Tax-Free Money Market Master Portfolio and the Capital Appreciation Master
Portfolio (each, a "Master Portfolio," and collectively, the "Master
Portfolios"). On or about April 29, 1996, the Trust will offer three
additional diversified master portfolios: the Corporate Stock Master
Portfolio, the Asset Allocation Master Portfolio and the U.S. Government
Allocation Master Portfolio (each a "Master Portfolio", and together with the
Master Portfolios, 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 Overland Sweep Fund, the
Short-Term Municipal Income Fund, the Short-Term Government-Corporate Income
Fund, the National Tax-Free Institutional Money Market Fund and the Strategic
Growth Fund of Overland Express and the National Tax-Free Money Market Mutual
Fund and the Aggressive Growth Fund of Stagecoach Funds, and as of on or about
April 29, 1996, the Corporate Stock Fund, the Asset Allocation Fund and the
U.S. Government Allocation Fund of Stagecoach Funds (each a "Fund" and
collectively, the "Funds"). Each Fund invests or intends to invest 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 Fund converted to
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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 is a newly created fund that 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, as of
the date of this Part A, are "stand-alone" funds. On or about April 29, 1996,
the funds intend to convert to a master/feeder structure and begin to invest
substantially all of their assets in the Asset Allocation, Corporate Stock and
U.S. Government Allocation Master Portfolios, respectively.
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 Master Portfolio, the
Asset Allocation Master Portfolio, and the U.S. Government Allocation Master
Portfolio; 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. 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:
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(i) 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, 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.
2. SHORT-TERM MUNICIPAL INCOME MASTER PORTFOLIO
The investment objective of the Municipal Income Master Portfolio is
to provide investors with a high level of income exempt from federal income
tax, while managing principal volatility. Wells Fargo Bank, as investment
adviser to the Municipal Income Master Portfolio, pursues the objective of the
Master Portfolio by investing (under normal market conditions) substantially
all of the assets of the Master Portfolio in the following types of municipal
obligations that pay interest which is exempt from federal income tax: bonds,
notes and commercial paper issued by or on behalf of states, territories, and
possessions of the United States, the District of Columbia, and their political
subdivisions, agencies, instrumentalities (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.
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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.
3. SHORT-TERM GOVERNMENT-CORPORATE INCOME MASTER PORTFOLIO
The investment objective of the Short-Term Government-Corporate Income
Master Portfolio is to provide investors with current income while managing
principal volatility. The Master Portfolio seeks to achieve its investment
objective by investing in obligations issued by the U.S. Government, its
agencies and instrumentalities and investment-grade corporate obligations. The
securities that the Master Portfolio may purchase include U.S. Treasury bonds,
notes and bills; obligations of the U.S. Government, its agencies and
instrumentalities, (including government-sponsored enterprises); corporate
bonds and notes, asset-backed securities and money market instruments. The
Master Portfolio seeks to manage principal volatility by diversifying its
assets among permissible investments based, in part, on their duration,
maturity or other characteristics that affect the sensitivity of such
investments to changes in market interest rates. There can, of course, be no
assurance that the Master Portfolio will achieve its investment objective.
The portfolio turnover rate for the Master Portfolio for the 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.
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The U.S. Treasury bonds in which the Master Portfolio invests
typically have maturities greater than 20 years; the U.S. Treasury notes in
which the Master Portfolio invests typically have maturities ranging from 2 to
10 years. The U.S. Treasury bills in which the Master Portfolio invests
generally have maturities of up to 1 year and are issued on a discount basis.
4. TAX-FREE MONEY MARKET MASTER PORTFOLIO
The investment objective of the Tax-Free Money Market Master Portfolio
is to provide investors with a high level of income exempt from federal income
tax, while preserving capital and liquidity. The Master Portfolio seeks to
achieve its investment objective by investing in high-quality, short-term U.S.
dollar denominated money market instruments, primarily municipal obligations,
with remaining maturities not exceeding 13 months. The Tax-Free Money Market
Master Portfolio 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 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
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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 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
Porfolio's investments in such obligations.
5. CAPITAL APPRECIATION MASTER PORTFOLIO
The investment objective of the Capital Appreciation Master Portfolio
is to provide investors with an above- average level of capital appreciation.
The Capital Appreciation Master Portfolio seeks to achieve its investment
objective through the active management of a broadly diversified portfolio of
equity securities of companies expected to experience strong growth in
revenues, earnings and assets.
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:
o Low or no dividends
o Smaller market capitalizations
o Less market liquidity
o Relatively short operating histories
o Aggressive capitalization structures (including high debt levels)
o 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
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condition and, therefore, the prices of such stocks may be more volatile than
those of larger company stocks.
From time to time Wells Fargo Bank may determine that conditions in
the securities markets make pursuing the Master Portfolio's basic investment
strategy inconsistent with the best interests of the Master Portfolio's
investors. At such times, Wells Fargo Bank may use temporary alternative
strategies, primarily designed to reduce fluctuations in the value of the
Master Portfolio's assets. In implementing these temporary "defensive"
strategies, the Master Portfolio may invest in preferred stock or
investment-grade debt securities that are convertible into common stock and in
money market securities. It is expected that these temporary "defensive"
investments will not exceed 30% of the Master Portfolio's total assets.
The Master Portfolio pursues an active trading investment strategy,
and the length of time the Master Portfolio has held a particular security is
not generally a consideration in investment decisions. Accordingly, the Master
Portfolio's portfolio turnover rate may be higher than that of other funds that
do not pursue an active trading investment strategy. Portfolio turnover
generally involves some expense to the Master Portfolio, including brokerage
commissions or dealer mark-ups and other transactions costs on the sale of
securities and the reinvestment in other securities. Portfolio turnover also
can generate short-term capital gains tax consequences.
Though the Master Portfolio will hold a number of larger
capitalization stocks, under normal market conditions, and subject to the
additional risks described above, more than 50% of the Master Portfolio's total
assets will be invested in companies with smaller to medium capitalizations.
The Master Portfolio will invest primarily in companies with a market
capitalization of $50 million or greater, but may invest in companies with a
market capitalization under $50 million if the investment adviser to the Master
Portfolio believes such investments to be in the best interests of the Master
Portfolio. It is currently expected that the majority of the Master
Portfolio's investments will be in companies with market capitalizations, at
the time of acquisition, of up to $750 million.
Under ordinary market conditions, at least 65% of the value of the
total assets of the Master Portfolio will be invested in common stocks and in
securities which are convertible into common stocks that Wells Fargo Bank, as
investment adviser, believes have better-than-average prospects for
appreciation. The Master Portfolio also may invest in convertible debt
securities. At most, 5% of the Master Portfolio's net assets will be invested
in convertible debt securities that are not either rated in the four highest
rating categories by one or more nationally recognized statistical rating
organizations ("NRSOs"), such as Moody's, S&P, or unrated securities determined
by Wells Fargo Bank to be of comparable quality. Securities rated in the
fourth lowest rating category (i.e., rated "BBB" by S&P or "Baa" by Moody's are
regarded by S&P as having an adequate capacity to pay interest and repay
principal, but changes in economic conditions or other circumstances are more
likely to lead to a weakened capacity to make such repayments. Moody's
considers such securities as having speculative characteristics.
PRIVATELY ISSUED SECURITIES (RULE 144A). The Master Portfolio may
invest in privately issued securities which may be resold in accordance with
Rule 144A under the Securities Act of
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1933 ("Rule 144A Securities"). Rule 144A Securities are restricted securities
which are not publicly traded. Accordingly, the liquidity of the market for
specific Rule 144A Securities may vary. Wells Fargo Bank, using guidelines
approved by the Board of Directors of the Company, will evaluate the liquidity
characteristics of each Rule 144A Security proposed for purchase by the Master
Portfolio on a case-by-case basis and will consider the following factors,
among others, in their evaluation: (1) the frequency of trades and quotes for
the Rule 144A Security; (2) the number of dealers willing to purchase or sell
the Rule 144A Security and the number of other potential purchasers; (3) dealer
undertakings to make a market in the Rule 144A Security; and (4) the nature of
the Rule 144A Security and the nature of the marketplace trades (e.g., the time
needed to dispose of the Rule 144A Security, the method of soliciting offers
and the mechanics of transfer).
CORPORATE REORGANIZATIONS. The Master Portfolio may invest in
securities for which a tender or exchange offer has been made or announced, and
in securities of companies for which a merger, consolidation, liquidation or
similar reorganization proposal has been announced if, in the judgment of Wells
Fargo Bank, there is a reasonable prospect of capital appreciation
significantly greater than the added portfolio turnover expenses inherent in
the short term nature of such transactions. The principal risk associated with
such investments is that such offers or proposals may not be consummated within
the time and under the terms contemplated at the time of the investment, in
which case, unless such offers or proposals are replaced by equivalent or
increased offers or proposals which are consummated, the Master Portfolio may
sustain a loss.
OPTIONS. The Master Portfolio may purchase or sell options on
individual securities and options on indices of securities as a means of
achieving additional return or of hedging the value of the Master Portfolio's
portfolio. If the Master Portfolio has sold an option, it may terminate its
obligation by effecting a closing purchase transaction. This is accomplished
by purchasing an option of the same series as the option previously sold.
There can be no assurance that a closing purchase transaction can be effected
when the Master Portfolio so desires.
The purchaser of an option risks a total loss of the premium paid for
the option if the price of the underlying security does not increase or
decrease sufficiently to justify exercise. The seller of an option, on the
other hand, will recognize the premium as income if the option expires
unrecognized but foregoes any capital appreciation in excess of the exercise
price in the case of a call option and may be required to pay a price in excess
of current market value in the case of a put option. Options purchased and
sold other than on an exchange in private transactions also impose on the
Master Portfolio the credit risk that the counterparty will fail to honor its
obligations. All investments by the Master Portfolio in off-exchange options
will be treated as "illiquid" and will therefore be subject to the Master
Portfolio's policy of not investing more than 15% of its net assets in illiquid
securities. The Master Portfolio will establish a segregated account with its
Custodian in which it will maintain liquid assets in an amount at least equal
in value to the Master Portfolio's commitments under off-exchange options.
WARRANTS. The Master Portfolio may invest no more than 5% of its net
assets at the time of purchase in warrants (other than those that have been
acquired in units or attached to other securities) and not more than 2% of its
net assets in warrants which are not listed on the New
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York or American Stock Exchange. Warrants represent rights to purchase
securities at a specific price valid for a specific period of time. The prices
of warrants do not necessarily correlate with the prices of the underlying
securities. The Master Portfolio may only purchase warrants on securities in
which the Master Portfolio may invest directly.
MONEY MARKET INSTRUMENTS. The Master Portfolio may invest in the
following types of money market instruments that have remaining maturities not
exceeding one year; (i) U.S. Government obligations; (ii) negotiable
certificates of deposit, bankers' acceptances and fixed time deposits and other
obligations of domestic banks (including foreign branches) that have more than
$1 billion in total assets at the time of investment and are members of the
Federal Reserve System or are examined by the Comptroller of the Currency or
whose deposits are insured by the FDIC; and (iii) commercial paper rated at the
date or purchase "P-1" by Moody's or "A-1" or "A-1+" by S&P. The Master
Portfolio also may invest in short-term U.S. dollar-denominated obligations of
foreign banks (including U.S. branches) that at the time of investment: (i)
have more than $10 billion, or the equivalent in other currencies, in total
assets; (ii) are among the 75 largest foreign banks in the world as determined
on the basis of assets; and (iii) have branches or agencies in the United
States.
6. 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").(1)
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 expenses and the total return of the S&P 500 Index. There can be
no assurance that the Master Portfolio will achieve this correlation.
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(1) 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(R)", "S&P(R)", "S&P 500(R)", "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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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.
7. 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 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(2)
using, to the extent feasible, the same weighting formula used by that index.
The
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(2) 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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<PAGE> 14
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.
8. 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 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
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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 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.
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<PAGE> 16
B. ADDITIONAL INFORMATION ABOUT PERMITTED INVESTMENT ACTIVITIES
OF THE MASTER PORTFOLIOS
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 with remaining maturities of up to 13 months.
BONDS
Certain of the debt instruments purchased by the Municipal Income
Master Portfolio and the Government-Corporate Income Master Portfolio may be
bonds. A bond is an interest-bearing security issued by a company or
governmental unit. The issuer of a bond has a contractual obligation to pay
interest at a stated rate on specific dates and to repay principal (the bond's
face value) periodically or on a specified maturity date. An issuer may have
the right to redeem or "call" a bond before maturity, in which case the
investor may have to reinvest the proceeds at lower market rates.
Most bonds bear interest income at a "coupon" rate that is fixed for
the life of the bond. The value of a fixed rate bond usually rises when market
interest rates fall, and falls when market interest rates rise. Accordingly, a
fixed rate bond's yield (income as a percent of the bond's current value) may
differ from its coupon rate as its value rises or falls.
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Other types of bonds bear income at an interest rate that is adjusted
periodically. Because of their adjustable interest rates, the value of
"floating-rate" or "variable-rate" bonds fluctuates much less in response to
market interest rate movements than the value of fixed rate bonds. Also, the
Master Portfolios may treat some of these bonds as having a shorter maturity
for purposes of calculating the weighted average maturity of their investment
portfolios.
Bonds may be senior or subordinated obligations. Senior obligations
generally have the first claim on a corporation's earnings and assets and, in
the event of liquidation, are paid before subordinated debt. Bonds may be
unsecured (backed only by the issuer's general creditworthiness) or secured
(also backed by specified collateral).
ASSET-BACKED SECURITIES
The Short-Term Government-Corporate Income Master Portfolio may invest
in various types of asset-backed securities. Asset-backed securities are
typically backed by an underlying pool of assets (such as credit card or
automobile trade receivables or corporate loans or bonds) which provides the
interest and principal payments to investors. Credit quality depends primarily
on the quality of the underlying assets and the level of credit support, if
any, provided by the issuer. The underlying assets may be subject to
prepayment which can shorten the life of asset- backed securities and may lower
their return. The value of asset-backed securities may change because of
actual or perceived changes in the creditworthiness of the originator,
servicing agent, or of the financial institution providing the credit support.
FLOATING- AND VARIABLE-RATE INSTRUMENTS
Certain of the debt instruments that the Master Portfolios may
purchase bear interest at rates that are not fixed, but float or vary with, for
example, changes in specified market rates or indices or at specified
intervals. These floating-and variable-rate instruments typically have
maturities of more than 13 months but may carry a demand feature that would
permit the holder to tender them back to the issuer at par value prior to
maturity. The Master Portfolios may purchase certificates of participation in
pools of floating- and variable- rate instruments from banks or other financial
institutions. With respect to the pass-through tax status of these
certificates, Wells Fargo Bank, as investment adviser, may rely upon either the
opinion of counsel or IRS rulings regarding the tax-exempt status of these
certificates.
Wells Fargo Bank, as investment adviser to the Master Portfolios (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.
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<PAGE> 18
The Municipal Income Master Portfolio may invest in variable-rate
instruments with a maximum final maturity of up to 30 years, provided the
period remaining until the next readjustment of the instrument's interest rate,
or the period remaining until the principal amount can be recovered through
demand, is less than 5 years.
A Master Portfolio may, in accordance with policies of the Securities
and Exchange Commission ("Commission"), account for these instruments as
maturing at the next interest-rate readjustment date or the date at which such
Master Portfolio may tender the instrument back to the issuer, whichever is
later. The Tax-Free Money Market Master Portfolio may invest in floating- and
variable-rate obligations even if they carry stated maturities in excess of 13
months, upon compliance with certain conditions of Commission rules, in which
case such obligations may be treated in accordance with these conditions as
having maturities not exceeding 13 months.
LETTERS OF CREDIT
Certain of the debt obligations, certificates of participation,
commercial paper and other short-term obligations which the CIT Master
Portfolio and the Tax-Free Money Market Master Portfolio are permitted to
purchase may be backed by an unconditional and irrevocable letter of credit of
a bank, savings and loan association or insurance company which assumes the
obligation for payment of principal and interest in the event of default by the
issuer. Only banks, savings and loan associations and insurance companies
that, in the opinion of the investment adviser, are comparable in quality to
issuers of other permitted high-quality investments of the Master Portfolios
may be used for letter of credit-backed investments. Letters of credit issued
by domestic bank issuers will be considered to be obligations of domestic banks
excluded from each Master Portfolio's fundamental investment restriction and
the 25% limitation regarding industry concentration .
REPURCHASE AGREEMENTS
Each Master Portfolio may enter into repurchase agreements wherein the
seller of a security to such Master Portfolio agrees to repurchase that
security from the Master Portfolio at a mutually agreed-upon time and price.
The period of maturity is usually quite short, often overnight or a few days,
although it may extend over a number of months. Each Master Portfolio may
enter into repurchase agreements only with respect to obligations that could
otherwise be purchased by such Master Portfolio. All repurchase agreements
will be fully collateralized based on values that are marked to market daily.
While the maturities of the underlying securities in a repurchase agreement
transaction may be greater than 13 months, the term of any repurchase agreement
on behalf of a Master Portfolio will always be less than 13 months. If the
seller defaults and the value of the underlying securities has declined, a
Master Portfolio may incur a loss. In addition, if bankruptcy proceedings are
commenced with respect to the seller of the security, a Master Portfolio's
disposition of the security may be delayed or limited. The Master Portfolios
enter into repurchase agreements only with registered broker/dealers and
commercial banks that meet guidelines established by the Board of Trustees of
the Trust and that are not affiliated with 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.
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The Municipal Income, Short-Term 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.
MUNICIPAL OBLIGATIONS - MUNICIPAL INCOME MASTER PORTFOLIO
This section describes certain instruments in which the Municipal
Income and Tax-Free Money Market Master Portfolios may invest 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.
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
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the fourth highest category are considered to have speculative characteristics.
A description of ratings is contained in the Appendix to the Statement of
Additional Information.
Municipal obligations may include "moral obligation" bonds, which are
normally issued by special purpose public authorities. If the issuer of moral
obligation bonds is unable to meet its debt service obligations from current
revenues, it may draw on a reserve fund, the restoration of which is a moral
commitment but not a legal obligation of the state or municipality which
created the issuer. An issuer's obligation to pay principal or interest on an
instrument may be backed by an unconditional bank letter or line of credit,
guarantee, or commitment to lend.
Municipal obligations may include variable- or floating-rate
instruments issued by industrial development authorities and other governmental
entities. While there may not be an active secondary market with respect to a
particular instrument purchased by the 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 the Master Portfolio to
dispose of the instrument if the issuer defaulted on its payment obligation or
during periods the Master Portfolio is not entitled to exercise its demand
rights, and the Master Portfolio could, for these or other reasons, suffer a
loss.
Municipal obligations also may include participations in privately
arranged loans to municipal borrowers, some of which may be referred to as
"municipal leases", and units of participation in trusts holding pools of
tax-exempt leases. Such loans in most cases are not backed by the taxing
authority of the issuers and may have limited marketability or may be
marketable only by virtue of a provision requiring repayment following demand
by the lender. Any such loans made by the Master Portfolio may have a demand
provision permitting the Master Portfolio to require payment within seven days.
Participations in such loans, however, may not have such a demand provision and
may not be otherwise marketable. To the extent these securities are illiquid,
they will be subject to the Master Portfolio's limitation on investments in
illiquid securities. As it deems appropriate, Wells Fargo Bank will establish
procedures to monitor the credit standing of each such municipal borrower,
including its ability to meet contractual payment obligations. The Municipal
Income 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 by the requisite NRSROs that otherwise
may be purchased by the Master Portfolio. are rated in the top four rating
categories by an NRSRO.
Municipal participation interests, which give the purchaser an
undivided interest in one or more underlying municipal obligations, may be
purchased from financial institutions. To the extent that municipal
participation interests are considered to be "illiquid securities", such
instruments are subject to the Master Portfolio's limitation on the purchase of
illiquid securities.
In addition, the 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
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municipal obligations at a specified price. The Master Portfolio acquires
stand-by commitments solely to facilitate portfolio liquidity and without
intending to exercise its rights thereunder for trading purposes.
Certain of the securities in which the Master Portfolio may invest are
purchased on a when-issued basis, in which case delivery and payment normally
take place within 120 days after the date of the commitment to purchase. The
Master Portfolio will make commitments to purchase securities on a when-issued
basis only with the intention of actually acquiring the securities, but may
sell them before the settlement date if it is deemed advisable. When-issued
securities are subject to market fluctuation, and no income accrues to the
purchaser during the period prior to issuance. The purchase price and the
interest rate that are received on debt securities are fixed at the time the
purchaser enters into the commitment. Purchasing a security on a when-issued
basis can involve a risk that the market price at the time of delivery may be
lower than the agreed-upon purchase price, in which case there could be an
unrealized loss at the time of delivery.
In purchasing securities on a when-issued basis, the Master Portfolio
will establish a segregated account in which it will maintain cash or liquid,
high-grade debt securities in an amount at least equal in value to its
commitments to purchase when-issued securities. If the value of these assets
declines, the Master Portfolio will place additional liquid assets in the
account on a daily basis so that the value of the assets in the account is
equal to the amount of such commitments.
MUNICIPAL OBLIGATIONS - TAX-FREE MONEY MARKET MASTER PORTFOLIO
Subject to the maturity and other restrictions under Rule 2a-7, the
Tax-Free Money Market Master Portfolio may invest in Municipal Obligations.
Municipal bonds generally have a maturity at the time of issuance of up to 40
years. Medium-term municipal notes are generally issued in anticipation of the
receipt of tax funds, of the proceeds of bond placements, or of other revenues.
The ability of an issuer to make payments on notes is therefore especially
dependent on such tax receipts, proceeds from bond sales or other revenues, as
the case may be. Municipal commercial paper is a debt obligation with a stated
maturity of 270 days or less that is issued to finance seasonal working capital
needs or as short-term financing in anticipation of longer-term debt. From
time to time, the Master Portfolio may invest 25% or more of the current value
of its total assets in certain revenue bonds, such as pollution control bonds;
provided, however, that such investments will be made only to the extent they
are consistent with the Master Portfolio's fundamental policy of investing,
under normal circumstances, at least 80% of its net assets in municipal
obligations that are exempt from federal income tax and are not subject to the
federal alternative minimum tax. Private revenue bonds depend on the revenue
from a specific project and may be backed by a private entity. The viability
of a project or tax incentives could effect the value and credit quality of
these obligations.
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;
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(ii) municipal notes rated at the date of purchase "MIG1" or
"MIG2" (or "VMIG1" or "VMIG2" in the case of an issue having
a variable rate with a demand feature) by Moody's or
"SP-1+", "SP-1" or "SP-2" by S&P; and
(iii) short-term municipal commercial paper rated at the date of
purchase "P-1" by Moody's or "A-1+", "A- 1" or "A-2" by S&P.
TAXABLE INVESTMENTS
Pending the investment of proceeds from the sale of shares of the
Tax-Free Money Market Master Portfolio or proceeds from sales of portfolio
securities or in anticipation of redemptions or to maintain a "defensive"
posture when, in the opinion of Wells Fargo Bank, as investment adviser, it is
advisable to do so because of market conditions, the Master Portfolio may elect
to invest temporarily up to 20% of the current value of its net assets in cash
reserves, including the following taxable high-quality money market
instruments: (i) U.S. Government obligations; (ii) negotiable certificates of
deposit, bankers' acceptances and fixed time deposits and other obligations of
domestic banks (including foreign branches) that have more than $1 billion in
total assets at the time of investment and are members of the Federal Reserve
System or are examined by the Comptroller of the Currency or whose deposits are
insured by the FDIC; (iii) commercial paper rated at the date of purchase "P-1"
by Moody's or "A-1+" or "A-1" by S&P; (iv) certain repurchase agreements; and
(v) high-quality municipal obligations, the income from which may or may not be
exempt from federal income tax.
Moreover, the Master Portfolio may invest temporarily more than 20% of
its total assets in such securities and in high-quality, short-term municipal
obligations the interest on which is not exempt from federal income tax to
maintain a temporary defensive posture or in an effort to improve after-tax
yield to the Master Portfolio's shareholders when, in the opinion of Wells
Fargo Bank, as investment adviser, it is advisable to do so because of unusual
market conditions.
OTHER INVESTMENT COMPANIES
For temporary investments, the Tax-Free Money Market Master Portfolio
and the Capital Appreciation Master Portfolio also may invest in shares of
other open-end investment companies that invest exclusively in high-quality
short-term securities subject to the limits set forth under Section 12 of the
1940 Act, provided however, that any such company has a fundamental policy of
investing, under normal market conditions, at least 80% of its net assets in
obligations that are exempt from federal income tax and are not subject to the
federal alternative minimum tax. Such investment companies can be expected to
charge management fees and other operating expenses that would be in addition
to those charged to the Master Portfolios; however, the Master Portfolios'
investment advisers have undertaken to waive its advisory fees with respect to
that portion of the Master Portfolios' assets so invested, except when such
purchase is part of a plan of merger, consolidation, reorganization or
acquisition. Under Section 12(d)(1) the Master Portfolios, together with any
company or companies controlled by it, generally prohibited from owning more
than 3% of the total outstanding voting stock of any such investment company,
nor
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may the Master Portfolios, together with any such company or companies, invest
more than 5% of its assets in any one such investment company or invest more
than 10% of its assets in securities of all such investment companies combined.
FOREIGN OBLIGATIONS
The Tax-Free Money Market Master Portfolio may invest up to 25% of its
total assets in high-quality, short-term (13 months or less) debt obligations
of foreign branches of U.S. banks or U.S. branches of foreign banks that are
denominated in and pay interest in U.S. dollars. The Capital Appreciation
Master Portfolio may invest in securities of foreign governments and private
issues that are denominated in and pay interest in U.S. dollars. The Corporate
Stock Master Portfolio, Asset Allocation Master Portfolio and U.S. Government
Allocation Master Portfolio may each invest up to 25% or more of its assets in
high-quality, short-term 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. These securities may take the form of American Depositary
Receipts ("ADRs") and European Depositary Receipts ("EDRs"). These securities
may not necessarily be denominated in the same currency as the securities into
which they may be converted. ADRs are receipts typically issued by a United
States bank or trust company which evidence ownership or underlying securities
issued by a foreign corporation. EDRs, which are sometimes referred to as
Continental Depositary Receipts ("CDRs"), are receipts issued in Europe
typically by non-United States banks and trust companies that evidence
ownership of either foreign or domestic securities. Generally, ADRs in
registered form are designed for use in the United States securities markets
and EDRs and CDRs in bearer form are designed for use in Europe. Investments
in foreign obligations involve certain considerations that are not typically
associated with investing in domestic obligations. There may be less publicly
available information about a foreign issuer than about a domestic issuer.
Foreign issuers also are not generally subject to the same uniform accounting,
auditing and financial reporting standards or governmental supervision as
domestic issuers. In addition, with respect to certain foreign countries,
interest may be withheld at the source under foreign income tax laws and there
is a possibility of expropriation or confiscatory taxation, political or social
instability or diplomatic developments that could adversely affect investments
in, the liquidity of, and the ability to enforce contractual obligations with
respect to, securities of issuers located in those countries.
MONEY MARKET INVESTMENTS: TEMPORARY OR REGULAR
The Master Portfolios may have temporary cash balances on account of new
purchases, dividends, interest and reserves for redemptions, which will
generally be less than 5% of the Master Portfolio's portfolio (or, in the case
of the Asset Allocation and U.S. Government Allocation Master Portfolios,
regular investments in varying percentages). Such Master Portfolios may invest
in the 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
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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.
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.
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).
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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 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
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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
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
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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. 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
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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 the 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, 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. The Master Portfolio
will not lend securities having a value that exceeds one-third of the current
value of its total assets. Loans of securities by the Master Portfolio will be
subject to termination at the Master Portfolios's or the borrower's option.
The Master Portfolio may pay reasonable administrative and custodial fees in
connection with a securities loan and may pay a negotiated portion of the
interest or fee earned with respect to the collateral to the borrower or the
placing broker. Borrowers and placing brokers may not be affiliated, directly
or indirectly, with the Company, the Trust, the investment adviser, or the
Distributor.
ILLIQUID SECURITIES
Certain securities may be sold only pursuant to certain legal
restrictions, and may be difficult to sell. Repurchase agreements and time
deposits that do not provide for payment to a Fund within seven days after
notice, guaranteed investment contracts and some commercial paper issued in
reliance upon the exemption in Section 4(2) of the Securities Act of 1933, as
amended (the "1933 Act") (other than variable amount master demand notes with
maturities of nine months or less), are subject to the limitation on illiquid
securities. In addition, interests in privately arranged loans acquired by the
Master Portfolios may be subject to this limitation.
If otherwise consistent with its investment objective and policies,
certain Master Portfolios may purchase securities which are not registered
under the 1933 Act but which can be sold to "qualified institutional buyers" in
accordance with Rule 144A under the 1933 Act. Any such security will not be
considered illiquid so long as it is determined by a Master Portfolio's Board
of Trustees, acting under guidelines approved and monitored by the Master
Portfolio's Board, that an adequate trading market exists for that security.
ASSET ALLOCATION MODEL
With respect to the Asset Allocation Master Portfolio, BGFA, as
sub-adviser to such Master Portfolio, 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
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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. In addition,
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 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
With respect to the U.S. Government Allocation Master Portfolio, BGFA,
as sub-adviser to such Master Portfolio, 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. In addition, 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
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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 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.
C. TEMPORARY INVESTMENTS OF THE SHORT-TERM MUNICIPAL INCOME
MASTER PORTFOLIO
The Short-Term Municipal Income Master Portfolio may elect to invest
temporarily up to 20% of its net assets in U.S. Government Obligations,
negotiable certificates of deposit, bankers acceptance and fixed time deposits
and other obligations of domestic banks (including foreign branches) that have
more than $1 billion in total assets at the time of investment and are members
of the Federal Reserve System or are examined by the Comptroller of the
Currency or whose deposits are insured by the FDIC; commercial paper rated at
the date of purchase "P-1" by Moody's or "A-1+" or "A-1" by Standard & Poor's
Corporation ("S&P"); high-quality taxable municipal obligations; shares of
taxable or tax-free money market mutual funds; and repurchase agreements.
Finally, the Short-Term Municipal Income Master Portfolio may invest
temporarily in shares of other open-end, management investment companies,
subject to the limitations of Sections 12(d)(1) of the 1940 Act. Purchases of
shares of other investment companies will be limited to temporary investments
in shares of unaffiliated investment companies, and the Master Portfolio's
investment adviser will waive its fee for that portion of the Master
Portfolio's assets so invested, except when such purchase is part of a plan of
merger, consolidation, reorganization or acquisition. Such temporary
investments would most likely be made for cash management purposes or when
there is an unexpected or abnormal level of investor purchases or redemptions
of shares of the Municipal Income Master Portfolio or because of unusual market
conditions. The income from these temporary investments and investment
activities may be subject to federal income tax. However, as stated above,
Wells Fargo Bank seeks to invest substantially all of the
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Short-Term Municipal Income Master Portfolio's assets in securities exempt from
such tax. A more complete description of tax-free municipal obligations,
taxable money market instruments and other investment activities is contained
in the section entitled "Additional Information About Permitted Investment
Activities of the Master Portfolios".
D. OTHER INVESTMENT POLICIES
Each Master Portfolio's investment objective and the classification of
each Master Portfolio as "diversified" may not be changed without the approval
of a majority vote of the Master Portfolio's investors.
As a matter of fundamental policy, the CIT Master Portfolio: (i) may
borrow from banks up to 10% of the current value of its net assets only for
temporary purposes in order to meet redemptions, and these borrowings may be
secured by the pledge of up to 10% of the current value of its net assets (but
investments may not be purchased while any such outstanding borrowing exceeds
5% of the Master Portfolio's net assets); and (ii) may not invest more than 25%
of its assets (i.e., concentrate) in any particular industry, excluding U.S.
Government obligations and obligations of domestic banks. (Foreign branches of
U.S. banks and U.S. branches of foreign banks are not domestic banks for
purposes of this exclusion.) As a matter of non-fundamental policy, the CIT
Master Portfolio may invest up to 10% of the current value of its net assets in
repurchase agreements having maturities of more than seven days, restricted
securities, illiquid securities, and fixed time deposits that are subject to
withdrawal penalties and that have maturities of more than seven days. If the
Trust's Board of Trustees determines, however, that the CIT Master Portfolio's
investment objective can best be achieved by a substantive change in a
non-fundamental investment policy or strategy, the CIT Master Portfolio may
make such change without investor approval and will make appropriate disclosure
of any such material change in the CIT Master Portfolio's prospectus.
As a matter of fundamental policy, each of the Municipal Income Master
Portfolio and the Short-Term Government- Corporate Income Master Portfolio may
borrow from banks up to 10% of the current value of its net assets only for
temporary purposes in order to meet redemptions, and these borrowings may be
secured by the pledge of up to 10% of the current value of such Master
Portfolio's net assets (but investments may not be purchased while any such
outstanding borrowing exceeds 5% of the respective Master Portfolio's net
assets). As a matter of fundamental policy, the Municipal Income Master
Portfolio and the Short-Term Government-Corporate Income Master Portfolio each
may not invest more than 25% of its assets (i.e., concentrate) in any
particular industry, excluding: (1) U.S. Government Obligations; and (2)
municipal obligations (for the purpose of this restriction, private activity
bonds and notes shall not be deemed municipal obligations if the payment of
principal and interest on such bonds or notes is the ultimate responsibility of
non-governmental issuers). As a matter of nonfundamental policy, the Municipal
Income and Short-Term Government- Corporate Income Master Portfolios may each
invest up to 15% of the current value of its net assets in securities that are
illiquid by virtue of the absence of a readily available market or legal or
contractual restrictions on resale and fixed time deposits that are subject to
withdrawal penalties and that have maturities of more than
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seven days. Disposing of illiquid securities may involve additional costs and
require additional time.
Except during temporary defensive periods, the Municipal Income Master
Portfolio and the Short-Term Government- Corporate Income Master Portfolio each
seeks to maintain an average weighted maturity of between 90 days and 2 years.
The maximum stated maturity of the Municipal Income Master Portfolio's
investments will not exceed 5 years for each individual security (though the
maximum stated maturity of certain variable-rate instruments purchased by the
Master Portfolio may be more than five years). The Short-Term
Government-Corporate Income Master Portfolio may invest in obligations of any
maturity.
As a matter of fundamental policy the Tax-Free Money Market Master
Portfolio may borrow (i) from banks up to 10% of the current value of its net
assets only for temporary purposes in order to meet redemptions, and these
borrowings may be secured by the pledge of up to 10% of the current value of
its net assets (but investments may not be purchased while any such outstanding
borrowing in excess of 5% of its net assets exists); (ii) may not make loans of
portfolio securities or other assets, except that loans for purpose of this
restriction will not include the purchase of fixed time deposits, repurchase
agreements, commercial paper and other short-term obligations, and other types
of debt instruments commonly sold in a public or private offering; and (iii)
may not purchase the securities of issuers conducting their principal business
activity in the same industry if, immediately after the purchase and as a
result thereof, the value of the Master Portfolio's investments in that
industry would be 25% or more of the current value of the Master Portfolio's
total assets, provided that there is no limitation with respect to investments
in (a) municipal securities (for the purpose of this restriction, private
activity bonds shall not be deemed municipal securities if the payments of
principal and interest on such bonds is the ultimate responsibility of
non-governmental users), (b) U.S. Government obligations, and (c) certain
obligations of domestic banks.
As a matter of non-fundamental policy, the 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
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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 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
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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.
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.
MANAGEMENT OF THE MASTER PORTFOLIOS
MASTER/FEEDER STRUCTURE
The Trust is organized as a business trust under the laws of the State
of Delaware. See "Capital Stock and Other Securities." The Overland Sweep,
Short-Term Municipal Income, Short-Term Government-Corporate Income, National
Tax-Free Institutional Money Market and Strategic Growth Funds of Overland
Express and the National Tax-Free Money Market Mutual Fund, the Aggressive
Growth Fund, the Corporate Stock Fund, the Asset Allocation Fund and the U.S.
Government Allocation Fund 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.
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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 of the Trust is advised by Wells Fargo Bank, 420 Montgomery Street,
San Francisco, California 94105, a wholly owned subsidiary of Wells Fargo &
Company. Wells Fargo Bank, one of the largest banks in the United States, was
founded in 1852 and is the oldest bank in the western United States. As of
December 31, 1995, Wells Fargo Bank provided investment advisory services for
over $33 billion of assets of individuals, trusts, estates and institutions.
Currently, Wells Fargo Bank serves as investment adviser or sub-adviser to
Funds of five other registered open-end management investment companies, each
of which consists of several separately managed investment portfolios.
Under the Advisory Contracts, Wells Fargo Bank has agreed to furnish
to each Master Portfolio investment guidance and policy direction in connection
with the daily portfolio management of the Master Portfolios. Pursuant to the
Advisory Contracts, Wells Fargo Bank also furnishes to the Board of Trustees of
the Trust periodic reports on the investment strategy and performance of each
Master Portfolio.
Mr. Mark Kraschel, portfolio manager of the Short-Term
Government-Corporate Income Master Portfolio, has specialized in short-term
bond investment applications for over a decade. He joined Wells Fargo Bank in
1988 after five years in fixed-income management at First Boston Corporation.
Mr. Kraschel holds a B.S. in business administration from the University of
Oregon and an M.B.A. in finance from the University of San Francisco. Mr.
Kraschel assumed sole responsibility for management of the Short-Term
Government-Corporate Income Master Portfolio on February 1, 1995. Prior to
that time, Mr. Kraschel had co-managed the Master Portfolio since its inception
in May of 1994.
Mr. Jeff L. Weaver assists Mr. Mark Krashel with the management of the
Short-Term Government-Corporate Income Master Portfolio. 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. 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
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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.
Mr. Steve Enos assists Mr. Jon Hickman and Mr. Robert Bissell with the
management of the Capital Appreciation Master Portfolio. Mr. Enos is a member
of the Wells Fargo Bank Growth Equity Team. He began his career with First
Interstate Bank, where he was assistant vice president and portfolio manager.
Prior to joining Wells Fargo Bank, he was a principal at Dolan Capital
Management where he managed both personal and pension portfolios. Mr. Enos is
a Chartered Financial Analyst and a member of the Association for Investment
Management and Research.
Ms. Sandra Thornton also assists Jon Hickman and Robert Bissell with
the management of the Capital Appreciation Master Portfolio. Ms. Thornton
manages equity portfolios and is a member of the Wells Fargo Bank Growth Equity
Team. Prior to joining Wells Fargo in 1993, she worked in the research
department of RCM Capital Management. She obtained her license as a Certified
Public Accountant from the State of California while performing tax/financial
planning services at Price Waterhouse. She holds a B.A. from Albertus Magnus
College and is a Chartered Financial Analyst.
Purchase and sale orders of the securities held by each Master
Portfolio may be combined with those of other accounts that Wells Fargo Bank
manages or advises, and for which it has brokerage placement authority, in the
interest of seeking the most favorable overall net results. When Wells Fargo
Bank determines that a particular security should be bought or sold for a
Master Portfolio of the Trust and other accounts managed by Wells Fargo Bank,
Wells Fargo Bank undertakes to allocate those transactions among the
participants equitably. From time to time, each Master Portfolio, to the
extent consistent with its investment objective, policies and restrictions, may
invest in securities of companies with which Wells Fargo Bank has a lending
relationship.
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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 Short-Term Government-Corporate Income 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 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 Short-Term
Government-Corporate Income Master Portfolio for advisory services during the
year ended December 31, 1995.
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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.
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 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 the Tax-Free Money Market Master Portfolio 0.05% of
the Tax-Free Money Market Master Portfolio's average daily net assets. The
other Master Portfolios do not pay a fee for administrative services. From
time to time, Stephens may waive fees from the CIT Master Portfolio and/or the
Tax-Free Money Market Master Portfolio in whole or in part. Any such waiver
will reduce expenses of the relevant Master Portfolio and, accordingly, have a
favorable impact on the yield or return of such Master Portfolio.
The Administration Agreements state that Stephens shall provide as
administrative services, among other things: (i) general supervision of the
operation of each Master Portfolio, including coordination of the services
performed by the investment adviser, transfer agent,
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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.
PLACEMENT AGENT -- Stephens, located at 111 Center Street, Little Rock,
Arkansas 72201, serves as placement agent for each Master Portfolio's shares.
EXPENSES -- Each Master Portfolio's Advisory Contract and Administration
Agreement provide that if, in any fiscal year, the total aggregate expenses of
a Master Portfolio incurred by, or allocated to, the Master Portfolio and other
investment companies investing in a Master Portfolio (excluding taxes,
interest, brokerage commissions and other portfolio transaction expenses,
expenditures that are capitalized in accordance with generally accepted
accounting principles, extraordinary expenses and amounts accrued or paid under
any distribution plan) exceed the most restrictive expense limitation
applicable to such investment companies imposed by the securities laws or
regulations of the states in which such investment companies' shares are
registered for sale, Wells Fargo Bank and Stephens shall waive their fees
proportionately under the Advisory Contract and Administration Agreement,
respectively, for the fiscal year to the extent of the excess, or reimburse the
excess, but only to the extent of their respective fees. The Advisory
Contracts and the Administration Agreements further provide that the total
expenses of each Master Portfolio shall be reviewed monthly so that, to the
extent the annualized expenses for such month exceed the most restrictive
applicable annual expense limitation, the monthly fees under the Advisory
Contract and the Administration Agreement of each Master Portfolio shall be
reduced 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.
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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:
Before After
Waivers Waivers
------- -------
CIT Master Portfolio 0.33% 0.30%
Government-Corporate Income Master Portfolio 1.72% 0.00%
Municipal Income Master Portfolio 0.80% 0.00%
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:
Before After
Waivers Waivers
------- -------
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%
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.
ORGANIZATION AND INTERESTS
The Trust is organized as a Business Trust under the laws of Delaware.
The Trust's Declaration of Trust permits the Board of Trustees to issue
beneficial interests in a Master Portfolio of the Trust, and to permit
investors to increase or decrease their holdings in the Master Portfolios of
the Trust. The Trust has no intention of holding annual meetings of investors
but will hold special meetings of investors when, in the judgment of the
Trustees, it is necessary or desirable to submit matters for an investor vote.
Investors are entitled to call a meeting of investors for purposes of voting on
removal of a Trustee or Trustees of the Trust.
Each investor is entitled to vote in proportion to the amount of the
investor's investment in a Master Portfolio of the Trust. As described below,
for certain matters interestholders vote together as a group; as to others,
they vote separately by Master Portfolio. Interests in a Master Portfolio of
the Trust may not be transferred, but an investor may withdraw all or any
portion of its investment at any time at net asset value. All Interests in the
Trust, when issued, will be fully
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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 Short-Term Government- Corporate Income Master
Portfolio, respectively. Similarly, the Strategic Growth Fund (of Overland
Express) owned at least 25% of the outstanding interests in the Capital
Appreciation Master Portfolio. As of the same date there were no persons who
could be considered "control persons" of the Asset Allocation, Corporate Stock
or U.S. Government Allocation Master Portfolios. However, upon conversions to
master-feeder structure, it is expected that each of the Corporate Stock Fund,
the Asset Allocation Fund, and the U.S. Government Allocation Fund of
Stagecoach Funds Inc. will own 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.
Accordingly, after conversion, each Fund could be considered to be a
controlling person of the respective Master Portfolio for purposes of the 1940
Act. As of the date of this Amendment, the Tax-Free Money Market Master
Portfolio had not commenced operations.
The Trust reserves the right, without the approval of interestholders,
to create and issue interests in the Master Portfolios. Any interests so
created in a Master Portfolio would participate equally in the earnings,
dividends and assets of the particular Master Portfolio. Interests in any new
master portfolio would participate equally in the earnings, dividends and
assets of the new master portfolio. The Trust currently offers eight separate
Master Portfolios. The previously single Master Portfolio is now referred to
as the CIT Master Portfolio. The Trust also offers seven other Master
Portfolios -- the Capital Appreciation Master Portfolio, the Municipal Income
Master Portfolio, the Short-Term Government-Corporate 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. The Trust no longer offers the 1-3 Year Duration
Government Income Master Portfolio.
All consideration received by the Trust for interests in a Master
Portfolio and all assets in which such consideration is invested belong to that
Master Portfolio (subject only to the rights of creditors of the Trust) and are
subject to the liabilities related thereto. The income attributable to, and
the expenses of, one Master Portfolio are treated separately from those of the
other Master Portfolios.
Interests in the Master Portfolios are not deposits or obligations of,
or guaranteed or endorsed by, any bank, and are not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board or any other
agency. Master Portfolios Interests involve certain investment risks,
including the possible loss of principal. The price and investment return of
each interest in a Master Portfolio will fluctuate and are not guaranteed.
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DIVIDENDS AND DISTRIBUTIONS
CIT MASTER PORTFOLIO -- The Net Income (as defined below) of the CIT
Master Portfolio is allocated daily to all investors of record as of 12:00 Noon
(New York time) on each day that Wells Fargo Bank is open (a "Bank Business
Day"). Currently, Wells Fargo Bank is closed on New Year's Day, Martin Luther
King's Day (the third Monday in January), President's Day (the third Monday in
February), Memorial Day (the last Monday in May), Independence Day, Labor Day,
Columbus Day (the second Monday in October), Veteran's Day, Thanksgiving Day,
and Christmas Day (each, a "Bank Holiday") and also on Saturdays and Sundays.
Net Income for a Saturday, Sunday or Bank Holiday is allocated to investors of
record as of 12:00 Noon (New York time) on the previous Bank Business Day.
The Net Income of the CIT Master Portfolio (from the time of the
immediately preceding determination thereof) consists of (i) all income
accrued, less the amortization of any premium, on the assets of the CIT Master
Portfolio, less (ii) all actual and accrued expenses of the CIT Master
Portfolio determined in accordance with generally accepted accounting
principles. Interest income includes discount earned (including both original
issue and market discount) on discount paper accrued ratably to the date of
maturity and any net realized short-term gains or losses on the assets of the
CIT Master Portfolio.
Dividends and any capital gain distributions paid by the CIT Master
Portfolio will be reinvested in additional Interests in that Master Portfolio
at net asset value and credited to an investor's account on the payment date.
OTHER MASTER PORTFOLIOS -- The net investment income of the Capital
Appreciation Master Portfolio, the Municipal Income Master Portfolio, the
Short-Term Government-Corporate Income Master Portfolio, the Corporate Stock
Master Portfolio, the Asset Allocation Master Portfolio, and the U.S.
Government Allocation Master Portfolio is allocated daily to all investors of
record in such Master Portfolios as of 4:00 p.m. (New York time) on any day the
New York Stock Exchange is open (a "Business Day"). Currently, the Exchange is
closed on New Year's Day, Presidents' Day (the third Monday in February), Good
Friday, Memorial Day (the last Monday in May), Independence Day, Labor Day,
Veterans Day, Thanksgiving Day and Christmas Day (each, a "Holiday") and
Saturdays and Sundays. The net investment of the Tax-Free Money Market Master
Portfolio allocated to all investors of record on each Business Day and also on
Good Friday. 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 4:00 p.m. (New York time) on the
preceding Business Day.
Dividends and any capital gains distributions paid by a Master
Portfolio will be reinvested in the investor's interest in that Master
Portfolio of the Trust at net asset value and credited to the investor's
account on the payment date.
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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 Capital Appreciation Master Portfolio, the
Municipal Income Master Portfolio, Short-Term Government-Corporate Income
Master Portfolio, Tax-Free Money Market Master Portfolio, the Corporate Stock
Master Portfolio, the Asset Allocation Master Portfolio, and the U.S.
Government Allocation Master Portfolio may be purchased on any Business Day.
Interest 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 eight Master Portfolios: the Capital
Appreciation Master Portfolio, the CIT Master Portfolio, the Short-Term
Municipal Income Master Portfolio, the Tax-Free Money Market Master Portfolio,
the Short-Term Government-Corporate Income Master Portfolio, the Corporate
Stock Master Portfolio, the Asset Allocation Master Portfolio, and the U.S.
Government Allocation Master Portfolio, each of which are diversified
investment portfolios. Beneficial interests in the Trust are issued solely in
private placement transactions that do not involve any "public offering" within
the meaning of Section 4(2) of the 1933 Act. Investments in the Trust may only
be made by registered broker/dealers or by investment companies, insurance
company separate accounts, common or commingled trust funds, group trusts or
similar organizations or entities that are "accredited investors" within the
meaning of Regulation D under the 1933 Act. This Amendment to the registration
statement does not constitute an offer to sell, or the solicitation of an offer
to buy, any "security" within the meaning of the 1933 Act.
There is no minimum initial or subsequent purchase amount required for
investment in a Master Portfolio. The Trust reserves the right to reject any
purchase order. If accepted by the
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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 12:00 Noon (New York time) on
any Bank Business Day or Business Day, respectively. Purchase orders for
Interests in the Municipal Income and Government-Corporate Income Master
Portfolio are effected if received by 4:00 p.m. (New York time) on any
Business Day.
DETERMINATION OF NET ASSET VALUE
CIT AND TAX-FREE MONEY MARKET MASTER PORTFOLIOS-- The net asset value
of the CIT Master Portfolio is determined as of 12:00 noon (New York time) on
each Bank Business Day and also on Good Friday. The net asset value of the
Tax-Free Money Market Master Portfolio is determined as of 9:00 a.m. and 1:00
p.m. (Pacific time) on each Business Day and also on Good Friday. The net asset
value of each of the CIT Tax-Free Money Market Master Portfolios 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, deducting
liabilities and their dividing the result by the number of outstanding
interests in such Master Portfolios. It is anticipated that the net asset value
of an interest in the CIT Master Portfolio or the Tax-Free Money Market Master
Portfolio will remain stable at $1.00 per share, although no assurance can be
given that each Master Portfolio will maintain a stable net asset value on a
continuing basis.
The CIT Master Portfolio and the Tax-Free Money Market Master
Portfolio each uses the amortized cost method to value its portfolio
securities. The amortized cost method involves valuing a security at its cost
and amortizing any discount or premium over the period until maturity,
generally without regard to the impact of fluctuating interest rates on the
market value of the security.
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OTHER MASTER PORTFOLIOS -- The net asset value of the Capital
Appreciation Master Portfolio, the Municipal Income Master Portfolio, the
Short-Term Government-Corporate Income Master Portfolio, the Corporate Stock
Master Portfolio, the Asset Allocation Master Portfolio, and the U.S.
Government Allocation Master Portfolio is determined on each Business Day. The
net asset value per interest in each of these Master Portfolios is determined
by dividing the value of the total 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 4:00 p.m. New York time.
Except for debt obligations with remaining maturities of 60 days or less, which
are valued at amortized cost, assets are valued at current market prices, or if
such prices are not readily available, at fair value as determined in good
faith by the 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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MASTER INVESTMENT TRUST
TELEPHONE: (800) 643-9691
PART B
DATED MARCH 21, 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 eight diversified portfolios: the Cash Investment Trust Master
Portfolio (the "CIT Master Portfolio"), the Short-Term Municipal Income Master
Portfolio (the "Municipal Income Master Portfolio"), the Short-Term
Government-Corporate Income Master Portfolio (the "Government-Corporate Income
Master Portfolio"), the Tax-Free Money Market Master Portfolio, the Capital
Appreciation Master Portfolio, the Corporate Stock Master Portfolio, the Asset
Allocation 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
March 21, 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.
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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 . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Item 15. Control Persons and Principal Holders of Securities . . . . . . . . . . . . . 28
Item 16. Investment Advisory and Other Services . . . . . . . . . . . . . . . . . . . 29
Item 17. Brokerage Allocation and Other Practices . . . . . . . . . . . . . . . . . . 34
Item 18. Capital Stock and Other Securities . . . . . . . . . . . . . . . . . . . . . 36
Item 19. Purchase, Redemption and Pricing of Securities . . . . . . . . . . . . . . . 38
Item 20. Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Item 21. Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Item 22. Calculations of Performance Data . . . . . . . . . . . . . . . . . . . . . . 40
Item 23. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
</TABLE>
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ITEM 12. GENERAL INFORMATION AND HISTORY.
Not applicable.
ITEM 13. INVESTMENT OBJECTIVES AND POLICIES.
The following information supplements and should be read in conjunction
with Item 4 in Part A.
A. CAPITAL APPRECIATION MASTER PORTFOLIO
As discussed in Part A, the investment objective of the Capital
Appreciation Master Portfolio is to provide investors with an above-average
level of capital appreciation. It seeks to achieve this objective through the
active management of a broadly diversified portfolio of equity securities of
companies expected to experience strong growth in revenues, earnings and
assets.
INVESTMENT RESTRICTIONS
As a matter of fundamental investment policy, the Capital Appreciation
Master Portfolio may not:
(1) purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after the purchase and
as a result thereof, the value of the Master Portfolio's investments in that
industry would equal or exceed 25% of the current value of the Master
Portfolio's total assets, provided that there is no limitation with respect to
investments in securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities;
(2) purchase or sell real estate or real estate limited
partnerships (other than securities secured by real estate or interests therein
or securities issued by companies that invest in real estate or interests
therein), commodities or commodity contracts, or interests in oil, gas, or
other mineral exploration or development programs;
(3) purchase securities on margin (except for short-term credits
necessary for the clearance of transactions) or make short sales of securities;
(4) underwrite securities of other issuers, except to the extent
that the purchase of permitted investments directly from the issuer thereof or
from an underwriter for an issuer and the later disposition of such securities
in accordance with the Master Portfolio's investment program may be deemed to
be an underwriting;
(5) make investments for the purpose of exercising control or
management;
(6) issue senior securities except that the Master Portfolio may
borrow from banks up to 10% of the current value of its net assets for
temporary purposes only in order
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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.
With respect to fundamental investment policy (7), the Master Portfolio
does not intend to loan its portfolio securities during the coming year.
The Capital Appreciation Master Portfolio is subject to the following
non-fundamental investment policies. These restrictions may be changed by a
vote of a majority of the Trustees of the Trust at any time. The Master
Portfolio may not:
(1) purchase or retain securities of any issuer if the officers or
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
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<PAGE> 50
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.
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.
B. CASH INVESTMENT TRUST MASTER PORTFOLIO
As described in Part A, the investment objective of the CIT Master
Portfolio is to provide its investors with a high level of current income,
while preserving capital and liquidity. The CIT Master Portfolio seeks to
achieve its investment objective by investing in high-quality, short-term
instruments. There can, of course, be no assurance that the CIT Master
Portfolio will achieve its investment objective. The investment objective of
the CIT Master Portfolio may not be changed without the approval of the
investors in the Master Portfolio.
INVESTMENT RESTRICTIONS
The CIT Master Portfolio is subject to the following investment
restrictions, all of which are fundamental policies. The CIT Master Portfolio
may not:
(1) purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after the purchase and
as a result thereof, the value of the CIT Master Portfolio's investments in
that industry would exceed 25% of the current value of its respective total
assets, provided that there is no limitation with respect to investments in (i)
obligations of the United States Government, its agencies or instrumentalities,
and (ii) obligations of domestic banks (for purposes of this restriction,
domestic bank obligations do not include obligations of U.S. branches of
foreign banks or obligations of foreign branches of U.S. banks);
(2) purchase or sell real estate or real estate limited
partnership interests (other than money market securities secured by real
estate or interests therein or securities issued
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<PAGE> 51
by companies that invest in real estate or interests therein), commodities or
commodity contracts;
(3) purchase securities on margin (except for short-term credits
necessary for the clearance of transactions) or make short sales of securities;
(4) underwrite securities of other issuers, except to the extent
that the purchase of permitted investments directly from the issuer thereof or
from an underwriter for an issuer and the later disposition of such securities
in accordance with the Master Portfolio's investment program may be deemed to
be an underwriting;
(5) make investments for the purpose of exercising control or
management;
(6) issue senior securities, except that the CIT Master Portfolio
may borrow from banks up to 10% of the current value of its net assets for
temporary purposes only in order to meet redemptions, and these borrowings may
be secured by the pledge of up to 10% of the current value of its net assets
(but investments may not be purchased while any such borrowing exceeds 5% of
the Master Portfolio's net assets);
(7) write, purchase or sell puts, calls, warrants or options or
any combination thereof, except that the CIT Master Portfolio may purchase
securities with put rights in order to maintain liquidity; or
(8) make loans of portfolio securities or other assets, except
that loans for purposes of this restriction will not include the purchase of
fixed time deposits, repurchase agreements, commercial paper and other
short-term obligations, and other types of debt instruments commonly sold in a
public or private offering.
The CIT Master Portfolio is subject to the following non-fundamental
policies.
The CIT Master Portfolio may not:
(1) purchase or retain securities of any issuer if the officers,
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
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(4) invest more than 10% of the current value of its net assets in
repurchase agreements maturing in more than seven days, fixed time deposits
that are subject to withdrawal penalties and that have maturities of more than
seven days, restricted securities (which are securities that must be registered
under the Securities Act of 1933 before they may be offered or sold to the
public), and illiquid securities.
As provided in Rule 2a-7 under the Act, the CIT Master Portfolio may
only purchase "Eligible Securities" (as defined in Rule 2a-7) and may purchase
such securities only if, immediately after such purchase, the CIT Master
Portfolio would have no more than 5% of its total assets in "First Tier
Securities" (as defined in Rule 2a-7) of any one issuer, excluding government
securities and except as otherwise permitted for temporary purposes and for
certain guarantees and unconditional puts; the CIT Master Portfolio would own
no more than 10% of the voting securities of any one issuer; the CIT Master
Portfolio would have no more than 5% of its total assets in "Second Tier
Securities" (as defined in Rule 2a-7); and the CIT Master Portfolio would have
no more than the greater of $1 million or 1% of its total assets in Second Tier
Securities of any one issuer.
ADDITIONAL PERMITTED INVESTMENT ACTIVITIES
Foreign Obligations. The CIT Master Portfolio may invest a portion of
its assets (no more than 5%) in obligations of foreign branches of U.S. banks
or U.S. branches of foreign banks that are denominated in and pay interest in
U.S. dollars. Investments in foreign obligations involve certain
considerations that are not typically associated with investing in domestic
obligations. There may be less publicly available information about a foreign
issuer than about a domestic issuer. Foreign issuers also are not generally
subject to the same accounting, auditing and financial reporting standards or
government supervision as domestic issuers. In addition, with respect to
certain foreign countries, tax may be withheld at the source under foreign
income tax laws, and there is a possibility of expropriation or confiscatory
taxation, political or social instability or diplomatic developments that could
adversely affect investments in, the liquidity of, and the ability to enforce
contractual obligations with respect to, securities of issuers located in those
countries.
Unrated Securities. The CIT Master Portfolio may purchase instruments
that are not rated if, in the opinion of Wells Fargo Bank, N.A. ("Wells Fargo
Bank"), such obligations are comparable in quality to other high-quality
investments that are permitted for purchase by the CIT Master Portfolio. After
purchase by the CIT Master Portfolio, a security may cease to be rated or its
rating may be reduced below the minimum required for purchase by the CIT Master
Portfolio. Neither event requires an immediate sale of such security by the
CIT Master Portfolio provided that, when a security ceases to be rated, the
Board of Trustees of the Trust determines that such security presents minimal
credit risks and, provided further that, when a security
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<PAGE> 53
rating is downgraded below the eligible quality for investment or no longer
presents minimal credit risks, the Board finds that disposal of such security
would not be in the CIT Master Portfolio's best interest. To the extent the
ratings given by Moody's or S&P may change as a result of changes in such
organizations or their rating systems, the Master Portfolio will attempt to use
comparable ratings as standards for investments in accordance with the
investment policies contained in Part A and in this Part B. The ratings of
Moody's and S&P are more fully described in the Appendix to Part B.
C. SHORT-TERM MUNICIPAL INCOME MASTER PORTFOLIO AND SHORT-TERM
GOVERNMENT-CORPORATE INCOME MASTER PORTFOLIO
INVESTMENT RESTRICTIONS
As described in Part A, the investment objective of the Short-Term
Government-Corporate Income Master Portfolio is to provide investors with
current income while managing principal volatility. The Master Portfolio seeks
to achieve its investment objective by investing in obligations issued by the
U.S. Government, its agencies and instrumentalities and investment-grade
corporate obligations.
As described in Part A, the investment objective of the Short-Term
Municipal Income Master Portfolio is to provide investors with a high level of
income exempt from federal income tax, while managing principal volatility.
The Short-Term Municipal Income Master Portfolio seeks to achieve its
investment objective by investing (under normal market conditions)
substantially all of the assets of the Master Portfolio in the following types
of municipal obligations that pay interest which is exempt from federal income
tax: bonds, notes and commercial paper issued by or on behalf of states,
territories, and possessions of the United States, the District of Columbia,
and their political subdivisions, agencies instrumentalities and authorities,
the interest on which, in the opinion of counsel to the issuer or bond counsel
is exempt from federal income tax.
The Short-Term Municipal Income Master Portfolio and the Short-Term
Government-Corporate Income Master Portfolio are subject to the following
investment restrictions, all of which are fundamental policies. The investment
restrictions of each such Master Portfolio cannot be changed without approval
by the holders of a majority (as defined in the 1940 Act) of the outstanding
voting securities of such Master Portfolio, as the case may be. The Short-Term
Municipal Income Master Portfolio and the Short-Term Government-Corporate
Income Master Portfolio may not:
(1) purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after the purchase and
as a result thereof, the value of such Master Portfolio's investments in that
industry would exceed 25% of the current value of the Master Portfolio's total
assets, provided that there is no limitation with respect to: (1) investments
in securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities; and (2) municipal securities (for the purpose of this
restriction, private activity bonds and notes shall not be deemed municipal
securities if the
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payment of principal and interest on such bonds or notes is the ultimate
responsibility of non-governmental issuers); and provided further that there is
no limitation with respect to investments by the Master Portfolio in securities
issued by registered investment companies;
(2) purchase or sell real estate (other than securities secured by
real estate or interests therein or securities issued by companies that invest
in real estate or interests therein), commodities or commodity contracts, or
interests in oil, gas, or other mineral exploration or development programs;
(3) purchase securities on margin (except for short-term credits
necessary for the clearance of transactions) or make short sales of securities;
(4) underwrite securities of other issuers, except to the extent
that the purchase of permitted investments directly from the issuer thereof or
from an underwriter for an issuer and the later disposition of such securities
in accordance with the Master Portfolio's investment program may be deemed to
be an underwriting;
(5) make investments for the purpose of exercising control or
management;
(6) purchase puts, calls, straddles, spreads, or any combination
thereof, except that each Master Portfolio may purchase securities with put
rights in order to maintain liquidity;
(7) issue senior securities, except that each Master Portfolio may
borrow from banks up to 10% of the current value of its net assets for
temporary purposes only in order to meet redemptions, and these borrowings may
be secured by the pledge of up to 10% of the current value of its net assets
(but investments may not be purchased by a Master Portfolio while any such
outstanding borrowing exceeds 5% of its net assets);
(8) purchase securities of any issuer (except securities issued or
guaranteed by the U.S. Government, its agencies and instrumentalities) if, as a
result, with respect to 75% of the total assets, more than 5% of the value of
each Master Portfolio's total assets would be invested in the securities of any
one issuer or such Master Portfolio would own more than 10% of the outstanding
voting securities of such issuer; or
(9) lend their portfolio securities having a value that exceeds
50% of the current value of their total assets, provided that, for purposes of
this restriction, loans will not include the purchase of fixed time deposits,
repurchase agreements, commercial paper and other types of debt instruments
commonly sold in a public or private offering. The Master Portfolios do not
intend to make loans of their portfolio securities during the coming year.
The Short-Term Municipal Income Master Portfolio and the Short-Term
Government-Corporate Income Master Portfolio are subject to the following
non-fundamental policies. These restrictions may be changed by vote of a
majority of the
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Trustees of the Trust at any time. The Short-Term Municipal Income Master
Portfolio and the Short-Term Government- Corporate Income Master Portfolio may
not:
(1) invest more than 5% of their net assets at the time of
purchase in warrants, or more than 2% of their net assets in warrants which are
not listed on the New York or American Stock Exchange;
(2) purchase or retain securities of any issuer if the officers,
directors or trustees of the Trust or the investment adviser owning
beneficially more than one-half of one percent (0.5%) of the securities of the
issuer together own beneficially more than 5% of such securities;
(3) invest in securities of issuers who, with their predecessors,
have been in existence less than three years, unless the securities are
guaranteed or insured by the U.S. Government, or a state or municipality, or an
agency or instrumentality thereof, if, by reason thereof, the value of a Master
Portfolio's aggregate investment in such securities will exceed 5% of its total
assets;
(4) write, purchase or sell options;
(5) invest more than 15% of the current value of their net assets
in repurchase agreements maturing in more than seven days, fixed time deposits
that are subject to withdrawal penalties and that have maturities of more than
seven days and other illiquid securities;
(6) purchase, hold or deal in real estate limited partnerships; or
(7) engage in any short sales other than short sales against the
box.
ADDITIONAL PERMITTED INVESTMENT ACTIVITIES
The following information supplements and should be read in conjunction
with the sections in Part A entitled "Investment Objectives and Policies" and
"Additional Information About Permitted Investment Activities."
When-Issued Securities. The Short-Term Municipal Income Master
Portfolio and the Short-Term Government- Corporate Income Master Portfolio may
purchase securities on a when-issued basis, in which case, delivery and payment
normally take place within 120 days after the date of the commitment to
purchase. The Short-Term Government-Corporate Income Master Portfolio does not
intend to invest more than 5% of its net assets in when-issued securities
during the coming year. The Master Portfolios make commitments to purchase
securities on a when-issued basis only with the intention of actually acquiring
the securities, but may sell such securities before the settlement date if it
is deemed advisable. When-issued securities are subject to market fluctuation,
and no income accrues to the purchaser during the period prior to issuance.
The purchase price and the interest rate that will be received on debt
securities are fixed at the time the
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purchaser enters into the commitment. Purchasing a security on a when-issued
basis can involve a risk that the market price at the time of delivery may be
lower than the agreed-upon purchase price, in which case there could be an
unrealized loss at the time of delivery.
Each Master Portfolio has established a segregated account in which the
Master Portfolio maintains liquid assets in an amount at least equal in value
to the Master Portfolio's commitments to purchase when-issued securities. If
the value of these assets declines, the Master Portfolio will place additional
liquid assets in the account on a daily basis so that the value of the assets
in the account is equal to the amount of such commitments.
Municipal Bonds. As discussed in Part A, the two principal
classifications of municipal bonds in which the Short-Term Municipal Income
Master Portfolio may invest are "general obligation" and "revenue" bonds.
Municipal bonds are debt obligations issued to obtain funds for various public
purposes, including the construction of a wide range of public facilities such
as bridges, highways, housing, hospitals, mass transportation, schools, streets
and water and sewer works. Other public purposes for which municipal bonds may
be issued include the refunding of outstanding obligations and obtaining funds
for general operating expenses or to loan to other public institutions and
facilities. Industrial development bonds are a specific type of revenue bond
backed by the credit and security of a private user. Certain types of
industrial development bonds are issued by or on behalf of public authorities
to obtain funds to provide privately-operated housing facilities, sports
facilities, convention or trade show facilities, airport, mass transit, port or
parking facilities, air or water pollution control facilities and certain local
facilities for water supply, gas, electricity, or sewage or solid waste
disposal. Assessment bonds, wherein a specially created district or project
area levies a tax (generally on its taxable property) to pay for an improvement
or project may be considered a variant of either category. There are, of
course, other variations in the types of municipal bonds, both within a
particular classification and between classifications, depending on numerous
factors. Subject to its investment objective and policies, the Short-Term
Municipal Income Master Portfolio is not limited with respect to which category
of municipal bonds it may acquire.
Municipal Notes. The Short-Term Municipal Income Master Portfolio may
invest in municipal notes. Municipal notes include, but are not limited to,
tax anticipation notes ("TANs"), bond anticipation notes ("BANs"), revenue
anticipation notes ("RANs") and construction loan notes. Notes sold as interim
financing in anticipation of collection of taxes, a bond sale or receipt of
other revenues are usually general obligations of the issuer.
TANs. An uncertainty in a municipal issuer's capacity to raise taxes
as a result of such things as a decline in its tax base or a rise in
delinquencies could adversely affect the issuer's ability to meet its
obligations on outstanding TANs. Furthermore, some municipal issuers mix
various tax proceeds into a general fund that is used to meet obligations other
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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 Short-Term Municipal Income Master Portfolio, will decline and (if
purchased at par value) they would sell at a discount. If interest rates fall,
the values of outstanding securities will generally increase and (if purchased
at par value) they would sell at a premium. Changes in the value of municipal
securities held by the Short-Term Municipal Income Master Portfolio arising
from these or other factors will cause changes in the net asset value per share
of the Short-Term Municipal Income Master Portfolio.
D. TAX-FREE MONEY MARKET MASTER PORTFOLIO
As described in Part A, the investment objective of the Tax-Free Money
Market Master Portfolio is to provide investors with a high level of income
exempt from federal income tax, while preserving capital and liquidity. The
Master Portfolio seeks to achieve its investment objective by investing in
high-quality, short-term U.S. dollar denominated money market instruments,
primarily municipal obligations, with remaining maturities not exceeding 13
months. There can, of course, be no assurance that the Tax-Free Money Market
Master Portfolio will achieve its investment objective. The investment
objective of the Tax-Free Money Market Master Portfolio may not be changed
without the approval of the investors in such Master Portfolio.
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INVESTMENT RESTRICTIONS
The Tax-Free Money Market Master Portfolio is subject to the following
investment restrictions, all of which are fundamental policies. The Tax-Free
Money Market Master Portfolio may not:
(1) purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after the purchase and
as a result thereof, the value of the Master Portfolio's investments in that
industry would be 25% or more of the current value of the Master Portfolio's
total assets, provided that there is no limitation with respect to investments
in (i) municipal securities (for the purpose of this restriction, private
activity bonds and notes shall not be deemed municipal securities if the
payment of principal and interest on such bonds or notes is the ultimate
responsibility of non-governmental entities), (ii) obligations of the United
States Government, its agencies or instrumentalities (including
government-sponsored enterprises), and (iii) the obligations of domestic banks
(for the purpose of this restriction, domestic bank obligations do not include
obligations of U.S. branches of foreign banks or obligations of foreign
branches of U.S. banks);
(2) purchase or sell real estate or real estate limited
partnerships (other than municipal obligations and other securities secured by
real estate or interests therein or securities issued by companies that invest
in real estate or interests therein), commodities or commodity contracts
(including futures contracts) except that the Master Portfolio may purchase
securities of an issuer 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);
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(7) write, purchase or sell puts, calls, options, warrants or
combinations thereof, except that the Master Portfolio may purchase securities
with put rights in order to maintain liquidity;
(8) purchase securities of any issuer (except securities issued or
guaranteed by the U.S. Government, its agencies and instrumentalities,
including government-sponsored enterprises) if, as a result, with respect to
75% of its total assets, more than 5% of the value of the Master Portfolio's
total assets would be invested in the securities of any one issuer or, with
respect to 100% of its total assets the Master Portfolio's ownership would be
more than 10% of the outstanding voting securities of such issuer; or
(9) make loans except that the Master Portfolio may purchase or
hold debt instruments, lend its portfolio securities or enter into repurchase
agreement transactions in accordance with its investment policies.
With regard to fundamental investment restriction number (1) above, the
Master Portfolio intends to reserve freedom of action to have in excess of 25%
of the value of its total assets invested in obligations of the banking
industry. Regarding this fundamental concentration policy, the Master
Portfolio may hold in excess of 25% of the value of its assets in obligations
of the banking industry to the extent that the Master Portfolio holds
obligations with such credit enhancements as letters of credit issued by
domestic bank issuers, which will be considered to be obligations of domestic
banks. The SEC staff's position is that the exclusion with respect to banks
may only be applied to domestic banks. For this purpose, the staff also takes
the position that U.S. branches of foreign banks and foreign branches of
domestic banks may, if certain conditions are met, be treated as "domestic
banks". The Trust currently intends to consider only obligations of "domestic
banks" to be within the exclusion with respect to bank obligations.
Fundamental investment restriction number (8), above, is less
restrictive than Rule 2a-7 of the 1940 Act. Nonetheless, it is the operating
policy of the Master Portfolio to comply with Rule 2a-7's diversification
requirements.
The Tax-Free Money Market Master Portfolio is subject to the following
non-fundamental policies. The Tax-Free Money Market Master Portfolio may not:
(1) purchase or retain securities of any issuer if the officers or
Trustees of the Trust or the investment adviser owning beneficially more than
one-half of one percent (0.5%) of the securities of the issuer together owned
beneficially more than 5% of such securities;
(2) purchase interests, leases, or limited partnership interests
in oil, gas, or other mineral exploration or development programs;
(3) purchase securities of issuers who, with their predecessors,
have been in existence less than three years, unless the securities are fully
guaranteed or insured by the
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U.S. Government, a state, commonwealth, possession, territory, the District of
Columbia or by an entity in existence at least three years, or the securities
are backed by the assets and revenues of any of the foregoing if, by reason
thereof, the value of its aggregate investments in such securities will exceed
5% of its total assets; and
(4) purchase securities of unseasoned issuers, including their
predecessors, which have been in operation for less than three years, and
equity securities of issuers which are not readily marketable if by reason
thereof the value of the Master Portfolio's aggregate investment in such
classes of securities will exceed 5% of its total assets.
The Master Portfolio may invest in shares of other open-end, management
investment companies, subject to the limitations of Section 12(d)(1) of the
1940 Act, provided that any such purchases will be limited to temporary
investments in shares of unaffiliated investment companies. However, the
investment adviser will waive its advisory fees for that portion of the Master
Portfolio's assets so invested, except when such purchase is part of a plan of
merger, consolidation, reorganization or acquisition. In addition, these
unaffiliated investment companies must have a fundamental investment policy of
investing at least 80% of their net assets in obligations that are exempt from
federal income tax and are not subject to the federal alternative minimum tax.
In addition, the Master Portfolio reserves the right to invest up to
10%, of the current value of its net assets in fixed time deposits that are
subject to withdrawal penalties and that have maturities of more than seven
days, repurchase agreements maturing in more than seven days or other illiquid
securities and restricted securities. However, as long as the shares of an
investment company investing in the Master Portfolio are registered for sale in
a state that imposes a lower limit on the percentage of an investment company's
assets that may be so invested, the Master Portfolio will comply with such
lower limit. The Master Portfolio presently is limited to investing 10% of its
net assets in such securities due to limits applicable in several states.
Furthermore, the Master Portfolio may not purchase or sell real estate
limited partnership interests. The Master Portfolio does not currently intend
to make loans of its portfolio securities.
ADDITIONAL PERMITTED INVESTMENT ACTIVITIES
Unrated and Downgraded Investments. The Tax-Free Money Market Master
Portfolio may purchase instruments that are not rated if, in the opinion of the
investment adviser, such obligations are of comparable quality to other rated
investments that are permitted to be purchased by the Master Portfolio. 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
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requires an immediate sale of such security, provided that when a security
ceases to be rated the Board of Trustees determines that such security
presents minimal credit risks and, provided further that when a security rating
is downgraded below the eligigle 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 SAI.
Letters of Credit. Certain of the debt obligations (including
municipal securities, certificates of participation, commercial paper and other
short-term obligations) which the Master Portfolio may purchase may be backed
by an unconditional and irrevocable letter of credit of a bank, savings and
loan association or insurance company which assumes the obligation for payment
of principal and interest in the event of default by the issuer. Only banks,
savings and loan associations and insurance companies which, in the opinion of
Wells Fargo Bank, are of comparable quality to issuers of other permitted
investments of the Master Portfolio may be used for letter of credit-backed
investments, provided that the Trust's Board approves or ratifies such
investments. For purposes of the Master Portfolio's fundamental policy on
concentrations, letters of credit issued by domestic bank issuers will be
considered to be obligations of domestic banks excluded from the 25% limitation
regarding industry concentration (see fundamental investment restriction number
(1) above).
Loans of Portfolio Securities. The Tax-Free Money Market Master
Portfolio may lend securities from its portfolio to brokers, dealers and
financial institutions (but not individuals) if cash, U.S. Government
obligations or other high-quality debt obligations equal to at least 100% of
the current market value of the securities loaned (including accrued interest
thereon) plus the interest payable to such Master Portfolio with respect to the
loan is maintained with the Master Portfolio. In determining whether or not to
lend a security to a particular broker, dealer or financial institution, the
Master Portfolio's investment adviser considers all relevant facts and
circumstances, including the size, creditworthiness and reputation of the
broker, dealer, or financial institution. Any loans of portfolio securities
are fully collateralized based on values that are marked to market daily. The
Master Portfolio will not enter into any portfolio security lending arrangement
having a duration longer than one year. Any securities that the Master
Portfolio receives as collateral do not become part of the Master Portfolio's
portfolio at the time of the loan and, in the event of a default by the
borrower, the Master Portfolio will, if permitted by law, dispose of such
collateral except for such part thereof that is a security in which the Master
Portfolio is permitted to invest. During the time securities are on loan, the
borrower will pay the Master Portfolio any accrued income on those securities,
and the Master Portfolio may invest the cash collateral and earn income or
receive an agreed-upon fee from a borrower that has delivered cash-equivalent
collateral. The Master Portfolio will not lend securities having a value that
exceeds one-third of the current value of its total assets. Loans of
securities by the Master Portfolio are subject to termination at the Master
Portfolio's or the borrower's option. The Master Portfolio may pay reasonable
administrative and custodial fees in connection with a securities loan and may
pay a
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negotiated portion of the interest or fee earned with respect to the collateral
to the borrower or the placing broker. Borrowers and placing brokers are not
permitted to be affiliated, directly or indirectly, with the Trust, the
investment adviser or the Distributor.
Foreign Obligations. The Tax-Free Money Market and the Capital
Appreciation Master Portfolios may each invest in foreign obligations as
described in Part A. Investments in foreign obligations involve certain
considerations that are not typically associated with investing in domestic
obligations. There may be less publicly available information about a foreign
issuer than about a domestic issuer. Foreign issuers also are not generally
subject to uniform accounting, auditing and financial reporting standards or
governmental supervision comparable to those applicable to domestic issuers.
In addition, with respect to certain foreign countries, tax may be withheld at
the source under foreign income tax laws, and there is a possibility of
expropriation of confiscatory taxation, political or social instability or
diplomatic developments that could adversely affect investments in, the
liquidity of, and the ability to enforce contractual obligations with respect
to, securities of issuers located in those countries. The Tax-Free Money
Market Master Portfolio may not invest 25% or more of its assets in foreign
obligations.
Obligations of foreign banks and foreign branches of U.S. banks involve
somewhat different investment risks from those affecting obligations of U.S.
banks, including the possibilities that liquidity could be impaired because of
future political and economic developments, that the obligations may be less
marketable than comparable obligations of U.S. banks, that a foreign
jurisdiction might impose withholding taxes on interest income payable on those
obligations, that foreign deposits may be seized or nationalized, that foreign
governmental restrictions (such as foreign exchange controls) may be adopted
which might adversely affect the payment of principal and interest on those
obligations and that the selection of those obligations may be more difficult
because there may be less publicly available information concerning foreign
banks or the accounting, auditing and financial reporting standards, practices
and requirements applicable to foreign banks may differ from those applicable
to U.S. banks. In that connection, foreign banks are not subject to
examination by any U.S. Government agency or instrumentality.
Municipal Bonds. The Tax-Free Money Market Master Portfolio may invest
in municipal bonds. The two principal classifications of municipal bonds are
"general obligation" and "revenue" bonds. Municipal bonds are debt obligations
issued to obtain funds for various public purposes, including the construction
of a wide range of public facilities such as bridges, highways, housing,
hospitals, mass transportation, schools, streets, and water and sewer works.
Other purposes for which municipal bonds may be issued include the refunding of
outstanding obligations and obtaining funds for general operating expenses or
to loan to other public institutions and facilities. Industrial development
bonds are a specific type of revenue bond backed by the credit and security of
a private user. Certain types of industrial development bonds are issued by or
on behalf of public authorities to obtain funds to provide privately-operated
housing facilities, sports facilities, convention or trade show facilities,
airport, mass transit, port or parking facilities, air or water pollution
control facilities and certain local facilities for water
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supply, gas, electricity, or sewage or solid waste disposal. The Master
Portfolio may not invest 25% or more of its assets in industrial development
bonds. Assessment bonds, wherein a specially created district or project area
levies a tax (generally on its taxable property) to pay for an improvement or
project may be considered a variant of either category. There are, of course,
other variations in the types of municipal bonds, both within a particular
classification and between classifications, depending on numerous factors.
Municipal Notes. Municipal notes include, but are not limited to, tax
anticipation notes ("TANs"), bond anticipation notes ("BANs"), revenue
anticipation notes ("RANs") and construction loan notes. Notes sold as interim
financing in anticipation of collection of taxes, a bond sale or receipt of
other revenues are usually general obligations of the issuer.
TANs. An uncertainty in a municipal issuer's capacity to raise taxes
as a result of a decline in its tax base or a rise in delinquencies could
adversely affect the issuer's ability to meet its obligations on outstanding
TANs. Furthermore, some municipal issuers mix various tax proceeds into a
general fund that is used to meet obligations other than those of the
outstanding TANs. Use of such a general fund to meet various obligations could
affect the likelihood of making payments on TANs.
BANs. The ability of a municipal issuer to meet its obligations on its
BANs is primarily dependent on the issuer's adequate access to the longer term
municipal bond market and the likelihood that the proceeds of such bond sales
will be used to pay the principal of, and interest on, BANs.
RANs. A decline in the receipt of certain revenues, such as
anticipated revenues from another level of government, could adversely affect
an issuer's ability to meet its obligations on outstanding RANs. In addition,
the possibility that the revenues would, when received, be used to meet other
obligations could affect the ability of the issuer to pay the principal of, and
interest on, RANs.
The values of outstanding municipal securities will vary as a result of
changing market evaluations of the ability of their issuers to meet the
interest and principal payments (i.e., credit risk). Such values also will
change in response to changes in the interest rates payable on new issues of
municipal securities (i.e., market risk). Should such interest rates rise, the
value of outstanding securities, including those held in a Master Portfolio's
portfolio, will decline and (if purchased at par value) they would sell at a
discount. If interests rates fall, the value of outstanding securities will
generally increase and (if purchased at par value) they would sell at a
premium. Changes in the value of municipal securities held in a Master
Portfolio's portfolio arising from these or other factors will cause changes in
the net asset value per share of the Master Portfolio.
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E. CORPORATE STOCK MASTER PORTFOLIO, ASSET ALLOCATION MASTER PORTFOLIO, AND
U.S. GOVERNMENT ALLOCATION MASTER PORTFOLIO
The investment objective of each of the Corporate Stock Master
Portfolio, the Asset Allocation Master Portfolio, and the U.S. Government
Allocation Master Portfolio are as described in Part A. The investment
restrictions and additional permitted investment activities applicable to 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 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;
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(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.
Each Master Portfolio is subject to the following 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
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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.
ADDITIONAL PERMITTED INVESTMENT ACTIVITIES
Portfolio Securities. To the extent set forth in Part A and Part B,
each Master Portfolio may invest in the securities described below.
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
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.
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<PAGE> 67
Unrated Investments. Each Master Portfolio may purchase instruments
that are not rated if, in the opinion of Wells Fargo Bank, such obligations
are of investment quality comparable to other rated investments that are
permitted to be purchased by such Master Portfolio. After purchase by a Master
Portfolio, a security may cease to be rated or its rating may be reduced below
the minimum required for purchase by such Master Portfolio. Neither event
requires an immediate sale of such security by such 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, each Master Portfolio will attempt
to use comparable ratings as standards for investments in accordance with the
investment policies contained in Part A and in this Part B. The ratings of
Moody's and S&P are more fully described in the Part B Appendix.
Letters of Credit. Certain of the debt obligations (including certificates
of participation, commercial paper and other short-term obligations) which the
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 permitted investments of such
Fund may be used for letter of credit-backed investments.
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.
When-Issued Securities. Certain of the securities in which the U.S.
Government Allocation Master Portfolio and the Asset Allocation Master
Portfolio may invest 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. These Master Portfolios only will make commitments to
purchase securities on a when-issued basis 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 will be received on debt
securities are fixed at the time the purchaser enters into the commitment.
Purchasing a security on a when-issued basis can involve a risk that the market
price at the time of delivery may be lower than the agreed-upon purchase price,
in which case there could be an unrealized loss at the time of delivery.
Each Master Portfolio 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
22
<PAGE> 68
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.
Loans of Portfolio Securities. All of the 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 a 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.
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
23
<PAGE> 69
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 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
24
<PAGE> 70
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.
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.
Foreign Obligations. Investments in foreign obligations involve certain
considerations that are not typically associated with investing in domestic
obligations. There may be less publicly available information about a foreign
issuer than about a domestic issuer. Foreign issuers also are not generally
subject to uniform accounting, auditing and financial reporting standards or
governmental supervision comparable to those applicable to domestic issuers.
In addition, with respect to certain foreign countries, interest may be
withheld at the source under foreign income tax laws, and there is a
possibility of expropriation or confiscatory taxation, political or social
instability or diplomatic developments that could adversely affect investments
in, the liquidity of, and
25
<PAGE> 71
the ability to enforce contractual obligations with respect to, securities of
issuers located in those countries. None of the Master Portfolios may invest
25% or more of its assets in foreign obligations.
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, 73 Trustee Private Investor.
415 Walsh Road
Atherton, CA 94027.
*R. Greg Feltus, 44 Trustee, Chairman and Senior Vice President of
President 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, 53 Trustee T.B. Rose Faculty Fellow-
321 Beechcliff Court Business, Wake Forest University,
Winston-Salem, NC 27104 Calloway School of Business and
Accountancy; Associate Professor
School of Business and Accounting
at Wake Forest University since
1983.
</TABLE>
26
<PAGE> 72
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION PRINCIPAL OCCUPATIONS
DURING PAST 5 YEARS
<S> <C> <C>
*Zoe Ann Hines, 46 Trustee Senior Vice President of Stephens
and Director of Brokerage
Accounting; and Secretary of
Stephens Resource Management.
*W. Rodney Hughes, 69 Trustee Private Investor.
31 Dellwood Court
San Rafael, CA 94901
Robert M. Joses, 77 Trustee Private Investor.
47 Dowitcher Way
San Rafael, CA 94901
*J. Tucker Morse, 51 Trustee Private Investor; Real Estate
10 Legrae Street Developer; Chairman of
Charleston, SC 29401 Renaissance Properties Ltd.;
President of Morse Investment
Corporation; and Co-Managing
Partner of Main Street Ventures.
Richard H. Blank, Jr., 39 Chief Operating Officer, Associate of Financial Services
Secretary and Treasurer Group of Stephens; Director of
Stephens Sports Management Inc.;
and Director of Capo Inc.
</TABLE>
COMPENSATION TABLE
------------------
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
AGGREGATE COMPENSATION FROM TOTAL COMPENSATION FROM
NAME AND POSITION REGISTRANT REGISTRANT AND FUND COMPLEX
<S> <C> <C>
Jack S. Euphrat $0 $39,750
Trustee
*R Greg Feltus 0 $0
Trustee
</TABLE>
27
<PAGE> 73
<TABLE>
<S> <C> <C>
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 is considered to be in the same "fund complex", as such term
is defined in Form N-1A under the 1940 Act, as the Trust. The Trustees are
compensated annually by other Companies and Trusts within the fund complex for
their services as Directors/Trustees to such Companies and Trusts. Currently,
the Trustees do not receive any compensation from the Trust (although they are
reimbursed for out-of-pocket expenses) and do not receive any retirement
benefits or deferred compensation from the Trust or fund complex.
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 and Strategic Growth Funds of
Overland Express Funds, Inc. owned at least 25% of the outstanding interests in
the CIT, Short-Term Municipal Income, Short-Term Government-Corporate Income
and Capital Appreciation Master Portfolios, respectively. Therefore, each Fund
could be considered to be a "controlling person" of the respective Master
Portfolio for purposes of the 1940 Act. 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, there were no 25% shareholders of the
Asset Allocation, Corporate Stock or U.S. Government Allocation Master
Portfolios. However, upon conversion of the Asset Allocation, Corporate Stock
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<PAGE> 74
and U.S. Government Allocation Funds of Stagecoach Funds to master/feeder
structure it is expected that each such Fund will own more than 25% of the
outstanding interests of the corresponding Master Portfolio and would be
considered a "controlling person" of such Master Portfolio for purposes of the
1940 Act. 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 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-
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<PAGE> 75
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 Short-Term Municipal Income Master Portfolio and the Short-Term
Government-Corporate Income Master Portfolio 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>
Cash Investment Trust $861,200 $ 0 $1,245,341 $181,344 $1,902,572 $255,082
Short-Term Government- N/A N/A $ 0 $ 731 $ 0 $ 11,944
Corporate*
Short-Term Municipal N/A N/A $ 0 $ 7,879 $ 0 $ 62,512
Income*
</TABLE>
- -------------------------------
*The Short-Term Government Corporate Income Master Portfolio and the Short-Term
Municipal Income Master Portfolio commenced operations on September 19, 1994
and June 3, 1994, respectively.
30
<PAGE> 76
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 Allocation $1,090,400 $0 $1,034,079 $0 $ 680,049 $0
</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
U.S. Government Allocation $ 366,951 $ 353,761 $ 244,478
</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
31
,
<PAGE> 77
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 Short-Term Municipal Income, Short-Term Government-Corporate
Income, Capital Appreciation, Corporate Stock, Asset Allocation, 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.
Stephens is entitled to receive from the Asset Allocation, Corporate
Stock and U.S. Government Allocation Funds monthly fees at the annual rate of
0.03% of such Funds average daily net assets and is entitled to receive from
the Strategic Growth Fund monthly fees of 0.15% of such Fund's average daily
net assets as compensation for administrative services.
32
<PAGE> 78
For the years ended December 31, 1993, 1994 and 1995, the CIT Master
Portfolio and the Asset Allocation, Corporate Stock, Strategic Growth and U.S.
Government Allocation Funds paid administrative fees to Stephens as follows:
<TABLE>
<CAPTION>
1993 1994 1995
Fund/ Fees Fees Fees
Master 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
U.S. Government Allocation $65,395 $62,168 $40,803
</TABLE>
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, after April 29, 1996, 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 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 Short-Term Municipal Income and the Short-Term 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
33
<PAGE> 79
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 Capital Appreciation Master Portfolio, the Corporate Stock
Master Portfolio and the Asset Allocation Master Portfolio, purchases and sales
of equity securities on a securities exchange are effected through brokers who
charge a negotiated commission for their services. Commission rates are
established pursuant to negotiations with the broker based on the quality and
quantity of execution services provided by the broker in light of generally
prevailing rates. Orders may be directed to any broker including, to the
extent and in the manner permitted by applicable law, Stephens or Wells Fargo
Securities Inc. In the over-the-counter-market, securities are generally
traded on a "net" basis with dealers acting as principal for their own accounts
without a stated commission, although the price of the security usually
includes a profit to the dealer. In underwritten offerings, securities are
purchased at a fixed price that includes an amount of compensation to the
underwriter, generally referred to as the underwriter's concession or discount.
Debt securities normally are purchased or sold from or to dealers
serving as market makers for the securities at a net price. A Master Portfolio
also may purchase portfolio securities in underwritten offerings or directly
from an issuer. Generally debt
34
<PAGE> 80
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 Capital Appreciation Master
Portfolio, the Corporate Stock Master Portfolio, and the Asset Allocation
Master Portfolio, purchases and sales of the investment securities of the
Master Portfolios usually are principal transactions. Securities of each
Master Portfolio normally are purchased or sold from or to dealers serving as
market makers for the securities at a net price. Each Master Portfolio also
may purchase portfolio securities in underwritten offerings and may purchase
securities directly from the issuer. Generally, taxable money market
securities are traded on a net basis and do not involve brokerage commissions.
The cost of executing securities transactions of the Master Portfolios consists
primarily of dealer spreads and underwriting commissions.
Wells Fargo Bank, as the investment adviser to the Master Portfolios,
may, in circumstances in which two or more dealers are in a position to offer
comparable results for a portfolio transaction, give preference to a dealer
that has provided statistical or other research services to Wells Fargo Bank.
By allocating transactions in this manner, Wells Fargo Bank is able to
supplement its research and analysis with the views and information of
securities firms. Information so received is in addition to, and not in lieu
of, the services required to be performed by Wells Fargo Bank under the
Investment Advisory Contracts, and the expenses of Wells Fargo Bank are not
necessarily reduced as a result of the receipt of this supplemental research
information. Furthermore, research services furnished by dealers through which
Wells Fargo Bank places securities transactions for the Master Portfolios may
be used by Wells Fargo Bank in servicing its other accounts, and not all of
these services may be used by Wells Fargo Bank in connection with advising the
Master Portfolios.
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.
35
<PAGE> 81
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 Short-Term 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 Portfolio owned securities of their
"regular brokers or dealers" or their parents as defined in the 1940 Act as
follows: the Asset Allocation Fund downed 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 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
36
<PAGE> 82
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.
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.
37
<PAGE> 83
ITEM 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES.
Beneficial interests in the Trust are issued solely in private
placement transactions that do not involve any "public offering" within the
meaning of Section 4(2) of the Securities Act of 1933, as amended (the "1933
Act"). Investments in a Master Portfolio of the Trust may only be made by
registered broker/dealers or by investment companies, insurance company
separate accounts, common or commingled trust funds, group trusts or similar
organizations or entities that are "accredited investors" within the meaning of
Regulation D under the 1933 Act. This registration statement does not
constitute an offer to sell, or the solicitation of an offer to buy, any
"security" within the meaning of the 1933 Act.
Net asset value per interest of the CIT Master Portfolio of the Trust
is determined by the Custodian of the Trust on each Bank Business Day. Net
asset value per interest of the Capital Appreciation Master Portfolio, the
Short-Term Government-Corporate Income Master Portfolio, the Short-Term
Municipal Income Master Portfolio, 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 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
38
<PAGE> 84
provides that the maturity of an instrument may be deemed shorter in the case
of certain instruments, including certain variable- and floating-rate
instruments subject to demand features. Pursuant to the Rule, the Board has
established procedures designed to stabilize, to the extent reasonably
possible, the Master Portfolio's net asset value. Such procedures include
review of a Master Portfolio's holdings by the Board of Trustees at such
intervals as it may deem appropriate to determine whether the Master
Portfolio's net asset value calculated by using available market quotations
deviates within 1/2 of the 1% of the value based on amortized cost. The extent
of any deviation is examined by the Board of Trustees. If such deviation
exceeds 1/2 of 1%, the Board promptly considers what action, if any, will be
initiated. In the event the Board determines that a deviation exists that may
result in material dilution or other unfair results to investors, the Board
will take such corrective action as it regards as necessary and appropriate,
including the sale of portfolio instruments prior to maturity to realize
capital gains or losses or to shorten average portfolio maturity, withholding
dividends or establishing a net asset value by using available market
quotations.
OTHER MASTER PORTFOLIOS -- The net asset value of the Capital Appreciation
Master Portfolio, the Short-Term Municipal Income Master Portfolio and the
Short-Term Government-Corporate Income Master Portfolio, the Corporate Stock
Master Portfolio, the Asset Allocation Master Portfolio and the U.S. Government
Allocation Master Portfolio is determined on each Business Day.
The net asset value per interest for these Master Portfolios is
determined by dividing the value of the total assets of a Master Portfolio less
the Master Portfolio's liabilities by the total number of outstanding
interests. The value of assets of these Master Portfolios (other than debt
obligations maturing in 60 days or less) is determined at the close of regular
trading on the New York Stock Exchange, which is currently 4:00 p.m. New York
time. Except for debt obligations with remaining maturities of 60 days or less
which are valued at amortized cost, assets are valued at current market prices,
or if such prices are not readily available, at fair value as determined in
good faith by the Board of Trustees. The valuation may be provided by
independent pricing services.
ITEM 20. TAX STATUS.
Under the anticipated method of operation of the Master Portfolios of
the Trust, none of the Master Portfolios will be subject to any 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.
39
<PAGE> 85
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.
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.
40
<PAGE> 86
ITEM 23. FINANCIAL INFORMATION.
The audited financial statements and portfolio of investments for the
CIT, Municipal Income and Government- Corporate Income Master Portfolios and
for certain of the funds of Overland Express Funds, Inc. are attached to the
SAI.
41
<PAGE> 87
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.
42
<PAGE> 88
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.
43
<PAGE> 89
STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 1995
<TABLE>
<CAPTION>
OVERLAND SWEEP FUND
<S> <C>
</TABLE>
...............................................................................
<TABLE>
<S> <C>
ASSETS
INVESTMENTS:
In interests in Cash Investment Trust, at value $ 1,209,960,920
Receivables:
Interest 5,346,989
Organization expenses, net of amortization 26,071
Prepaid expenses 10,383
TOTAL ASSETS 1,215,344,363
LIABILITIES
Payables:
Distribution to shareholders 4,428,431
Due to sponsor and distributor (Note 2) 1,087,157
Due to transfer agent (Note 2) 597,191
Other 48,483
TOTAL LIABILITIES 6,161,262
NET ASSETS
$ 1,209,183,101
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
Net Assets $ 1,209,183,101
Shares Outstanding 1,209,183,101
Net Asset Value Per Share $ 1.00
</TABLE>
...............................................................................
At December 31, 1995 net assets were comprised predominately of paid-in-capital.
The Overland Sweep Fund seeks to maintain a net asset value of $1.00 per share.
There is no assurance that the Fund will be able to do so.
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 90
STATEMENT OF OPERATIONS
- FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
OVERLAND SWEEP FUND
<S> <C>
</TABLE>
...............................................................................
<TABLE>
<S> <C>
INVESTMENT INCOME ALLOCATED FROM CASH INVESTMENT TRUST
Interest income allocated from Cash Investment Trust $ 51,213,316
Expenses allocated from Cash Investment Trust (2,815,815)
Waived expenses from Cash Investment Trust 252,531
NET INVESTMENT INCOME ALLOCATED FROM CASH INVESTMENT TRUST 48,650,032
EXPENSES (NOTE 2):
Adminstration fees 215,624
Transfer Agency fees 3,018,737
Distribution fees 4,743,731
Amortization of organization expenses 35,004
Legal and audit 112,385
Other 45,452
TOTAL EXPENSES 8,170,933
NET INVESTMENT INCOME AND NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 40,479,099
</TABLE>
...............................................................................
The accompanying notes are an integral part of these financial statements.
8
<PAGE> 91
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
OVERLAND SWEEP FUND
For The Year For The Year
Ended Dec. 31, 1995 Ended Dec. 31, 1994
<S> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS:
Net investment income and net increase in net assets resulting
from operations $ 40,479,099 $ 18,338,584
DISTRIBUTION TO SHAREHOLDERS:
From net investment income (40,479,099) (18,338,412)
CAPITAL SHARE TRANSACTIONS AT $1.00 PER SHARE:
Shares sold 3,237,176,288 2,310,876,149
Dividend reinvestments 5,201 3,061
Cost of shares redeemed (2,840,557,449) (2,026,392,087)
NET INCREASE IN NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS 396,624,040 284,487,123
INCREASE IN NET ASSETS
396,624,040 284,487,295
NET ASSETS:
Beginning net assets 812,559,061 528,071,766
ENDING NET ASSETS $ 1,209,183,101 $ 812,559,061
</TABLE>
...............................................................................
The accompanying notes are an integral part of these financial statements.
9
<PAGE> 92
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
OVERLAND SWEEP FUND(3)
..............................................
Year Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.05 0.03 0.02
----- ----- -----
LESS DISTRIBUTIONS:
Dividends from net investment income (0.05) (0.03) (0.02)
----- ----- -----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00
------ ------ ------
------ ------ ------
TOTAL RETURN (NOT ANNUALIZED) 4.80% 3.11% 1.97%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $1,209,183 $812,559 $528,072
Number of shares outstanding, end of period (000) 1,209,183 812,559 528,072
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)(4):
Ratio of expenses to average net assets(1) 1.25% 1.25% 1.25%
Ratio of net investment income to average net assets(2) 4.70% 2.92% 1.67%
...........................................................................................................
(1) Ratio of expenses to average net assets prior to waived
fees and reimbursed expenses: 1.28% 1.33% 1.31%
(2) Ratio of net investment income to average net assets
prior to waived fees and reimbursed expenses: 4.67% 2.84% 1.61%
</TABLE>
...............................................................................
(3) THE FUND COMMENCED OPERATIONS OCTOBER 1, 1991
(4) THESE RATIOS INCLUDE EXPENSES CHARGED TO CIT. PRIOR YEAR RATIOS HAVE
BEEN ADJUSTED FOR COMPARABILITY PURPOSES.
The accompanying notes are an integral part of these financial statements.
10
<PAGE> 93
<TABLE>
<CAPTION>
OVERLAND SWEEP FUND(3) (CONT.)
..............................
Year Ended Period Ended
Dec. 31, 1992 Dec. 31, 1991
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $1.00 $1.00
------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.03 0.01
----- -----
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.03) (0.01)
----- -----
NET ASSET VALUE, END OF
PERIOD $1.00 $1.00
------ ------
------ ------
TOTAL RETURN (NOT
ANNUALIZED) 2.31% 0.93%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $253,617 $14,010
Number of shares
outstanding, end of
period (000) 253,628 14,010
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED)(4):
Ratio of expenses to
average net assets(1) 1.24% 1.23%
Ratio of net investment
income to average net
assets(2) 2.20% 3.46%
...........................................................................................................
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses: 1.51% 6.92%
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses: 1.93% (2.23)%
</TABLE>
...............................................................................
(3) THE FUND COMMENCED OPERATIONS OCTOBER 1, 1991
(4) THESE RATIOS INCLUDE EXPENSES CHARGED TO CIT. PRIOR YEAR RATIOS HAVE
BEEN ADJUSTED FOR COMPARABILITY PURPOSES.
The accompanying notes are an integral part of these financial statements.
11
<PAGE> 94
OVERLAND SWEEP FUND
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The Overland Sweep Fund (the "Fund") is a series of Overland Express Funds, Inc.
(the "Company"), which is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as a diversified, open-end management investment
company. The Company commenced operations on April 7, 1988 and consists of
twelve separate funds (the "Funds"): the Asset Allocation, California Tax-Free
Bond, California Tax-Free Money Market, Money Market, Municipal Income, Overland
Sweep, Short-Term Government-Corporate Income, Short-Term Municipal Income,
Strategic Growth, U.S. Government Income, U.S. Treasury Money Market and
Variable Rate Government Funds. These financial statements represent only the
Overland Sweep Fund (the "Fund").
The following significant accounting policies are consistently followed by the
Fund in the preparation of its financial statements, and such policies are in
conformity with Generally Accepted Accounting Principles for investment
companies.
The preparation of financial statements in conformity with Generally Accepted
Accounting Principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INVESTMENT POLICY AND SECURITY VALUATION
The Fund invests only in interests of the Cash Investment Trust Master Portfolio
("CIT") of the Master Investment Trust (the "Trust"). CIT has the same
investment objective as the Fund. The value of the Fund's investment in CIT
reflects the Fund's interest in CIT (99.99%). CIT invests only in securities
with remaining maturities not exceeding 397 days (thirteen months), including
obligations of the U.S. Government, bankers acceptances, commercial paper and
certain floating-and variable-rate instruments. Certain of these floating- and
variable-rate instruments may carry a demand feature that would permit the
holder to tender them back to the issuer at par value prior to maturity.
CIT uses the amortized cost method to value its portfolio securities and
attempts to maintain a constant net asset value of $1.00 per interest. There is
no assurance that CIT will meet this goal. The amortized cost method involves
valuing a security at its cost, plus accretion of discount or minus amortization
of premium over the period until maturity, which approximates market value.
SECURITY TRANSACTIONS AND INCOME RECOGNITION
The Fund records security transactions in CIT on the date interests are
purchased or sold (trade date). Interest income is recognized on a daily accrual
basis. Realized gains or losses are reported on the basis of identified cost of
securities delivered.
12
<PAGE> 95
OVERLAND SWEEP FUND
NOTES TO FINANCIAL STATEMENTS
DISTRIBUTIONS TO SHAREHOLDERS
Dividends to shareholders are declared daily and distributed monthly. Any
distributions to shareholders from net realized capital gains are declared and
distributed annually.
FEDERAL INCOME TAXES
The Company's policy is for the Fund to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute substantially all its net investment income to its shareholders.
Therefore, no federal or state income tax provision is required. Cost for
federal income tax purposes is the same as for financial statement purposes. The
Overland Sweep Fund has a capital loss carryforward of $85,119, which will
expire in the year 2002 and $606,577 which will expire in 2003. The Board of
Directors intends to offset net capital gains with the capital loss carryforward
until the carryforward has been fully utilized or expires. No capital gain
distribution shall be made until the capital loss carryforward has been fully
utilized or has expired.
ORGANIZATION EXPENSES
Stephens Inc. ("Stephens"), the Fund's administrator, sponsor and distributor,
has incurred expenses in connection with the Fund's organization and initial
registration. These expenses are being amortized over 60 months on a
straightline basis from the date the Fund commenced operations.
2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a contract on behalf of the Fund with Wells Fargo
Bank, N.A. ("WFB,") whereby WFB will provide transfer agent and shareholder
servicing functions for the Fund. Under the contract, WFB is entitled to be
compensated at an annual rate of 0.35% of the average daily net assets of the
Fund.
The Company has entered into an administration agreement on behalf of the Fund
with Stephens. Under the agreement, Stephens will provide supervisory and
administrative services to the Fund. For providing supervisory and
administrative services, the Fund has agreed to pay Stephens a monthly fee at
the annual rate of 0.025% of its average daily net assets.
Under the contracts and agreements described above, WFB and Stephens may each
voluntarily waive fees payable or reimburse expenses to the Fund. Reimbursed
expenses and waived fees continue at the discretion of the transfer agent,
administrator and directors.
The Company has adopted a plan pursuant to Rule 12b-1 under the 1940 Act (the
"Plan"), whereby the Company pays Stephens, as compensation for
distribution-related services, a monthly fee at an annual rate of up to 0.55% of
the average daily net assets of the Fund. The actual fee payable to Stephens is
determined within such limit, from time to time by mutual agreement between the
Company and Stephens.
13
<PAGE> 96
OVERLAND SWEEP FUND
NOTES TO FINANCIAL STATEMENTS
Certain officers and directors of the Company are also officers of Stephens. As
of December 31, 1995, Stephens owned 113,706 shares of the Overland Sweep Fund.
3. CAPITAL SHARE TRANSACTIONS
As of December 31, 1995, the Overland Sweep Fund was authorized to issue 3
billion shares of capital stock with a par value of $0.001. Transactions in
capital shares for the years ended December 31, 1995 and 1994 are disclosed in
detail in the Statement of Changes in Net Assets.
4. ORANGE COUNTY, CALIFORNIA DEBT SECURITIES
During the year CIT held securities issued by Orange County, California. Orange
County filed for protection under Chapter 9 of the Federal Bankruptcy Code on
December 6, 1994 and defaulted on such securities on July 10, 1995. The
bankruptcy court trustee approved an extension of the securities' maturity to
June 30, 1996 and modification of certain other terms, including increasing the
interest rate and providing for some portion of interest to accrue until the
maturity date rather than being due and payable monthly. Concurrent with the
default by Orange County, the Trust entered into a Credit Enhancement Agreement
(the "Agreement") with WFB, pursuant to which CIT was named as a beneficiary of
an irrevocable letter of credit issued by Bank of America National Trust and
Savings Association ("Bank of America"). The Agreement provided support for a
portion of the Orange County securities such that Bank of America would make
certain payments to CIT under defined circumstances.
During the period from September 19, 1995 through October 17, 1995, CIT sold all
of the Orange County securities subject to the Agreement. Under the terms of the
Agreement, the sale of such securities did not result in any payments from Bank
of America to CIT.
14
<PAGE> 97
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
OVERLAND EXPRESS FUNDS, INC.:
We have audited the accompanying statement of assets and liabilities of the
Overland Sweep Fund (one of the funds comprising Overland Express Funds, Inc.)
as of December 31, 1995, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the two years in
the period then ended, and financial highlights for the periods indicated
herein. These financial statements and financial highlights are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of
December 31, 1995, by examination and other appropriate audit procedures. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Overland Sweep Fund of Overland Express Funds, Inc. as of December 31, 1995, the
results of its operations, the changes in its net assets and its financial
highlights for the periods indicated herein in conformity with generally
accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
SAN FRANCISCO, CALIFORNIA
FEBRUARY 14, 1996
15
<PAGE> 98
CASH INVESTMENT TRUST MASTER PORTFOLIO - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
YIELD TO MATURITY
PRINCIPAL SECURITY NAME MATURITY DATE VALUE
<C> <S> <C> <C> <C> <C>
COMMERCIAL PAPER - 62.42%
$ 20,000,000 Asset Securitization Cooperative Corp++ 5.65 % 02/29/96 $ 19,814,806
26,000,000 Asset Securitization Cooperative Corp++ 5.70 01/23/96 25,909,433
50,000,000 Associates Corp of North America 5.60 04/11/96 49,214,444
25,000,000 AT & T Corp 5.65 02/13/96 24,831,285
25,000,000 Cargill Financial Services Corp++ 5.62 02/13/96 24,832,181
22,500,000 Ciesco LP++ 5.65 02/14/96 22,344,625
50,000,000 Corporate Receivables Corp++ 5.55 03/06/96 49,498,958
20,000,000 Daimler-Benz North America Corp 5.50 03/28/96 19,734,167
37,000,000 Daimler-Benz North America Corp 5.67 02/15/96 36,737,763
40,000,000 Den Danske Corp Inc 5.67 02/09/96 39,754,300
20,000,000 Glaxo Wellcome Plc++ 5.65 02/12/96 19,868,167
25,000,000 Glaxo Wellcome Plc++ 5.70 01/12/96 24,956,458
25,000,000 Greenwich Funding Corp++ 5.55 03/18/96 24,703,229
30,000,000 Greenwich Funding Corp++ 5.68 02/27/96 29,730,200
25,000,000 Hanson Finance Plc 5.65 02/28/96 24,772,431
50,000,000 National Australia Funding Inc 5.57 03/11/96 49,458,472
25,000,000 National Rural Utilities Cooperative Finance
Corp 5.63 02/22/96 24,796,694
50,000,000 New Center Asset Funding++ 5.60 03/15/96 49,424,444
50,000,000 Philip Morris Co Inc 5.55 02/07/96 49,714,792
25,000,000 Sony Capital Corp++ 5.67 02/14/96 24,826,750
20,000,000 Sony Capital Corp++ 5.67 02/20/96 19,842,500
25,000,000 Sweden (Kingdom of) 5.65 02/28/96 24,772,431
25,000,000 Swedish Export Credit Corp 5.48 03/26/96 24,676,528
26,100,000 U.S. Borax & Chemical Corp++ 5.64 02/27/96 25,866,927
25,000,000 WCP Funding Corp++ 5.65 02/28/96 24,772,431
------------
TOTAL COMMERCIAL PAPER $754,854,416
SHORT TERM FEDERAL AGENCIES - 11.54%
$ 50,000,000 Federal Home Loan Bank 5.50 % 01/31/96 $ 49,770,833
50,000,000 Federal Home Loan Mortgage Corp 5.45 01/22/96 49,841,042
40,000,000 Federal National Mortgage Assoc 5.45 01/17/96 39,903,111
------------
TOTAL SHORT TERM FEDERAL AGENCIES $139,514,986
</TABLE>
16
<PAGE> 99
CASH INVESTMENT TRUST MASTER PORTFOLIO - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
VARIABLE AND FLOATING RATE BONDS - 9.92%
$ 25,000,000 Comerica Inc 5.84 % 10/30/96 $ 24,987,963
40,000,000 FCC National Bank 5.59 10/31/96 39,983,979
30,000,000 First Bank N.A. 5.90 01/17/96 29,999,743
25,000,000 PNC Bank Corp 5.64 07/29/96 24,995,824
------------
TOTAL VARIABLE AND FLOATING RATE BONDS $119,967,509
U.S. TREASURY BILLS - 12.21%
$ 152,000,000 U.S. Treasury Bills 5.19 %F 07/25/96 $147,643,386
REPURCHASE AGREEMENTS - 4.33%
$ 52,415,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 5.75 01/02/96 $ 52,415,000
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $1,214,395,297)* (Note 1) 100.42 % $1,214,395,297
Other Assets and Liabilities, Net (0.42 ) (5,060,324)
---------- --------------
TOTAL NET ASSETS 100.00 % $1,209,313,707
---------- --------------
---------- --------------
................................................................................
</TABLE>
++ THESE SECURITIES ARE NOT REGISTERED UNDER THE SECURITIES ACT OF 1933.
RULE 144A UNDER THAT ACT PERMITS THESE SECURITIES TO BE RESOLD IN
TRANSACTIONS EXEMPT FROM REGISTRATION TO QUALIFIED INSTITUTIONAL
BUYERS. THESE SECURITIES WERE DEEMED LIQUID BY THE INVESTMENT ADVISER
IN ACCORDANCE WITH PROCEDURES APPROVED BY THE FUND'S BOARD OF
DIRECTORS.
F YIELD TO MATURITY.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES.
The accompanying notes are an integral part of these financial statements.
17
<PAGE> 100
STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 1995
<TABLE>
<CAPTION>
CASH INVESTMENT TRUST
MASTER PORTFOLIO
<S> <C>
ASSETS
INVESTMENTS:
In securities, at value and identified cost $ 1,214,395,297
Cash 18,347
Receivables:
Interest 740,119
Organization expenses, net of amortization 18,350
Prepaid expenses 9,370
TOTAL ASSETS 1,215,181,483
LIABILITIES
Allocations to unitholders 5,347,245
Due to sponsor (Note 2) 24,281
Due to adviser (Note 2) 480,842
Other 15,408
TOTAL LIABILITIES 5,867,776
TOTAL NET ASSETS
$ 1,209,313,707
</TABLE>
...............................................................................
At December 31, 1995, net assets were comprised predominately of
paid-in-capital.
The accompanying notes are an integral part of these financial statements.
18
<PAGE> 101
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
CASH INVESTMENT TRUST
MASTER PORTFOLIO
<S> <C>
INVESTMENT INCOME
Interest income $ 51,231,618
EXPENSES (NOTE 2):
Advisory fees 2,157,654
Administration fees 215,765
Custody fees 149,559
Portfolio accounting fees 234,446
Legal and Audit fees 48,827
Amortization of organization expenses 25,650
Other 12,357
TOTAL EXPENSES 2,844,258
Less:
Waived fees (Notes 2) (255,082)
NET EXPENSES 2,589,176
NET INVESTMENT INCOME 48,642,442
REALIZED LOSS ON INVESTMENTS (NOTE 3)
(606,617)
NET INVESTMENT INCOME AND NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 48,035,825
</TABLE>
...............................................................................
The accompanying notes are an integral part of these financial statements.
19
<PAGE> 102
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
CASH INVESTMENT TRUST
. For The MASTER PORTFOLIO
For The
Year Ended Year Ended
Dec. 31, 1995 Dec. 31,1994
<S> <C> <C>
INCREASE IN NET ASSETS
Net investment income and net increase in net assets resulting
from operations $ 48,642,442 $ 23,759,529
Net realized loss on sale of investments (606,617) (85,297)
NET INCREASE RESULTING FROM OPERATIONS 48,035,825 23,674,232
NET INCREASE IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 348,618,395 260,993,235
INCREASE IN NET ASSETS 396,654,220 284,667,467
NET ASSETS:
Beginning net assets 812,659,487 527,992,020
ENDING NET ASSETS $ 1,209,313,707 $ 812,659,487
</TABLE>
...............................................................................
The accompanying notes are an integral part of these financial statements.
20
<PAGE> 103
CASH INVESTMENT TRUST MASTER PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICES
ORGANIZATION
The Cash Investment Trust Master Portfolio ("CIT") is a series of Master
Investment Trust (the "Trust"), a business trust organized under the laws of
Delaware as of September 23, 1991. The Declaration of Trust permits the issuance
of an unlimited number of interests ("Interests"). Substantially all of CIT's
outstanding interests are owned by Overland Sweep Fund, a series of Overland
Express Funds, Inc. The following significant accounting policies are
consistently followed by CIT in the preparation of its financial statements, and
such policies are in conformity with generally accepted accounting principles
for investment companies.
The preparation of financial statements in conformity with Generally Accepted
Accounting Principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INVESTMENT POLICY AND SECURITY VALUATION
CIT invests only in securities with remaining maturities not exceeding 397 days
(thirteen months), including obligations of the U.S. Government, bankers
acceptances, commercial paper and certain floating- and variable-rate
instruments. Certain of these floating- and variable-rate instruments may carry
a demand feature that would permit the holder to tender them back to the issuer
at par value prior to maturity.
CIT uses the amortized cost method to value its portfolio securities and
attempts to maintain a constant net asset value value of $1.00 per interest.
There is no assurance that CIT will meet this goal. The amortized cost method
involves valuing a security at its cost, plus accretion of discount or minus
amortization of premium over the period until maturity, which approximates
market value.
SECURITY TRANSACTIONS AND INCOME RECOGNITION
CIT records security transactions on the date the securities are purchased or
sold (trade date). Interest income is recognized on an accrual basis. Realized
gains or losses are reported on the basis of identified cost of securities
delivered.
REPURCHASE AGREEMENTS
Transactions involving purchases of securities under agreements to resell
("repurchase agreements") are treated as collateralized financing transactions
and are recorded at their contracted resale amounts. These repurchase
agreements, if any, are detailed in CIT's Portfolio of Investments. The adviser
to CIT pools its cash with the cash of other funds advised by the adviser and
invests in repurchase agreements entered into by CIT and the funds. Repurchase
agreements must be fully collateralized based on values that are marked to
market daily. The collateral is held by an agent bank under a tri-party
agreement. It is the adviser's responsibility to value collateral daily and to
obtain additional collateral as necessary to maintain market value equal to or
greater than the
21
<PAGE> 104
CASH INVESTMENT TRUST MASTER PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
resale price. The repurchase agreement held by CIT at December 31, 1995 are
collateralized by U.S. Treasury or federal agency obligations. The repurchase
agreement was entered into on December 29, 1995.
FEDERAL INCOME TAXES
CIT intends to qualify for federal income tax purposes as a partnership. CIT
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 CIT will be taxable
on its distributive share of the partnership's income for purposes of
determining its federal income tax on its income and any net capital gains. The
determination of such share will be made in accordance with the Internal Revenue
Code of 1986, as amended (the "Code") and the regulations promulgated
thereunder.
It is intended that CIT's assets, income and distributions will be managed in
such a way that a regulated investment company investing in CIT will be able to
satisfy the requirements of Subchapter M of the Code, assuming that the
investment company invested all of its assets in CIT.
ORGANIZATION EXPENSES
Costs incurred in connection with organization and initial registration as an
investment company under the 1940 Act are being amortized on a straightline
basis over 60 months from the date CIT commenced operation.
If any of the initial interests of CIT are redeemed during the amortization
period, the amount paid by CIT on any withdrawal of initial interests in the
Trust will be reduced by a portion of any unamortized organization expenses,
determined by the proportion of the amount of interests withdrawn to the initial
interests of all holders after taking into account any prior withdrawals of any
such initial interests.
2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into an advisory contract with Wells Fargo Bank, N.A.
("WFB"). Pursuant to the contract, WFB furnishes to the Trust investment
guidance and policy direction in connection with daily portfolio management of
the Trust. Under the contract WFB is entitled to be paid a monthly advisory fee
based on an annual rate of 0.25% of average daily net assets. For the year ended
December 31, 1995, WFB retained payment of $1,902,572, after waivers of
$255,082, in advisory fees payable to it under the advisory contract.
The Trust has entered into a contract with WFB, whereby WFB will provide custody
and portfolio accounting services for the Trust. WFB is entitled to be
compensated for these services plus certain transaction expenses at an annual
rate of 0.0167% of average daily net assets of the Trust.
For portfolio accounting WFB is entitled to be compensated at a base rate of
$2,000 monthly plus 0.07% for the first $50 million, 0.045% for the next $50
million, and 0.020% over $100 million of average daily net assets
22
<PAGE> 105
CASH INVESTMENT TRUST MASTER PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
On behalf of CIT the Trust has entered into administration and distribution
agreements with Stephens. Under these agreements, Stephens will provide
supervisory, administrative and distribution services to CIT. For providing
supervisory and administrative services, the Trust pays Stephens a monthly fee
at the annual rate of 0.025% of CIT's average daily net assets.
3. ORANGE COUNTY, CALIFORNIA DEBT SECURITIES
During the year CIT held securities issued by Orange County, California. Orange
County filed for protection under Chapter 9 of the Federal Bankruptcy Code on
December 6, 1994 and defaulted on such securities on July 10, 1995. The
bankruptcy court trustee approved an extension of the securities' maturity to
June 30, 1996 and modification of certain other terms, including increasing the
interest rate and providing for some portion of interest to accrue until the
maturity date rather than being due and payable monthly. Concurrent with the
default by Orange County, the Trust entered into a Credit Enhancement Agreement
(the "Agreement") with WFB, pursuant to which CIT was named as a beneficiary of
an irrevocable letter of credit issued by Bank of America National Trust and
Savings Association ("Bank of America"). The Agreement provided support for a
portion of the Orange County securities such that Bank of America would make
certain payments to CIT under defined circumstances.
During the period from September 19, 1995, through October 17, 1995, CIT sold
all of the Orange County securities subject to the Agreement. Under the terms of
the Agreement, the sale of such securities did not result in any payments from
Bank of America to CIT.
23
<PAGE> 106
TO THE UNITHOLDERS AND BOARD OF TRUSTEES
MASTER INVESTMENT TRUST:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Cash Investment Trust Master Portfolio (one of
the series comprising Master Investment Trust) as of December 31, 1995, and the
related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
financial highlights for the periods indicated herein. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of
December 31, 1995, by examination and other appropriate audit procedures. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Cash
Investment Trust Master Portfolio of Master Investment Trust as of December 31,
1995, the results of its operations, the changes in its net assets and its
financial highlights for the periods indicated herein in conformity with
generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
SAN FRANCISCO, CALIFORNIA
FEBRUARY 14, 1996
24
<PAGE> 107
ASSET ALLOCATION FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - 96.16%
11,334 Abbott Laboratories $ 364,201 $ 473,195
1,491 Advanced Micro Devices+ 45,243 24,602
1,654 Aetna Life & Casualty Co 98,398 114,540
1,722 Ahmanson (H F) & Co 35,216 45,633
1,567 Air Products & Chemicals Inc 72,329 82,659
7,043 Airtouch Communications+ 172,234 198,965
366 Alberto-Culver Co Class B 9,964 12,581
3,608 Albertson's Inc 102,520 118,613
3,204 Alcan Aluminium Ltd 76,446 99,725
1,580 Alco Standard Corp 46,219 72,088
692 Alexander & Alexander Services 16,429 13,148
880 Allergan Inc 21,823 28,600
4,030 Allied Signal Inc 154,897 191,425
6,377 Allstate Corp 180,642 262,254
2,719 Alltel Corp 78,280 80,211
2,544 Aluminum Co of America 101,545 134,514
1,222 ALZA Corp+ 27,178 30,245
1,667 Amdahl Corp+ 12,806 14,170
1,283 Amerada Hess Corp 66,121 67,999
2,722 American Brands Inc 97,131 121,469
2,669 American Electric Power Inc 96,643 108,095
6,966 American Express Corp 221,319 288,218
2,913 American General Corp 97,116 101,591
1,045 American Greetings Corp Class A 30,460 28,868
4,463 American Home Products Corp 308,728 432,911
6,795 American International Group Inc 460,909 628,538
2,075 American Stores Co 49,696 55,506
7,928 Ameritech Corp 341,835 467,752
3,734 Amgen Inc+ 95,299 221,706
7,088 Amoco Corp 429,656 509,450
3,083 AMP Inc 111,447 118,310
1,059 AMR Corp+ 70,857 78,631
567 Andrew Corp+ 13,856 21,688
3,684 Anheuser-Busch Inc 190,429 246,368
1,750 Apple Computer Inc 60,803 55,781
</TABLE>
40
<PAGE> 108
ASSET ALLOCATION FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
2,519 Applied Materials Inc+ $ 74,933 $ 99,186
7,716 Archer-Daniels-Midland Co 119,244 138,888
1,518 Armco Inc+ 10,011 8,918
516 Armstrong World Industries Inc 22,991 31,992
564 ASARCO Inc 13,275 18,048
952 Ashland Inc 31,931 33,439
22,655 AT & T Corp 1,279,209 1,466,911
2,325 Atlantic Richfield Corp 265,275 257,494
638 Autodesk Inc 19,311 21,852
2,020 Automatic Data Processing 113,442 149,985
771 Avery Dennison Corp 24,279 38,646
987 Avon Products Inc 58,510 74,395
1,986 Baker Hughes Inc 47,365 48,409
395 Ball Corp 12,419 10,863
651 Bally Entertainment Corp+ 6,228 9,114
2,132 Baltimore Gas & Electric Co 54,494 60,762
5,620 Banc One Corp 198,488 212,155
1,584 Bank of Boston Corp 45,276 73,260
2,698 Bank of New York Inc 95,325 131,528
5,339 BankAmerica Corp 257,644 345,700
1,159 Bankers Trust N Y Corp 82,521 77,074
808 Bard (C R) Inc 20,996 26,058
1,350 Barnett Banks Inc 62,527 79,650
5,079 Barrick Gold Corp 140,746 133,959
815 Bausch & Lomb Inc 35,361 32,294
3,921 Baxter International Inc 114,508 164,192
945 Becton Dickinson & Co 42,703 70,875
6,258 Bell Atlantic Corp 366,952 418,504
14,146 BellSouth Corp 423,755 615,351
711 Bemis Co Inc 17,258 18,219
727 Beneficial Corp 29,381 33,896
1,639 Bethlehem Steel Corp+ 25,607 22,946
1,388 Beverly Enterprises+ 15,963 14,748
1,703 Biomet Inc+ 20,088 30,441
1,261 Black & Decker Corp 30,333 44,450
</TABLE>
41
<PAGE> 109
ASSET ALLOCATION FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
1,518 Block (H & R) Inc $ 60,554 $ 61,479
1,832 Boatmen's Bancshares Inc 58,542 74,883
4,936 Boeing Co 231,395 386,859
648 Boise Cascade Corp 18,773 22,437
2,324 Boston Scientific Corp+ 56,898 113,876
412 Briggs & Stratton Corp 14,769 17,871
7,280 Bristol-Myers Squibb Co 441,567 625,170
278 Brown Group Inc 8,427 3,962
969 Brown-Forman Corp Class B 28,451 35,369
3,026 Browning-Ferris Industries Inc 88,604 89,267
1,423 Brunswick Corp 25,436 34,152
2,011 Burlington Northern Santa Fe 105,405 156,858
1,757 Burlington Resources Inc 75,246 68,962
982 Cabletron Systems Inc+ 52,598 79,542
3,545 Campbell Soup Co 153,490 212,700
2,210 Capital Cities/ABC Inc 150,120 272,659
2,246 Carolina Power & Light Co 69,800 77,487
2,878 Caterpillar Inc 137,976 169,083
414 Centex Corp 14,627 14,387
2,711 Central & South West Corp 79,143 75,569
842 Ceridian Corp+ 25,616 34,733
1,415 Champion International Corp 51,722 59,430
1,460 Charming Shoppes Inc 13,786 4,198
2,489 Chase Manhattan Corp 96,324 150,896
3,574 Chemical Banking Corp Class A 156,240 209,973
9,343 Chevron Corp 438,230 490,508
5,426 Chrysler Corp 245,898 300,465
1,205 Chubb Corp 103,978 116,584
1,001 CIGNA Corp 68,088 103,353
472 Cincinnati Milacron Inc 11,025 12,390
2,254 Cinergy Corp 55,479 69,029
1,427 Circuit City Stores Inc 37,833 39,421
3,919 Cisco Systems Inc+ 147,761 292,455
6,059 Citicorp 265,467 407,468
738 Clorox Co 43,313 52,859
</TABLE>
42
<PAGE> 110
ASSET ALLOCATION FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
1,451 Coastal Corp $ 42,197 $ 54,050
17,908 Coca-Cola Co 906,498 1,329,669
2,069 Colgate-Palmolive Co 125,232 145,347
714 Columbia Gas System Inc+ 19,460 31,327
6,357 Columbia HCA Healthcare Corp 264,456 322,618
3,483 Comcast Corp Class A 68,321 63,347
1,681 Comerica Inc 62,861 67,450
623 Community Psychiatric Centers+ 7,378 7,632
3,764 Compaq Computer Corp+ 103,696 180,672
3,436 Computer Associates International Inc 107,579 195,423
752 Computer Sciences Corp+ 31,924 52,828
3,459 ConAgra Inc 99,028 142,684
1,113 Conrail Inc 62,342 77,910
3,367 Consolidated Edison Co 110,036 107,744
612 Consolidated Freightways 12,069 16,218
1,375 Consolidated Natural Gas Co 65,662 62,391
1,506 Cooper Industries Inc 68,429 55,346
1,159 Cooper Tire & Rubber Co 29,726 28,540
543 Coors (Adolph) Co Class B 9,978 12,014
1,972 CoreStates Financial Corp 58,265 74,690
3,237 Corning Inc 103,802 103,584
2,047 CPC International Inc 104,116 140,475
411 Crane Co 12,362 15,156
383 Cray Research Inc+ 8,580 9,479
1,312 Crown Cork & Seal Co+ 52,778 54,776
2,950 CSX Corp 114,685 134,594
2,449 CUC International Inc+ 65,829 83,572
591 Cummins Engine Co Inc 26,276 21,867
1,359 Cyprus Amax Minerals 36,809 35,504
1,464 Dana Corp 39,634 42,822
2,300 Darden Restaurants Inc+ 25,309 27,313
623 Data General Corp+ 6,597 8,566
1,014 Dayton-Hudson Corp 69,970 76,050
2,377 Dean Witter Discover & Co 100,333 111,719
3,755 Deere & Co 95,691 132,364
</TABLE>
43
<PAGE> 111
ASSET ALLOCATION FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
692 Delta Air Lines Inc $ 41,157 $ 51,122
1,217 Deluxe Corp 42,684 35,293
2,109 Detroit Edison Co 68,155 72,761
1,291 Dial Corp 28,047 38,246
2,068 Digital Equipment Corp+ 83,040 132,611
1,658 Dillard Department Stores Inc Class A 54,855 47,253
7,394 Disney (Walt) Co 345,085 436,246
2,505 Dominion Resources Inc 107,069 103,331
2,221 Donnelley (R R) & Sons Co 72,106 87,452
1,605 Dover Corp 47,120 59,184
3,738 Dow Chemical Co 241,828 263,062
1,353 Dow Jones & Co Inc 45,803 53,951
2,624 Dresser Industries Inc 58,232 63,960
1,649 DSC Communications Corp+ 57,162 60,807
2,937 Duke Power Co 121,532 139,140
2,448 Dun & Bradstreet Corp 143,485 158,508
7,972 DuPont (E I) de Nemours 448,829 557,044
303 Eastern Enterprises 8,320 10,681
1,162 Eastman Chemical Co 63,054 72,770
4,905 Eastman Kodak Co 256,988 328,635
1,146 Eaton Corp 57,990 61,454
834 Echlin Inc 27,501 30,441
1,624 Echo Bay Mines Ltd 16,250 16,849
906 Ecolab Inc 20,855 27,180
794 EG & G Inc 14,708 19,255
3,161 Emerson Electric Co 201,007 258,412
2,065 Engelhard Corp 42,663 44,914
3,614 Enron Corp 126,002 137,784
1,024 Enserch Corp 18,740 16,640
3,272 Entergy Corp 103,692 95,706
17,687 Exxon Corp 1,194,713 1,417,171
769 Federal Express Corp+ 47,740 56,810
2,620 Federal Home Loan Mortgage Corp 154,153 218,770
3,892 Federal National Mortgage Assoc 327,517 483,095
693 Federal Paper Board Co 18,796 35,949
</TABLE>
44
<PAGE> 112
ASSET ALLOCATION FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
2,880 Federated Department Stores Inc+ $ 78,333 $ 79,200
1,926 First Bank System Inc 99,941 95,578
4,545 First Chicago NBD Corp 134,355 179,528
3,180 First Data Corp 185,630 212,663
1,135 First Fidelity Bancorp 56,518 85,551
1,105 First Interstate Bancorp 81,993 150,833
2,450 First Union Corp 112,667 136,281
3,510 Fleet Financial Group Inc 108,576 143,033
675 Fleetwood Enterprises Inc 14,762 17,381
515 Fleming Co Inc 14,280 10,622
1,162 Fluor Corp 54,345 76,692
493 FMC Corp+ 29,922 33,339
15,381 Ford Motor Co 423,598 446,049
491 Foster Wheeler Corp 16,720 20,868
2,592 FPL Group Inc 99,526 120,204
2,923 Freeport McMoRan Copper & Gold Inc Class B 79,653 82,209
1,140 Fruit of the Loom Inc Class A+ 30,580 27,788
2,028 Gannett Co Inc 107,254 124,469
2,099 Gap Inc 67,774 88,158
898 General Dynamics Corp 39,687 53,094
23,846 General Electric Co 1,261,946 1,716,912
2,300 General Mills Inc 117,388 132,825
10,654 General Motors Corp 499,942 563,330
1,692 General Public Utilities 50,713 57,528
1,220 General Re Corp 156,340 189,100
659 General Signal Corp 23,122 21,335
1,726 Genuine Parts Co 65,201 70,766
1,325 Georgia-Pacific Corp 93,460 90,928
816 Giant Food Inc Class A 20,352 25,704
474 Giddings & Lewis Inc 9,691 7,821
6,318 Gillette Co 214,050 329,326
851 Golden West Financial 36,942 47,018
372 Goodrich (B F) Co 17,309 25,343
2,192 Goodyear Tire & Rubber Co 90,771 99,462
1,379 Grace (W R) & Co 65,736 81,533
</TABLE>
45
<PAGE> 113
ASSET ALLOCATION FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
708 Grainger (W W) Inc $ 42,054 $ 46,905
558 Great Atlantic & Pacific Tea Co 14,389 12,834
880 Great Lakes Chemical Corp 57,877 63,360
1,977 Great Western Financial Corp 38,443 50,414
13,801 GTE Corp 490,370 607,244
1,595 Halliburton Co 60,611 80,747
364 Handleman Co 4,049 2,093
1,081 Harcourt General Inc 40,678 45,267
415 Harland (John H) Co 10,143 8,663
651 Harnischfeger Industries Inc 17,683 21,646
1,425 Harrah's Entertainment Inc+ 43,756 34,556
535 Harris Corp 24,381 29,224
1,295 Hasbro Inc 45,407 40,145
5,225 Heinz (H J) Co 137,363 173,078
326 Helmerich & Payne Inc 10,044 9,699
1,599 Hercules Inc 64,319 90,144
1,064 Hershey Foods Corp 53,266 69,160
7,307 Hewlett Packard Co 371,950 611,961
668 Hilton Hotels Corp 40,984 41,082
6,798 Home Depot Inc 283,026 325,454
2,044 Homestake Mining Co 36,903 31,938
1,778 Honeywell Inc 66,856 86,455
1,362 Household International Inc 56,042 80,528
3,776 Houston Industries Inc 83,137 91,568
2,277 Humana Inc+ 63,761 62,333
1,686 Illinois Tool Works Inc 75,434 99,474
1,739 Inco Ltd 40,685 57,822
1,560 Ingersoll-Rand Co 56,817 54,795
745 Inland Steel Industries Inc 20,931 18,718
11,729 Intel Corp 480,003 665,621
638 Intergraph Corp+ 7,189 10,049
8,116 International Business Machines Corp 524,299 744,643
1,551 International Flavors & Fragrances 65,863 74,448
3,676 International Paper Co 129,959 139,229
1,082 Interpublic Group Cos Inc 34,518 46,932
</TABLE>
46
<PAGE> 114
ASSET ALLOCATION FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
1,633 ITT Corp+ $ 65,560 $ 86,549
1,633 ITT Hartford Group Inc+ 63,461 78,996
1,633 ITT Industries Inc 28,259 39,192
1,212 James River Corp 25,919 29,240
1,026 Jefferson-Pilot Corp 36,917 47,709
9,187 Johnson & Johnson 476,072 786,637
543 Johnson Controls Inc 30,328 37,331
562 Jostens Inc 11,411 13,629
6,634 K Mart Corp 124,989 48,097
432 Kaufman & Broad Home Corp 7,470 6,426
3,105 Kellogg Co 178,630 239,861
700 Kerr-McGee Corp 36,902 44,450
3,247 KeyCorp 98,651 117,704
4,013 Kimberly-Clark Corp 183,343 332,076
493 King World Productions+ 19,508 19,165
747 Knight-Ridder Inc 41,255 46,688
1,711 Kroger Co+ 39,622 64,163
4,304 Laidlaw Inc Class B 38,327 44,116
7,858 Lilly (Eli) & Co 244,372 442,013
5,082 Limited Inc 107,198 88,300
1,516 Lincoln National Corp 65,986 81,485
1,114 Liz Claiborne Inc 25,343 30,914
2,847 Lockheed Martin Corp 141,680 224,913
1,714 Loews Corp 96,116 134,335
305 Longs Drug Stores Corp 10,302 14,602
2,485 Loral Corp 48,087 87,907
445 Louisiana Land & Exploration Co 18,592 19,079
1,571 Louisiana-Pacific Corp 49,990 38,097
2,331 Lowe's Co Inc 59,402 78,089
1,826 LSI Logic Corp+ 66,451 59,802
381 Luby's Cafeterias Inc 8,448 8,477
1,134 Mallinckrodt Group Inc 36,297 41,249
939 Manor Care Inc 22,668 32,865
1,830 Marriott International 52,059 69,998
1,046 Marsh & McLennan Companies Inc 88,268 92,833
</TABLE>
47
<PAGE> 115
ASSET ALLOCATION FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
2,241 Masco Corp $ 66,673 $ 70,311
3,186 Mattel Inc 68,071 97,970
3,535 May Co Department Stores Co 140,956 149,354
1,530 Maytag Corp 25,930 30,983
2,152 MBNA Corp 57,662 79,355
764 McDermott International Inc 21,096 16,808
9,870 McDonald's Corp 306,301 445,384
1,649 McDonnell Douglas Corp 69,792 151,708
681 McGraw-Hill Inc 48,477 59,332
9,688 MCI Communications 233,426 253,099
719 Mead Corp 34,693 37,568
3,287 Medtronic Inc 86,838 183,661
2,123 Mellon Bank Corp 85,462 114,111
1,545 Melville Corp 64,888 47,509
506 Mercantile Stores Co Inc 19,748 23,403
17,605 Merck & Co Inc 681,765 1,157,529
428 Meredith Corp 9,494 17,923
2,520 Merrill Lynch & Co Inc 117,702 128,520
2,912 Micron Technology Inc 85,887 115,388
8,456 Microsoft Corp+ 549,532 742,014
597 Millipore Corp 12,889 24,552
6,046 Minnesota Mining & Manufacturing Co 336,808 400,548
5,619 Mobil Corp 484,768 629,328
1,693 Monsanto Co 120,149 207,393
1,480 Moore Corp Ltd 28,602 27,565
2,697 Morgan (J P) & Co Inc 194,444 216,434
1,048 Morgan Stanley Group 104,090 84,495
2,073 Morton International Inc 61,300 74,369
8,443 Motorola Inc 447,192 481,251
137 NACCO Industries Inc Class A 6,482 7,604
930 Nalco Chemical Co 33,069 28,016
2,146 National City Corp 60,941 71,086
1,820 National Semiconductor+ 36,229 40,495
702 National Service Industries Inc 18,651 22,727
3,901 NationsBank 205,081 271,607
</TABLE>
48
<PAGE> 116
ASSET ALLOCATION FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
1,086 Navistar International Corp+ $ 21,186 $ 11,403
1,367 New York Times Co Class A 33,372 40,497
2,282 Newell Co 48,066 59,047
1,277 Newmont Mining Corp 52,008 57,784
2,118 Niagara Mohawk Power Corp 42,085 20,386
699 NICOR Inc 18,913 19,223
1,993 Nike Inc Class B 63,906 138,763
1,771 NorAm Energy Corp 13,773 15,718
1,214 Nordstrom Inc 41,859 49,167
1,866 Norfolk Southern Corp 125,332 148,114
939 Northern States Power Co 43,096 46,128
3,626 Northern Telecom Ltd 110,688 155,918
666 Northrop Grumman Corp 28,300 42,624
5,082 Norwest Corp 139,473 167,706
5,303 Novell Inc+ 104,378 75,568
1,285 Nucor Corp 61,370 73,406
6,065 NYNEX Corp 261,680 327,510
4,539 Occidental Petroleum Corp 97,600 97,021
694 Ogden Corp 15,262 14,834
2,194 Ohio Edison Co 50,661 51,559
353 ONEOK Inc 7,181 8,075
6,159 Oracle Systems Corp+ 153,281 260,988
1,487 Oryx Energy Co+ 27,388 19,889
253 Outboard Marine Corp 5,247 5,155
699 Owens Corning Fiberglass+ 28,783 31,368
524 PACCAR Inc 26,446 22,074
1,214 Pacific Enterprises 30,943 34,296
6,072 Pacific Gas & Electric Co 194,580 172,293
6,074 Pacific Telesis Group 189,011 204,238
4,125 PacifiCorp 79,397 87,656
1,596 Pall Corp 31,773 42,893
2,179 Panhandle Eastern Corp 52,909 60,740
1,007 Parker Hannifin Corp 28,324 34,490
3,162 PECO Energy Co 94,095 95,255
3,203 Penney (J C) Co Inc 145,952 152,543
</TABLE>
49
<PAGE> 117
ASSET ALLOCATION FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
619 Pennzoil Co $ 35,821 $ 26,153
486 Peoples Energy Corp 14,963 15,431
848 Pep Boys-Manny Moe & Jack 21,766 21,730
11,265 Pepsico Inc 465,257 629,432
588 Perkin-Elmer Corp 19,390 22,197
9,014 Pfizer Inc 335,622 567,882
7,216 Pharmacia and Upjohn Inc+ 208,742 279,620
1,004 Phelps Dodge Corp 50,598 62,499
12,017 Philip Morris Co Inc 700,001 1,087,539
3,706 Phillips Petroleum Co 123,645 126,467
1,158 Pioneer Hi Bred International Inc 43,392 64,414
2,163 Pitney Bowes Inc 85,864 101,661
568 Pittston Services Group 13,206 17,821
3,418 Placer Dome Inc 76,684 82,459
3,272 PNC Bank Corp 92,437 105,522
646 Polaroid Corp 23,111 30,604
384 Potlatch Corp 16,512 15,360
2,268 PP & L Resources Inc 58,727 56,700
2,921 PPG Industries Inc 106,622 133,636
2,008 Praxair Inc 38,028 67,519
894 Premark International Inc 35,274 45,259
2,771 Price/Costco Inc+ 47,973 42,258
9,807 Procter & Gamble Co 579,939 813,981
1,341 Providian Corp 51,809 54,646
3,475 Public Services Enterprise Group 111,090 106,422
413 Pulte Corp 13,138 13,887
1,960 Quaker Oats Co 67,000 67,620
1,471 Ralston-Purina Group 60,884 91,754
598 Raychem Corp 23,195 34,011
3,516 Raytheon Co 119,542 166,131
1,103 Reebok International Ltd 31,703 31,160
792 Republic New York Corp 46,427 49,203
858 Reynolds Metals Co 42,713 48,584
1,177 Rite Aid Corp 24,148 40,312
536 Roadway Services Inc 28,707 26,197
</TABLE>
50
<PAGE> 118
ASSET ALLOCATION FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
3,049 Rockwell International Corp $ 120,244 $ 161,216
962 Rohm & Haas Co 54,069 61,929
1,178 Rowan Co Inc+ 10,128 11,633
7,619 Royal Dutch Petroleum Co 843,553 1,075,231
2,249 Rubbermaid Inc 70,144 57,350
526 Russell Corp 15,230 14,597
681 Ryan's Family Steak House+ 5,480 4,767
1,127 Ryder System Inc 27,697 27,893
1,782 SAFECO Corp 54,464 61,479
795 Safety-Kleen Corp 12,637 12,422
1,560 Salomon Inc 67,922 55,380
1,257 Santa Fe Energy Resources Inc+ 12,390 12,099
1,888 Santa Fe Pacific Gold Corp 26,174 22,892
6,865 Sara Lee Corp 181,147 218,822
8,729 SBC Communication Inc 384,622 501,918
6,310 SCEcorp 131,257 112,003
5,310 Schering-Plough Corp 186,532 290,723
3,486 Schlumberger Ltd 221,762 241,406
1,135 Scientific-Atlanta Inc 20,926 17,030
5,343 Seagram Co Ltd 147,490 185,001
5,560 Sears Roebuck & Co 160,726 216,840
1,468 Service Corp International 40,642 64,592
342 Shared Medical System Corp 9,075 18,596
1,171 Sherwin Williams Co 40,574 47,718
593 Shoney's Inc+ 9,844 6,078
704 Sigma-Aldrich Corp 28,369 34,848
2,213 Silicon Graphics Inc+ 78,398 60,858
597 Snap-On Inc 23,691 27,014
1,233 Sonat Inc 39,706 43,926
9,462 Southern Co 204,390 233,002
2,020 Southwest Airlines Co 51,762 46,965
270 Springs Industries Inc Class A 10,321 11,171
5,017 Sprint Corp 174,376 200,053
1,012 St Jude Medical Inc+ 27,428 43,516
1,236 St Paul Co Inc 57,089 68,753
</TABLE>
51
<PAGE> 119
ASSET ALLOCATION FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
622 Stanley Works $ 25,678 $ 32,033
1,377 Stone Container Corp+ 19,707 19,794
678 Stride Rite Corp 9,059 5,085
1,046 Sun Co Inc 31,303 28,634
2,776 Sun Microsystems Inc+ 46,793 126,655
1,650 SunTrust Banks Inc 82,602 113,025
993 Super Value Inc 31,993 31,280
2,562 Sysco Corp 73,270 83,265
1,725 Tandem Computers Inc+ 20,131 18,328
922 Tandy Corp 40,597 38,263
500 Tektronix Inc 16,653 24,563
9,275 Tele-Communication Inc Class A+ 162,610 184,341
787 Teledyne Inc 19,174 20,167
1,229 Tellabs Inc+ 58,733 45,473
762 Temple-Inland Inc 33,764 33,623
2,911 Tenet Healthcare Corp+ 40,705 60,403
2,617 Tenneco Inc 129,213 129,869
3,695 Texaco Inc 244,934 290,058
2,722 Texas Instruments Inc 121,434 140,864
3,235 Texas Utilities Co 136,266 133,039
1,250 Textron Inc 70,052 84,375
295 Thomas & Betts Corp 18,892 21,756
5,554 Time Warner Inc 219,640 210,358
1,638 Times Mirror Co Class A 36,210 55,487
456 Timken Co 15,997 17,442
1,043 TJX Companies Inc 22,886 19,687
1,015 Torchmark Corp 49,410 45,929
3,916 Toys R Us Inc+ 128,576 85,173
985 Transamerica Corp 57,903 71,782
4,543 Travelers Inc 194,087 285,641
933 Tribune Co 51,585 57,030
421 Trinova Corp 12,348 12,051
907 TRW Inc 62,445 70,293
2,154 Tyco International Inc 53,233 76,736
2,160 U.S. Bancorp 63,465 72,630
</TABLE>
52
<PAGE> 120
ASSET ALLOCATION FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
2,202 U.S. Healthcare Inc $ 91,448 $ 102,393
481 U.S. Life Corp 12,579 14,370
6,770 U.S. West Inc 177,466 242,028
6,770 U.S. West Media Group+ 120,615 128,630
3,072 Unicom Corp 87,017 100,608
2,304 Unilever NV 265,563 324,288
994 Union Camp Corp 48,490 47,339
1,965 Union Carbide Corp 45,634 73,688
1,420 Union Electric Co 57,778 59,285
2,921 Union Pacific Corp 176,085 192,786
2,525 Unisys Corp+ 27,344 14,203
2,481 United Healthcare Corp 108,630 162,506
786 United States Surgical 17,522 16,801
1,710 United Technologies Corp 111,582 162,236
3,495 Unocal Corp 100,721 101,792
997 UNUM Corp 51,984 54,835
847 USAir Group Inc+ 10,225 11,223
1,670 USF & G Corp 27,498 28,181
2,794 UST Inc 79,260 93,250
4,288 USX - Marathon Group 81,857 83,616
1,178 USX - US Steel Group 38,825 36,224
605 Varity Corp+ 24,768 22,461
901 VF Corp 43,707 47,528
5,129 Viacom Inc Class B+ 216,808 242,986
2,478 Wachovia Corp 93,484 113,369
32,818 Wal Mart Stores Inc 828,062 734,303
3,559 Walgreen Co 74,947 106,325
1,924 Warner Lambert Co 142,190 186,869
712 Wells Fargo & Co 94,579 153,792
1,497 Wendy's International Inc 23,529 31,811
732 Western Atlas Inc+ 29,826 36,966
5,657 Westinghouse Electric Corp 85,301 93,341
1,462 Westvaco Corp 37,888 40,571
2,943 Weyerhaeuser Co 123,067 127,285
1,051 Whirlpool Corp 62,687 55,966
</TABLE>
53
<PAGE> 121
ASSET ALLOCATION FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
1,505 Whitman Corp $ 25,343 $ 34,991
825 Willamette Industries Inc 56,324 46,406
1,413 Williams Co Inc 43,677 61,995
2,204 Winn-Dixie Stores Inc 65,993 81,273
6,912 WMX Technologies Inc 199,118 206,496
1,982 Woolworth Corp 41,679 25,766
1,356 Worthington Industries Inc 26,469 28,222
1,617 Wrigley (Wm) Jr Co 68,843 84,893
1,567 Xerox Corp 146,503 214,627
393 Yellow Corp 8,745 4,863
------------ ------------
TOTAL COMMON STOCKS $ 52,255,144 $ 65,464,545
</TABLE>
54
<PAGE> 122
ASSET ALLOCATION FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
YIELD TO MATURITY
PRINCIPAL SECURITY NAME MATURITY DATE VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS - 4.08%
$ 2,714,000 U.S. Treasury Bills 5.03 % 03/07/96 $ 2,690,133
90,000 U.S. Treasury Bills 5.06 03/14/96 89,113
------------
TOTAL SHORT-TERM INSTRUMENTS $ 2,779,246
(Cost $2,777,223)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $55,032,367)* (Notes 1 and 3) 100.24 % $ 68,243,791
Other Assets and Liabilities, Net (0.24 ) (162,164)
---------- -------------
TOTAL NET ASSETS 100.00 % $ 68,081,627
---------- -------------
---------- -------------
...............................................................................
</TABLE>
+ NON-INCOME EARNING SECURITIES.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 14,267,221
Gross Unrealized Depreciation (1,055,797)
-------------
NET UNREALIZED APPRECIATION $ 13,211,424
-------------
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
55
<PAGE> 123
CALIFORNIA TAX-FREE BOND FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS - 95.74%
$ 1,000,000 ABAG Finance Authority for Nonprofit Corp CA
State Insured 7.10 % 12/01/20 $ 1,065,500
1,000,000 ABAG Finance Authority for Nonprofit Corp
Stanford University Hospital MBIA Insured 5.25 11/01/20 962,410
1,000,000 Alameda CA USD AMBAC Insured 6.05 07/01/11 1,062,140
1,000,000 Alameda CA USD MBIA Insured 5.70 12/01/14 1,019,940
1,000,000 Alameda County CA Public Facilities Corp COP 6.25 06/01/06 1,059,690
1,000,000 Alameda County CA Water District Revenue COP
Water System Project MBIA Insured 6.20 06/01/13 1,055,120
100,000 Albany CA Public Facilities FA Lease Revenue
Capital Improvement Project 6.90 09/01/12 105,873
500,000 Albany CA Public Facilities FA Lease Revenue
Capital Improvement Project 7.85 09/01/09 539,890
1,000,000 Antioch CA Development Agency Tax Allocation
Project 1 FGIC Insured 6.40 09/01/17 1,078,500
3,550,000 California State DWR Central Valley Project
Revenue Series L 5.75 12/01/14 3,655,471
1,000,000 California State DWR Central Valley Project
Revenue Series L MBIA Insured 5.50 12/01/09 1,020,970
2,000,000 California State EDFA Revenue Chapman College
Refunding Pending 7.30 01/01/02 2,195,880
1,000,000 California State EDFA Revenue Claremont
Colleges Pooled Facilities 6.38 05/01/22 1,064,850
350,000 California State EDFA Revenue Loyola Marymount
University 6.00 10/01/14 360,210
710,000 California State EDFA Revenue Loyola Marymount
University Series B 6.55 10/01/12 769,576
1,200,000 California State EDFA Revenue University of San
Diego Project 6.50 10/01/08 1,313,124
1,355,000 California State GO AMBAC Insured 5.75 03/01/15 1,395,989
525,000 California State HFA Home Mortgage Revenue AMT
Series B Multiple Credit Enhancements 8.00 08/01/29 553,124
</TABLE>
56
<PAGE> 124
CALIFORNIA TAX-FREE BOND FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS - CONTINUED
$ 1,455,000 California State HFA Home Mortgage Revenue AMT
Series D Multiple Credit Enhancements 7.75 08/01/10 $ 1,549,371
345,000 California State HFA Home Mortgage Revenue AMT
Series G Multiple Credit Enhancements 8.15 08/01/19 358,962
1,535,000 California State HFA Home Mortgage Revenue
Series A Multiple Credit Enhancements 7.35 08/01/11 1,669,405
445,000 California State HFA Home Mortgage Revenue
Series B Multiple Credit Enhancements 7.25 08/01/10 479,296
130,000 California State HFA Home Mortgage Revenue
Series F Multiple Credit Enhancements 7.75 08/01/08 133,992
140,000 California State HFA Insured Housing Revenue
AMT Series C MBIA Insured 7.00 08/01/23 149,226
1,575,000 California State HFA Multi-Unit Rental Housing
Revenue Series A AMT 5.50 08/01/15 1,508,992
700,000 California State HFFA American Baptist Homes
West State Insured 7.65 04/01/14 750,246
1,000,000 California State HFFA Cedar Knoll Insured
Series B State Insured 7.50 08/01/20 1,093,370
1,000,000 California State HFFA Episcopal Homes
Foundation Project State Insured 7.75 07/01/18 1,028,460
400,000 California State HFFA Episcopal Homes
Foundation Project State Insured 7.85 07/01/15 412,072
1,000,000 California State HFFA Gould Medical Foundation
Escrowed to Maturity 7.25 04/01/10 1,129,870
1,250,000 California State HFFA Gould Medical Foundation
Escrowed to Maturity 7.30 04/01/20 1,423,650
2,855,000 California State HFFA Kaiser Permanente Series
A 6.50 12/01/20 3,047,170
2,000,000 California State HFFA Revenue Catholic
Healthcare West AMBAC Insured 5.75 07/01/15 2,044,780
1,000,000 California State HFFA Revenue Insured Health
Facilities Valleycare Series State Insured 6.50 05/01/05 1,084,110
</TABLE>
57
<PAGE> 125
CALIFORNIA TAX-FREE BOND FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS - CONTINUED
$ 1,750,000 California State HFFA Revenue Small Insured
Health Facilities Series A 6.75 03/01/20 $ 1,846,320
1,000,000 California State HFFA San Diego Hospital
Association MBIA Insured 6.20 08/01/12 1,058,660
1,000,000 California State Maritime Infrastructure
Authority Revenue Port of San Diego Project
AMBAC Insured 5.25 11/01/15 966,370
2,500,000 California State PCFA Resource Recovery Revenue
Waste Management AMT Series A 7.15 02/01/11 2,768,850
1,000,000 California State PCFA San Diego Gas & Electric
Co AMT 6.80 06/01/15 1,153,950
1,000,000 California State PCFA Southern California
Edison AMT 6.90 09/01/06 1,077,340
180,000 California State Public Capital Improvements FA
Revenue Joint Powers Agency Pooled Projects
Series 8.25 03/01/98 191,657
1,000,000 California State Public Works Board Lease
Revenue University Of California Project Series
A AMBAC Insured 6.30 12/01/09 1,083,180
1,500,000 California State Public Works Board Lease
Revenue University Of California Project Series
B MBIA Insured 5.38 12/01/19 1,479,150
1,590,000 California Statewide CDA Motion Picture and
Television Development AMBAC Insured 5.25 01/01/13 1,566,897
1,500,000 California Statewide CDA Motion Picture and
Television Development AMBAC Insured 5.25 01/01/14 1,477,515
1,500,000 California Statewide CDA Revenue COP Hospital
Cedars Sinai Medical Center 6.50 08/01/12 1,654,470
3,840,000 Cathedral City CA PFA RevenueTax Allocation
Redevelopment Projects Series A MBIA Insured 5.25 08/01/13 3,783,014
1,000,000 Cerritos CA PFA Redevelopment Los Cerritos
Redevelopment Project Revenue AMBAC Insured 5.75 11/01/22 1,019,720
</TABLE>
58
<PAGE> 126
CALIFORNIA TAX-FREE BOND FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS - CONTINUED
$ 870,000 Chula Vista CA COP Town Centre II Package
Project RDA 6.00 09/01/11 $ 896,483
1,200,000 Contra Costa County CA COP Public Facilities
Merrithew Memorial Hospital Replacement 6.60 11/01/12 1,283,856
500,000 Contra Costa County CA COP Public Facilities
Merrithew Memorial Hospital Replacement 6.63 11/01/22 529,000
270,000 Contra Costa County CA Home Mortgage Revenue
AMT Escrowed to Maturity 7.75 05/01/22 346,834
755,000 Contra Costa County CA Transportation Authority
Sales Tax Revenue Series A Escrowed to Maturity 6.50 03/01/09 854,418
4,000,000 Contra Costa County CA Transportation Authority
Sales Tax Revenue Series A FGIC Insured 5.50 03/01/08 4,119,440
3,000,000 Contra Costa County CA Water District Water
Revenue Series G MBIA Insured 5.75 10/01/14 3,088,080
1,000,000 Covina CA COP Water System Improvement Project 7.30 04/01/16 1,059,020
1,500,000 Cupertino CA Series A AMBAC Insured 5.75 07/01/16 1,526,340
2,675,000 East Bay CA MUD Water System Revenue MBIA
Insured 6.00 06/01/12 2,802,758
3,655,000 East Bay CA Regional Park District Series B 5.75 09/01/13 3,730,585
500,000 Eastern Municipal Water District CA Water &
Sewer Revenue Certificates FGIC Insured 6.30 07/01/20 524,970
2,500,000 El Dorado County CA Bond Authority Lease
Revenue Capital Facilities Project 7.40 11/01/09 2,773,350
1,000,000 Emeryville CA PFA Housing Increment Revenue
Series A 6.35 05/01/10 1,049,330
1,725,000 Escondido CA PFA Lease Revenue Center for the
Arts AMBAC Insured 5.80 09/01/09 1,816,977
2,000,000 Escondido CA PFA Lease Revenue Center for the
Arts AMBAC Insured 6.00 09/01/18 2,105,460
1,410,000 Fairfield CA PFA CGIC Insured 5.20 08/01/08 1,411,340
</TABLE>
59
<PAGE> 127
CALIFORNIA TAX-FREE BOND FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS - CONTINUED
$ 3,000,000 Fontana CA USD Convertible Series C FGIC
Insured 6.03 F 05/01/20 $ 2,813,970
700,000 Fontana CA USD Series B AMBAC Insured 5.40 07/01/08 717,325
1,000,000 Fresno CA COP Street Improvement Project 6.63 12/01/11 1,064,090
1,000,000 Fresno CA Sewer Revenue Series A MBIA Insured 5.00 09/01/15 965,870
2,000,000 Fresno CA USD Series A MBIA Insured 5.70 08/01/15 2,053,840
1,250,000 Fresno County CA Solid Waste Revenue American
Avenue Landfill Project MBIA Insured 5.75 05/15/14 1,277,663
3,840,000 Hayward CA COP Capital Improvement Projects 6.80 08/01/17 4,008,230
2,800,000 Huntington Beach CA PFA Revenue Bond 7.00 08/01/10 2,846,900
500,000 Industry CA Urban Development Agency 6.70 11/01/03 544,790
1,080,000 Industry CA Urban Development Agency 6.85 11/01/04 1,179,803
500,000 Industry CA Urban Development Agency Project 3 6.60 11/01/02 544,505
1,000,000 Industry CA Urban Development Agency Tax
Allocation MBIA Insured 5.80 05/01/09 1,041,370
1,500,000 Inglewood CA COP Civic Center Improvement
Project PFA 7.00 08/01/19 1,591,065
485,000 Inglewood CA PFA Revenue Series C 7.00 05/01/22 514,449
1,000,000 Lincoln CA USD Special Tax Community District
Number 1B 7.20 09/01/21 1,088,730
1,000,000 Long Beach CA Finance Authority Revenue AMBAC
Insured 6.00 11/01/17 1,092,670
2,900,000 Los Angeles CA Airport Revenue Series A FGIC
Insured 5.50 05/15/08 2,977,633
1,000,000 Los Angeles CA Community College District COP
Series A CGIC Insured 6.00 08/15/08 1,067,670
4,000,000 Los Angeles CA DW&P Electric Plant Revenue 5.38 09/01/23 3,964,040
1,000,000 Los Angeles CA DW&P Electric Plant Revenue 6.38 02/01/20 1,065,060
</TABLE>
60
<PAGE> 128
CALIFORNIA TAX-FREE BOND FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS - CONTINUED
$ 1,000,000 Los Angeles CA DW&P Electric Plant Revenue
Second Issue 6.00 08/15/32 $ 1,038,320
100,000 Los Angeles CA Harbor Revenue Escrowed to
Maturity 7.60 10/01/18 111,461
2,775,000 Los Angeles CA Harbor Revenue Series B AMT 6.50 08/01/13 2,977,520
115,000 Los Angeles CA SFMR Series A AMT Multiple
Credit Enhancements 7.55 12/01/23 121,072
7,250,000 Los Angeles CA Wastewater System Revenue Series
A 5.70 06/01/20 7,361,868
3,000,000 Los Angeles CA Wastewater System Revenue Series
D FGIC Insured 5.20 11/01/21 2,925,210
4,000,000 Los Angeles County CA Metropolitan
Transportation Authority Sales Tax Revenue
Series A AMBAC Insured 5.50 07/01/17 4,039,120
1,000,000 Los Angeles County CA Transportation Commission
Sales Tax Revenue Series B 5.75 07/01/18 1,004,810
480,000 Los Angeles County CA Transportation Commission
Sales Tax Revenue Series B FGIC Insured 6.50 07/01/15 516,835
2,395,000 Lucia Mar CA USD COP Prerefunded 6.90 05/01/15 2,503,853
1,000,000 Menlo Park CA CDA Tax Allocation Las Pulgas
Community Project AMBAC Insured 6.70 10/01/22 1,095,980
2,800,000 Metropolitan Water District of Southern CA
Waterworks Revenue 5.50 07/01/19 2,802,380
665,000 Mid Peninsula CA Regional Open Space District
Promissory Notes 6.30 07/10/10 708,245
2,000,000 Mid Peninsula CA Regional Open Space District
Promissory Notes 7.00 09/01/14 2,197,720
520,000 Mojave CA Water Agency Improvement District M
Morongo Basin 6.25 09/01/02 555,994
500,000 Mojave CA Water Agency Improvement District M
Morongo Basin 6.60 09/01/12 532,805
1,000,000 Mountain View CA Shoreline Regional Park
Community Tax Allocation Series A 5.60 08/01/09 986,540
1,450,000 Nevada County CA Solid Waste Revenue 6.50 10/01/06 1,560,157
345,000 Nevada County CA Solid Waste Revenue 7.00 06/01/98 352,138
</TABLE>
61
<PAGE> 129
CALIFORNIA TAX-FREE BOND FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS - CONTINUED
$ 345,000 Nevada County CA Solid Waste Revenue 7.10 06/01/99 $ 355,340
1,000,000 Nevada County CA Solid Waste Revenue 7.50 06/01/21 1,030,660
1,035,000 Northridge CA Water District AMBAC Insured 5.40 02/01/11 1,048,113
1,000,000 Nuview CA USD COP 7.25 02/01/16 1,055,500
1,500,000 Ontario CA RDFA Revenue Project One MBIA
Insured 6.00 08/01/15 1,549,905
1,000,000 Orange County CA Water District Revenue Series
A 5.50 08/15/10 1,001,880
1,000,000 Palm Springs CA Municipal Golf Course Expansion
Project 7.40 11/01/18 1,068,530
2,400,000 Pittsburg CA RDFA Tax Allocation Los Medanos
Community Project FGIC Insured 5.50 08/01/07 2,484,816
2,250,000 Pittsburg CA RDFA Tax Allocation Los Medanos
Community Project FGIC Insured 5.50 08/01/15 2,251,643
1,500,000 Pittsburg CA RDFA Tax Allocation Los Medanos
Community Project Series 90-1 7.40 08/15/20 1,600,560
1,000,000 Port of Oakland CA Special Facilities Revenue
Mitsui OSK Lines Limited Series A AMT LOC -
Industrial Bank of Japan Ltd 6.70 01/01/07 1,093,570
1,000,000 Rancho Cucamonga CA RDFA Tax Allocation MBIA
Insured 5.50 09/01/23 1,000,800
1,100,000 Richmond CA Joint Powers Financing Authority
Lease and Gas Tax Revenue Series A 5.25 05/15/13 1,034,022
100,000 Richmond CA RDFA Tax Allocation Harbour Project
CGIC Insured 7.00 07/01/09 113,973
1,055,000 Riverside CA Sewer Revenue FGIC Insured 5.00 08/01/10 1,040,736
1,750,000 Riverside County CA Asset Leasing Corp Revenue
Riverside County Hospital Project A 6.38 06/01/09 1,830,605
3,000,000 Riverside County CA COP Series A 6.88 11/01/09 3,214,890
1,000,000 Riverside County CA PFA Special Tax Revenue
Series A MBIA Insured 5.25 09/01/13 990,720
</TABLE>
62
<PAGE> 130
CALIFORNIA TAX-FREE BOND FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS - CONTINUED
$ 370,000 Riverside County CA SFMR Project A AMT GNMA
Collateralized 6.85 10/01/16 $ 411,718
1,250,000 Riverside County CA Transportation Commission
Sales Tax Revenue Series A 6.50 06/01/09 1,318,913
1,370,000 Rosemead CA RDFA Tax Allocation Redevelopment
Project Area 1-A 5.50 10/01/18 1,263,003
1,335,000 Roseville CA Joint USD Capital Appreciation
Series A 8.39 F 08/01/06 778,879
1,900,000 Sacramento CA Light Rail Transportation Project 6.75 07/01/07 2,108,829
3,600,000 Sacramento CA MUD Electric Revenue Series E
MBIA- Insured 5.70 05/15/12 3,681,756
500,000 Sacramento CA MUD Electric Revenue Series Z
FGIC Insured 6.45 07/01/10 540,935
3,000,000 Sacramento County Main Detention Facility MBIA
Insured 5.75 06/01/15 3,052,770
1,000,000 San Bernardino CA Municipal Water Department
COP FGIC Insured 6.25 02/01/12 1,055,950
2,000,000 San Buenaventura CA Capital Improvement Project
COP 6.85 08/01/16 2,063,720
230,000 San Carlos CA RDFA Tax Allocation Series A 7.00 09/01/01 251,054
250,000 San Carlos CA RDFA Tax Allocation Series A 7.00 09/01/02 274,865
225,000 San Carlos CA RDFA Tax Allocation Series A 7.00 09/01/03 246,650
235,000 San Carlos CA RDFA Tax Allocation Series A 7.00 09/01/04 256,401
235,000 San Carlos CA RDFA Tax Allocation Series A 7.10 09/01/05 256,933
1,520,000 San Diego CA COP 6.90 07/15/16 1,629,562
5,000,000 San Diego CA PFA Sewer Revenue FGIC Insured 5.00 05/15/15 4,830,800
1,000,000 San Diego CA Regional Building Authority Lease
Revenue San Miguel Consolidated Fire Protection
District MBIA Insured 5.65 01/01/20 1,014,940
</TABLE>
63
<PAGE> 131
CALIFORNIA TAX-FREE BOND FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS - CONTINUED
$ 1,230,000 San Diego County CA COP East Mesa Detention
Facilities Project 7.00 10/01/09 $ 1,299,569
500,000 San Diego County CA Regional Transportation
Community Sales Tax Revenue Series A Escrowed
to Maturity 6.00 04/01/08 542,305
2,715,000 San Elijo Joint Powers Authority San Diego
County CA Water Pollution Control Facility FGIC
Insured 5.38 03/01/13 2,722,113
2,250,000 San Francisco CA BART Sales Tax Revenue FGIC
Insured 5.50 07/01/15 2,270,385
1,800,000 San Joaquin County CA COP North County Landfill
Project 7.00 04/01/11 1,880,496
2,000,000 San Joaquin Hills CA Transportation Corridor
Agency Toll Road Revenue Capital Appreciation 4.72 F 01/01/10 1,525,220
1,395,000 San Jose RDFA Merged Area Project MBIA Insured 5.25 08/01/16 1,372,499
1,935,000 San Mateo County CA Board of Education COP 7.10 05/01/21 2,043,050
1,700,000 Santa Clara County CA COP Multiple Facilities
Project AMBAC Insured 6.00 05/15/12 1,780,818
100,000 Santa Clara County CA COP Public Facilities
Corp 7.75 11/01/08 111,482
750,000 Santa Maria CA RDFA Town Center West Side
Parking Facilities FSA Insured 5.25 06/01/11 747,450
2,000,000 Santa Monica - Malibu CA USD Facilities
Reconstruction Projects 5.50 08/01/15 1,996,360
1,195,000 Santa Rosa CA High School District FGIC Insured 5.90 05/01/13 1,252,754
1,000,000 Shasta CA Dam Area Public Utility District COP 7.25 03/01/12 1,071,280
350,000 Shasta CA Joint Powers Financing Authority
Landfill Revenue Series A 7.20 07/01/09 370,293
500,000 Shasta CA Joint Powers Financing Authority
Landfill Revenue Series A 7.20 07/01/10 528,990
1,500,000 Snowline CA Joint USD COP 6.40 07/01/18 1,525,845
520,000 Sonoma County CA COP 6.75 10/01/06 566,212
</TABLE>
64
<PAGE> 132
CALIFORNIA TAX-FREE BOND FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS - CONTINUED
$ 1,000,000 South County CA Regional Wastewater Authority
Revenue Capital Improvement FGIC Insured 5.75 08/01/10 $ 1,038,470
1,000,000 Southern California State Public Power
Authority 5.50 07/01/12 1,002,410
2,750,000 Southern California State Public Power
Authority Transmission Project Revenue Southern
Transmission Project 6.13 07/01/18 2,843,060
1,450,000 Southern California State Public Power
Authority Transmission Revenue Project 5.75 07/01/21 1,462,717
1,030,000 Southern California State SFMR Series A AMT
GNMA Collateralized 7.63 10/01/22 1,077,988
530,000 Southern California State SFMR Series A AMT
GNMA Collateralized 7.63 10/01/23 563,008
670,000 Southern California State SFMR Series A AMT
GNMA/FNMA Collateralized 6.75 09/01/22 710,502
695,000 Southern California State SFMR Series A AMT
GNMA/FNMA Collateralized 7.35 09/01/24 732,697
2,000,000 Stanislaus County CA COP Series A 6.85 06/01/12 2,107,320
750,000 Stockton CA Port District Revenue Series A 8.10 01/01/14 808,185
20,000 Stockton CA SFMR Government Agency
Collateralized 7.50 02/01/23 21,992
265,000 Sulphur Springs CA USD COP AMBAC Insured 7.15 02/01/11 292,483
5,690,000 Sulphur Springs CA USD Series A MBIA Insured
Zero Coupon 8.58 F 09/01/13 2,168,175
1,000,000 Sunnyvale CA Financing Authority Utilities
Revenue Solid Waste Materials Series B AMT MBIA
Insured 6.00 10/01/08 1,055,730
1,000,000 Temecula Valley CA USD Series D FGIC Insured 6.00 09/01/14 1,045,350
1,900,000 Torrance CA COP AMBAC Insured 5.50 04/01/12 1,938,722
1,705,000 Torrance CA COP AMBAC Insured 5.75 04/01/16 1,755,383
1,000,000 Twentynine Palms CA Water District CA COP 7.00 08/01/17 1,055,350
1,000,000 University of California Housing System Revenue
Series A MBIA Insured 5.00 11/01/13 962,110
</TABLE>
65
<PAGE> 133
CALIFORNIA TAX-FREE BOND FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS - CONTINUED
$ 3,000,000 University of California Revenue Multiple
Purpose Project C AMBAC Insured 5.25 09/01/11 $ 3,002,790
2,300,000 University of California Revenue Multiple
Purpose Projects Series C AMBAC Insured 5.25 09/01/12 2,291,881
1,750,000 University of California Revenue Seismic Safety
Project MBIA Insured 5.50 11/01/10 1,791,720
1,095,000 University of California Revenues Multiple
Purpose Projects Series B MBIA Insured 6.00 09/01/13 1,153,440
990,000 Upland CA HFA Revenue Issue A 7.85 07/01/20 1,036,490
1,000,000 Vacaville CA PFA Tax Allocation Redevelopment
Project MBIA Insured 6.35 09/01/22 1,052,910
1,135,000 Walnut Valley CA USD Series C FGIC Insured 5.75 08/01/15 1,161,215
1,000,000 West & Central Basin CA Financing Authority
Redevelopment AMBAC Insured 6.13 08/01/12 1,057,080
1,000,000 Yolo County CA HFA Mortgage Revenue AMT FHA
Collateralized 7.20 08/01/33 1,079,330
------------
TOTAL CALIFORNIA MUNICIPAL BONDS $263,677,834
(Cost $248,725,174)
SHORT-TERM INSTRUMENTS - 3.58%
CALIFORNIA MUNICIPAL VARIABLE RATE SECURITIES+ - 3.25%
$ 1,300,000 California State HFFA St Francis Hospital V/R 5.90 % 11/01/19 $ 1,300,000
1,000,000 California State HFFA Sutter Hospital V/R LOC -
Morgan Guaranty Trust 5.90 03/01/20 1,000,000
1,000,000 Irvine Ranch CA Water District V/R LOC -
Commerzbank AG 5.90 01/01/21 1,000,000
500,000 Irvine Ranch CA Water District V/R LOC -
Sumitomo Bank Ltd 5.90 10/01/10 500,000
900,000 Los Angeles County CA IDA Komax System Inc V/R
AMT LOC - Dai-Ichi Kangyo Bank Ltd 6.25 12/01/06 900,000
</TABLE>
66
<PAGE> 134
CALIFORNIA TAX-FREE BOND FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS - CONTINUED
CALIFORNIA MUNICIPAL VARIABLE RATE SECURITIES+ - CONTINUED
$ 1,350,000 Los Angeles County CA IDA V/R AMT LOC -
Dai-Ichi Kangyo Bank Ltd 6.25 12/01/06 $ 1,350,000
900,000 Los Angeles County CA V/R 6.25 12/01/05 900,000
1,000,000 Orange County CA Sanitation District V/R LOC -
National Westminster Bank Plc 5.90 08/01/15 1,000,000
1,000,000 Orange County CA Sanitation District V/R
Multiple Credit Enhancements 5.90 08/01/16 1,000,000
------------
$ 8,950,000
MONEY MARKET FUNDS - 0.33%
$ 123,773 Arbor Fund CA Tax-Exempt Portfolio $ 123,773
800,186 Nuveen Institutional CA Tax-Exempt Fund 800,186
------------
$ 923,959
TOTAL SHORT-TERM INSTRUMENTS $ 9,873,959
(Cost $9,873,950)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $258,599,124)* (Notes 1 and 3) 99.32 % $ 273,551,793
Other Assets and Liabilities, Net 0.68 1,863,007
---------- -------------
TOTAL NET ASSETS 100.00 % $ 275,414,800
---------- -------------
---------- -------------
...............................................................................
</TABLE>
F YIELD TO MATURITY.
+ THESE VARIABLE RATE SECURITIES ARE SUBJECT TO A DEMAND FEATURE WHICH
REDUCES THE REMAINING MATURITY.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 14,988,173
Gross Unrealized Depreciation (35,504)
-------------
NET UNREALIZED APPRECIATION $ 14,952,669
-------------
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
67
<PAGE> 135
CALIFORNIA TAX-FREE MONEY MARKET FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE + VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES - 103.45%
$ 4,400,000 ABAG Finance Authority for Nonprofit Corp CA
Lucile Salter Packard Project V/R AMBAC Insured 5.00 % 08/01/23 $ 4,400,000
3,000,000 Alameda County CA TRAN LOC - Union Bank of
Switzerland 4.75 07/25/96 3,013,204
1,700,000 Alhambra CA IDA Sunclipse V/R LOC - Bank of
America 3.50 05/01/07 1,700,000
2,500,000 Anaheim CA Public Improvement COP LOC -
Industrial Bank of Japan Ltd 5.30 08/01/19 2,500,000
3,000,000 Brea & Olinda CA USD Brea High School
Prerefunded 7.70 08/01/18 3,125,445
9,055,000 California State DWR Central Valley Project
Revenue V/R 5.15 12/01/05 9,055,000
2,600,000 California State HFFA Adventist Health System
V/R LOC - Toronto Dominion Bank 4.75 08/01/21 2,600,000
4,900,000 California State HFFA Kaiser Permanente V/R 4.90 05/01/28 4,900,000
1,300,000 California State HFFA Kaiser Permanente V/R 5.90 11/01/19 1,300,000
3,650,000 California State HFFA St Joseph Health Center
Series A V/R 5.90 07/01/13 3,650,000
965,000 California State PCFA Chevron Project V/R 4.06 11/15/01 965,000
1,500,000 California State PCFA Revenue Pacific Gas &
Electric CP 3.70 01/10/96 1,500,000
2,000,000 California State PCFA Revenue Pacific Gas &
Electric CP 3.75 01/11/96 2,000,000
5,000,000 California State PCFA Solid Waste Disposal
Revenue Colmac Energy Project Series B V/R AMT
LOC - Swiss Bank 5.05 12/01/16 5,000,000
1,800,000 California State PCFA Solid Waste Disposal
Revenue Shell Oil Co Martinez Project Series A
V/R AMT 4.29 10/01/24 1,800,000
</TABLE>
...............................................................................
+ SECURITIES WITH MATURITIES IN EXCESS OF 397 DAYS ARE SUBJECT TO A DEMAND
FEATURE WHICH REDUCES THE REMAINING MATURITY.
68
<PAGE> 136
CALIFORNIA TAX-FREE MONEY MARKET FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE + VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES - CONTINUED
$ 1,000,000 California State PCFA Solid Waste Disposal
Revenue Taormina Industries Project Series B
V/R LOC - Sanwa Bank 5.40 08/01/14 $ 1,000,000
2,900,000 California State PCFA Southern California
Edison V/R 5.40 02/28/08 2,900,000
2,400,000 California State PCFA Southern California
Edison V/R Series A 5.40 02/28/08 2,400,000
3,200,000 California State PCFA Southern California
Edison V/R Series C 5.40 02/28/08 3,200,000
4,600,000 California State PCFA Southern California
Edison V/R Series D 5.40 02/28/08 4,600,000
3,200,000 California State PCFA Stanislaus Project V/R
AMT LOC - Swiss Bank 6.00 12/01/17 3,200,000
4,000,000 California State PCFA V/R San Diego Gas &
Electric Co V/R Series A 4.25 12/01/07 4,000,000
7,300,000 California State PCFA Wadham Project V/R AMT
LOC - Banque Paribas 5.15 11/01/17 7,300,000
1,000,000 California State PCFA Western Waste Industries
Project V/R LOC - Citibank 5.38 12/01/00 1,000,000
10,000,000 California State RAW Series C Multiple LOC's 5.75 04/25/96 10,063,200
1,500,000 California State RAW Series C V/R FGIC Insured 5.91 04/25/96 1,508,846
6,000,000 California State School Cash Reserve Program
Pool Series A MBIA Insured 4.75 07/03/96 6,025,308
8,000,000 California State School Cash Reserve Program
Pool Series B MBIA Insured 4.50 12/20/96 8,052,140
2,500,000 California Statewide CDA Apartment Development
Revenue Series A-6 V/R FNMA Collateralized 4.70 05/15/25 2,500,000
500,000 California Statewide CDA Apartment Revenue
Series A-7 V/R AMT FNMA Collateralized 4.85 05/15/25 500,000
2,300,000 California Statewide CDA St Joseph Health
System V/R 4.90 07/01/08 2,300,000
</TABLE>
...............................................................................
+ SECURITIES WITH MATURITIES IN EXCESS OF 397 DAYS ARE SUBJECT TO A DEMAND
FEATURE WHICH REDUCES THE REMAINING MATURITY.
69
<PAGE> 137
CALIFORNIA TAX-FREE MONEY MARKET FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE + VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES - CONTINUED
$ 1,800,000 California Statewide CDA Sutter Health Group
V/R AMBAC Insured 5.90 07/01/15 $ 1,800,000
1,600,000 California Statewide CDA Industrial Revenue Tri
H Food Multiple LOC's 5.55 08/01/11 1,600,000
9,000,000 Chula Vista CA IDA San Diego Gas & Electric CP 3.80 02/12/96 9,000,000
3,000,000 Chula Vista CA IDA San Diego Gas & Electric CP 3.80 02/13/96 3,000,000
5,100,000 Colton CA RDFA Las Palomas Associates Project
V/R LOC - Bank of America 5.10 11/01/15 5,100,000
1,000,000 Colton CA RDFA MFHR V/R LOC - Federal Home Loan
Bank of San Francisco 4.55 05/01/10 1,000,000
1,100,000 Concord CA MFHR Bel Air Apartments V/R AMT LOC
-Bank of America 5.00 12/01/16 1,100,000
2,000,000 Duarte CA RDFA COP Johnson Duarte Partners
Project V/R Series B LOC - Bank of America 4.90 12/01/14 2,000,000
8,100,000 Eagle Trust V/R Series 94 MBIA Insured 5.20 09/01/03 8,100,000
3,950,000 East Bay CA MUD CP 3.40 01/30/96 3,950,000
4,000,000 East Bay CA MUD CP 3.75 02/22/96 4,000,000
4,400,000 Escondido CA CDA V/R AMT LOC - Bank of America 5.25 10/01/16 4,400,000
3,800,000 Escondido CA MFHR Morning View Terrace V/R LOC
-Bank of America 4.80 02/15/07 3,800,000
1,000,000 Foothill / Eastern CA Transportation Corridor
Agency Toll Road Revenue Series B V/R LOC -
Morgan Guaranty Trust 4.75 01/02/35 1,000,000
2,000,000 Foothill / Eastern CA Transportation Corridor
Toll Road Development Series D V/R LOC -
Industrial Bank of Japan Ltd 5.00 01/02/35 2,000,000
</TABLE>
...............................................................................
+ SECURITIES WITH MATURITIES IN EXCESS OF 397 DAYS ARE SUBJECT TO A DEMAND
FEATURE WHICH REDUCES THE REMAINING MATURITY.
70
<PAGE> 138
CALIFORNIA TAX-FREE MONEY MARKET FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE + VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES - CONTINUED
$ 3,800,000 Huntington Beach CA MFHR Seabridge Villas V/R
LOC - Bank of America 4.00 02/01/10 $ 3,800,000
4,100,000 Industry CA IDR Helene Curtis Inc Project V/R
LOC - Harris Trust & Savings Bank 5.10 10/01/06 4,100,000
3,330,000 Inglewood CA RDFA Tax Allocation Series B
Prerefunded 7.88 09/01/18 3,484,677
1,800,000 Irvine CA IDA Irvine East Investment Co V/R LOC
-Bank of America 5.10 12/01/05 1,800,000
500,000 Irvine Ranch CA Water District LOC - National
Westminster Bank Plc 5.90 08/01/16 500,000
1,400,000 Irvine Ranch CA Water District LOC - Sumitomo
Bank Ltd 5.90 10/01/00 1,400,000
7,700,000 Irvine Ranch CA Water District V/R LOC -
Commerzbank AG 5.90 01/01/21 7,700,000
2,500,000 Irvine Ranch CA Water District V/R LOC -
Dai-Ichi Kangyo Bank Ltd 5.90 09/02/20 2,500,000
600,000 Irvine Ranch CA Water District V/R LOC -
Sumitomo Bank Ltd 5.90 10/01/05 600,000
2,000,000 Irwindale CA IDA Revenue Toys R Us Project 5.13 12/01/19 2,000,000
3,000,000 Long Beach CA Harbor CP 3.50 01/19/96 3,000,000
2,500,000 Long Beach CA Harbor CP 3.70 03/14/96 2,500,000
2,500,000 Long Beach CA Harbor CP 3.80 01/18/96 2,500,000
6,500,000 Long Beach CA Health Facilities Memorial Health
Services V/R 4.90 10/01/16 6,500,000
1,000,000 Los Angeles CA MFHR Channel Gateway Apartments
Series B V/R LOC - Fuji Bank Ltd 5.30 08/01/19 1,000,000
1,900,000 Los Angeles CA MFHR Series B V/R AMT LOC -
Federal Home Loan Bank of San Francisco 6.25 12/01/26 1,900,000
3,800,000 Los Angeles CA MFHR V/R AMT LOC - Federal Home
Loan Bank of San Francisco 6.25 08/01/26 3,800,000
</TABLE>
...............................................................................
+ SECURITIES WITH MATURITIES IN EXCESS OF 397 DAYS ARE SUBJECT TO A DEMAND
FEATURE WHICH REDUCES THE REMAINING MATURITY.
71
<PAGE> 139
CALIFORNIA TAX-FREE MONEY MARKET FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE + VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES - CONTINUED
$ 3,500,000 Los Angeles CA Wastewater System CP 3.45 02/08/96 $ 3,500,000
1,000,000 Los Angeles County CA COP Van Nuys Courthouse
Project Prerefunded 9.00 06/01/15 1,041,092
1,100,000 Los Angeles County CA HFA MFHR Harbor Cove
Project V/R LOC - Citibank 5.30 10/01/06 1,100,000
1,000,000 Los Angeles County CA HFA MFHR Sand Canyon
Ranch Project V/R LOC - Citibank 5.30 11/01/06 1,000,000
2,000,000 Los Angeles County CA Metropolitan
Transportation Commission CP 3.30 02/09/96 2,000,000
3,000,000 Los Angeles County CA Metropolitan
Transportation Commission CP 3.55 03/27/96 3,000,000
4,000,000 Los Angeles County CA Metropolitan
Transportation Commission CP 3.60 02/08/96 4,000,000
1,000,000 Los Angeles County CA Metropolitan
Transportation Commission CP 3.75 01/12/96 1,000,000
15,000,000 Los Angeles County CA TRAN Multiple LOC's 4.50 07/01/96 15,047,159
5,000,000 Los Angeles County CA Transportation Authority
Revenue Union Station Gateway V/R Series A FSA
Insured 4.75 07/01/25 5,000,000
1,100,000 Metropolitan Water District of Southern CA
Waterworks Revenue CP 3.40 01/30/96 1,100,000
2,900,000 Montebello CA V/R LOC - Bank of America 3.50 04/01/05 2,900,000
3,000,000 Monterey CA Regional Waste Management Authority
Revenue Series A V/R LOC - Dai-Ichi Kangyo Bank
Ltd 5.30 04/01/15 3,000,000
1,500,000 Ontario CA MFHR Daisy Apartments V/R LOC - Bank
of America 4.80 11/01/04 1,500,000
6,000,000 Ontario CA MFHR Park Centre Apartments V/R LOC
-Bank of New York 4.80 08/01/07 6,000,000
</TABLE>
...............................................................................
+ SECURITIES WITH MATURITIES IN EXCESS OF 397 DAYS ARE SUBJECT TO A DEMAND
FEATURE WHICH REDUCES THE REMAINING MATURITY.
72
<PAGE> 140
CALIFORNIA TAX-FREE MONEY MARKET FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE + VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES - CONTINUED
$ 2,100,000 Ontario CA MFHR Vineyard Village Apartments V/R
LOC - Industrial Bank of Japan Ltd 5.35 12/01/05 $ 2,100,000
4,000,000 Orange County CA HFA Bear Brand Apartments
Project Series Z LOC - Fuji Bank Ltd 5.80 11/01/07 4,000,000
5,000,000 Orange County CA HFA Harbor Pointe Apartment
V/R Issue D LOC - Citibank 5.15 12/01/06 5,000,000
1,000,000 Orange County CA HFA Seaside Meadow Apartments
Series C LOC - Bank of America 5.65 08/01/08 1,000,000
2,000,000 Orange County CA HFA Vintage Wood Apartments
V/R LOC - Mitsubishi Bank Ltd 5.40 11/01/08 2,000,000
3,000,000 Orange County CA Office & Courthouse Projects
V/R LOC - Dai-Ichi Kangyo Bank 5.90 12/01/15 3,000,000
1,000,000 Orange County CA Sanitation District Multiple
Credit Enhancments 5.05 08/01/13 1,000,000
1,500,000 Orange County CA Sanitation District V/R LOC -
National Westminster Bank Plc 5.90 08/01/15 1,500,000
1,000,000 Orange County CA Sanitation District V/R
Multiple Credit Enhancements 5.90 08/01/16 1,000,000
4,000,000 Sacramento CA MUD CP 3.30 02/28/96 4,000,000
2,637,000 Sacramento CA MUD CP 3.70 01/10/96 2,637,000
4,524,000 Sacramento CA MUD CP 3.80 01/12/96 4,524,000
200,000 Sacramento County CA MFHR Series A V/R LOC -
Dai-Ichi Kangyo Bank Ltd 5.30 04/15/07 200,000
2,780,000 Salinas CA MFHR Brentwood Gardens V/R LOC -
Bank of America 4.80 03/01/05 2,780,000
</TABLE>
...............................................................................
+ SECURITIES WITH MATURITIES IN EXCESS OF 397 DAYS ARE SUBJECT TO A DEMAND
FEATURE WHICH REDUCES THE REMAINING MATURITY.
73
<PAGE> 141
CALIFORNIA TAX-FREE MONEY MARKET FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE + VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES - CONTINUED
$ 5,000,000 San Bernardino CA Alta Loma Apartments V/R LOC
-Federal Home Loan Bank of Atlanta 4.65 02/01/23 $ 5,000,000
2,185,000 San Bernardino County CA MFHR V/R LOC - Federal
Home Loan Bank of San Francisco 4.65 05/01/17 2,185,000
8,100,000 San Bernardino County CA TRAN Multiple LOC's 4.50 07/05/96 8,122,039
2,000,000 San Diego CA IDR San Diego Gas & Electric CP 3.70 01/09/96 2,000,000
2,000,000 San Diego CA MFHR Los Serano V/R LOC - Citibank 4.80 02/01/09 2,000,000
5,000,000 San Diego CA MFHR Lusk Mira Mesa Apartments V/R
LOC - Bank of America 5.00 04/01/07 5,000,000
1,000,000 San Diego CA Regional Transportation Commission
CP 3.60 02/16/96 1,000,000
3,300,000 San Diego CA Regional Transportation Commission
CP 3.70 02/07/96 3,300,000
3,600,000 San Francisco CA City & County V/R LOC -
Industrial Bank of Japan Ltd 5.00 12/01/05 3,600,000
1,200,000 San Francisco CA MFHR Winterland Project V/R
LOC - Citibank 5.30 06/01/06 1,200,000
2,200,000 San Joaquin County CA Transportation Authority
Sales Tax Revenue V/R LOC - Sumitomo Bank Ltd 5.15 04/01/11 2,200,000
1,300,000 San Jose CA MFHR Kimberly Woods Apartments V/R
LOC - Bank of America 4.80 11/01/08 1,300,000
300,000 Santa Clara CA Electric Revenue V/R Series 85A
LOC - National Westminster Bank Plc 4.90 07/01/10 300,000
500,000 Santa Clara CA Electric Revenue V/R Series 85B
LOC - National Westminster Bank Plc 4.90 07/01/10 500,000
</TABLE>
...............................................................................
+ SECURITIES WITH MATURITIES IN EXCESS OF 397 DAYS ARE SUBJECT TO A DEMAND
FEATURE WHICH REDUCES THE REMAINING MATURITY.
74
<PAGE> 142
CALIFORNIA TAX-FREE MONEY MARKET FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE + VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES - CONTINUED
$ 1,500,000 Santa Clara County CA HFA Lincoln Pajaro
Apartments Series 85A LOC - Sumitomo Bank 5.05 01/01/97 $ 1,500,000
1,000,000 Santa Clara County CA MFHR Foxchase Apartments
V/R Series E FGIC Insured 5.00 11/01/07 1,000,000
2,575,000 Santa Clara County CA MFHR Grove Garden
Apartments V/R LOC - Citibank 5.30 03/01/17 2,575,000
4,800,000 Simi Valley CA MFHR Lincoln Wood Ranch V/R LOC
-Sumitomo Bank 5.30 06/01/10 4,800,000
3,000,000 Southern California State Public Power
Authority Hydroelectric Revenue Hoover Updating
Project Prerefunded 8.13 10/01/17 3,162,012
7,000,000 Southern California State Public Power
Authority Southern Transmission Project V/R LOC
-Swiss Bank 4.75 07/01/19 7,000,000
1,000,000 Southern California State Rapid Transit
District COP V/R MBIA Insured 3.00 07/01/99 1,000,000
3,200,000 Stockton CA COP 1986 Water Facility Project
Prerefunded 7.50 08/01/16 3,280,467
2,200,000 Tracy CA MFHR Sycamore Village Apartments V/R
LOC - Bank of America 4.55 05/01/15 2,200,000
1,770,000 Turlock CA Irrigation District Revenue V/R
Series A LOC - Canadian Imperial Bank of
Commerce 4.85 01/01/14 1,770,000
2,500,000 University of California Housing Revenue
Prerefunded 7.60 11/01/18 2,626,230
2,000,000 Vacaville CA MFHR Western Properties Sycamores
Project V/R LOC - Bank of America 4.55 04/01/05 2,000,000
2,600,000 Walnut Creek CA MFHR Creekside Drive Apartments
V/R LOC - Bank of America 4.55 04/01/07 2,600,000
------------
TOTAL SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES $368,142,819
</TABLE>
...............................................................................
+ SECURITIES WITH MATURITIES IN EXCESS OF 397 DAYS ARE SUBJECT TO A DEMAND
FEATURE WHICH REDUCES THE REMAINING MATURITY.
75
<PAGE> 143
CALIFORNIA TAX-FREE MONEY MARKET FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
TOTAL INVESTMENTS IN SECURITIES
(Cost $368,142,819)* (Note 1) 103.45 % $ 368,142,819
Other Assets and Liabilities, Net (3.45 ) (12,274,986)
---------- -------------
TOTAL NET ASSETS 100.00 % $ 355,867,833
========== =============
...............................................................................
+ SECURITIES WITH MATURITIES IN EXCESS OF
397 DAYS ARE SUBJECT TO A DEMAND
FEATURE WHICH REDUCES THE REMAINING
MATURITY.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES.
The accompanying notes are an integral part of these financial statements.
76
<PAGE> 144
MONEY MARKET FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
YIELD TO MATURITY
PRINCIPAL SECURITY NAME MATURITY DATE VALUE
<C> <S> <C> <C> <C> <C>
COMMERCIAL PAPER - 60.89%
$ 27,500,000 Abbey National North America 5.72 % 01/31/96 $ 27,368,917
30,000,000 ANZ Delaware Inc 5.67 02/13/96 29,797,004
30,000,000 Associates Corp of North America 5.60 04/11/96 29,528,667
14,900,000 Corporate Asset Funding Co Inc++ 5.67 02/12/96 14,801,437
32,500,000 Corporate Receivables Corp++ 5.57 03/14/96 32,132,922
7,500,000 Daimler-Benz North America Corp 5.50 03/28/96 7,400,313
22,500,000 Den Danske Corp Inc 5.67 02/08/96 22,365,338
7,000,000 Den Danske Corp Inc 5.67 02/09/96 6,957,003
25,000,000 Glaxo Wellcome Plc++ 5.70 01/12/96 24,956,458
20,360,000 Greenwich Funding Corp++ 5.75 01/18/96 20,304,717
17,000,000 Hanson Finance Plc++ 5.66 02/21/96 16,863,688
12,500,000 Hanson Finance Plc++ 5.67 02/12/96 12,417,313
20,000,000 International Business Machines Credit Corp 5.66 02/02/96 19,899,378
30,000,000 Morgan (J P) & Co Inc 5.57 03/18/96 29,642,592
32,500,000 National Australia Funding Inc 5.57 03/15/96 32,127,893
32,500,000 New Center Asset Funding++ 5.60 03/15/96 32,125,889
22,000,000 Penney (J C) Co Inc 5.66 02/20/96 21,827,059
15,600,000 Pitney Bowes Credit Corp 5.70 01/02/96 15,597,530
30,000,000 Swedish Export Credit Corp 5.60 03/01/96 29,720,000
------------
TOTAL COMMERCIAL PAPER $425,834,118
SHORT TERM FEDERAL AGENCIES - 2.14%
$ 15,000,000 Federal Home Loan Mortgage Corp 5.57 % 01/05/96 $ 14,990,714
U.S. TREASURY BILLS - 15.97%
$ 115,000,000 U.S. Treasury Bills 5.19 % 07/25/96 $111,704,183
</TABLE>
77
<PAGE> 145
MONEY MARKET FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CERTIFICATES OF DEPOSITS - 2.86%
$ 20,000,000 Banque Nationale de Paris (Yankee) 5.81 % 01/30/96 $ 20,000,000
VARIABLE AND FLOATING RATE BONDS - 15.16%
$ 21,000,000 Chemical Banking Corp 6.08 % 08/19/96 21,027,737
20,000,000 Comerica Inc 5.25 08/12/96 19,987,698
20,000,000 FCC National Bank 5.59 10/31/96 19,990,356
15,000,000 First Bank N.A. 5.90 01/17/96 14,999,872
10,000,000 First Chicago Corp 6.22 02/23/96 10,004,977
20,000,000 PNC Bank Corp 5.64 07/29/96 19,994,162
------------
TOTAL VARIABLE AND FLOATING RATE BONDS $106,004,802
REPURCHASE AGREEMENTS - 3.39%
$ 23,731,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 5.75 01/02/96 $ 23,731,000
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $702,264,817)* (Note 1) 100.41 % $ 702,264,817
Other Assets and Liabilities, Net (0.41 ) (2,871,641)
---------- -------------
TOTAL NET ASSETS 100.00 % $ 699,393,176
---------- -------------
---------- -------------
...............................................................................
</TABLE>
++ THESE SECURITIES ARE NOT REGISTERED UNDER THE SECURITIES ACT OF 1933.
RULE 144A UNDER THAT ACT PERMITS THESE SECURITIES TO BE RESOLD IN
TRANSACTIONS EXEMPT FROM REGISTRATION TO QUALIFIED INSTITUTIONAL
BUYERS. THESE SECURITIES WERE DEEMED LIQUID BY THE INVESTMENT ADVISER
IN ACCORDANCE WITH PROCEDURES APPROVED BY THE FUND'S BOARD OF
DIRECTORS.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES.
The accompanying notes are an integral part of these financial statements.
78
<PAGE> 146
MUNICIPAL INCOME FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS - 95.21%
ALABAMA - 0.24%
$ 160,000 Alabama State SFMR Series B AMT Multiple Credit
Enhancements 7.40 % 04/01/22 $ 170,085
ALASKA - 0.91%
605,000 Alaska State Housing Finance Corporation Second
Series AMT Government Agency Collateralized 7.10 06/01/22 640,949
CALIFORNIA - 24.64%
145,000 California State HFA Insured Housing Revenue
AMT Series C MBIA Insured 7.00 08/01/23 154,556
2,000,000 Contra Costa County CA Mortgage Revenue Cedar
Point Apartments Project A FHA Collateralized 6.15 09/01/25 2,072,440
120,000 Riverside County CA SFMR Project A AMT GNMA
Collateralized 6.85 10/01/16 133,530
9,750,000 Riverside County CA SFMR Series B AMT GNMA
Collateralized 8.35 06/01/13 12,890,378
1,055,000 Sacramento CA SFMR AMT Escrowed to Maturity 7.25 10/01/23 1,288,619
830,000 Southern California State SFMR Series A AMT
GNMA/FNMA Collateralized 6.90 10/01/24 885,087
DISTRICT OF COLUMBIA - 0.48%
320,000 District of Columbia SFMR AMT GNMA
Collateralized 7.10 12/01/24 341,478
FLORIDA - 0.43%
285,000 Brevard County FL HFA SFMR Series B FSA Insured 7.00 03/01/13 303,821
HAWAII - 6.28%
725,000 Hawaii State Airports Systems Revenue AMT FGIC
Insured 7.00 07/01/20 808,854
500,000 Hawaii State Harbor Capital Improvement Revenue
AMT MBIA Insured 7.00 07/01/17 549,930
3,000,000 Hawaii State SFMR AMT Multiple Credit
Enhancements 6.00 07/01/26 3,084,300
</TABLE>
79
<PAGE> 147
MUNICIPAL INCOME FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS - CONTINUED
IDAHO - 2.20%
$ 1,500,000 Idaho State HFA SFMR Series C-2 AMT 6.35 07/01/15 $ 1,552,710
ILLINOIS - 5.11%
500,000 Chicago IL O'Hare International Airport Special
Facilities Revenue AMT LOC - Bayerische
Landesbank 7.13 05/01/18 556,770
1,900,000 Chicago IL O'Hare International Airport Special
Facilities Revenue AMT MBIA Insured 6.75 01/01/18 2,055,040
1,000,000 Saint Claire County IL AMT FGIC Insured 5.75 10/01/23 1,002,580
INDIANA - 3.65%
2,500,000 Indiana State HFA Series A-2 AMT FHA
Collateralized 6.45 07/01/14 2,581,975
IOWA - 3.31%
1,450,000 Iowa State HFA SFMR Series B AMT GNMA/FNMA
Collateralized 6.95 07/01/24 1,533,013
420,000 Iowa State HFA SFMR Series B AMT GNMA/FNMA
Collateralized 7.45 07/01/23 445,637
365,000 Iowa State HFA SFMR Series B AMT Government
Agency Collateralized 5.95 07/01/23 364,518
KANSAS - 0.28%
185,000 Kansas City KS Mortgage Revenue AMT Multiple
Credit Enhancements 7.35 12/01/23 198,694
KENTUCKY - 4.77%
1,100,000 Kenton County KY Cincinnati/Northern Kentucky
International Airport Revenue AMT FSA Insured 6.30 03/01/15 1,152,426
925,000 Kentucky State HFA MFHR AMT Multiple Credit
Enhancements 5.90 01/01/15 940,244
1,230,000 Kentucky State HFA MFHR Series D AMT FHA
Collateralized 7.45 01/01/23 1,276,888
</TABLE>
80
<PAGE> 148
MUNICIPAL INCOME FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS - CONTINUED
LOUISIANA - 2.44%
$ 1,000,000 Louisiana State MFHR AMT FHA Collateralized 5.90 12/01/18 $ 1,006,430
670,000 Louisiana State Public Facilities Authority
Student Loan Revenue AMT FSA Insured 6.85 01/01/09 718,783
MASSACHUSETTS - 5.08%
1,000,000 Massachusetts State HFA Residential Development
FNMA Collateralized 6.90 11/15/21 1,071,910
2,500,000 Massachusetts State HFA Revenue Series A AMT
FSA Insured 6.10 06/01/26 2,520,300
MINNESOTA - 0.68%
455,000 Minneapolis-St Paul MN Housing Finance Board
Revenue SFMR Phase IX AMT GNMA Collateralized 7.30 08/01/31 483,151
NEVADA - 8.71%
1,340,000 Nevada State SFMR Series A-2 AMT FHA
Collateralized 6.55 10/01/15 1,398,357
1,825,000 Nevada State SFMR Series C AMT FHA
Collateralized 6.35 10/01/13 1,879,440
2,700,000 Washoe County NV Gas Facilities Sierra Pacific
Power AMT MBIA Insured 6.55 09/01/20 2,878,333
NEW JERSEY - 1.89%
1,250,000 New Jersey State MFHR FHA Collateralized 7.00 05/01/30 1,333,413
NEW YORK - 0.76%
500,000 New York State Energy R & D Authority Electric
Facilities Revenue Cons Edison Co New York City
AMT MBIA Insured 7.25 11/01/24 538,385
OKLAHOMA - 2.01%
200,000 Pryor Creek OK Economic Development Authority
Mortgage Revenue Series A 7.13 07/01/21 211,328
</TABLE>
81
<PAGE> 149
MUNICIPAL INCOME FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS - CONTINUED
OKLAHOMA - CONTINUED
$ 635,000 Tulsa County OK HFA Mortgage Revenue Series B
Remarket AMT GNMA Collateralized 7.10 06/01/22 $ 678,605
500,000 Tulsa County OK HFA Mortgage Revenue Series B
Remarket AMT GNMA Collateralized 7.55 05/01/23 532,830
PENNSYLVANIA - 2.14%
990,000 Allegheny County PA Residential FA SFMR AMT
GNMA/FNMA Collateralized 5.63 11/01/23 974,408
500,000 Pennsylvania State Higher EDFA Student Loan
Revenue Series D AMT AMBAC Insured 7.05 10/01/16 538,845
TEXAS - 0.74%
480,000 Travis County TX HFA Residential Mortgage
Revenue Series A AMT GNMA/FNMA Collateralized 7.00 12/01/11 519,518
UTAH - 8.43%
500,000 Utah State Board of Regents Student Loan
Revenue Series F AMT AMBAC Insured 7.45 11/01/08 541,670
1,100,000 Utah State Board of Regents Student Loan
Revenue Series H AMT AMBAC Insured 6.70 11/01/15 1,160,863
2,000,000 Utah State HFA SFMR Series B-2 AMT FHA
Collateralized 6.50 07/01/15 2,072,980
1,360,000 Utah State HFA SFMR Series C-2 AMT FHA
Collateralized 6.50 07/01/15 1,406,308
750,000 Utah State HFA SFMR Series D-2 AMT FHA
Collateralized 6.45 01/01/11 781,133
VIRGINIA - 1.80%
1,250,000 Virginia State HFA Commonwealth Mortgage Series
B-5 AMT FSA Insured 6.20 07/01/21 1,271,275
</TABLE>
82
<PAGE> 150
MUNICIPAL INCOME FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS - CONTINUED
WASHINGTON - 4.11%
$ 1,310,000 Washington State SFMR Series D AMT GNMA/FNMA
Collateralized 6.15 01/01/26 $ 1,385,089
1,440,000 Washington State SFMR Series D AMT GNMA/FNMA
Collateralized 7.10 07/01/22 1,523,994
WEST VIRGINIA - 4.12%
3,000,000 West Virginia State Housing Revenue AMT AMBAC
Insured 5.70 05/01/24 2,914,110
------------
TOTAL MUNICIPAL BONDS $ 67,325,980
(Cost $63,778,413)
SHORT-TERM INSTRUMENTS - 3.80%
MONEY MARKET FUNDS - 0.55%
$ 386,156 National Municipal Fund $ 386,156
VARIABLE RATE MUNICIPAL BONDS+ - 3.25%
$ 1,900,000 Phenix City AL IDA Environmental Improvement
Mead Coates Project Series A V/R LOC - Toronto
Dominion Bank 6.05 06/01/08 $ 1,900,000
400,000 Babylon NY Individual Development Agency V/R
AMT LOC - Union Bank of Switzerland 6.00 12/01/24 400,000
------------
TOTAL VARIABLE RATE MUNICIPAL BONDS $ 2,300,000
TOTAL SHORT-TERM INSTRUMENTS $ 2,686,156
(COST $2,686,156)
</TABLE>
83
<PAGE> 151
MUNICIPAL INCOME FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<C> <S> <C> <C> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $66,464,569)* (Notes 1 and 3) 99.01 % $ 70,012,136
Other Assets and Liabilities, Net 0.99 698,372
---------- -------------
TOTAL NET ASSETS 100.00 % $ 70,710,508
---------- -------------
---------- -------------
...............................................................................
</TABLE>
+ THESE VARIABLE RATE SECURITIES ARE SUBJECT TO A DEMAND FEATURE WHICH
REDUCES THE REMAINING MATURITY.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 3,649,531
Gross Unrealized Depreciation (101,964)
-------------
NET UNREALIZED APPRECIATION $ 3,547,567
-------------
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
84
<PAGE> 152
STRATEGIC GROWTH FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - 94.80%
ADVERTISING - 0.90%
25,000 HA-LO Industries inc+ $ 410,000 $ 768,750
BASIC INDUSTRIES - 0.17%
10,000 Cronos Group $ 100,000 $ 101,250
55,000 Quadrax Corp+ 212,492 46,406
------------ ------------
$ 312,492 $ 147,656
BIOTECHNOLOGY - 4.50%
10,000 Cephalon Inc+ $ 277,250 $ 407,500
30,000 Genzyme Corp - General Division+ 1,550,250 1,871,250
40,000 Genzyme Corp - Tissue Repair+ 601,250 635,000
35,000 Liposome Co Inc+ 426,103 700,000
25,000 Neurex Corp+ 112,500 228,125
------------ ------------
$ 2,967,353 $ 3,841,875
COMMERCIAL SERVICES - 2.20%
20,000 AccuStaff Inc+ $ 318,229 $ 880,000
11,000 Central Parking Corp+ 198,000 316,250
22,000 Sylvan Learning Systems Inc+ 562,625 654,500
86,000 Work Recovery Inc+ 367,812 21,500
------------ ------------
$ 1,446,666 $ 1,872,250
COMPUTER SOFTWARE - 16.90%
20,000 Adobe Systems Inc $ 1,270,195 $ 1,240,000
26,000 Avant! Corp+ 803,308 500,500
25,000 First Data Corp 1,608,075 1,671,875
48,500 IKOS Systems Inc+ 397,989 539,563
20,000 Imnet Systems Inc+ 364,750 480,000
33,000 LifeRate Systems Inc+ 259,875 367,125
45,000 Metatec Corp Class A+ 530,657 495,000
12,500 MetaTools Inc+ 312,500 325,000
10,000 Microsoft Corp+ 668,063 877,500
12,000 Minnesota Educational Computing Corp+ 360,469 300,000
48,000 Oracle Systems Corp+ 1,815,084 2,034,000
</TABLE>
85
<PAGE> 153
STRATEGIC GROWTH FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
COMPUTER SOFTWARE - CONTINUED
20,000 Phamis Inc+ $ 520,435 $ 595,000
22,000 Premenos Tech Corp+ 562,709 580,250
100,000 Sanctuary Woods Multimedia+ 512,831 287,500
10,000 Software 2000 Inc+ 110,000 77,500
10,000 Syncronys Softcorp+ 127,078 28,750
20,000 Synopsys Inc+ 559,875 760,000
50,000 Veritas Software Corp+ 1,126,348 1,900,000
20,000 Verity Inc+ 326,850 885,000
40,000 Viasoft Inc+ 404,688 475,000
------------ ------------
$ 12,641,779 $ 14,419,563
COMPUTER SYSTEMS - 12.81%
5,000 3Com Corp+ $ 214,313 $ 233,125
45,000 Adaptec Inc+ 1,329,158 1,845,000
30,000 Cisco Systems Inc+ 1,054,875 2,238,750
19,000 Clarify Inc+ 442,875 570,000
60,000 Komag Inc+ 2,865,072 2,767,500
40,000 RadiSys Corp+ 517,500 470,000
15,000 Silicon Storage Technology Inc+ 135,000 198,750
36,000 Solectron Corp+ 851,938 1,588,500
22,500 Sync Research Inc+ 1,153,750 1,018,125
------------ ------------
$ 8,564,481 $ 10,929,750
ELECTRICAL EQUIPMENT - 2.12%
45,000 Interlink Electronics Inc+ $ 225,000 $ 292,500
32,000 Nokia Corp ADR Class A 1,197,215 1,244,000
50,000 Power (R F) Products Inc+ 348,463 275,000
------------ ------------
$ 1,770,678 $ 1,811,500
ENERGY & RELATED - 4.70%
28,200 Camco International Inc $ 703,960 $ 789,600
40,000 Digicon Inc+ 232,400 320,000
15,000 Ensco International Inc+ 250,367 345,000
15,000 Global Industries Ltd+ 389,375 450,000
</TABLE>
86
<PAGE> 154
STRATEGIC GROWTH FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
ENERGY & RELATED - CONTINUED
32,400 J Ray McDermott SA+ $ 700,762 $ 579,150
15,000 Marine Drilling Co Inc+ 71,250 76,875
10,000 Petroleum Geo-Services ADR+ 244,167 250,000
10,000 Sonat Offshore Drilling Co 350,561 447,500
15,000 Sun Co Inc 469,950 410,625
17,500 Trigen Energy Corp 300,850 341,250
------------ ------------
$ 3,713,642 $ 4,010,000
ENTERTAINMENT & LEISURE - 3.19%
40,000 Family Golf Centers Inc+ $ 600,000 $ 730,000
30,000 Mirage Resorts Inc+ 971,405 1,035,000
8,000 Morrow Snowboards Inc+ 88,000 130,000
5,000 Mountasia Entertainment International Inc+ 24,063 24,063
19,500 Sports Club Inc+ 136,260 60,938
20,000 Station Casino Inc+ 293,750 292,500
45,000 Stratosphere Corp+ 378,617 444,375
------------ ------------
$ 2,492,095 $ 2,716,876
ENVIRONMENTAL CONTROL - 3.29%
55,000 Molten Metal Technology Inc+ $ 1,248,970 $ 1,794,375
15,000 Republic Industries Inc+ 349,107 541,875
25,000 U.S.A. Waste Services Inc+ 505,045 471,873
------------ ------------
$ 2,103,122 $ 2,808,123
FINANCE & RELATED - 4.76%
60,000 Capital One Financial Corp $ 1,655,226 $ 1,432,500
20,000 Cole Taylor Financial Group Inc 391,740 597,500
70,000 Envoy Corp (New)+ 414,846 1,211,875
20,000 NHP Inc+ 252,500 370,000
20,000 Oxford Corp Class A+ 534,709 450,000
------------ ------------
$ 3,249,021 $ 4,061,875
FOOD & RELATED - 1.75%
40,000 Garden Fresh Restaurant Corp+ $ 328,375 $ 260,000
</TABLE>
87
<PAGE> 155
STRATEGIC GROWTH FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
FOOD & RELATED - CONTINUED
30,000 General Nutrition Co Inc+ $ 378,750 $ 690,000
10,000 NuCo2 Inc+ 126,040 130,000
30,000 Whole Foods Market Inc+ 566,125 416,250
------------ ------------
$ 1,399,290 $ 1,496,250
GENERAL BUSINESS & RELATED - 0.27%
12,500 LeCroy Corp+ $ 176,875 $ 231,250
HEALTHCARE - 8.28%
15,000 Coventry Corp+ $ 309,550 $ 309,375
40,000 Genesis Health Ventures Inc+ 909,602 1,460,000
60,000 Healthsouth Corp+ 1,229,949 1,747,500
25,000 Owen Healthcare Inc+ 454,375 690,625
40,000 Renal Treatment Centers+ 973,000 1,760,000
40,000 Value Health Inc+ 1,337,160 1,100,000
------------ ------------
$ 5,213,636 $ 7,067,500
MANUFACTURING PROCESSING - 1.50%
8,200 Intertape Polymer Group Inc+ $ 247,180 $ 257,275
25,000 Lydall Inc+ 371,040 568,750
25,000 Waters Corp+ 414,500 456,250
------------ ------------
$ 1,032,720 $ 1,282,275
MEDICAL EQUIPMENT & SUPPLIES - 6.57%
30,000 AVECOR Cardiovascular Inc+ $ 468,125 $ 532,500
50,000 Bioject Medical Technologies+ 229,063 93,750
40,000 Biomatrix Inc+ 347,292 670,000
50,000 CompuMed Inc+ 475,938 212,500
60,000 Endosonics Corp+ 553,906 907,500
40,000 Heart Technology Inc+ 777,569 1,315,000
35,000 ICU Medical Inc+ 465,000 595,000
30,000 InStent Inc+ 514,031 450,000
12,500 Life Med Sciences Inc+ 92,188 112,500
</TABLE>
88
<PAGE> 156
STRATEGIC GROWTH FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
MEDICAL EQUIPMENT & SUPPLIES - CONTINUED
32,500 Molecular Devices Corp+ $ 358,750 $ 341,250
15,000 Sola International Inc+ 261,879 378,750
------------ ------------
$ 4,543,741 $ 5,608,750
PHARMACEUTICALS - 0.74%
16,000 Ergo Science Corp+ $ 144,000 $ 228,000
1,000 Fuisz Technologies Ltd+ 12,000 15,250
20,000 Medarex Inc+ 111,250 142,500
60,000 Seragen Inc+ 414,940 247,500
------------ ------------
$ 682,190 $ 633,250
RETAIL & RELATED - 2.70%
30,000 Barnes & Noble+ $ 875,857 $ 870,000
15,000 Concord Camera Corp+ 63,750 67,500
30,000 Corporate Express Inc+ 723,750 903,750
15,000 PetSmart Inc+ 383,125 465,000
------------ ------------
$ 2,046,482 $ 2,306,250
SEMICONDUCTORS - 5.00%
93,500 Integrated Device Technology Inc+ $ 2,335,108 $ 1,203,813
18,000 Intel Corp 904,125 1,021,500
40,000 OnTrak Systems Inc+ 991,438 580,000
15,000 S3 Inc+ 262,188 264,375
40,000 Semtech Corp+ 857,655 780,000
40,600 Tegal Corp+ 518,414 416,150
------------ ------------
$ 5,868,928 $ 4,265,838
TELECOMMUNICATIONS - 10.93%
65,000 Accom Inc+ $ 552,594 $ 422,500
25,000 AML Communications Inc+ 232,750 262,500
15,000 Anicom Inc+ 135,000 159,375
15,000 Arch Communications Group Inc+ 408,681 360,000
15,000 Cascade Communications Corp+ 1,218,005 1,278,750
15,000 Celeritek Inc+ 112,500 159,375
</TABLE>
89
<PAGE> 157
STRATEGIC GROWTH FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
TELECOMMUNICATIONS - CONTINUED
45,000 Comdial Corp+ $ 541,000 $ 410,625
42,800 DSC Communications Corp+ 1,864,154 1,578,250
100,000 LCI International Inc+ 913,174 2,050,000
50,000 PanAmSat Corp+ 805,536 1,103,125
15,000 Premisys Communications Inc+ 674,063 840,000
20,000 WorldCom Inc+ 605,000 705,000
------------ ------------
$ 8,062,457 $ 9,329,500
TRANSPORTATION - 1.52%
20,000 Greenbrier Companies Inc $ 307,323 $ 242,500
40,000 Landair Services Inc+ 666,866 530,000
10,000 Marten Transportation Ltd+ 196,250 165,000
40,000 Mesa Airlines Inc+ 622,588 360,000
------------ ------------
$ 1,793,027 $ 1,297,500
TOTAL COMMON STOCKS $ 70,490,675 $ 80,906,581
WARRANTS - 2.22%
50,000 Intel Corp expires 3/14/1998+ $ 1,337,500
3,000 Interlink Electronics Inc expires 06/07/1996+ 3,188
100,000 Viacom Inc Class E expires 07/07/1999+ 550,000
------------
TOTAL WARRANTS $ 1,890,688
(Cost $1,099,271)
</TABLE>
90
<PAGE> 158
STRATEGIC GROWTH FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CORPORATE BONDS & NOTES - 1.47%
CONVERTIBLE CORPORATE BONDS - 1.47%
$ 240,000 First Financial Management Corp 5.00 % 12/15/99 $ 383,280
100,000 Genesis Health Ventures Inc 6.00 11/30/03 162,000
100,000 LDDS Communications Inc 5.00 08/15/03 105,000
800,000 Softkey International Inc 5.50 11/01/00 604,000
------------
TOTAL CORPORATE BONDS & NOTES $ 1,254,280
(Cost $1,215,624)
SHORT-TERM INSTRUMENTS - 1.92%
REPURCHASE AGREEMENTS - 1.92%
$ 1,638,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 5.75 01/02/96 $ 1,638,000
(Cost $1,638,000)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $74,443,570)* (Notes 1 and 3) 100.41 % $ 85,689,549
Other Assets and Liabilities, Net (0.41 ) (347,079)
---------- -------------
TOTAL NET ASSETS 100.00 % $ 85,342,470
---------- -------------
---------- -------------
...............................................................................
</TABLE>
+ NON-INCOME EARNING SECURITIES.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 18,980,372
Gross Unrealized Depreciation (7,734,393)
-------------
NET UNREALIZED APPRECIATION $ 11,245,979
-------------
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
91
<PAGE> 159
U.S. GOVERNMENT INCOME FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES - 64.37%
ADJUSTABLE RATE MORTGAGES - 1.07%
$ 21,630 GNMA #8109 (CMT) 6.75 % 03/20/16 $ 22,157
36,931 GNMA #8119 (CMT) 7.38 04/20/16 37,923
11,123 GNMA #8137 (CMT) 7.38 06/20/16 11,408
6,944 GNMA #8268 (CMT) 7.25 08/20/17 7,148
17,835 GNMA #8292 (CMT) 6.75 11/20/17 18,237
31,474 GNMA #8293 (CMT) 6.75 12/20/17 32,182
8,979 GNMA #8310 (CMT) 6.75 01/20/18 9,209
37,918 GNMA #8392 (CMT) 7.25 08/20/18 38,961
37,173 GNMA #8393 (CMT) 7.25 08/20/18 38,218
21,651 GNMA #8429 (CMT) 6.75 11/20/18 22,192
116,795 GNMA #8761 (CMT) 6.50 03/20/21 119,423
------------
$ 357,058
FEDERAL AGENCY - OTHER - 31.10%
$ 10,000,000 Tennessee Valley Authority 6.38 % 06/15/05 $ 10,343,700
FIXED RATE MORTGAGES - 27.78%
$ 46,330 FHLMC #275825 9.50 % 08/01/16 $ 49,514
47,920 FHLMC #304114 9.00 05/01/18 50,510
125,703 FHLMC #304398 9.00 06/01/18 132,723
41,824 FHLMC #305831 10.00 08/01/18 45,666
9,614 FHLMC #307323 9.50 09/01/18 10,266
72,883 FHLMC #307637 9.50 07/01/16 77,979
43,173 FHLMC #307915 9.50 10/01/18 46,207
5,862 FHLMC #308074 9.50 10/01/18 6,273
23,699 FHLMC #360020 10.00 01/01/18 25,891
33,575 FHLMC #360045 10.00 02/01/19 36,659
55,369 FHLMC #532468 9.50 04/01/19 59,175
108,358 GNMA #17087 9.00 09/15/16 115,688
17,544 GNMA #33080 9.00 08/15/22 18,663
14,695 GNMA #150499 10.50 03/15/16 16,405
166,910 GNMA #173055 9.00 09/15/16 178,201
105,823 GNMA #176892 9.00 10/15/16 113,147
494,118 GNMA #190848 9.00 01/15/17 527,545
</TABLE>
92
<PAGE> 160
U.S. GOVERNMENT INCOME FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES - CONTINUED
FIXED RATE MORTGAGES - CONTINUED
$ 186,294 GNMA #191961 9.00 % 02/15/20 $ 198,316
56,652 GNMA #202624 9.00 11/15/19 60,352
62,121 GNMA #236877 9.00 04/15/18 66,226
64,393 GNMA #285963 9.00 01/15/20 68,598
18,574 GNMA #289319 9.00 11/15/20 19,773
179,260 GNMA #303235 9.00 05/15/21 190,688
212,038 GNMA #304653 9.00 09/15/21 225,556
7,281 GNMA #314150 9.00 10/15/21 7,751
2,088,927 GNMA #319413 7.25 12/15/18 2,131,227
23,972 GNMA #335400 9.00 12/15/22 25,501
1,936,206 GNMA #358863 7.25 01/15/24 1,975,473
249,220 GNMA II #85 10.00 02/20/22 271,181
168,019 GNMA II #908 10.00 01/20/18 182,825
938,676 GNMA II #1124 11.00 01/20/19 1,053,363
477,778 GNMA II #1221 11.00 07/20/19 536,152
147,997 GNMA II #1562 10.00 02/20/21 161,038
32,293 GNMA II #194221 10.00 09/20/20 35,139
368,102 GNMA II #266120 10.00 08/20/19 402,049
6,901 GNMA II #272537 10.00 08/20/19 7,536
18,555 GNMA II #278055 10.00 07/20/19 20,258
82,630 GNMA II #289000 10.00 05/20/20 89,912
------------
$ 9,239,426
U.S. GOVERNMENT AGENCY NOTES - 4.42%
$ 1,700,000 FNMA Principal Strip 8.21 %F 03/09/22 $ 1,471,588
TOTAL U.S. GOVERNMENT AGENCY SECURITIES $ 21,411,772
(Cost $20,553,453)
U.S. TREASURY SECURITIES - 34.53%
U.S. TREASURY BONDS - 24.90%
$ 3,000,000 U.S. Treasury Bonds 11.63 % 11/15/04 $ 4,245,930
2,500,000 U.S. Treasury Bonds 12.50 08/15/14 4,035,550
------------
$ 8,281,480
</TABLE>
93
<PAGE> 161
U.S. GOVERNMENT INCOME FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. TREASURY SECURITIES - CONTINUED
U.S. TREASURY NOTES - 9.63%
$ 2,000,000 U.S. Treasury Notes 6.50 % 08/15/05 $ 2,130,620
1,000,000 U.S. Treasury Notes 7.50 10/31/99 1,073,590
------------
$ 3,204,210
TOTAL U.S. TREASURY SECURITIES $ 11,485,690
(Cost $11,365,623)
SHORT-TERM INSTRUMENTS - 0.91%
REPURCHASE AGREEMENTS - 0.91%
$ 303,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 5.75 01/02/96 $ 303,000
(Cost $303,000)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $32,222,076)* (Notes 1 and 3) 99.81 % $33,200,462
Other Assets and Liabilities, Net 0.19 63,394
---------- -----------
TOTAL NET ASSETS 100.00 % $33,263,856
---------- -----------
---------- -----------
.............................................................................
</TABLE>
F YIELD TO MATURITY.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 1,141,523
Gross Unrealized Depreciation (163,137)
-----------
NET UNREALIZED APPRECIATION $ 978,386
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
94
<PAGE> 162
U.S. TREASURY MONEY MARKET FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
YIELD TO MATURITY
PRINCIPAL SECURITY NAME MATURITY DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. TREASURY BILLS - 100.54%
$ 13,070,000 U.S. Treasury Bills 1.93 % 01/04/96 $ 13,064,240
14,875,000 U.S. Treasury Bills 4.06 01/11/96 14,853,032
20,000,000 U.S. Treasury Bills 4.49 01/25/96 19,929,933
19,190,000 U.S. Treasury Bills 4.54 01/18/96 19,142,523
17,870,000 U.S. Treasury Bills 4.58 02/01/96 17,788,924
18,280,000 U.S. Treasury Bills 4.71 02/15/96 18,158,520
28,595,000 U.S. Treasury Bills 4.74 02/08/96 28,443,045
13,355,000 U.S. Treasury Bills 4.78 02/29/96 13,238,935
22,585,000 U.S. Treasury Bills 4.81 02/22/96 22,411,480
18,995,000 U.S. Treasury Bills 5.02 03/21/96 18,775,924
26,035,000 U.S. Treasury Bills 5.03 03/07/96 25,792,503
14,139,000 U.S. Treasury Bills 5.06 03/14/96 13,987,787
18,590,000 U.S. Treasury Bills 5.07 04/18/96 18,315,613
19,650,000 U.S. Treasury Bills 5.12 04/04/96 19,386,012
------------
TOTAL U.S. TREASURY BILLS $263,288,471
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $263,288,471)* (Note 1) 100.54 % $ 263,288,471
Other Assets and Liabilities, Net (0.54 ) (1,402,110)
---------- -------------
TOTAL NET ASSETS 100.00 % $ 261,886,361
---------- -------------
---------- -------------
...............................................................................
</TABLE>
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES.
The accompanying notes are an integral part of these financial statements.
95
<PAGE> 163
VARIABLE RATE GOVERNMENT FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES - 92.33%
ADJUSTABLE RATE MORTGAGES - 91.08%
$ 47,135,170 FHLMC #410055 (CMT) 6.87 % 11/01/24 $ 48,203,253
24,114,685 FHLMC #609684 (CMT) 5.99 05/01/24 24,759,030
19,690,503 FHLMC #610237 (CMT) 5.93 10/01/25 20,090,417
10,000,000 FHLMC #610268 (CMT) 5.88 11/01/25 10,185,900
2,539,816 FHLMC #640065 (CMT) 7.38 01/01/18 2,600,136
7,985,642 FHLMC #755102 (CMT) 7.36 06/01/18 8,130,342
9,291,790 FHLMC #845130 (CMT) 7.17 06/01/22 9,479,113
47,595 FHLMC #845410 (CMT) 7.63 07/01/23 48,398
21,585 FHLMC #845613 (CMT) 6.24 01/01/24 21,967
37,237,433 FHLMC #845752 (CMT) 6.05 05/01/24 38,057,773
10,084,326 FHLMC #845819 (CMT) 6.41 05/01/24 10,304,971
22,895,531 FHLMC #845897 (CMT) 7.64 06/01/24 23,230,721
31,173,412 FHLMC #845916 (CMT) 7.64 09/01/24 31,830,548
22,394,710 FHLMC #845969 (6 month LIBOR) 7.32 12/01/24 23,056,025
19,163,421 FHLMC #846150 (CMT) 8.11 04/01/21 19,834,141
21,987,819 FHLMC #846206 (CMT) 5.96 12/01/25 22,306,642
9,815,145 FNMA #136014 (COFI) 5.43 05/01/18 10,223,553
26,406,337 FNMA #190166 (CMT) 7.69 11/01/23 27,247,907
9,188,412 FNMA #190826 (CMT) 7.54 03/01/24 9,481,246
9,679,443 FNMA #303386 (CMT) 5.97 06/01/25 9,848,834
6,581,372 FNMA #303431 (CMT) 6.59 07/01/24 6,711,025
14,601,831 FNMA #326091 (6 month Treasury) 6.01 07/01/25 14,875,615
11,528,049 FNMA #333938 (CMT) 6.05 12/01/25 11,695,206
4,712,307 FNMA #70485 (CMT) 7.19 04/01/27 4,777,101
4,896,958 FNMA #90031 (CMT) 7.52 01/01/20 4,994,897
10,000,000 GNMA ARM TBA 5.50 01/24/96 10,021,000
15,000,000 GNMA II ARM TBA 5.00 01/24/96 15,030,000
7,957,862 GNMA II #8121 (CMT) 6.50 01/20/23 8,102,138
9,185,342 GNMA II #8358 (CMT) 6.00 01/20/24 9,354,720
13,619,289 GNMA II #8373 (CMT) 6.00 02/20/24 13,870,429
32,185,225 GNMA II #8387 (CMT) 6.00 03/20/24 32,778,720
11,023,593 GNMA II #8443 (CMT) 6.50 06/20/24 11,219,923
157,858 GNMA II #8623 (CMT) 7.50 04/20/25 161,089
2,620,462 GNMA II #8633 (CMT) 7.50 05/20/25 2,674,102
</TABLE>
96
<PAGE> 164
VARIABLE RATE GOVERNMENT FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES - CONTINUED
ADJUSTABLE RATE MORTGAGES - CONTINUED
$ 1,846,706 GNMA II #8644 (CMT) 7.50 06/20/25 $ 1,884,509
9,668,108 GNMA II #8705 (CMT) 7.00 09/20/25 9,903,817
13,798,258 GNMA II #8710 (CMT) 5.50 10/20/25 13,815,506
24,633,652 GNMA II #8717 (CMT) 6.00 10/20/25 24,879,988
40,146,885 GNMA II #8744 (CMT) 5.50 11/20/25 40,197,069
15,300,000 GNMA II #8765 (CMT) 5.50 12/20/25 15,293,880
1,385,128 GNMA II #8998 (CMT) 7.38 06/20/22 1,410,021
------------
$602,591,672
REAL ESTATE MORTGAGE INVESTMENT CONDUITS - 1.25%
$ 8,344,327 FNMA 1995-210 FL 6.07 % 09/25/23 $ 8,292,008
TOTAL U.S. GOVERNMENT AGENCY SECURITIES $610,883,680
(Cost $607,547,078)
U.S. TREASURY SECURITIES - 11.87%
U.S. TREASURY NOTES - 11.87%
$ 50,000,000 U.S. Treasury Notes 5.38 % 11/30/97 $ 50,164,000
28,000,000 U.S. Treasury Notes 6.00 08/31/97 28,345,520
------------
TOTAL U.S. TREASURY SECURITIES $ 78,509,520
(Cost $78,213,804)
SHORT-TERM INSTRUMENTS - 0.22%
REPURCHASE AGREEMENTS - 0.22%
$ 1,448,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 5.75 01/02/96 $ 1,448,000
(Cost $1,448,000)
</TABLE>
97
<PAGE> 165
VARIABLE RATE GOVERNMENT FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<C> <S> <C> <C> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $687,208,882)* (Notes 1 and 3) 104.42 % $ 690,841,200
Other Assets and Liabilities, Net (4.42 ) (29,214,295)
---------- -------------
TOTAL NET ASSETS 100.00 % $ 661,626,905
---------- -------------
---------- -------------
...............................................................................
</TABLE>
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 4,381,590
Gross Unrealized Depreciation (749,272)
-------------
NET UNREALIZED APPRECIATION $ 3,632,318
-------------
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
98
<PAGE> 166
STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 1995
<TABLE>
<CAPTION>
CALIFORNIA
ASSET CALIFORNIA TAX-FREE
ALLOCATION TAX-FREE MONEY
FUND BOND FUND MARKET FUND
<S> <C> <C> <C>
....................................................................................
ASSETS
INVESTMENTS:
In securities, at market
value
(see cost below) $ 68,243,791 $ 273,551,793 $ 368,142,819
Cash 0 391 770,449
Receivables:
Dividends and interest 214,075 4,650,928 2,771,267
Fund shares sold 56,663 19,100 0
Investment securities sold 0 0 0
Due from administrator
(Note 2) 0 0 0
Organization expenses, net
of amortization 10,906 2,465 0
Prepaid expenses 22,817 18,364 0
TOTAL ASSETS 68,548,252 278,243,041 371,684,535
LIABILITIES
Cash overdraft due to
custodian 26,874 0 0
Payables:
Investment securities
purchased 0 984,100 13,928,600
Distribution to
shareholders 251,526 1,177,050 1,094,288
Fund shares redeemed 3,300 114,439 0
Due to sponsor and
distributor (Note 2) 65,066 198,277 497,911
Due to adviser (Note 2) 83,060 291,868 223,691
Other 36,799 62,507 72,212
TOTAL LIABILITIES 466,625 2,828,241 15,816,702
TOTAL NET ASSETS
$ 68,081,627 $ 275,414,800 $ 355,867,833
NET ASSETS CONSIST OF:
Paid-in capital, Class
A(1) $ 39,516,327 $ 250,777,820 $ 355,939,961
Paid-in capital, Class D
or I(1) 14,481,832 7,704,783 N/A
Undistributed
(overdistributed) net
investment income 0 (15,018) 0
Undistributed net realized
gain (loss) on
investments 872,044 1,994,546 (72,128)
Net unrealized
appreciation
(depreciation) of
investments 13,211,424 14,952,669 0
TOTAL NET ASSETS $ 68,081,627 $ 275,414,800 $ 355,867,833
COMPUTATION OF NET ASSET
VALUE AND OFFERING PRICE
(NOTE 4)
Net assets - Class A(1) $ 52,006,874 $ 268,351,721 $ 355,867,833
Shares outstanding - Class
A(1) 3,778,222 24,749,623 355,939,965
Net asset value per share -
Class A(1) $13.76 $10.84 $1.00
Maximum offering price per
share - Class A(1) $14.41(2) $11.35(2) $1.00
Net assets - Class D or I $ 16,074,753 $ 7,063,079 N/A
Shares outstanding - Class D
or I 939,789 498,931 N/A
Net asset value and offering
price per share - Class D
or I $17.10 $14.16 N/A
INVESTMENTS AT COST (NOTE 3) $ 55,032,367 $ 258,599,124 $ 368,142,819
</TABLE>
...............................................................................
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) MAXIMUM OFFERING PRICE IS COMPUTED AS 100/95.5 OF NET ASSET VALUE. ON
INVESTMENTS OF $100,000 OR MORE THE OFFERING PRICE IS REDUCED.
(3) MAXIMUM OFFERING PRICE IS COMPUTED AS 100/97 OF NET ASSET VALUE. ON
INVESTMENTS OF $100,000 OR MORE THE OFFERING PRICE IS REDUCED.
The accompanying notes are an integral part of these financial statements.
99
<PAGE> 167
STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHORT-TERM
MONEY MUNICIPAL GOVERNMENT-
MARKET INCOME CORPORATE
FUND FUND INCOME FUND
<S> <C> <C> <C>
....................................................................................
ASSETS
INVESTMENTS:
In securities, at market
value
(see cost below) $ 702,264,817 $ 70,012,136 $ 5,922,594(4)
Cash 9,407 0 0
Receivables:
Dividends and interest 817,012 1,195,201 32,688
Fund shares sold 0 291 0
Investment securities sold 0 0 0
Due from administrator
(Note 2) 0 0 912
Organization expenses, net
of amortization 35,220 21,951 71,311
Prepaid expenses 52,985 10,422 454
TOTAL ASSETS 703,179,441 71,240,001 6,027,959
LIABILITIES
Cash overdraft due to
custodian 0 0 0
Payables:
Investment securities
purchased 0 0 0
Distribution to
shareholders 3,114,797 307,779 31,144
Fund shares redeemed 0 21,575 0
Due to sponsor and
distributor (Note 2) 309,355 64,333 4,388
Due to adviser (Note 2) 318,503 67,509 0
Other 43,610 68,297 37,960
TOTAL LIABILITIES 3,786,265 529,493 73,492
TOTAL NET ASSETS
$ 699,393,176 $ 70,710,508 $ 5,954,467
NET ASSETS CONSIST OF:
Paid-in capital, Class
A(1) $ 375,366,288 $ 57,860,364 $ 5,936,048
Paid-in capital, Class D
or I(1) 324,220,168 13,061,371 0
Undistributed
(overdistributed) net
investment income 0 0 0
Undistributed net realized
gain (loss) on
investments (193,280) (3,758,794) 3,851
Net unrealized
appreciation
(depreciation) of
investments 0 3,547,567 14,568
TOTAL NET ASSETS $ 699,393,176 $ 70,710,508 $ 5,954,467
COMPUTATION OF NET ASSET
VALUE AND OFFERING PRICE
(NOTE 4)
Net assets - Class A(1) $ 375,217,777 $ 58,439,806 $ 5,954,467
Shares outstanding - Class
A(1) 375,364,023 5,347,075 1,185,070
Net asset value per share -
Class A(1) $1.00 $10.93 $5.02
Maximum offering price per
share - Class A(1) $1.00 $11.27(3) $5.18(3)
Net assets - Class D or I $ 324,175,399 $ 12,270,702 N/A
Shares outstanding - Class D
or I 324,222,390 829,082 N/A
Net asset value and offering
price per share - Class D
or I $1.00 $14.80 N/A
INVESTMENTS AT COST (NOTE 3) $ 702,264,817 $ 66,464,569 N/A
</TABLE>
...............................................................................
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) MAXIMUM OFFERING PRICE IS COMPUTED AS 100/95.5 OF NET ASSET VALUE. ON
INVESTMENTS OF $100,000 OR MORE THE OFFERING PRICE IS REDUCED.
(3) MAXIMUM OFFERING PRICE IS COMPUTED AS 100/97 OF NET ASSET VALUE. ON
INVESTMENTS OF $100,000 OR MORE THE OFFERING PRICE IS REDUCED.
(4) INVESTMENT IN CORRESPONDING MASTER PORTFOLIO.
The accompanying notes are an integral part of these financial statements.
100
<PAGE> 168
<TABLE>
<CAPTION>
SHORT-TERM
MUNICIPAL STRATEGIC U.S. GOVERNMENT U.S. TREASURY VARIABLE RATE
INCOME GROWTH INCOME MONEY MARKET GOVERNMENT
FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
..........................................................................................................................
ASSETS
INVESTMENTS:
In securities, at market
value
(see cost below) $ 16,448,917(4) $ 85,689,549 $ 33,200,462 $ 263,288,471 $ 690,841,200
Cash 0 2,170 1,428 921 1,956
Receivables:
Dividends and interest 63,483 14,679 324,713 3,363 5,519,337
Fund shares sold 0 277,987 148 0 1,337,000
Investment securities sold 0 0 5,848 0 4,932,782
Due from administrator
(Note 2) 8,888 0 0 0 0
Organization expenses, net
of amortization 64,215 35,626 9,328 23,582 10,617
Prepaid expenses 512 35,008 20,606 2,210 1,463
TOTAL ASSETS 16,586,015 86,055,019 33,562,533 263,318,547 702,644,355
LIABILITIES
Cash overdraft due to
custodian 0 0 0 0 0
Payables:
Investment securities
purchased 0 468,750 0 0 36,556,636
Distribution to
shareholders 57,984 0 172,090 1,068,293 3,032,611
Fund shares redeemed 0 44,362 72,029 0 242,347
Due to sponsor and
distributor (Note 2) 15,745 90,525 0 220,284 529,786
Due to adviser (Note 2) 0 93,585 24,764 107,584 603,624
Other 25,821 15,327 29,794 36,025 52,446
TOTAL LIABILITIES 99,550 712,549 298,677 1,432,186 41,017,450
TOTAL NET ASSETS
$ 16,486,465 $ 85,342,470 $ 33,263,856 $ 261,886,361 $ 661,626,905
NET ASSETS CONSIST OF:
Paid-in capital, Class
A(1) $ 16,355,584 $ 50,306,393 $ 30,683,514 $ 198,782,464 $ 801,254,033
Paid-in capital, Class D
or I(1) 0 22,955,679 3,564,121 63,129,720 8,787,922
Undistributed
(overdistributed) net
investment income 0 (1,105,810) (12,644) 0 0
Undistributed net realized
gain (loss) on
investments (195) 1,940,229 (1,949,521) (25,823) (152,047,368)
Net unrealized
appreciation
(depreciation) of
investments 131,076 11,245,979 978,386 0 3,632,318
TOTAL NET ASSETS $ 16,486,465 $ 85,342,470 $ 33,263,856 $ 261,886,361 $ 661,626,905
COMPUTATION OF NET ASSET
VALUE AND OFFERING PRICE
(NOTE 4)
Net assets - Class A(1) $ 16,486,465 $ 59,016,086 $ 30,471,202 $ 198,752,763 $ 653,896,801
Shares outstanding - Class
A(1) 3,301,804 3,508,125 2,825,738 198,782,464 69,952,079
Net asset value per share -
Class A(1) $4.99 $16.82 $10.78 $1.00 $9.35
Maximum offering price per
share - Class A(1) $5.14(3) $17.61(2) $11.29(2) $1.00 $9.64(3)
Net assets - Class D or I N/A $ 26,326,384 $ 2,792,654 $ 63,133,598 $ 7,730,103
Shares outstanding - Class D
or I N/A 1,266,478 189,435 63,129,720 553,192
Net asset value and offering
price per share - Class D
or I N/A $20.79 $14.74 $1.00 $13.97
INVESTMENTS AT COST (NOTE 3) N/A $ 74,443,570 $ 32,222,076 $ 263,288,471 $ 687,208,882
</TABLE>
...............................................................................
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) MAXIMUM OFFERING PRICE IS COMPUTED AS 100/95.5 OF NET ASSET VALUE. ON
INVESTMENTS OF $100,000 OR MORE THE OFFERING PRICE IS REDUCED.
(3) MAXIMUM OFFERING PRICE IS COMPUTED AS 100/97 OF NET ASSET VALUE. ON
INVESTMENTS OF $100,000 OR MORE THE OFFERING PRICE IS REDUCED.
(4) INVESTMENT IN CORRESPONDING MASTER PORTFOLIO.
The accompanying notes are an integral part of these financial statements.
101
<PAGE> 169
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
CALIFORNIA
ASSET CALIFORNIA TAX-FREE
ALLOCATION TAX-FREE MONEY
FUND BOND FUND MARKET FUND
<S> <C> <C> <C>
....................................................................................
INVESTMENT INCOME(1)
Dividends $ 1,407,563 $ 0 $ 0
Interest 631,530 17,521,368 11,537,586
Expenses N/A N/A N/A
TOTAL INVESTMENT INCOME 2,039,093 17,521,368 11,537,586
EXPENSES (NOTE 2)
Advisory fees 424,416 1,414,023 1,330,839
Administration fees 60,627 384,015 297,191
Custody fees 6,247 50,563 50,845
Shareholder servicing fees 31,150 18,322 0
Portfolio accounting fees 0 118,303 125,975
Transfer agency fees 50,453 162,269 41,752
Distribution fees 213,867 36,643 120,094
Amortization of
organization expenses 4,220 1,210 0
Legal and audit fees 33,018 35,550 31,390
Registration fees 55,092 4,438 10,000
Directors' fees 5,715 5,000 5,000
Shareholder reports 28,055 33,424 4,774
Other 7,196 13,435 12,252
TOTAL EXPENSES 920,056 2,277,195 2,030,112
Less:
Waived fees and reimbursed
expenses (Note 2) (39,137) (579,182) (17,718)
NET EXPENSES 880,919 1,698,013 2,012,394
NET INVESTMENT INCOME (LOSS) 1,158,174 15,823,355 9,525,192
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS(1)
Net realized gain (loss)
on sale of investments 2,440,725 11,707,680 8,582
Net change in unrealized
appreciation
(depreciation) of
investments 14,291,076 15,517,216 0
NET GAIN (LOSS) ON
INVESTMENTS 16,731,801 27,224,896 8,582
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 17,889,975 $ 43,048,251 $ 9,533,774
</TABLE>
...............................................................................
(1) FOR THE SHORT-TERM GOVERNMENT-CORPORATE INCOME FUND AND THE SHORT-TERM
MUNICIPAL INCOME FUND THE INCOME, EXPENSES AND REALIZED AND UNREALIZED
GAINS AND LOSSES ARE ALLOCATED FROM EACH FUND'S CORRESPONDING MASTER
PORTFOLIO. SEE NOTE 5 FOR DETAILS OF INCOME ALLOCATIONS FROM THE MASTER
PORTFOLIO.
The accompanying notes are an integral part of these financial statements.
102
<PAGE> 170
<TABLE>
<CAPTION>
SHORT-TERM SHORT-TERM
MONEY MUNICIPAL GOVERNMENT- MUNICIPAL STRATEGIC
MARKET INCOME CORPORATE INCOME GROWTH
FUND FUND INCOME FUND FUND FUND
<S> <C> <C> <C> <C> <C>
..........................................................................................................................
INVESTMENT INCOME(1)
Dividends $ 0 $ 0 $ 0 $ 0 $ 132,455
Interest 29,280,765 5,081,588 150,854 617,987 186,812
Expenses N/A N/A 0 0 N/A
TOTAL INVESTMENT INCOME 29,280,765 5,081,588 150,854 617,987 319,267
EXPENSES (NOTE 2)
Advisory fees 1,230,778 408,252 0 0 302,821
Administration fees 492,311 82,019 3,560 19,436 91,128
Custody fees 88,546 14,742 0 0 22,191
Shareholder servicing fees 0 35,700 0 0 49,492
Portfolio accounting fees 158,791 73,409 0 0 63,554
Transfer agency fees 48,139 53,759 10,060 9,962 56,926
Distribution fees 866,432 151,382 5,933 32,393 250,865
Amortization of
organization expenses 3,895 28,300 15,640 10,836 14,899
Legal and audit fees 44,287 33,294 24,312 24,366 29,255
Registration fees 21,302 57,760 41,726 35,479 43,014
Directors' fees 5,000 5,000 3,785 3,797 5,000
Shareholder reports 19,316 40,075 13,001 11,439 35,206
Other 8,699 12,133 3,000 3,000 18,734
TOTAL EXPENSES 2,987,496 995,825 121,017 150,708 983,085
Less:
Waived fees and reimbursed
expenses (Note 2) (145,674) (326,109) (113,896) (101,721) (57,496)
NET EXPENSES 2,841,822 669,716 7,121 48,987 925,589
NET INVESTMENT INCOME (LOSS) 26,438,943 4,411,872 143,733 569,000 (606,322)
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS(1)
Net realized gain (loss)
on sale of investments (155,089) (157,864) 3,975 19,197 10,895,873
Net change in unrealized
appreciation
(depreciation) of
investments 0 8,364,389 15,944 159,456 8,601,611
NET GAIN (LOSS) ON
INVESTMENTS (155,089) 8,206,525 19,919 178,653 19,497,484
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 26,283,854 $ 12,618,397 $ 163,652 $ 747,653 $ 18,891,162
</TABLE>
...............................................................................
(1) FOR THE SHORT-TERM GOVERNMENT-CORPORATE INCOME FUND AND THE SHORT-TERM
MUNICIPAL INCOME FUND THE INCOME, EXPENSES AND REALIZED AND UNREALIZED
GAINS AND LOSSES ARE ALLOCATED FROM EACH FUND'S CORRESPONDING MASTER
PORTFOLIO. SEE NOTE 5 FOR DETAILS OF INCOME ALLOCATIONS FROM THE MASTER
PORTFOLIO.
The accompanying notes are an integral part of these financial statements.
103
<PAGE> 171
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
U.S. GOVERNMENT U.S. TREASURY VARIABLE RATE
INCOME MONEY MARKET GOVERNMENT
FUND FUND FUND
<S> <C> <C> <C>
....................................................................................
INVESTMENT INCOME
Dividends $ 0 $ 0 $ 0
Interest 2,893,181 12,944,520 53,768,325
Expenses N/A N/A N/A
TOTAL INVESTMENT INCOME 2,893,181 12,944,520 53,768,325
EXPENSES (NOTE 2)
Advisory fees 188,719 575,257 4,115,581
Administration fees 37,744 230,103 923,116
Custody fees 21,103 44,428 156,528
Shareholder servicing fees 8,291 0 24,977
Portfolio accounting fees 52,185 107,519 226,122
Transfer agency fees 55,947 38,680 75,667
Distribution fees 16,582 492,571 2,082,768
Amortization of
organization expenses 3,500 11,109 19,374
Legal and audit fees 23,242 41,586 245,313
Registration fees 44,918 41,946 29,703
Directors' fees 5,000 5,000 5,000
Shareholder reports 23,780 21,287 31,711
Other 19,736 5,600 47,764
TOTAL EXPENSES 500,747 1,615,086 7,983,624
Less:
Waived fees and reimbursed
expenses (Note 2) (142,902) (203,631) (1,012,797)
NET EXPENSES 357,845 1,411,455 6,970,827
NET INVESTMENT INCOME (LOSS) 2,535,336 11,533,065 46,797,498
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain (loss)
on sale of investments (736,709) (13,382) (7,586,997)
Net change in unrealized
appreciation
(depreciation) of
investments 4,863,922 0 23,216,208
NET GAIN (LOSS) ON
INVESTMENTS 4,127,213 (13,382) 15,629,211
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 6,662,549 $ 11,519,683 $ 62,426,709
</TABLE>
...............................................................................
The accompanying notes are an integral part of these financial statements.
104
<PAGE> 172
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND
For the For the
Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 1,158,174 $ 1,490,375
Net realized (loss) on
sale of investments 2,440,725 3,975,711
Net change in unrealized
appreciation
(depreciation) of
investments 14,291,076 (6,051,202)
NET INCREASE (DECREASE)
RESULTING FROM OPERATIONS 17,889,975 (585,116)
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income
Class A (996,012) (1,253,254)
Class D or I (162,162) (192,825)
In excess of net
investment income
Class A 0 0
Class D or I 0 0
From net realized gain on
sales of investments
Class A (1,201,148) (3,165,196)
Class D or I (367,533) (766,987)
From tax return of capital
Class A 0 0
Class D or I 0 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
- Class A 4,025,824 5,857,662
Reinvestment of dividends
- Class A 5,040,708 694,596
Cost of shares redeemed -
Class A (9,469,024) (14,543,493)
NET INCREASE IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A (402,492) (7,991,235)
Proceeds from shares sold
- Class D or I 5,176,687 5,046,708
Reinvestment of dividends
- Class D or I 1,070,410 87,663
Cost of shares redeemed -
Class D or I (3,031,687) (3,194,348)
NET INCREASE IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS D OR I 3,215,410 1,940,023
INCREASE (DECREASE) IN NET
ASSETS 17,976,038 (12,014,590)
NET ASSETS:
Beginning net assets 50,105,589 62,120,179
ENDING NET ASSETS $ 68,081,627 $ 50,105,589
SHARES ISSUED AND REDEEMED:
Shares sold - Class A 324,722 497,697
Shares issued in
reinvestment of
dividends - Class A 441,179 60,791
Shares redeemed - Class A (766,534) (1,244,313)
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS A (633) (685,825)
Shares sold - Class D or I 328,419 344,653
Shares issued in
reinvestment of
dividends - Class D or I 75,254 6,181
Shares redeemed - Class D
or I (202,929) (221,506)
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS D
OR I 200,744 129,328
</TABLE>
...............................................................................
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
The accompanying notes are an integral part of these financial statements.
105
<PAGE> 173
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE BOND FUND
For the For the
Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 15,823,355 $ 19,402,678
Net realized (loss) on
sale of investments 11,707,680 4,054,017
Net change in unrealized
appreciation
(depreciation) of
investments 15,517,216 (39,374,337)
NET INCREASE (DECREASE)
RESULTING FROM OPERATIONS 43,048,251 (15,917,642)
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income
Class A (15,466,590) (18,973,436)
Class D or I (356,764) (429,242)
In excess of net
investment income
Class A 0 0
Class D or I 0 0
From net realized gain on
sales of investments
Class A (9,468,118) (3,947,872)
Class D or I (245,016) (106,145)
From tax return of capital
Class A 0 0
Class D or I 0 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
- Class A 13,066,837 15,317,908
Reinvestment of dividends
- Class A 17,283,285 14,574,219
Cost of shares redeemed -
Class A (52,153,705) (80,201,764)
NET INCREASE IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A (21,803,583) (50,309,637)
Proceeds from shares sold
- Class D or I 1,423,486 2,864,757
Reinvestment of dividends
- Class D or I 397,321 348,941
Cost of shares redeemed -
Class D or I (2,565,176) (2,499,120)
NET INCREASE IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS D OR I (744,369) 714,578
INCREASE (DECREASE) IN NET
ASSETS (5,036,189) (88,969,396)
NET ASSETS:
Beginning net assets 280,450,989 369,420,385
ENDING NET ASSETS $ 275,414,800 $ 280,450,989
SHARES ISSUED AND REDEEMED:
Shares sold - Class A 1,213,665 1,401,041
Shares issued in
reinvestment of
dividends - Class A 1,620,338 1,315,610
Shares redeemed - Class A (4,864,665) (7,464,971)
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS A (2,030,662) (4,748,320)
Shares sold - Class D or I 102,025 197,191
Shares issued in
reinvestment of
dividends - Class D or I 28,596 24,268
Shares redeemed - Class D
or I (183,326) (179,799)
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS D
OR I (52,705) 41,660
</TABLE>
...............................................................................
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) CLASS I SHARES COMMENCED OPERATIONS ON AUGUST 18, 1994.
The accompanying notes are an integral part of these financial statements.
106
<PAGE> 174
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE MONEY MARKET FUND MONEY MARKET FUND
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1995 Dec. 31, 1994(2)
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 9,525,192 $ 7,235,197 $ 26,438,943 $ 11,484,645
Net realized (loss) on
sale of investments 8,582 (76,188) (155,089) (36,799)
Net change in unrealized
appreciation
(depreciation) of
investments 0 0 0 0
NET INCREASE (DECREASE)
RESULTING FROM OPERATIONS 9,533,774 7,159,009 26,283,854 11,447,846
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income
Class A (9,525,192) (7,235,197) (18,371,046) (11,414,964)
Class D or I 0 0 (8,067,897) (69,681)
In excess of net
investment income
Class A 0 0 0 0
Class D or I 0 0 0 0
From net realized gain on
sales of investments
Class A 0 0 0 0
Class D or I 0 0 0 0
From tax return of capital
Class A 0 0 0 0
Class D or I 0 0 0 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
- Class A 659,698,172 630,837,073 1,969,443,796 1,991,327,766
Reinvestment of dividends
- Class A 2,986,292 2,663,580 8,012,050 4,615,464
Cost of shares redeemed -
Class A (595,234,606) (742,727,104) (1,910,005,001) (1,916,112,891)
NET INCREASE IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A 67,449,858 (109,226,451) 67,450,845 79,830,339
Proceeds from shares sold
- Class D or I 0 0 918,045,967 19,768,852
Reinvestment of dividends
- Class D or I 0 0 6,132,104 26,043
Cost of shares redeemed -
Class D or I 0 0 (611,195,414) (8,557,384)
NET INCREASE IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS D OR I 0 0 312,982,657 11,237,511
INCREASE (DECREASE) IN NET
ASSETS 67,458,440 (109,302,639) 380,278,413 91,031,051
NET ASSETS:
Beginning net assets 288,409,393 397,712,032 319,114,763 228,083,712
ENDING NET ASSETS $ 355,867,833 $ 288,409,393 $ 699,393,176 $ 319,114,763
SHARES ISSUED AND REDEEMED:
Shares sold - Class A 659,698,172 630,837,073 1,969,427,483 1,991,327,765
Shares issued in
reinvestment of
dividends - Class A 2,986,292 2,663,580 8,012,052 4,615,464
Shares redeemed - Class A (595,234,606) (742,727,100) (1,909,990,912) (1,916,112,891)
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS A 67,449,858 (109,226,447) 67,448,623 79,830,338
Shares sold - Class D or I 0 0 918,035,650 19,768,852
Shares issued in
reinvestment of
dividends - Class D or I 0 0 6,132,104 26,043
Shares redeemed - Class D
or I 0 0 (611,182,876) (8,557,384)
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS D
OR I 0 0 312,984,878 11,237,511
</TABLE>
...............................................................................
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) CLASS I SHARES COMMENCED OPERATIONS ON AUGUST 18, 1994.
The accompanying notes are an integral part of these financial statements.
107
<PAGE> 175
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MUNICIPAL INCOME FUND
For the For the
Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 4,411,872 $ 6,025,578
Net realized (loss) on
sale of investments (157,864) (3,600,931)
Net change in unrealized
appreciation
(depreciation) of
investments 8,364,389 (11,048,257)
NET INCREASE (DECREASE)
RESULTING FROM OPERATIONS 12,618,397 (8,623,610)
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income
Class A (3,711,863) (5,151,955)
Class D or I (700,009) (873,623)
In excess of net
investment income
Class A 0 (137,633)
Class D or I 0 (26,101)
From net realized gain on
sales of investments
Class A 0 0
Class D or I 0 0
From tax return of capital
Class A 0 0
Class D or I 0 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
- Class A 2,879,523 14,853,144
Reinvestment of dividends
- Class A 1,817,939 2,696,820
Cost of shares redeemed -
Class A (26,842,190) (35,965,725)
NET INCREASE IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A (22,144,728) (18,415,761)
Proceeds from shares sold
- Class D or I 444,177 6,605,791
Reinvestment of dividends
- Class D or I 263,711 363,289
Cost of shares redeemed -
Class D or I (5,395,020) (3,876,822)
NET INCREASE IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS D OR I (4,687,132) 3,092,258
INCREASE (DECREASE) IN NET
ASSETS (18,625,335) (30,136,425)
NET ASSETS:
Beginning net assets 89,335,843 119,472,268
ENDING NET ASSETS $ 70,710,508 $ 89,335,843
SHARES ISSUED AND REDEEMED:
Shares sold - Class A 276,270 1,375,339
Shares issued in
reinvestment of
dividends - Class A 174,511 257,416
Shares redeemed - Class A (2,549,296) (3,481,504)
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS A (2,098,515) (1,848,749)
Shares sold - Class D or I 31,359 447,121
Shares issued in
reinvestment of
dividends - Class D or I 18,704 25,788
Shares redeemed - Class D
or I (379,181) (283,002)
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS D
OR I (329,118) 189,907
</TABLE>
...............................................................................
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(3) THE FUND COMMENCED OPERATIONS ON SEPTEMBER 19, 1994.
(4) THE FUND COMMENCED OPERATIONS ON JUNE 3, 1994.
The accompanying notes are an integral part of these financial statements.
108
<PAGE> 176
<TABLE>
<CAPTION>
SHORT-TERM GOVERNMENT- CORPORATE INCOME FUND SHORT-TERM MUNICIPAL INCOME FUND
For the For the For the For the
Year Ended Period Ended Year Ended Period Ended
Dec. 31, 1995 Dec. 31, 1994(3) Dec. 31, 1995 Dec. 31, 1994(4)
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 143,733 $ 1,538 $ 569,000 $ 68,324
Net realized (loss) on
sale of investments 3,975 (1,534) 19,197 (33,634)
Net change in unrealized
appreciation
(depreciation) of
investments 15,944 157 159,456 4,179
NET INCREASE (DECREASE)
RESULTING FROM OPERATIONS 163,652 161 747,653 38,869
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income
Class A (143,733) (1,538) (569,000) (68,324)
Class D or I 0 0 0 0
In excess of net
investment income
Class A 0 0 0 0
Class D or I 0 0 0 0
From net realized gain on
sales of investments
Class A (123) 0 (18,317) 0
Class D or I 0 0 0 0
From tax return of capital
Class A 0 0 0 0
Class D or I 0 0 0 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
- Class A 6,608,129 97,090 13,131,189 12,358,144
Reinvestment of dividends
- Class A 62,845 564 559,579 30,765
Cost of shares redeemed -
Class A (832,585) 0 (9,142,984) (581,114)
NET INCREASE IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A 5,838,389 97,654 4,547,784 11,807,795
Proceeds from shares sold
- Class D or I 0 0 0 0
Reinvestment of dividends
- Class D or I 0 0 0 0
Cost of shares redeemed -
Class D or I 0 0 0 0
NET INCREASE IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS D OR I 0 0 0 0
INCREASE (DECREASE) IN NET
ASSETS 5,858,185 96,277 4,708,120 11,778,340
NET ASSETS:
Beginning net assets 96,282 5 11,778,345 5
ENDING NET ASSETS $ 5,954,467 $ 96,282 $ 16,486,465 $ 11,778,345
SHARES ISSUED AND REDEEMED:
Shares sold - Class A 1,319,177 19,418 2,632,568 2,502,660
Shares issued in
reinvestment of
dividends - Class A 12,545 114 112,388 6,232
Shares redeemed - Class A (166,185) 0 (1,834,871) (117,174)
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS A 1,165,537 19,532 910,085 2,391,718
Shares sold - Class D or I 0 0 0 0
Shares issued in
reinvestment of
dividends - Class D or I 0 0 0 0
Shares redeemed - Class D
or I 0 0 0 0
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS D
OR I 0 0 0 0
</TABLE>
...............................................................................
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(3) THE FUND COMMENCED OPERATIONS ON SEPTEMBER 19, 1994.
(4) THE FUND COMMENCED OPERATIONS ON JUNE 3, 1994.
The accompanying notes are an integral part of these financial statements.
109
<PAGE> 177
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
STRATEGIC GROWTH FUND
For the For the
Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ (606,322) $ (449,157)
Net realized (loss) on
sale of investments 10,895,873 1,481,221
Net change in unrealized
appreciation
(depreciation) of
investments 8,601,611 336,969
NET INCREASE (DECREASE)
RESULTING FROM OPERATIONS 18,891,162 1,369,033
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income
Class A(1) 0 0
Class D or I 0 0
In excess of net
investment income
Class A(1) 0 0
Class D or I 0 0
From net realized gain on
sales of investments
Class A(1) (6,182,997) (655,929)
Class D or I (2,772,646) (376,137)
From tax return of capital
Class A(1) 0 (278,477)
Class D or I 0 (170,680)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
- Class A(1) 36,545,391 11,769,539
Reinvestment of dividends
- Class A(1) 4,705,176 403,346
Cost of shares redeemed -
Class A(1) (15,571,514) (10,877,764)
NET INCREASE IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A(1) 25,679,053 1,295,121
Proceeds from shares sold
- Class D or I 11,752,195 6,859,821
Reinvestment of dividends
- Class D or I 1,754,560 175,834
Cost of shares redeemed -
Class D or I (5,858,015) (3,485,125)
NET INCREASE IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS D OR I 7,648,740 3,550,530
INCREASE (DECREASE) IN NET
ASSETS 43,263,312 4,733,461
NET ASSETS:
Beginning net assets 42,079,158 37,345,697
ENDING NET ASSETS $ 85,342,470 $ 42,079,158
SHARES ISSUED AND REDEEMED:
Shares sold - Class A(1) 2,168,399 890,673
Shares issued in
reinvestment of
dividends - Class A(1) 292,301 30,559
Shares redeemed - Class
A(1) (965,246) (834,218)
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS
A(1) 1,495,454 87,014
Shares sold - Class D or I 552,068 410,160
Shares issued in
reinvestment of
dividends - Class D or I 88,848 10,884
Shares redeemed - Class D
or I (301,590) (214,855)
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS D
OR I 339,326 206,189
</TABLE>
...............................................................................
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) CLASS I SHARES COMMENCED OPERATIONS ON JUNE 20, 1994.
The accompanying notes are an integral part of these financial statements.
110
<PAGE> 178
<TABLE>
<CAPTION>
U.S. GOVERNMENT INCOME FUND U.S. TREASURY MONEY MARKET FUND
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1995 Dec. 31, 1994(2)
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 2,535,336 $ 3,493,708 $ 11,533,065 $ 4,895,405
Net realized (loss) on
sale of investments (736,709) (1,212,813) (13,382) (12,441)
Net change in unrealized
appreciation
(depreciation) of
investments 4,863,922 (5,164,808) 0 0
NET INCREASE (DECREASE)
RESULTING FROM OPERATIONS 6,662,549 (2,883,913) 11,519,683 4,882,964
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income
Class A(1) (2,334,261) (3,066,842) (9,781,347) (4,799,315)
Class D or I (201,075) (426,866) (1,751,718) (96,090)
In excess of net
investment income
Class A(1) 0 0 0 0
Class D or I 0 0 0 0
From net realized gain on
sales of investments
Class A(1) 0 0 0 0
Class D or I 0 0 0 0
From tax return of capital
Class A(1) 0 0 0 0
Class D or I 0 0 0 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
- Class A(1) 4,782,569 11,812,017 746,154,757 628,656,179
Reinvestment of dividends
- Class A(1) 620,986 1,241,308 4,323,454 1,652,082
Cost of shares redeemed -
Class A(1) (14,528,380) (22,062,966) (746,737,367) (553,436,130)
NET INCREASE IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A(1) (9,124,825) (9,009,641) 3,740,844 76,872,131
Proceeds from shares sold
- Class D or I 190,856 1,463,572 496,751,048 310,876,391
Reinvestment of dividends
- Class D or I 116,849 271,695 1,309,335 21,937
Cost of shares redeemed -
Class D or I (1,606,274) (6,683,335) (438,830,786) (306,998,204)
NET INCREASE IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS D OR I (1,298,569) (4,948,068) 59,229,597 3,900,124
INCREASE (DECREASE) IN NET
ASSETS (6,296,181) (20,335,330) 62,957,059 80,759,814
NET ASSETS:
Beginning net assets 39,560,037 59,895,367 198,929,302 118,169,488
ENDING NET ASSETS $ 33,263,856 $ 39,560,037 $ 261,886,361 $ 198,929,302
SHARES ISSUED AND REDEEMED:
Shares sold - Class A(1) 472,576 1,143,944 746,154,757 628,656,178
Shares issued in
reinvestment of
dividends - Class A(1) 60,905 120,007 4,323,454 1,652,082
Shares redeemed - Class
A(1) (1,418,306) (2,181,814) (746,737,367) (553,436,130)
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS
A(1) (884,825) (917,863) 3,740,844 76,872,130
Shares sold - Class D or I 13,647 101,936 496,751,048 310,876,391
Shares issued in
reinvestment of
dividends - Class D or I 8,425 19,155 1,309,335 21,937
Shares redeemed - Class D
or I (114,517) (485,093) (438,830,787) (306,998,204)
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS D
OR I (92,445) (364,002) 59,229,596 3,900,124
</TABLE>
...............................................................................
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) CLASS I SHARES COMMENCED OPERATIONS ON JUNE 20, 1994.
The accompanying notes are an integral part of these financial statements.
111
<PAGE> 179
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
VARIABLE RATE GOVERNMENT FUND
For the For the
Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 46,797,498 $ 74,993,269
Net realized (loss) on
sale of investments (7,586,997) (125,280,826)
Net change in unrealized
appreciation
(depreciation) of
investments 23,216,208 (11,149,757)
NET INCREASE (DECREASE)
RESULTING FROM OPERATIONS 62,426,709 (61,437,314)
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income
Class A (46,275,296) (74,426,329)
Class D or I (522,203) (566,940)
In excess of net
investment income
Class A 0 0
Class D or I 0 0
From net realized gain on
sales of investments
Class A 0 0
Class D or I 0 0
From tax return of capital
Class A 0 0
Class D or I 0 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
- Class A 12,727,285 357,940,526
Reinvestment of dividends
- Class A 10,963,115 24,395,946
Cost of shares redeemed -
Class A (600,782,109) (980,573,296)
NET INCREASE IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A (577,091,709) (598,236,824)
Proceeds from shares sold
- Class D or I 282,762 7,287,276
Reinvestment of dividends
- Class D or I 231,329 232,670
Cost of shares redeemed -
Class D or I (5,190,680) (5,418,428)
NET INCREASE IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS D OR I (4,676,589) 2,101,518
INCREASE (DECREASE) IN NET
ASSETS (566,139,088) (732,565,889)
NET ASSETS:
Beginning net assets 1,227,765,993 1,960,331,884
ENDING NET ASSETS $ 661,626,905 $ 1,227,765,993
SHARES ISSUED AND REDEEMED:
Shares sold - Class A 1,367,861 36,230,262
Shares issued in
reinvestment of
dividends - Class A 1,180,210 2,505,413
Shares redeemed - Class A (64,851,613) (101,611,784)
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS A (62,303,542) (62,876,109)
Shares sold - Class D or I 20,310 495,723
Shares issued in
reinvestment of
dividends - Class D or I 16,653 16,111
Shares redeemed - Class D
or I (373,247) (380,431)
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS D
OR I (336,284) 131,403
</TABLE>
...............................................................................
The accompanying notes are an integral part of these financial statements.
112
<PAGE> 180
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND
..............................................
CLASS A
..............................................
Year Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.67 $11.90 $11.45
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.28 0.31 0.30
Net realized and unrealized gain (loss) on investments 3.42 (0.39) 1.12
------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 3.70 (0.08) 1.42
LESS DISTRIBUTIONS:
Dividends from net investment income (0.28) (0.31) (0.30)
Distributions from net realized gain (0.33) (0.84) (0.67)
Tax return of capital 0.00 0.00 0.00
------ ------ ------
TOTAL FROM DISTRIBUTIONS (0.61) (1.15) (0.97)
------- ------- -------
NET ASSET VALUE, END OF PERIOD $13.76 $10.67 $11.90
------- ------- -------
------- ------- -------
TOTAL RETURN (NOT ANNUALIZED)(3) 34.71% (0.68)% 12.54%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $52,007 $40,308 $53,124
Number of shares outstanding, end of period (000) 3,778 3,779 4,465
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets(1) 1.30% 1.30% 1.36%
Ratio of net investment income to average net assets(2) 2.07% 2.41% 2.64%
Portfolio turnover 47% 50% 53%
...........................................................................................................
(1) Ratio of expenses to average net assets prior to waived
fees and reimbursed expenses 1.35% 1.38% 1.47%
(2) Ratio of net investment income to average net assets
prior to waived fees and reimbursed expenses 2.02% 2.33% 2.53%
</TABLE>
...............................................................................
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
The accompanying notes are an integral part of these financial statements.
113
<PAGE> 181
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND (CONT.)
..............................
CLASS A (CONT.)
..............................
Year Ended Year Ended
Dec. 31, 1992 Dec. 31, 1991
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.95 $10.31
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.47 0.57
Net realized and unrealized gain (loss) on investments 0.36 1.51
------ ------
TOTAL FROM INVESTMENT OPERATIONS 0.83 2.08
LESS DISTRIBUTIONS:
Dividends from net investment income (0.63) (0.44)
Distributions from net realized gain (0.70) 0.00
Tax return of capital 0.00 0.00
------ ------
TOTAL FROM DISTRIBUTIONS (1.33) (0.44)
------- -------
NET ASSET VALUE, END OF PERIOD $11.45 $11.95
------- -------
------- -------
TOTAL RETURN (NOT ANNUALIZED)(3) 7.44% 20.69%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $41,165 $38,663
Number of shares outstanding, end of period (000) 3,596 3,235
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets(1) 1.25% 1.38%
Ratio of net investment income to average net assets(2) 4.08% 5.23%
Portfolio turnover 38% 18%
..........................................................................................................
(1) Ratio of expenses to average net assets prior to waived fees and
reimbursed expenses 1.71% 1.56%
(2) Ratio of net investment income to average net assets prior to waived
fees and reimbursed expenses 3.62% 5.05%
</TABLE>
...............................................................................
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
(4) THIS CLASS COMMENCED OPERATIONS ON JULY 1, 1993.
The accompanying notes are an integral part of these financial statements.
114
<PAGE> 182
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND (CONT.) CALIFORNIA TAX-FREE BOND FUND
.............................................. ..............................................
CLASS D(4) CLASS A
.............................................. ..............................................
Year Ended Year Ended Period Ended Year Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $13.26 $14.75 $15.00 $10.20 $11.47 $10.92
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.20 0.25 0.07 0.60 0.64 0.63
Net realized and
unrealized gain (loss)
on investments 4.24 (0.45) 0.61 1.03 (1.13) 0.75
------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS 4.44 (0.20) 0.68 1.63 (0.49) 1.38
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.20) (0.25) (0.10) (0.60) (0.64) (0.63)
Distributions from net
realized gain (0.40) (1.04) (0.83) (0.39) (0.14) (0.20)
Tax return of capital 0.00 0.00 0.00 0.00 0.00 0.00
------ ------ ------ ------ ------ ------
TOTAL FROM DISTRIBUTIONS (0.60) (1.29) (0.93) (0.99) (0.78) (0.83)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD $17.10 $13.26 $14.75 $10.84 $10.20 $11.47
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
TOTAL RETURN (NOT
ANNUALIZED)(3) 33.72% (1.38)% 4.56% 16.38% (4.32)% 12.98%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $16,075 $9,798 $8,996 $268,352 $273,105 $361,779
Number of shares
outstanding, end of
period (000) 940 739 610 24,750 26,780 31,529
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 2.05% 2.01% 0.96% 0.58% 0.50% 0.69%
Ratio of net investment
income to average net
assets(2) 1.30% 1.75% 0.53% 5.59% 5.87% 5.54%
Portfolio turnover 47% 50% 53% 38% 4% 10%
...........................................................................................................................
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses 2.17% 2.20% 1.12% 0.78% 0.95% 0.85%
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses 1.18% 1.56% 0.37% 5.39% 5.42% 5.38%
</TABLE>
...............................................................................
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
(4) THIS CLASS COMMENCED OPERATIONS ON JULY 1, 1993.
The accompanying notes are an integral part of these financial statements.
115
<PAGE> 183
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE BOND FUND
(CONT.)
..............................
CLASS A (CONT.)
..............................
Year Ended Year Ended
Dec. 31, 1992 Dec. 31, 1991
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.73 $10.27
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.68 0.69
Net realized and unrealized gain (loss) on investments 0.26 0.46
------ ------
TOTAL FROM INVESTMENT OPERATIONS 0.94 1.15
LESS DISTRIBUTIONS:
Dividends from net investment income (0.68) (0.69)
Distributions from net realized gain (0.07) 0.00
Tax return of capital 0.00 0.00
------ ------
TOTAL FROM DISTRIBUTIONS (0.75) (0.69)
------- -------
NET ASSET VALUE, END OF PERIOD $10.92 $10.73
------- -------
------- -------
TOTAL RETURN (NOT ANNUALIZED)(3) 9.01% 11.62%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $375,376 $332,845
Number of shares outstanding, end of period (000) 34,376 31,008
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets(1) 0.50% 0.45%
Ratio of net investment income to average net assets(2) 6.24% 6.56%
Portfolio turnover 24% 8%
..........................................................................................................
(1) Ratio of expenses to average net assets prior to waived fees and
reimbursed expenses 0.85% 0.87%
(2) Ratio of net investment income to average net assets prior to waived
fees and reimbursed expenses 5.89% 6.14%
</TABLE>
...............................................................................
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
(4) THIS CLASS COMMENCED OPERATIONS ON JULY 1, 1993.
The accompanying notes are an integral part of these financial statements.
116
<PAGE> 184
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE BOND FUND (CONT.)
.............................................. CALIFORNIA TAX-FREE MONEY
CLASS D(4) MARKET FUND
.............................................. ..............................
Year Ended Year Ended Period Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1995 Dec. 31, 1994
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $13.32 $14.98 $15.00 $1.00 $1.00
------- ------- ------- ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.68 0.73 0.34 0.03 0.02
Net realized and
unrealized gain (loss)
on investments 1.35 (1.47) 0.24 0.00 0.00
------ ------ ------ ----- -----
TOTAL FROM INVESTMENT
OPERATIONS 2.03 (0.74) 0.58 0.03 0.02
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.68) (0.73) (0.34) (0.03) (0.02)
Distributions from net
realized gain (0.51) (0.19) (0.26) 0.00 0.00
Tax return of capital 0.00 0.00 0.00 0.00 0.00
------ ------ ------ ----- -----
TOTAL FROM DISTRIBUTIONS (1.19) (0.92) (0.60) (0.03) (0.02)
------- ------- ------- ------ ------
NET ASSET VALUE, END OF
PERIOD $14.16 $13.32 $14.98 $1.00 $1.00
------- ------- ------- ------ ------
------- ------- ------- ------ ------
TOTAL RETURN (NOT
ANNUALIZED)(3) 15.58% (5.00)% 3.92% 3.25% 2.22%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $7,063 $7,346 $7,641 $355,868 $288,409
Number of shares
outstanding, end of
period (000) 499 552 510 355,940 288,409
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 1.30% 1.20% 1.32% 0.68% 0.68%
Ratio of net investment
income to average net
assets(2) 4.87% 5.15% 4.50% 3.20% 2.17%
Portfolio turnover 38% 4% 10% N/A N/A
...........................................................................................................
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses 1.57% 1.82% 1.61% 0.68% 0.70%
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses 4.60% 4.53% 4.21% 3.20% 2.15%
</TABLE>
...............................................................................
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
(4) THIS CLASS COMMENCED OPERATIONS ON JULY 1, 1993.
The accompanying notes are an integral part of these financial statements.
117
<PAGE> 185
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE MONEY MARKET FUND (CONT.)
..............................................
Year Ended Year Ended Year Ended
Dec. 31, 1993 Dec. 31, 1992 Dec. 31, 1991
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.02 0.03 0.04
Net realized and unrealized gain (loss) on investments 0.00 0.00 0.00
----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS 0.02 0.03 0.04
LESS DISTRIBUTIONS:
Dividends from net investment income (0.02) (0.03) (0.04)
Distributions from net realized gain 0.00 0.00 0.00
Tax return of capital 0.00 0.00 0.00
----- ----- -----
TOTAL FROM DISTRIBUTIONS (0.02) (0.03) (0.04)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00
------ ------ ------
------ ------ ------
TOTAL RETURN (NOT ANNUALIZED)(3) 1.84% 2.54% 3.99%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $397,712 $363,067 $299,234
Number of shares outstanding, end of period (000) 397,717 363,069 299,234
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets(1) 0.66% 0.66% 0.66%
Ratio of net investment income to average net assets(2) 1.82% 2.50% 3.92%
Portfolio turnover N/A N/A N/A
...........................................................................................................
(1) Ratio of expenses to average net assets prior to waived
fees and reimbursed expenses 0.70% 0.69% 0.70%
(2) Ratio of net investment income to average net assets
prior to waived fees and reimbursed expenses 1.68% 2.47% 3.88%
</TABLE>
...............................................................................
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
The accompanying notes are an integral part of these financial statements.
118
<PAGE> 186
<TABLE>
<CAPTION>
MONEY MARKET FUND
..............................................................................
CLASS A
..............................................................................
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992 Dec. 31, 1991
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.05 0.04 0.03 0.03 0.06
Net realized and
unrealized gain (loss)
on investments 0.00 0.00 0.00 0.00 0.00
----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS 0.05 0.04 0.03 0.03 0.06
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.05) (0.04) (0.03) (0.03) (0.06)
Distributions from net
realized gain 0.00 0.00 0.00 0.00 0.00
Tax return of capital 0.00 0.00 0.00 0.00 0.00
----- ----- ----- ----- -----
TOTAL FROM DISTRIBUTIONS (0.05) (0.04) (0.03) (0.03) (0.06)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF
PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL RETURN (NOT
ANNUALIZED)(3) 5.44% 3.70% 2.57% 3.23% 5.65%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $375,218 $307,878 $228,084 $268,424 $229,863
Number of shares
outstanding, end of
period (000) 375,364 307,915 228,085 268,434 229,866
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 0.65% 0.68% 0.74% 0.75% 0.74%
Ratio of net investment
income to average net
assets(2) 5.43% 3.71% 2.54% 3.17% 5.54%
Portfolio turnover N/A N/A N/A N/A N/A
...........................................................................................................
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses 0.69% 0.72% 0.74% 0.75% 0.75%
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses 5.39% 3.67% 2.54% 3.17% 5.53%
</TABLE>
...............................................................................
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
The accompanying notes are an integral part of these financial statements.
119
<PAGE> 187
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
MONEY MARKET FUND (CONT.)
..............................
CLASS I(4)
..............................
Year Ended Period Ended
Dec. 31, 1995 Dec. 31, 1994
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00
------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.06 0.02
Net realized and unrealized gain (loss) on investments 0.00 0.00
----- -----
TOTAL FROM INVESTMENT OPERATIONS 0.06 0.02
LESS DISTRIBUTIONS:
Dividends from net investment income (0.06) (0.02)
Distributions from net realized gain 0.00 0.00
Tax return of capital 0.00 0.00
----- -----
TOTAL FROM DISTRIBUTIONS (0.06) (0.02)
------ ------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00
------ ------
------ ------
TOTAL RETURN (NOT ANNUALIZED)(3) 5.71% 1.83%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $324,175 $11,237
Number of shares outstanding, end of period (000) 324,222 11,238
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets(1) 0.39% 0.38%
Ratio of net investment income to average net assets(2) 5.70% 5.05%
Portfolio turnover N/A N/A
..........................................................................................................
(1) Ratio of expenses to average net assets prior to waived fees and
reimbursed expenses 0.45% 0.55%
(2) Ratio of net investment income to average net assets prior to waived
fees and reimbursed expenses 5.64% 4.88%
</TABLE>
...............................................................................
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
(4) THIS CLASS COMMENCED OPERATIONS ON AUGUST 18, 1994.
(5) THE FUND COMMENCED OPERATIONS ON JULY 15, 1991.
The accompanying notes are an integral part of these financial statements.
120
<PAGE> 188
<TABLE>
<CAPTION>
MUNICIPAL INCOME FUND
..............................................................................
CLASS A(5)
..............................................................................
Year Ended Year Ended Year Ended Year Ended Period Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992 Dec. 31, 1991
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $9.91 $11.27 $10.56 $10.25 $10.00
------ ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.57 0.60 0.64 0.66 0.28
Net realized and
unrealized gain (loss)
on investments 1.02 (1.36) 0.71 0.32 0.25
----- ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS 1.59 (0.76) 1.35 0.98 0.53
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.57) (0.60) (0.64) (0.66) (0.28)
Distributions from net
realized gain 0.00 0.00 0.00 (0.01) 0.00
Tax return of capital 0.00 0.00 0.00 0.00 0.00
----- ------ ------ ------ ------
TOTAL FROM DISTRIBUTIONS (0.57) (0.60) (0.64) (0.67) (0.28)
------ ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD $10.93 $9.91 $11.27 $10.56 $10.25
------ ------- ------- ------- -------
------ ------- ------- ------- -------
TOTAL RETURN (NOT
ANNUALIZED)(3) 16.45% (6.82)% 13.11% 9.94% 5.81%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $58,440 $73,791 $104,701 $52,553 $16,585
Number of shares
outstanding, end of
period (000) 5,347 7,446 9,294 4,976 1,618
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 0.71% 0.43% 0.39% 0.23% 0.00%
Ratio of net investment
income to average net
assets(2) 5.49% 5.77% 5.56% 6.05% 6.38%
Portfolio turnover 14% 32% 15% 67% 5%
...........................................................................................................
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses 1.09% 0.98% 1.09% 1.20% 3.02%
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses 5.11% 5.22% 4.86% 5.08% 3.36%
</TABLE>
...............................................................................
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
(4) THIS CLASS COMMENCED OPERATIONS ON AUGUST 18, 1994.
(5) THE FUND COMMENCED OPERATIONS ON JULY 15, 1991.
The accompanying notes are an integral part of these financial statements.
121
<PAGE> 189
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
MUNICIPAL INCOME FUND (CONT.)
..............................................
CLASS D(4)
..............................................
Year Ended Year Ended Period Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.42 $15.26 $15.00
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.69 0.73 0.36
Net realized and unrealized gain (loss) on investments 1.38 (1.84) 0.26
------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 2.07 (1.11) 0.62
LESS DISTRIBUTIONS:
Dividends from net investment income (0.69) (0.73) (0.36)
Distributions from net realized gain 0.00 0.00 0.00
Tax return of capital 0.00 0.00 0.00
------ ------ ------
TOTAL FROM DISTRIBUTIONS (0.69) (0.73) (0.36)
------- ------- -------
NET ASSET VALUE, END OF PERIOD $14.80 $13.42 $15.26
------- ------- -------
------- ------- -------
TOTAL RETURN (NOT ANNUALIZED)(3) 15.75% (7.37)% 4.19%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $12,271 $15,545 $14,771
Number of shares outstanding, end of period (000) 829 1,158 968
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets(1) 1.32% 1.02% 1.13%
Ratio of net investment income to average net assets(2) 4.88% 5.17% 4.14%
Portfolio turnover 14% 32% 15%
...........................................................................................................
(1) Ratio of expenses to average net assets prior to waived
fees and reimbursed expenses 1.78% 1.74% 1.84%
(2) Ratio of net investment income to average net assets
prior to waived fees and reimbursed expenses 4.42% 4.45% 3.43%
</TABLE>
...............................................................................
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
(4) THIS CLASS COMMENCED OPERATIONS ON JULY 1, 1993.
(5) THE FUND COMMENCED OPERATIONS ON JANUARY 20, 1993.
(6) THIS RATIO INCLUDES INCOME AND EXPENSES CHARGED TO THE MASTER
PORTFOLIO.
The accompanying notes are an integral part of these financial statements.
122
<PAGE> 190
<TABLE>
<CAPTION>
SHORT-TERM GOVERNMENT- SHORT-TERM MUNICIPAL INCOME
CORPORATE INCOME FUND FUND STRATEGIC GROWTH FUND
.............................. .............................. ..............................
From Sept. 19, From June 3, CLASS A(5)
1994 1994 ..............................
Year Ended (inception) to Year Ended (inception) to Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1995 Dec. 31, 1994
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $4.93 $5.00 $4.92 $5.00 $13.29 $13.20
------ ------ ------ ------ ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.30 0.08 0.22 0.09 (0.04) (0.11)
Net realized and
unrealized gain (loss)
on investments 0.09 (0.07) 0.07 (0.08) 5.66 0.67
----- ----- ----- ----- ------ ------
TOTAL FROM INVESTMENT
OPERATIONS 0.39 0.01 0.29 0.01 5.62 0.56
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.30) (0.08) (0.22) (0.09) 0.00 0.00
Distributions from net
realized gain 0.00 0.00 0.00 0.00 (2.09) (0.33)
Tax return of capital 0.00 0.00 0.00 0.00 0.00 (0.14)
----- ----- ----- ----- ------ ------
TOTAL FROM DISTRIBUTIONS (0.30) (0.08) (0.22) (0.09) (2.09) (0.47)
------ ------ ------ ------ ------- -------
NET ASSET VALUE, END OF
PERIOD $5.02 $4.93 $4.99 $4.92 $16.82 $13.29
------ ------ ------ ------ ------- -------
------ ------ ------ ------ ------- -------
TOTAL RETURN (NOT
ANNUALIZED)(3) 8.05% 0.28% 6.10% 0.13% 42.51% 4.23%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $5,954 $96 $16,486 $11,778 $59,016 $26,744
Number of shares
outstanding, end of
period (000) 1,185 20 3,302 2,392 3,508 2,013
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 0.30%(6) 0.30%(6) 0.38%(6) 0.27%(6) 1.28% 1.20%
Ratio of net investment
income to average net
assets(2) 6.01%(6) 5.77%(6) 4.39%(6) 3.67%(6) (0.76)% (0.81)%
Portfolio turnover N/A N/A N/A N/A 171% 149%
...........................................................................................................................
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses 6.79%(6) 67.89%(6) 1.97%(6) 1.98%(6) 1.38% 1.55%
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses (0.48)(6) (61.82)(6) 2.80%(6) 1.96%(6) (0.86)% (1.16)%
<CAPTION>
Period Ended
Dec. 31, 1993
<S> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $10.00
-------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) (0.03)
Net realized and
unrealized gain (loss)
on investments 3.68
------
TOTAL FROM INVESTMENT
OPERATIONS 3.65
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.03)
Distributions from net
realized gain (0.41)
Tax return of capital (0.01)
------
TOTAL FROM DISTRIBUTIONS (0.45)
-------
NET ASSET VALUE, END OF
PERIOD $13.20
-------
-------
TOTAL RETURN (NOT
ANNUALIZED)(3) 36.56%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $25,413
Number of shares
outstanding, end of
period (000) 1,926
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 0.66%
Ratio of net investment
income to average net
assets(2) (0.01)%
Portfolio turnover 182%
...........................
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses 1.64%
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses (0.99)%
</TABLE>
...............................................................................
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
(4) THIS CLASS COMMENCED OPERATIONS ON JULY 1, 1993.
(5) THE FUND COMMENCED OPERATIONS ON JANUARY 20, 1993.
(6) THIS RATIO INCLUDES INCOME AND EXPENSES CHARGED TO THE MASTER
PORTFOLIO.
The accompanying notes are an integral part of these financial statements.
123
<PAGE> 191
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
STRATEGIC GROWTH FUND (CONT.)
..............................................
CLASS D(4)
..............................................
Year Ended Year Ended Period Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $16.54 $16.55 $15.00
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.16) (0.24) (0.43)
Net realized and unrealized gain (loss) on investments 6.99 0.81 2.51
------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 6.83 0.57 2.08
LESS DISTRIBUTIONS:
Dividends from net investment income 0.00 0.00 0.00
Distributions from net realized gain (2.58) (0.40) (0.53)
Tax return of capital 0.00 (0.18) 0.00
------ ------ ------
TOTAL FROM DISTRIBUTIONS (2.58) (0.58) (0.53)
------- ------- -------
NET ASSET VALUE, END OF PERIOD $20.79 $16.54 $16.55
------- ------- -------
------- ------- -------
TOTAL RETURN (NOT ANNUALIZED)(3) 41.54% 3.46% 13.84%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $26,326 $15,335 $11,932
Number of shares outstanding, end of period (000) 1,266 927 721
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets(1) 2.02% 1.95% 0.61%
Ratio of net investment income to average net assets(2) (1.49)% (1.56)% (1.00)%
Portfolio turnover 171% 149% 182%
...........................................................................................................
(1) Ratio of expenses to average net assets prior to waived
fees and reimbursed expenses 2.09% 2.23% 2.14%
(2) Ratio of net investment income to average net assets
prior to waived fees and reimbursed expenses (1.56)% (1.84)% (2.53)%
</TABLE>
...............................................................................
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
(4) THIS CLASS COMMENCED OPERATIONS ON JULY 1, 1993.
The accompanying notes are an integral part of these financial statements.
124
<PAGE> 192
<TABLE>
<CAPTION>
U.S. GOVERNMENT INCOME FUND
..............................................................................
CLASS A
..............................................................................
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992 Dec. 31, 1991
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $9.66 $10.87 $10.56 $10.97 $10.30
------ ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.69 0.70 0.74 0.79 0.86
Net realized and
unrealized gain (loss)
on investments 1.12 (1.21) 0.36 (0.14) 0.90
----- ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS 1.81 (0.51) 1.10 0.65 1.76
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.69) (0.70) (0.74) (0.79) (0.86)
Distributions from net
realized gain 0.00 0.00 (0.05) (0.27) (0.23)
Tax return of capital 0.00 0.00 0.00 0.00 0.00
----- ------ ------ ------ ------
TOTAL FROM DISTRIBUTIONS (0.69) (0.70) (0.79) (1.06) (1.09)
------ ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD $10.78 $9.66 $10.87 $10.56 $10.97
------ ------- ------- ------- -------
------ ------- ------- ------- -------
TOTAL RETURN (NOT
ANNUALIZED)(3) 19.32% (4.81)% 10.67% 6.27% 18.08%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $30,471 $35,838 $50,301 $40,883 $20,457
Number of shares
outstanding, end of
period (000) 2,826 3,711 4,628 3,871 1,865
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 0.88% 0.76% 0.53% 0.47% 0.00%
Ratio of net investment
income to average net
assets(2) 6.79% 6.84% 6.79% 6.26% 8.30%
Portfolio turnover 95% 50% 115% 128% 100%
...........................................................................................................
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses 1.24% 1.08% 1.01% 1.13% 1.87%
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses 6.44% 6.52% 6.31% 5.60% 6.43%
</TABLE>
...............................................................................
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
(4) THIS CLASS COMMENCED OPERATIONS ON JULY 1, 1993.
The accompanying notes are an integral part of these financial statements.
125
<PAGE> 193
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
U.S. GOVERNMENT INCOME FUND (CONT.)
..............................................
CLASS D(4)
..............................................
Year Ended Year Ended Period Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.20 $14.85 $15.00
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.85 0.86 0.42
Net realized and unrealized gain (loss) on investments 1.54 (1.65) (0.08)
------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 2.39 (0.79) 0.34
LESS DISTRIBUTIONS:
Dividends from net investment income (0.85) (0.86) (0.42)
Distributions from net realized gain 0.00 0.00 (0.07)
Tax return of capital 0.00 0.00 0.00
------ ------ ------
TOTAL FROM DISTRIBUTIONS (0.85) (0.86) (0.49)
------- ------- -------
NET ASSET VALUE, END OF PERIOD $14.74 $13.20 $14.85
------- ------- -------
------- ------- -------
TOTAL RETURN (NOT ANNUALIZED)(3) 18.54% (5.45)% 2.25%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $2,793 $3,722 $9,594
Number of shares outstanding, end of period (000) 189 282 646
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets(1) 1.62% 1.37% 0.90%
Ratio of net investment income to average net assets(2) 6.07% 6.14% 5.90%
Portfolio turnover 95% 50% 115%
...........................................................................................................
(1) Ratio of expenses to average net assets prior to waived
fees and reimbursed expenses 2.29% 1.87% 2.03%
(2) Ratio of net investment income to average net assets
prior to waived fees and reimbursed expenses 5.40% 5.64% 4.77%
</TABLE>
...............................................................................
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
(4) THIS CLASS COMMENCED OPERATIONS ON JULY 1, 1993.
(5) THE FUND COMMENCED OPERATIONS ON MAY 12, 1992.
(6) THIS CLASS COMMENCED OPERATIONS ON JUNE 20, 1994.
The accompanying notes are an integral part of these financial statements.
126
<PAGE> 194
<TABLE>
<CAPTION>
U.S. TREASURY MONEY MARKET FUND
..............................................................................................
CLASS A (5) CLASS I (6)
.............................................................. ..............................
Year Ended Year Ended Year Ended Period Ended Year Ended Period Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992 Dec. 31, 1995 Dec. 31, 1994
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.05 0.03 0.03 0.02 0.05 0.02
Net realized and
unrealized gain (loss)
on investments 0.00 0.00 0.00 0.00 0.00 0.00
----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS 0.05 0.03 0.03 0.02 0.05 0.02
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.05) (0.03) (0.03) (0.02) (0.05) (0.02)
Distributions from net
realized gain 0.00 0.00 0.00 0.00 0.00 0.00
Tax return of capital 0.00 0.00 0.00 0.00 0.00 0.00
----- ----- ----- ----- ----- -----
TOTAL FROM DISTRIBUTIONS (0.05) (0.03) (0.03) (0.02) (0.05) (0.02)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF
PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
TOTAL RETURN (NOT
ANNUALIZED)(3) 5.09% 3.44% 2.56% 1.97% 5.35% 2.00%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $198,753 $195,031 $118,169 $137,412 $63,134 $3,898
Number of shares
outstanding, end of
period (000) 198,782 195,042 118,169 137,416 63,130 3,900
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 0.65% 0.63% 0.52% 0.27% 0.39% 0.23%
Ratio of net investment
income to average net
assets(2) 4.97% 3.47% 2.55% 3.12% 5.16% 4.42%
Portfolio turnover N/A N/A N/A N/A N/A N/A
...........................................................................................................................
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses 0.73% 0.80% 0.77% 0.79% 0.49% 0.57%
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses 4.89% 3.30% 2.30% 2.60% 5.06% 4.08%
</TABLE>
...............................................................................
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
(4) THIS CLASS COMMENCED OPERATIONS ON JULY 1, 1993.
(5) THE FUND COMMENCED OPERATIONS ON MAY 12, 1992.
(6) THIS CLASS COMMENCED OPERATIONS ON JUNE 20, 1994.
The accompanying notes are an integral part of these financial statements.
127
<PAGE> 195
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
VARIABLE RATE GOVERNMENT FUND
..............................................
CLASS A(4)
..............................................
Year Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.19 $9.99 $9.95
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.53 0.43 0.44
Net realized and unrealized gain (loss) on investments 0.16 (0.80) 0.04
----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS 0.69 (0.37) 0.48
LESS DISTRIBUTIONS:
Dividends from net investment income (0.53) (0.43) (0.44)
Distributions from net realized gain 0.00 0.00 0.00
Tax return of capital 0.00 0.00 0.00
----- ----- -----
TOTAL FROM DISTRIBUTIONS (0.53) (0.43) (0.44)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $9.35 $9.19 $9.99
------ ------ ------
------ ------ ------
TOTAL RETURN (NOT ANNUALIZED)(3) 7.69% (3.81)% 4.87%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $653,897 $1,215,546 $1,949,013
Number of shares outstanding, end of period (000) 69,952 132,256 195,132
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets(1) 0.84% 0.79% 0.76%
Ratio of net investment income to average net assets(2) 5.71% 4.40% 4.37%
Portfolio turnover 317% 164% 201%
...........................................................................................................
(1) Ratio of expenses to average net assets prior to waived
fees and reimbursed expenses 0.96% 0.94% 0.95%
(2) Ratio of net investment income to average net assets
prior to waived fees and reimbursed expenses 5.59% 4.25% 4.18%
</TABLE>
...............................................................................
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
(4) THE FUND COMMENCED OPERATIONS ON NOVEMBER 1, 1990.
(5) THIS CLASS COMMENCED OPERATIONS ON JULY 1, 1993.
The accompanying notes are an integral part of these financial statements.
128
<PAGE> 196
<TABLE>
<CAPTION>
VARIABLE RATE GOVERNMENT FUND (CONT.)
..............................................................................
CLASS A(4) (CONT.) CLASS D(5)
.............................. ..............................................
Year Ended Period Ended Year Ended Year Ended Period Ended
Dec. 31, 1992 Dec. 31, 1991 Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $10.13 $10.12 $13.74 $14.93 $15.00
------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.59 0.78 0.73 0.57 0.27
Net realized and
unrealized gain (loss)
on investments (0.18) 0.01 0.23 (1.19) (0.07)
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS 0.41 0.79 0.96 (0.62) 0.20
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.59) (0.78) (0.73) (0.57) (0.27)
Distributions from net
realized gain 0.00 0.00 0.00 0.00 0.00
Tax return of capital 0.00 0.00 0.00 0.00 0.00
------ ------ ------ ------ ------
TOTAL FROM DISTRIBUTIONS (0.59) (0.78) (0.73) (0.57) (0.27)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD $9.95 $10.13 $13.97 $13.74 $14.93
------- ------- ------- ------- -------
------- ------- ------- ------- -------
TOTAL RETURN (NOT
ANNUALIZED)(3) 4.23% 8.60% 7.08% (4.25)% 1.32%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $2,559,363 $566,840 $7,730 $12,220 $11,319
Number of shares
outstanding, end of
period (000) 257,238 55,933 553 889 758
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 0.75% 0.50% 1.35% 1.29% 1.26%
Ratio of net investment
income to average net
assets(2) 5.62% 7.36% 5.23% 3.94% 3.41%
Portfolio turnover 197% 250% 317% 164% 201%
...........................................................................................................................
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses 0.94% 1.08% 1.64% 1.55% 1.75%
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses 5.43% 6.78% 4.95% 3.68% 2.92%
</TABLE>
...............................................................................
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
(4) THE FUND COMMENCED OPERATIONS ON NOVEMBER 1, 1990.
(5) THIS CLASS COMMENCED OPERATIONS ON JULY 1, 1993.
The accompanying notes are an integral part of these financial statements.
129
<PAGE> 197
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Overland Express Funds, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end series
investment company. The Company commenced operations on April 7, 1988 and
includes ten separate diversified funds: the Asset Allocation, Money Market,
Municipal Income, Overland Sweep, Short-Term Government-Corporate Income
(formerly, the 1-3 Year Duration Full Faith and Credit Government Income),
Short-Term Municipal Income (formerly, the 1-3 Year Duration Municipal Income),
Strategic Growth, U.S. Government Income, U.S. Treasury Money Market and
Variable Rate Government Funds, and two non-diversified funds: the California
Tax-Free Bond and California Tax-Free Money Market Funds. The financial
statements for the Overland Sweep Fund are presented separately. These Funds
invest in a range of securities, generally including money market instruments,
equities and U.S. government securities.
Each of the funds presented in this book (the "Funds"), with the exception of
the Money Market, California Tax-Free Money Market, Short-Term
Government-Corporate Income, Short-Term Municipal Income and U.S. Treasury Money
Market Funds, commenced offering Class D shares on July 1, 1993. The U.S.
Treasury Money Market and Money Market Funds commenced offering Class I shares
on June 20, 1994 and August 18, 1994, respectively. The three classes of shares
differ principally in their respective sales charges (if any), service fees, and
distribution fees. Shareholders of each class also bear certain expenses that
pertain to that particular class. All shareholders bear the common expenses of
the Fund and earn income from the portfolio, pro rata based on the average daily
net assets of each class, without distinction between share classes. Dividends
are declared separately for each class. Gains are allocated to each class pro
rata based upon net assets of each class on the date of distribution. No class
has preferential dividend rights. Differences in per share dividend rates
generally result from the relative weightings of pro rata income and gain
allocations and from differences in separate class expenses, including
distribution and service fees.
The following significant accounting policies are consistently followed by the
Company in the preparation of its financial statements, and such policies are in
conformity with Generally Accepted Accounting Principles for investment
companies.
The preparation of financial statements in conformity with Generally Accepted
Accounting Principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
SECURITY VALUATION
Investments in securities for which the primary market is a national securities
exchange or the Nasdaq National Market System are valued at the last reported
sales price on the day of valuation.
131
<PAGE> 198
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
U.S. Government obligations are valued at the mean between the last reported bid
and ask prices. In the absence of any sale of such securities on the valuation
date and in the case of other securities, excluding debt securities maturing in
60 days or less, the valuations are based on latest quoted bid prices. Debt
securities maturing in 60 days or less are valued at amortized cost. Debt
securities other than those maturing in 60 days or less and other than U.S.
Government obligations are valued at the latest quoted bid price. Securities for
which quotations are not readily available are valued at fair value as
determined by procedures set by the Board of Directors.
The California Tax-Free Money Market, Money Market and U.S. Treasury Money
Market Funds use the amortized cost method to value their portfolio securities
and seek to maintain constant net asset values of $1.00 per share. There is no
assurance these Funds will meet this objective. The amortized cost method
involves valuing a security at its cost and amortizing any discount or premium
over the period until maturity, which approximates market value.
The California Tax-Free Money Market, Money Market, and U.S. Treasury Money
Market Funds invest in securities with remaining maturities not exceeding 397
days (thirteen months), including obligations of the U.S. Government, bankers
acceptances, commercial paper and certain floating-and variable-rate
instruments. Certain of these floating- and variable-rate instruments may carry
a demand feature that would permit the holder to tender them back to the issuer
at par value prior to maturity.
The Short-Term Government-Corporate Income Fund invests only in shares of the
Short-Term Government-Corporate Income Master Portfolio of Master Investment
Trust (the "Trust"). The Short-Term Municipal Income Fund invests only in shares
of the Short-Term Municipal Income Master Portfolio (together with the
Short-Term Government-Corporate Income Master Portfolio, the "Master
Portfolios") of the Trust. Each Master Portfolio has the same investment
objective as the Fund bearing the corresponding name. The value of each Fund's
investment in its corresponding Master Portfolio reflects that Fund's interest
in the net assets of that Master Portfolio (99.99% and 99.99%) for the
Short-Term Government-Corporate Income and the Short-Term Municipal Income
Funds, respectively, at December 31, 1995. The Master Portfolio's investments
include fixed-, variable-, and floating-rate instruments. Certain of these
floating- and variable-rate instruments may carry a demand feature that would
permit the holder to tender them back to the issuer at par value prior to
maturity. 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
by procedures approved by the Trust's Board of Trustees.
Cash equivalents relating to firm commitment purchase agreements are segregated
by the custodian and may not be sold without appropriate replacement while any
firm commitment purchase agreement is outstanding.
132
<PAGE> 199
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Security transactions are accounted for on the date the securities are purchased
or sold (trade date). Dividend income is recognized on the ex-dividend date, and
interest income is accrued daily. Realized gains or losses are reported on the
basis of identified cost of securities delivered. Bond discounts are accreted
and premiums are amortized as required by the Internal Revenue Code.
TBA PURCHASE COMMITMENTS
The Variable Rate Government Fund enters into "TBA" (to be announced) purchase
commitments to purchase securities for a fixed price at a future date beyond
customary settlement time. Although the unit price of a TBA has been
established, the principal value has not been finalized. However, the amount of
the commitment will not flucuate more than 2% from the principal amount. The
Fund holds, and maintains until the settlement date, cash or high-quality debt
obligations in an amount sufficient to meet the purchase price. TBA purchase
commitments may be considered securities in themselves, and involve a risk of
loss if the value of the security to be purchased declines prior to the
settlement date. This risk is in addition to the risk of decline in the value of
the Fund's other assets. Unsettled TBA purchase commitments are valued at the
current market value of the underlying securities, generally acording to the
procedures described under "Security Valuation" above.
Although the Fund generally enters into TBA purchase commitments with the
intention of acquiring securities for its portfolio, the Fund may dispose of a
commitment prior to settlement if the Fund's adviser deems it appropriate to do
so.
TBA purchase commitments at December 31, 1995 were as follows:
<TABLE>
<CAPTION>
DELIVERY COUPON MARKET
AGENCY SHARES/PAR DATE RATE VALUE
<S> <C> <C> <C> <C>
.........................................................................................................
Ginnie Mae II ARM TBA 15,000,000 1/24/96 5.0% $ 15,030,000
Ginnie Mae ARM TBA 10,000,000 1/24/96 5.5% 10,021,000
</TABLE>
REPURCHASE AGREEMENTS
Transactions involving purchases of securities under agreements to resell
("repurchase agreements") are treated as collateralized financing transactions
and are recorded at their contracted resale amounts. These repurchase
agreements, if any, are detailed in each Fund's Portfolio of Investments. The
Funds' and Master Portfolios' adviser pools the cash and invests in repurchase
agreements entered into by the Funds and Master Portfolios. The repurchase
agreements must be fully collateralized based on values that are marked to
market daily. The collateral is held by an agent bank under a tri-party
agreement. It is the adviser's responsibility to value collateral daily and to
obtain additional collateral as necessary to maintain market value equal to or
greater than the resale price. The repurchase agreements held in the Funds and
Master Portfolios at December 31, 1995 are collateralized by U.S. Treasury or
federal agency obligations. The repurchase agreements were entered into on
December 29, 1995.
133
<PAGE> 200
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
DISTRIBUTIONS TO SHAREHOLDERS
Dividends to shareholders from net investment income of the Asset Allocation
Fund, if any, are declared and distributed quarterly. Dividends to shareholders
from net investment income of the Strategic Growth Fund, if any, are declared
and distributed annually. Dividends to shareholders from net investment income
are declared daily and distributed monthly for the California Tax-Free Bond,
California Tax-Free Money Market, Money Market, Municipal Income, Short-Term
Government-Corporate Income, Short-Term Municipal Income, U.S. Government
Income, U.S. Treasury Money Market and Variable Rate Government Funds. Any
distributions to shareholders from net realized capital gain are declared and
distributed annually.
FEDERAL INCOME TAXES
The Company's policy with respect to each Fund is to comply with the
requirements of the Internal Revenue Code that are applicable to regulated
investment companies and to distribute substantially all of the Fund's net
investment income and any net realized capital gains to its shareholders.
Therefore, no federal or state income tax provision is required. The following
funds had net capital loss carryforwards at December 31, 1995:
<TABLE>
<CAPTION>
YEAR NET CAPITAL LOSS
FUND EXPIRES CARRYFORWARD
<S> <C> <C>
...............................................................................................................
California Tax-Free Money Market Fund 2002 $ 67,605
Money Market Fund 2001 1,392
2002 36,799
2003 155,089
Municipal Income Fund 2002 3,600,931
2003 157,864
U.S. Government Income Fund 2002 1,212,813
2003 725,379
U.S. Treasury Money Market Fund 2002 12,441
2003 13,382
Variable Rate Government Fund 1999 978,191
2000 15,382,953
2001 2,818,400
2002 125,280,827
2003 7,526,188
</TABLE>
The Board intends to offset net capital gains with each capital loss
carryforward until each carryforward has been fully utilized or expires. No
capital gain distribution shall be made until the capital loss carryforward has
been fully utilized or expires.
Due to the timing of dividend distributions and the differences in accounting
for income and realized gains (losses) for financial statement and federal
income tax purposes, the fiscal year in
134
<PAGE> 201
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
which amounts are distributed may differ from the year in which the income and
realized gains (losses) were recorded by the portfolio. The differences between
the income or gains distributed on a book versus tax basis are shown as excess
distributions of net investment income and net realized gain on sales of
investments in the accompanying Statements of Changes in Net Assets.
ORGANIZATION EXPENSES
Stephens Inc. ("Stephens"), the Funds' administrator, sponsor and distributor,
has incurred expenses in connection with the organization and initial
registration of the various funds and their classes. These expenses were charged
to the individual Funds and are being amortized by the Funds or their classes on
a straightline basis over 60 months from the date the Funds commenced
operations.
2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into separate advisory contracts on behalf of the Funds,
except the Short-Term Government-Corporate Income and Short-Term Municipal
Income Funds, with Wells Fargo Bank, N.A. ("WFB"). Pursuant to the contracts,
WFB has agreed to provide the Funds with investment guidance and policy
direction in connection with daily portfolio management. Under the contract with
the Asset Allocation Fund, WFB is entitled to be paid a monthly advisory fee at
the annual rate of 0.70% of the Fund's average daily net assets up to $500
million and 0.60% of the remaining average daily net assets. Under the contracts
with the California Tax-Free Bond, Municipal Income, Strategic Growth, U.S.
Government Income and Variable Rate Government Funds, WFB is entitled to be paid
a monthly advisory fee at the annual rate of 0.50% of the average daily net
assets of each Fund. Under the contract with the California Tax-Free Money
Market Fund, WFB is entitled to be paid a monthly advisory fee at the annual
rate of 0.45% of the average daily net assets. Under the contracts with the
Money Market and U.S. Treasury Money Market Funds, WFB is entitled to be paid a
monthly advisory fee at the annual rate of 0.25% of the average daily net
assets.
The Company has entered into contracts on behalf of each Fund, except the Asset
Allocation Fund, with WFB whereby WFB is responsible for providing custody and
portfolio accounting services for the Funds. For all of these Funds, WFB is
entitled to an annual fee for custody services at the annual rate of 0.0167% of
the average daily net assets of each Fund. For portfolio accounting services,
WFB is entitled to a monthly base fee from each Fund of $2,000 plus an annual
fee of 0.07% of the first $50 million, 0.045% of the next $50 million and 0.02%
of the remaining average daily net assets.
In connection with the Asset Allocation Fund, the Company has entered into a
sub-advisory contract with Wells Fargo Nikko Investment Advisors ("WFNIA").
WFNIA is an affiliate of Wells Fargo & Company. Pursuant to the agreement WFB
pays WFNIA a subadvisory fee. Wells Fargo Institutional Trust Company N.A.
("WFITC"), a subsidiary of WFNIA, acts as custodian for this Fund. Custody fees
are paid to WFITC from the sub-advisory fee paid to WFNIA.
Effective January 1, 1996, BZW Barclays Global Fund Advisors ("BGFA") replaced
WFNIA as investment sub-adviser to the Asset Allocation Fund. BGFA was created
by the reorganization of
135
<PAGE> 202
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
WFNIA with and into an affiliate of WFITC. Pursuant to a sub-advisory contract
with the Fund and subject to the overall supervision of WFB, the Fund's
investment adviser, BGFA is responsible for day-to-day portfolio management of
the Fund. BGFA will continue to employ substantially the same personnel and will
continue to use the computer-based investment model developed and previously
used by WFNIA to determine the recommended mix of assets in the Fund's
portfolio. BGFA is entitled to receive from WFB an annual fee of $60,000 and
monthly fees at the annual rate of 0.20% of the Fund's average daily net assets
as compensation for its sub-advisory services. BGFA is an indirect subsidiary of
Barclays Bank PLC and is located at 45 Fremont Street, San Francisco, CA 94105.
As of January 1, 1996 BGFA and its affiliates provide investment advisory
services for over $220 billion of assets under management. As of January 1,
1996, WFB provides investment advisory services for approximately $33 billion of
assets.
Effective January 1, 1996, WFITC became a wholly owned subsidiary of BZW
Barclays Global Investors Holdings Inc. (formerly, The Nikko Building U.S.A.,
Inc.) and WFITC was renamed BZW Barclays Global Investors, N.A. ("BGI"). BGI
currently acts as the Asset Allocation Fund's custodian. BGFA is a subsidiary of
BGI. BGI will not be entitled to receive compensation for its services to the
Fund so long as BGFA is entitled to receive fees for providing investment
sub-advisory services to the Fund. The principal business address of BGI is 45
Fremont Street, San Francisco, California 94105.
The Company has entered into a contract on behalf of the Funds with WFB whereby
WFB provides transfer agent services for the Funds. Under the transfer agency
agreement, WFB is paid a per account fee and other related costs with a minimum
monthly fee of $3,000 per fund unless net assets of a fund are under $20
million. For as long as the assets remain under $20 million the fund will not be
charged any transfer agency fees by WFB.
The Funds, except the California Tax-Free Money Market, Money Market, Short-Term
Government-Corporate Income, Short-Term Municipal Income and U.S. Treasury Money
Market Funds, may enter into service agreements with one or more servicing
agents on behalf of Class D shares of the Funds. Under such agreements,
servicing agents have agreed to provide shareholder liaison services, including
responding to customer inquiries and providing information on their investments,
and to provide such other related services as the Fund or a Class D shareholder
may reasonably request. For these services, a servicing agent receives a fee, on
an annualized basis for
136
<PAGE> 203
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
the Fund's then-current fiscal year, not to exceed 0.25% of the average daily
net assets of the Class D shares of the Fund. Service fees paid on behalf of
Class D shares for the year ended December 31, 1995 are described below:
<TABLE>
<CAPTION>
SERVICE FEE
FUND CLASS D
<S> <C>
................................................................................................................
Asset Allocation Fund $ 31,150
California Tax-Free Bond Fund 18,322
Municipal Income Fund 35,700
Strategic Growth Fund 49,492
U.S. Government Income Fund 8,291
Variable Rate Government Fund 24,977
</TABLE>
The Company has entered into administration and distribution agreements on
behalf of the Funds with Stephens. Under the agreements, Stephens has agreed to
provide supervisory, administrative and distribution services to the Funds. For
providing supervisory and administrative services, the California Tax-Free Bond,
Short-Term Government-Corporate Income, Short-Term Municipal Income, Strategic
Growth and Variable Rate Government Funds have each agreed to pay Stephens a
monthly fee at the annual rate of 0.15% of each Fund's average daily net assets
up to $200 million and 0.10% of the average daily net assets in excess of $200
million. For the Asset Allocation, California Tax-Free Money Market and U.S.
Government Income Funds, Stephens is entitled to be compensated for
administrative services monthly at the annual rate of 0.10% of the average daily
net assets of such Fund up to $200 million and 0.05% of the average daily net
assets in excess of $200 million. The Money Market, Municipal Income and U.S.
Treasury Money Market Funds have each agreed to pay Stephens a monthly
administrative fee at the annual rate of 0.10% of each Fund's average daily net
assets.
The Company has adopted separate Distribution Plans for Class A and Class D
shares pursuant to Rule 12b-1 under the 1940 Act (each, a "Distribution Plan").
The Class A Distribution Plans for the California Tax-Free Bond, California
Tax-Free Money Market and U.S. Government Income Funds provide that each Fund
may defray all or part of the cost of preparing, printing and distributing
prospectuses and other promotional materials by paying on an annual basis up to
the greater of $100,000 or 0.05% of the Class A shares of a Fund's average daily
net assets for costs incurred. Each Fund may participate in joint distribution
activities with the other Funds, in which event expenses reimbursed out of the
assets of one of the Funds may be attributable, in part, to the distribution-
related activities of another Fund. Generally, the expenses of joint
distribution activities are allocated among the Funds in proportion to their
relative net asset sizes.
The Company also has adopted separate distribution plans pursuant to Rule 12b-1
under the 1940 Act, whereby on behalf of Class A shares of the Asset Allocation,
Money Market, Municipal Income, Strategic Growth, U.S. Treasury Money Market and
Variable Rate Government Funds and shares of the Short-Term Government-Corporate
and Short-Term Municipal Income Funds, a Fund may pay Stephens, as compensation
for distribution-related services, a monthly fee at an annual rate of up to
137
<PAGE> 204
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
0.25% of the average daily net assets attributable to the Fund's shares.
Payments under the Distribution Plan for the Class A shares of the Municipal
Income Fund currently are capped by WFB and Stephens at the annual rate of 0.15%
of the average daily net assets of the Class A shares. The Class D Distribution
Plan of the Asset Allocation Fund and Strategic Growth Fund provides that a Fund
may pay the Distributor a monthly fee at an annual rate of up to 0.75% of each
such Fund's average daily net assets attributable to Class D shares. In
addition, the Class D Distribution Plan for the California Tax-Free Bond,
Municipal Income, U.S. Government Income and Variable Rate Government Funds may
pay Stephens, as compensation for distribution-related services, a monthly fee
at annual rates of up to 0.50% of the average daily net assets attributable to
the Fund's Class D shares. Through February 28, 1995, a portion of the Municipal
Income Fund Class A distribution fee was charged to net capital for income tax
purposes.
<TABLE>
<CAPTION>
DISTRIBUTION FEES
FUND CLASS A
<S> <C>
................................................................................................................
Asset Allocation Fund $ 120,417
California Tax-Free Bond Fund 0
Municipal Income Fund 83,443
Strategic Growth Fund 102,390
U.S. Government Income Fund 0
Variable Rate Government Fund 2,032,814
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION FEES
FUND CLASS D
<S> <C>
................................................................................................................
Asset Allocation Fund $ 93,450
California Tax-Free Bond Fund 36,643
Municipal Income Fund 67,939
Strategic Growth Fund 148,475
U.S. Government Income Fund 16,582
Variable Rate Government Fund 49,954
</TABLE>
138
<PAGE> 205
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
WAIVED FEES AND REIMBURSED EXPENSES
The following fees/expenses were waived/reimbursed for the year ended December
31, 1995:
<TABLE>
<CAPTION>
REIMBURSED
FUND WAIVED FEES EXPENSES TOTAL
<S> <C> <C> <C>
.............................................................................................................
Asset Allocation $ 39,137 $ 0 $ 39,137
California Tax-Free Bond 574,744 0 574,744
California Tax-Free Money Market 17,718 0 17,718
Money Market 145,674 0 145,674
Municipal Income 321,109 0 321,109
Short-Term Government-Corporate Income 10,060 103,836 113,896
Short-Term Municipal Income 9,962 91,759 101,721
Strategic Growth 57,496 0 57,496
U.S. Government Income 142,902 0 142,902
U.S. Treasury Money Market 203,631 0 203,631
Variable Rate Government 983,094 0 983,094
</TABLE>
Waived fees and reimbursed expenses continue at the discretion of WFB and the
administrator.
All of the officers and certain of the directors of the Company are also
officers of Stephens. At December 31, 1995, Stephens owned 180,335 shares of the
Asset Allocation Fund, 1,667 shares of the California Tax-Free Bond Fund, 46,012
shares of the California Tax-Free Money Market Fund, 1,344,975 shares of the
Money Market Fund, 13,005 shares of the Municipal Income Fund, 6,030 shares of
the Strategic Growth Fund, 2,851 shares of the U.S. Government Income Fund,
123,930 shares of the U.S. Treasury Money Market Fund and 13,444 shares of the
Variable Rate Government Fund.
Stephens has retained $1,424,127 as sales charges from the proceeds of Class A
capital shares sold and $23,048 as proceeds from Class D capital shares redeemed
by the Company for the year ended December 31, 1995. Wells Fargo Securities
Inc., a subsidiary of WFB, received $31,366 as sales charges from the proceeds
of Class A capital shares sold by the Company for the year ended December 31,
1995.
139
<PAGE> 206
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
3. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, exclusive of short-term securities, for each
Fund for the year ended December 31, 1995, were as follows:
<TABLE>
<CAPTION>
ASSET CALIFORNIA MUNICIPAL
AGGREGATE PURCHASES ALLOCATION TAX-FREE INCOME
AND SALES OF: FUND BOND FUND FUND
<S> <C> <C> <C>
.............................................................................................................
U.S. GOVERNMENT OBLIGATIONS:
Purchases at cost $ 1,925,625 $ 0 $ 0
Sales proceeds 24,476,791 0 0
OTHER SECURITIES:
Purchases at cost 25,759,100 102,928,974 11,320,000
Sales proceeds 7,490,150 136,242,403 38,242,630
<CAPTION>
U.S.
STRATEGIC GOVERNMENT VARIABLE RATE
AGGREGATE PURCHASES GROWTH INCOME GOVERNMENT
AND SALES OF: FUND FUND FUND
<S> <C> <C> <C>
.............................................................................................................
U.S. GOVERNMENT OBLIGATIONS:
Purchases at cost $ 0 $ 14,373,672 $ 185,689,844
Sales proceeds 0 24,558,750 201,433,047
OTHER SECURITIES:
Purchases at cost 122,483,641 19,956,049 1,811,104,565
Sales proceeds 100,543,477 19,605,320 2,300,349,324
.............................................................................................................
</TABLE>
ALL FUNDS NOT REFLECTED IN THIS SCHEDULE TRADED EXCLUSIVELY IN SHORT-TERM
SECURITIES OR WERE FEEDER FUNDS THAT INVEST ALL THEIR ASSETS IN A CORRESPONDING
MASTER PORTFOLIO.
4. CAPITAL SHARES TRANSACTIONS
As of December 31, 1995, there were 20 billion shares of $.001 par value capital
stock authorized by the Company. As of December 31, 1995, each Fund was
authorized to issue 100 million shares of $.001 par value capital stock for each
class of shares, except the California Tax-Free Money Market Fund, the Money
Market Fund, the U.S. Treasury Money Market Fund, and the Variable Rate
Government Fund which are as follows:
<TABLE>
<CAPTION>
SHARES
FUND AUTHORIZED
<S> <C>
................................................................................................................
California Tax-Free Money Market Fund 3 billion
Money Market Fund 1 billion
U.S. Treasury Money Market Fund 1 billion
Variable Rate Government Fund 500 million
</TABLE>
Transactions in capital shares for the year ended December 31, 1995 are
disclosed in detail in the Statements of Changes in Net Assets.
140
<PAGE> 207
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
The following funds have shareholders who own greater than 5% of the outstanding
share capital of the Fund. This concentration of ownership may expose the Fund
to the risks associated with significant redemptions.
<TABLE>
<CAPTION>
NUMBER OF
SHAREHOLDERS WITH GREATER
FUND THAN 5% OWNERSHIP
<S> <C>
................................................................................................................
California Tax-Free Money Market Fund 1
Money Market Fund 2
Short-Term Government-Corporate Income Fund 7
Short-Term Municipal Income Fund 5
U.S. Treasury Money Market Fund 3
Variable Rate Government Fund 2
</TABLE>
5. INCOME ALLOCATIONS
The Short-Term Government Corporate-Income and Short-Term Municipal Income Funds
are each allocated net investment income from their corresponding Master
Portfolio. The detail of allocated net investment income for the year ended
December 31, 1995 is as follows:
<TABLE>
<CAPTION>
NET
WAIVED INVESTMENT
INTEREST DIVIDENDS EXPENSES FEES INCOME
<S> <C> <C> <C> <C> <C>
..........................................................................................................
Short-Term Government-Corporate Income
Fund $ 150,854 $ 0 $ 41,340 $ (41,340) $ 150,854
Short-Term Municipal Income Fund 617,987 0 104,339 (104,339) 617,987
</TABLE>
6. ORANGE COUNTY CALIFORNIA DEBT OBLIGATIONS
During the year the Money Market Fund held obligations issued by Orange County,
California. Orange County filed for protection under Chapter 9 of the Federal
Bankruptcy Code on December 6, 1994 and defaulted on such obligations on July
10, 1995. The bankruptcy court trustee approved an extension of the obligations'
maturity to June 30, 1996 and modification of certain other terms, including
increasing the interest rate and providing for some portion of interest to
accrue until the maturity date rather than being due and payable monthly.
Concurrent with the default by Orange County, the Company entered into a Credit
Enhancement Agreement (the "Agreement") with WFB, pursuant to which the Fund was
named as a beneficiary of an irrevocable letter of credit issued by Bank of
America National Trust and Savings Association ("Bank of America"). The
Agreement provided support for a portion of the Orange County obligations such
that Bank of America would make certain payments to the Fund under defined
circumstances.
During the period from September 19, 1995 through October 17, 1995, the Money
Market Fund sold all of the Orange County obligations. The sale of such
obligations did not result in any payments from Bank of America to the Money
Market Fund.
141
<PAGE> 208
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
7. VARIABLE RATE GOVERNMENT FUND LITIGATION
A purported class action lawsuit was filed on March 14, 1995 in the United
States District Court for the Southern District of California by Conrad D.
Schaefer and Diane L. Schaefer, Trustees for the Schaefer Family Trust of 1992
against the Overland Express Variable Rate Government Fund, WFB and Wells Fargo
& Company. Plaintiffs voluntarily withdrew that complaint and served defendants
with a First Amended Complaint, also a putative class action, on June 2, 1995.
In the First Amended Complaint, as in the original complaint, plaintiffs sought
to sue on behalf of persons who bought the fund during the period from January
1, 1991 and March 10, 1995, alleging that defendants violated the Securities Act
of 1933, the Securities Exchange Act of 1934, the 1940 Act and common law by,
among other things, failing to disclose adequately the risks of investing in the
Fund. By Order dated October 30, 1995, the Court granted defendants' motions to
dismiss the First Amended Complaint in its entirety. The Court dismissed certain
claims with prejudice, but gave plaintiffs permission to replead other claims.
On January 11, 1996, plaintiffs served defendants with a Second Amended
Complaint. The Second Amended Complaint names Stephens as an additional
defendant and changes the alleged Class to those who purchased, acquired or held
shares of the Fund from June 30, 1993 through December 31, 1994. The Second
Amended Complaint seeks to assert claims under federal and California securities
laws and common law relating to alleged misstatements and omissions in the
prospectuses, reports and marketing materials pertaining to the Fund; it alleges
that the Class as a whole suffered substantial, but unspecified damages in
connection with the purchase of securities covered by the Fund's offering
documents over the course of the specified period. The Company continues to
believe that the case is without merit and intends to defend vigorously against
the action.
8. SHAREHOLDER MEETINGS
A. OVERLAND EXPRESS ASSET ALLOCATION FUND APPROVAL OF NEW SUB-ADVISER AND
INVESTMENTS IN FUTURES AND RELATED TRANSACTIONS
The Company received shareholder approval for a new sub-advisory contract for
the Asset Allocation Fund with Wells Fargo Bank, as adviser, and BZW Barclays
Global Fund Advisors (the successor entity to WFNIA), as sub-adviser. This
action was necessary because of the purchase by a subsidiary of Barclays Bank
PLC of WFNIA. The Company also received shareholder approval for an investment
policy to permit the Fund to engage in the purchase and sale of certain futures
contracts and related transactions.
B. OVERLAND EXPRESS STRATEGIC GROWTH FUND APPROVAL OF REORGANIZATION TO
MASTER-FEEDER STRUCTURE
The Company received shareholder approval for a proposed reorganization of the
Strategic Growth Fund into a master-feeder structure. Under this structure, the
Fund will become a feeder fund and will invest in a corresponding newly
established Master Portfolio. The reorganization will not result in any changes
to the Fund's investment objective. WFB has agreed to absorb the additional
expenses for at least one year after the reorganization.
142
<PAGE> 209
OVERLAND EXPRESS FUNDS, INC.
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
OVERLAND EXPRESS FUNDS, INC.:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Asset Allocation Fund, California Tax-Free
Bond Fund, California Tax-Free Money Market Fund, Money Market Fund, Municipal
Income Fund, Short-Term Government-Corporate Income Fund (formerly the 1-3 Year
Duration Full Faith and Credit Government Income Fund), Short-Term Municipal
Income Fund (formerly the 1-3 year Duration Municipal Income Fund), Strategic
Growth Fund, U.S. Government Income Fund, U.S. Treasury Money Market Fund and
Variable Rate Government Fund (eleven of the funds comprising Overland Express
Funds, Inc.) as of December 31, 1995, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
two years in the period then ended, except for Short-Term Government Corporate
Income Fund which is for the period from September 19, 1994 (commencement of
operations) to December 31, 1994, and Short-Term Municipal Income Fund which is
for the period from June 3, 1994 (commencement of operations) to December 31,
1994, and financial highlights for the periods indicated herein. These financial
statements and financial highlights are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of
December 31, 1995, by examination and other appropriate audit procedures. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the aforementioned funds of Overland Express Funds, Inc. as of December 31,
1995, the results of their operations, the changes in their net assets and their
financial highlights for the periods indicated herein in conformity with
generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
SAN FRANCISCO, CALIFORNIA
FEBRUARY 14, 1996
143
<PAGE> 210
MASTER INVESTMENT TRUST SHORT-TERM GOVERNMENT-
CORPORATE INCOME MASTER PORFOLIO - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
U.S. TREASURY SECURITIES - 97.62%
U.S. TREASURY NOTES - 97.62%
$3,200,000 U.S. Treasury Notes 6.13% 05/31/97 $3,239,008
2,500,000 U.S. Treasury Notes 6.75 02/28/97 2,542,575
----------
TOTAL U.S. TREASURY
SECURITIES $5,781,583
(Cost $5,766,993)
SHORT-TERM INSTRUMENTS - 1.57%
REPURCHASE AGREEMENTS - 1.57%
$ 93,000 Goldman Sachs Pooled
Repurchase Agreement -
102% Collateralized by U.S.
Government Securities 5.75% 01/02/96 $ 93,000
(Cost $93,000)
TOTAL INVESTMENTS IN SECURITIES
(Cost $5,859,993)*
(Notes 1 and 3) 99.19% $5,874,583
Other Assets and Liabilities Net 0.81 48,039
------ ----------
TOTAL NET ASSETS 100.00% $5,922,622
- --------------------------------------------------------------------------------
* Cost for federal income tax purposes is the same as for financial statement
purposes and net unrealized appreciation consists of:
Gross Unrealized Appreciation $ 14,590
Gross Unrealized Depreciation 0
---------
Net Unrealized Appreciation $ 14,590
=========
The accompanying notes are an integral part of these financial statements.
145
<PAGE> 211
MASTER INVESTMENT TRUST SHORT-TERM MUNICIPAL INCOME MASTER PORTFOLIO -
DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS - 88.09%
ARIZONA - 5.94%
$ 200,000 Arizona State Transportation Board Excise Tax
Revenue Maricopa County Regional Area Road
Funding MBIA Insured 6.70 % 07/01/96 $ 202,864
700,000 Arizona State Transportation Board Tax Revenue
Maricopa County Regional Area Road Fund MBIA
Insured 7.00 07/01/00 774,662
CALIFORNIA - 10.90%
420,000 California State Maritime Infrastructure
Authority Port of San Diego Revenue AMBAC
Insured 4.20 11/01/98 419,202
500,000 Los Angeles CA DW&P Electric Plant Revenue
Second Issue 9.00 11/15/97 545,370
500,000 Los Angeles County CA COP Van Nuys Courthouse
Project Prerefunded 8.90 06/01/06 520,460
300,000 Modesto CA Irrigation District 86 Geysers
Geothermal Power Project Series A 6.60 10/01/97 310,614
DELAWARE - 2.47%
400,000 Delaware State GO Series C 4.70 07/01/98 406,576
ILLINOIS - 7.58%
200,000 Chicago IL AMBAC Insured 6.00 01/01/98 207,088
500,000 Illinois State Municipal Electric Agency Power
Supply System Revenue Series A 5.70 02/01/96 500,810
500,000 Illinois State Sales Tax Revenue Series E
Prerefunded 8.10 06/15/10 538,340
INDIANA - 3.04%
500,000 Indiana State Bond Bank Advance Funding Notes
Series A-2 5.75 01/10/96 500,282
MARYLAND - 1.41%
225,000 Prince Georges County MD Series A 6.60 02/01/97 232,110
</TABLE>
146
<PAGE> 212
MASTER INVESTMENT TRUST SHORT-TERM MUNICIPAL INCOME MASTER PORTFOLIO -
DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS - CONTINUED
MINNESOTA - 2.86%
$ 200,000 Minneapolis MN Special School District No. One
COP Prerefunded 7.38 02/01/15 $ 213,304
255,000 Minnesota State Convention Center Prerefunded 6.75 04/01/12 256,948
MISSOURI - 1.24%
200,000 Branson MO Tax Allocation Revenue Street
Improvement Project CGIC Insured 4.95 10/01/97 203,524
NEW JERSEY - 8.28%
500,000 Mercer County NJ Solid Waste Site Project
Prerefunded 7.90 04/01/13 533,495
600,000 New Jersey State Transportation Authority Fund
Series A Escrowed to Maturity 4.10 06/15/97 602,076
225,000 New Jersey State Wastewater Revenue Series B 6.50 05/15/96 227,293
NEW YORK - 6.28%
250,000 New York State Mortgage Agency Revenue
Homeowner Mortgage Series 44 AMT FHA
Collateralized 6.00 04/01/99 256,245
250,000 New York State Power Authority Revenue &
General Purpose Series T Prerefunded 7.40 01/01/06 255,048
500,000 United Nations Development Corp Revenue Phase
Two & Three Series B Prerefunded 8.13 07/01/06 520,875
NORTH CAROLINA - 3.12%
500,000 North Carolina State Municipal Power Agency
Catawba No 1 Electrical Revenue FGIC Insured 5.10 01/01/99 512,665
OREGON - 1.87%
300,000 Lane County OR School District No. 52 FGIC
Insured 5.20 12/01/97 306,771
</TABLE>
147
<PAGE> 213
MASTER INVESTMENT TRUST SHORT-TERM MUNICIPAL INCOME MASTER PORTFOLIO -
DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS - CONTINUED
PENNSYLVANIA - 1.36%
$ 200,000 Montgomery County PA Higher Education & Health
Authority Hospital Revenue Bryn Manor Hospital
Project Prerefunded 9.38 12/01/19 $ 223,258
PUERTO RICO - 3.03%
500,000 Commonwealth of Puerto Rico Aquaduct and Sewer
Authority Revenue 4.50 07/01/99 497,920
TEXAS - 8.46%
240,000 Brazos TX Higher Education Authority AMT Series
C-1 6.00 11/01/99 252,761
275,000 Dallas TX Waterworks & Sewer System Revenue
Series A 9.00 10/01/97 298,268
500,000 Northside TX Independent School District PSFG
Insured 8.60 08/01/97 534,640
275,000 Port of Houston Authority TX AMT 8.50 10/01/98 305,143
VIRGINIA - 4.49%
700,000 Virginia State Public School Authority Series A 7.00 01/01/98 738,031
WASHINGTON - 9.39%
200,000 Southern Columbia Basin WA Irrigation District 5.50 12/01/98 208,990
200,000 Tacoma WA Sewer Revenue Series B FGIC Insured 5.00 12/01/96 201,492
500,000 Thirstin County WA Olympia USD No 111 FGIC
Insured 5.25 12/01/98 516,855
300,000 Washington State HFFA Revenue Highline
Community Hospital LOC - Bank of Tokyo Ltd 7.40 08/15/09 312,618
300,000 Washington State Public Power Supply System
Nuclear Project Number Three Revenue Series B 6.70 07/01/96 303,726
</TABLE>
148
<PAGE> 214
MASTER INVESTMENT TRUST SHORT-TERM MUNICIPAL INCOME MASTER PORTFOLIO -
DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS - CONTINUED
WEST VIRGINIA - 3.29%
$ 500,000 West Virginia State HFFA Charleston Area
Medical Center Series A MBIA Insured 4.30 09/01/99 $ 500,475
40,000 West Virginia State Hospital Financing
Authority West Virginia Hospital Inc MBIA
Insured 7.20 06/01/16 41,363
WISCONSIN - 3.08%
500,000 Wisconsin State Transportation Series A 6.50 07/01/96 506,510
------------
TOTAL MUNICIPAL BONDS $ 14,488,672
(Cost $14,359,819)
SHORT-TERM INSTRUMENTS - 10.43%
MONEY MARKET FUNDS - 3.74%
$ 615,000 National Municipal Fund $ 615,000
VARIABLE RATE MUNICIPAL BONDS+ - 6.69%
$ 500,000 Northeast Maryland State Waste Disposal
Authority Harford County V/R AMBAC Insured 5.05 % 01/01/08 $ 500,000
600,000 Clark County NV Airport Improvement Revenue
Series A-1 V/R LOC - Toronto Dominion Bank 5.05 07/01/25 600,000
------------
TOTAL VARIABLE RATE MUNICIPAL BONDS $ 1,100,000
TOTAL SHORT-TERM INSTRUMENTS $ 1,715,000
(Cost $1,715,000)
</TABLE>
149
<PAGE> 215
MASTER INVESTMENT TRUST SHORT-TERM MUNICIPAL INCOME MASTER PORTFOLIO -
DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<C> <S> <C> <C> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $16,074,819)* (Notes 1 and 3) 98.52 % $ 16,203,672
Other Assets and Liabilities, Net 1.48 243,032
---------- -------------
TOTAL NET ASSETS 100.00 % $ 16,446,704
---------- -------------
---------- -------------
...............................................................................
</TABLE>
+ THESE VARIABLE RATE SECURITIES ARE SUBJECT TO A DEMAND FEATURE WHICH
REDUCES THE REMAINING MATURITY.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 129,315
Gross Unrealized Depreciation (462)
-------------
NET UNREALIZED APPRECIATION $ 128,853
-------------
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
150
<PAGE> 216
MASTER INVESTMENT TRUST
STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHORT-TERM SHORT-TERM
GOVERNMENT- MUNICIPAL
CORPORATE INCOME INCOME
MASTER PORTFOLIO MASTER PORTFOLIO
<S> <C> <C>
.............................................................................................
ASSETS
INVESTMENTS:
In securities, at market value (see cost below) $ 5,874,583 $ 16,203,672
Cash 1,148 1,746
Receivables:
Dividends and interest 74,174 293,490
Due from administrator (Note 2) 5,729 14,604
Organization expenses, net of amortization 2,742 2,087
Prepaid expenses 73 74
TOTAL ASSETS 5,958,449 16,515,673
LIABILITIES
Payables:
Allocations to beneficial interest holders 32,688 63,483
Other 3,139 5,486
TOTAL LIABILITIES 35,827 68,969
TOTAL NET ASSETS $ 5,922,622 $ 16,446,704
INVESTMENTS AT COST (NOTE 3) $ 5,859,993 $ 16,074,819
</TABLE>
...............................................................................
The accompanying notes are an integral part of these financial statements.
151
<PAGE> 217
MASTER INVESTMENT TRUST
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHORT-TERM SHORT-TERM
GOVERNMENT- MUNICIPAL
CORPORATE INCOME INCOME
MASTER PORTFOLIO MASTER PORTFOLIO
<S> <C> <C>
.............................................................................................
INVESTMENT INCOME
Interest $ 150,854 $ 617,988
TOTAL INVESTMENT INCOME 150,854 617,988
EXPENSES (NOTE 2)
Advisory fees 11,944 62,512
Custody fees 399 2,156
Amortization of organization expenses 685 275
Legal and audit fees 26,312 34,921
Other 2,000 4,475
TOTAL EXPENSES 41,340 104,339
Less:
Waived and reimbursed fees (Note 2) (41,340) (104,339)
NET EXPENSES 0 0
NET INVESTMENT INCOME (LOSS) 150,854 617,988
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on sale of investments 3,975 19,197
Net change in unrealized appreciation (depreciation)
of investments 16,126 157,711
NET GAIN ON INVESTMENTS 20,101 176,908
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 170,955 $ 794,896
</TABLE>
...............................................................................
The accompanying notes are an integral part of these financial statements.
152
<PAGE> 218
MASTER INVESTMENT TRUST
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SHORT-TERM GOVERNMENT- CORPORATE INCOME
. For the MASTER PORTFOLIO
For the
Period Ended
Year Ended December 31,
December 31, 1995 1994(1)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss) $ 150,854 $ 1,617
Net realized gain (loss) on sale of investments 3,975 0
Net change in unrealized appreciation (depreciation) of
investments 16,126 (1,536)
NET INCREASE (DECREASE) RESULTING FROM OPERATIONS 170,955 81
NET INCREASE IN NET ASSETS RESULTING FROM BENEFICIAL INTEREST
TRANSACTIONS] 5,655,489 97,709
INCREASE IN NET ASSETS 5,826,444 96,173
NET ASSETS:
Beginning net assets 96,178 5
ENDING NET ASSETS $ 5,922,622 $ 96,178
</TABLE>
...............................................................................
(1) THE MASTER PORTFOLIO COMMENCED OPERATIONS ON SEPTEMBER 19, 1994.
The accompanying notes are an integral part of these financial statements.
153
<PAGE> 219
MASTER INVESTMENT TRUST
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SHORT-TERM MUNICIPAL INCOME MASTER
. For the PORTFOLIO
For the
Period Ended
Year Ended December 31,
December 31, 1995 1994(1)
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income
(loss) $ 617,988 $ 73,315
Net realized gain (loss)
on sale of investments 19,197 (1,075)
Net change in unrealized
appreciation
(depreciation) of
investments 157,711 (28,859)
NET INCREASE (DECREASE)
RESULTING FROM OPERATIONS 794,896 43,381
NET INCREASE IN NET ASSETS
RESULTING FROM BENEFICIAL
INTEREST
TRANSACTIONS] 3,872,671 11,809,066
INCREASE IN NET ASSETS 4,667,567 11,779,132
NET ASSETS:
Beginning net assets 11,779,137 5
ENDING NET ASSETS $ 16,446,704 $ 11,779,137
</TABLE>
...............................................................................
(1) THE MASTER PORTFOLIO COMMENCED OPERATIONS ON JUNE 3, 1994.
The accompanying notes are an integral part of these financial statements.
154
<PAGE> 220
MASTER INVESTMENT TRUST
SHORT-TERM MASTER PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The Short-Term Municipal Income Master Portfolio and the Short-Term
Government-Corporate Income Master Portfolio (the "Master Portfolios") are two
series of Master Investment Trust (the "Trust"), a business trust organized
under the laws of Delaware on August 14, 1991. The Trust is registered as an
investment company under the Investment Company Act of 1940 as amended (the
"1940 Act"). The Declaration of Trust permits the issuance of beneficial
interests ("interests"). The Trust currently issues three series of investment
portfolios: the Cash Investment Trust Master Portfolio, the Short-Term
Government-Corporate Income Master Portfolio and the Short-Term Municipal Income
Master Portfolio. These Funds invest in a range of securities, generally
including money market instruments, equities and U.S. government securities.
The following significant accounting policies are consistently followed by the
Trust in the preparation of its financial statements, and such policies are in
conformity with Generally Accepted Accounting Principles for investment
companies. These financial statements are representative of only the Short-Term
Government-Corporate Income Master Portfolio and the Short-Term Municipal Income
Master Portfolio.
The preparation of financial statements in conformity with Generally Accepted
Accounting Principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INVESTMENT POLICY AND SECURITY VALUATION
Each Master Portfolio's investments include fixed-, variable- and floating-rate
instruments. Except during temporary defensive periods, each Master Portfolio
seeks to maintain an average weighted maturity ranging from 90 days to 2 years.
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 accordance
with procedures adopted by the Board of Trustees.
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Security transactions are accounted for on the date the securities are purchased
or sold (trade date). Interest income is accrued daily. Realized gains and
losses are reported on the basis of identified cost of securities delivered.
Bond discounts and premiums are amortized as required by the Internal Revenue
Code.
FEDERAL INCOME TAXES
Each Master Portfolio intends to qualify for federal income tax purposes as a
partnership. Management of each Master Portfolio therefore believes that it will
not be subject to any federal or
155
<PAGE> 221
MASTER INVESTMENT TRUST
SHORT-TERM MASTER PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
state income tax on its income and net capital gains (if any). However, each
investor in a Master Portfolio will be taxed on its distributive share of the
partnership's income for purposes of determining its federal and state income
tax liabilities. The determination of such share will be made in accordance with
the Internal Revenue Code of 1986, as amended ("Code"), and the regulations
promulgated thereunder.
It is intended that the Master Portfolios' assets, income and allocations will
be managed in such a way that a regulated investment company investing in the
Master Portfolio will be able to satisfy the requirements of Subchapter M of the
Code, assuming that the investment company invests all of its assets in the
Master Portfolio.
ORGANIZATION EXPENSES
Costs incurred in connection with organization and initial registration as an
investment company under the 1940 Act were advanced by Stephens Inc.
("Stephens"). Organization expenses of each series are being amortized on a
straight line basis over 60 months from the date the series of the Trust
commenced operation.
2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into separate advisory contracts with WFB on behalf of
each Master Portfolio. Pursuant to the contracts, WFB furnishes investment
guidance and policy direction in connection with daily portfolio management of
each Master Portfolio. Under the contract, WFB is entitled to receive a monthly
advisory fee at an annual rate of 0.50% of the average daily net assets.
The Trust has also entered into a contract with WFB whereby WFB has agreed to
provide custody services for each Master Portfolio. For providing these
services, WFB is entitled to be compensated for custody services based on a rate
of 0.0167% of the average daily net assets of each Master Portfolio.
WAIVED FEES AND REIMBURSED EXPENSES
Waived fees and reimbursed expenses for the year ended December 31, 1995, were
as follows:
<TABLE>
<CAPTION>
WAIVED FEES REIMBURSED EXPENSES
MASTER PORTFOLIO BY WFB BY STEPHENS
<S> <C> <C>
..............................................................................................................
Short-Term Government-Corporate Income $12,343 $28,997
Short-Term Municipal Income 64,668 39,671
</TABLE>
Waived fees and reimbursed expenses continue at the discretion of WFB and
Stephens.
156
<PAGE> 222
MASTER INVESTMENT TRUST
SHORT-TERM MASTER PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
3. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments exclusive of securities with maturities of
one year or less at purchase date for the Short-Term Government-Corporate Income
Master Portfolio and the Short-Term Municipal Income Master Portfolio,
respectively, for the year ended December 31, 1995, were as follows:
<TABLE>
<CAPTION>
SHORT-TERM
GOVERNMENT - SHORT-TERM
AGGREGATE PURCHASES CORPORATE INCOME MUNICIPAL INCOME
AND SALES OF: MASTER PORTFOLIO MASTER PORTFOLIO
<S> <C> <C>
...............................................................................................................
U.S. GOVERNMENT OBLIGATIONS:
Purchases at cost $10,833,717 $0
Sales proceeds 5,159,266 0
OTHER LONG-TERM SECURITIES:
Purchases at cost 0 10,485,249
Sales proceeds 0 4,115,783
</TABLE>
4. FINANCIAL HIGHLIGHTS
The portfolio turnover rates, excluding securities with maturities of one year
or less at purchase date for each Master Portfolio for the year ended December
31, 1995 are as follows:
<TABLE>
<CAPTION>
SHORT-TERM
GOVERNMENT- SHORT-TERM
CORPORATE INCOME MUNICIPAL INCOME
MASTER PORTFOLIO MASTER PORTFOLIO
<S> <C> <C> <C> <C>
......................................... ........................................
<CAPTION>
FROM FROM
SEPTEMBER 19, 1994 JUNE 3, 1994
YEAR (INCEPTION) YEAR (INCEPTION)
ENDED TO ENDED TO
DECEMBER 31, 1995 DECEMBER 31, 1994 DECEMBER 31, 1995 DECEMBER 31, 1994
<S> <C> <C> <C> <C>
......................................................................................................................
PORTFOLIO TURNOVER 227% 0% 46% 8%
</TABLE>
157
<PAGE> 223
TO THE UNITHOLDERS AND BOARD OF TRUSTEES
MASTER INVESTMENT TRUST:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Short-Term Government-Corporate Income
Master Portfolio (formerly the 1-3 Year Duration Full Faith and Credit
Government Income Master Portfolio) and Short-Term Municipal Income Master
Portfolio (formerly the 1-3 year Duration Municipal Income Master Portfolio)
(two of the master portfolios comprising Master Investment Trust) as of December
31, 1995, and the related statement of operations for the year then ended, the
statements of changes in net assets and financial highlights for the year then
ended and for Short-Term Government-Corporate Income Master Portfolio, the
period from September 19, 1994 (commencement of operations) to December 31,
1994, and for Short-Term Municipal Income Master Portfolio, the period from June
3, 1994 (commencement of operations) to December 31, 1994. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of
December 31, 1995, by examination and other appropriate audit procedures. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the aforementioned master portfolios of Master Investment Trust as of
December 31, 1995, the results of their operations, the changes in their net
assets and their financial highlights for the periods indicated herein in
conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
SAN FRANCISCO, CALIFORNIA
FEBRUARY 14, 1996
158
<PAGE> 224
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
(1) The following audited financial statements for the fiscal year
ended December 31, 1995 for the Asset Allocation, California Tax-Free
Bond, California Tax-Free Money Market, Money Market, Municipal Income,
Overland Sweep, Short-Term Government-Corporate Income, Short-Term
Municipal Income, Strategic Growth, U.S. Government Income, U.S.
Treasury Money Market and Variable Rate Government Funds of Overland
Express Funds, Inc., and the Cash Investment Trust, Short-Term
Municipal Income and Short-Term Government-Corporate Income Master
Portfolios of the Trust are included in Part B, Item 23:
Portfolio of Investments - December 31, 1995
Statement of Assets and Liabilities - December 31, 1995
Statement of Operations for the year ended December 31, 1995
Statement of Changes in Net Assets for the year ended December 31, 1995
Financial Highlights for the year ended December 31, 1995
Notes to Financial Statements - December 31, 1995
Independent Auditors Report dated February 14, 1996
(2) The audited financial statements for the fiscal year ended
December 31, 1995 for the Asset Allocation, Corporate Stock and U.S.
Government Allocation Funds of Stagecoach Funds, Inc. ("Stagecoach")
(SEC File Nos. 33-42927; 811-6419), the "predecessor funds" to the Asset
Allocation, Corporate Stock and U.S. Government Allocation Master
Portfolios, and certain other Funds of Stagecoach are incorporated by
reference to Post-Effective Amendment No. 21 to the Registration
Statement of Stagecoach, filed February 29, 1996.
(b) Exhibits:
Exhibit
Number Description
------- -----------
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.
2 - By-Laws, incorporated by reference to the
Registration Statement on Form N-1A filed on
September 24, 1991.
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Exhibit
Number Description
------- -----------
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, filed herewith.
5(e) - Investment Advisory Contract with Wells Fargo Bank,
N.A. on behalf of the Capital Appreciation Master
Portfolio, filed herewith.
5(f)(i) - Investment Advisory Contract with Wells Fargo Bank,
N.A. on behalf of the Asset Allocation Master
Portfolio, filed herewith.
5(f)(ii) - Sub-Advisory Contract with BZW Barclays Global Fund
Advisors on behalf of the Asset Allocation Master
Portfolio, filed herewith.
5(g)(i) - Investment Advisory Contract with Wells Fargo Bank,
N.A. on behalf of the Corporate Stock Master
Portfolio, filed herewith.
5(g)(ii) - Sub-Advisory Contract with BZW Barclays Global Fund
Advisors on behalf of the Corporate Stock Master
Portfolio, filed herewith.
5(h)(i) - Investment Advisory Contract with Wells Fargo Bank,
N.A. on behalf of the U.S. Government Allocation
Master Portfolio, filed herewith.
5(h)(ii) - Sub-Advisory Contract with BZW Barclays Global Fund
Advisors on behalf of the U.S. Government Allocation
Master Portfolio, filed herewith.
6 - Amended Placement Agency Agreement, incorporated by
reference to Amendment No. 3 filed on May 2, 1994.
7 - Not Applicable.
8(a) - Custody Agreement with Wells Fargo Bank, N.A.,
incorporated by reference to Amendment No. 3 filed
on May 2, 1994.
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Exhibit
Number Description
------- -----------
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., incorporated by reference to Amendment No. 3
filed on May 2, 1994.
9(b) - Amended Administration Agreement with Stephens Inc.
incorporated by reference to Amendment No. 3 filed
on May 2, 1994.
10 - Not Applicable.
11 - Consent of Auditors - KOMG Peat Marwick, LLP, filed
herewith.
12 - Not Applicable.
13 - Investment Letter, incorporated by reference to the
Registration Statement on Form N-1A filed on
September 24, 1991.
14 - Not Applicable.
15 - Not Applicable.
16 - Not Applicable.
17 - Not Applicable.
27.1 - Financial Data Schedule for the Cash Investment
Trust Master Portfolio, incorporated by reference to
Form N-SAR filed on February 29, 1996.
27.2 - Financial Data Schedule for the Short-Term Municipl
Income Master Portfolio, incorporated by reference to
Form N-SAR filed on February 29, 1996.
27.3 - Financial Data Schedule for the Short-Term
Government-Corporate Income Master Portfolio,
incorporated by reference to Form N-SAR filed on
February 29, 1996.
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 February 26, 1996, the number of record holders of each
Master Portfolio of the Registrant was as follows:
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<PAGE> 227
Title of Class Number of Record Holders
-------------- ------------------------
Cash Investment Trust Master Portfolio 2
Short-Term Municipal Income Master Portfolio 2
Short-Term Government-Corporate Income Master Portfolio 2
Tax-Free Money Market Master Portfolio 0
Capital Appreciation Master Portfolio 3
Asset Allocation Master Portfolio 0
Corporate Stock Master Portfolio 0
U.S. Government Allocation Master Portfolio 0
As of April 1, 1996, the Tax-Free Money Market Master Portfolio is
expected to have three shareholders. As of April 29, 1996, the Asset
Allocation, Corporate Stock and U.S. Government Allocation Master Portfolios
are each expected to have two shareholders.
Item 27. Indemnification.
Article V of the Registrant's Declaration of Trust limits the
liability and, in certain instances, provides for mandatory indemnification of
the Registrant's trustees, officers, employees, agents and holders of
beneficial interests in the Trust and its four Master Portfolios. In addition,
the Trustees are empowered under Section 3.9 of the Registrant's Declaration of
Trust to obtain such insurance policies as they deem necessary.
Item 28. Business and Other Connections of Investment Adviser.
Wells Fargo Bank, N.A. ("Wells Fargo Bank"), a wholly owned
subsidiary of Wells Fargo & Company, serves as investment adviser to the 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
</TABLE>
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<PAGE> 228
<TABLE>
<S> <C>
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
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
</TABLE>
C-5
<PAGE> 229
<TABLE>
<S> <C>
Paul Hazen Chairman of the Board of Directors of
Chairman of the Wells Fargo & Company
Board of Directors 420 Montgomery Street
San Francisco, CA 94105
Director of Pacific Telesis Group
130 Kearny Street
San Francisco, CA 94108
Director of Phelps Dodge Corp.
2600 North Central Avenue
Phoenix, AZ 85004
Director of Safeway Inc.
Fourth and Jackson Streets
Oakland, CA 94660
Robert K. Jaedicke Accounting Professor and Dean Emeritus of
Director Graduate School of Business, Stanford University
MBA Admissions Office
Stanford, CA 94305
Director of Homestake Mining Co.
650 California Street
San Francisco, CA 94108
Director of California Water Service Company
1720 North First Street
San Jose, CA 95112
Director of Boise Cascade Corp.
1111 West Jefferson Street
P.O. Box 50
Boise, ID 83728
Director of Enron Corp.
1400 Smith Street
Houston, TX 77002
Director of GenCorp, Inc.
175 Ghent Road
Fairlawn, OH 44333
Paul A. Miller Chairman of Executive Committee and Director of
Director Pacific Enterprises
633 West Fifth Street
Los Angeles, CA 90071
Trustee of Mutual Life Insurance Company
of New York
1740 Broadway
New York, NY 10019
</TABLE>
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<PAGE> 230
<TABLE>
<S> <C>
Director of Newhall Management Corporation
23823 Valencia Blvd.
Valencia, CA 91355
Trustee of University of Southern California
University Park TGF 200
665 Exposition Blvd.
Los Angeles, CA 90089
Ellen M. Newman President of Ellen Newman Associates
Director 323 Geary Street, Suite 507
San Francisco, CA 94102
Chair of Board of Trustees of
University of California at San Francisco Foundation
250 Executive Park Blvd., Suite 2000
San Francisco, CA 94143
Director of American Conservatory Theater
30 Grant Avenue
San Francisco, CA 94108
Director of California Chamber of Commerce
1201 K Street, 12th Floor
Sacramento, CA 95814
Philip J. Quigley Chairman, Chief Executive Officer and
Director Director of Pacific Telesis Group
130 Kearney Street, Rm. 3700
San Francisco, CA 94108
Director of Varian Associates
3050 Hansen Way
P.O. Box 10800
Palo Alto, CA 94303
Carl E. Reichardt Chairman and Chief Executive Officer of the
Director Board of Directors of Wells Fargo & Company
420 Montgomery Street
San Francisco, CA 94105
Director of Ford Motor Company
The American Road
Dearborn, MI 48121
Director of Hospital Corporation of America,
HCA-Hospital Corp. of America
One Park Plaza
Nashville, TN 37203
Director of Pacific Gas and Electric Company
77 Beale Street
</TABLE>
C-7
<PAGE> 231
<TABLE>
<S> <C>
San Francisco, CA 94105
Director of Newhall Management Corporation
23823 Valencia Blvd.
Valencia, CA 91355
Donald B. Rice President, Chief Operating Officer and Director of
Director Teledyne, Inc.
2049 Century Park East
Los Angeles, CA 90067
Director of Vulcan Materials Company
One Metroplex Drive
Birmingham, AL 35209
Retired Secretary of the Air Force
Susan G. Swenson President and Chief Executive Officer of Cellular One
Director 651 Gateway Blvd.
San Francisco, CA 94080
Chang-Lin Tien Chancellor of University of California at Berkeley
Director UC at Berkeley
Berkeley, CA 94720
John A. Young President, Director and Chief Executive Officer of
Director Hewlett-Packard Company
3000 Hanover Street
Palo Alto, CA 94304
Director of Chevron Corporation
225 Bush Street
San Francisco, CA 94104
William F. Zuendt Director of 3Com Corp.
President 5400 Bayfront Plaza
P.O. Box 58145
Santa Clara, CA 95052
Director of MasterCard International
888 Seventh Avenue
New York, NY 10106
Trustee of Golden Gate University
536 Mission Street
San Francisco, CA 94163
</TABLE>
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
C-8
<PAGE> 232
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
Vice Chairman & Director Contribution Group+
Irving Cohen Chief Financial Officer and Chief Operating
Director Officer of Barclays Bank 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
Chief Fiduciary Officer & Trust Company++
</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., Stagecoach Inc., Stagecoach Trust and Stagecoach Funds, Inc. and is the
exclusive placement agent for Master Investment Portfolio, Managed Series
Investment Trust and Life & Annuity Trust, each of which is a registered series
management investment company and has acted as principal underwriter for the
Liberty Term Trust, Inc., Nations Government Income Term Trust 2003, Inc.,
Nations Government Income Term Trust 2004, Inc. and the Managed Balanced Target
Maturity Fund, Inc., which are closed-end management investment companies and
Nations Fund Trust, Nations Funds, Inc., Nations Fund Portfolio, Inc. and The
Capitol Mutual Funds, which are open-end management investment companies.
C-9
<PAGE> 233
(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.
(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 Trust" in Part A of this Registration Statement and "Item 16 Investment
Advisory and Other Services" in Part B of this Registration Statement,
Registrant is not a party to any management-related service contract.
Item 32. Undertakings.
(a) Not applicable.
(b) Not applicable.
(c) Registrant undertakes to hold a special meeting of
its shareholders for the purpose of voting on the
question of removal of a trustee or trustees if
requested in writing by the holders of at least 10% of
each Master Portfolio, the outstanding voting
securities of Master Investment Trust and to assist in
communicating with other shareholders as required by
Section 16(c) of the Investment Company Act of 1940.
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<PAGE> 234
SIGNATURES
Pursuant to the requirements of the Investment Company Act of
1940, the Registrant has duly caused this Amendment to the 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 18th day of
March, 1996.
MASTER INVESTMENT TRUST
By: /s/ Richard H. Blank, Jr.
--------------------------------
Richard H. Blank, Jr.
Secretary and Treasurer
(Principal Financial Officer)
Signature Title
--------- -----
* Chairman, President (Principal
- ----------------------------- Executive Officer) and Trustee
(R. Greg Feltus)
/s/ RICHARD H. BLANK, JR. Chief Operating Officer,
- ----------------------------- Secretary and Treasurer
(Richard H. Blank, Jr.) (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)
March 18, 1996
*By: /s/ RICHARD H. BLANK, JR.
-----------------------------
Richard H. Blank, Jr.
As Attorney-In-Fact
<PAGE> 235
MASTER INVESTMENT TRUST
File No. 811-6415
Amendment No. 8 to the
Registration Statement on Form N-1A
Under the Investment Company Act of 1940
EXHIBIT INDEX
EXHIBIT DESCRIPTION
NUMBER
EX-99.B5(d) Investment Advisory Contract on behalf of the
Tax-Free Money Market Master Portfolio
EX-99.B5(e) Investment Advisory Contract on behalf of the
Capital Appreciation Master Portfolio
EX-99.B5(f)(i) Investment Advisory Contract on behalf of the Asset
Allocation Master Portfolio
EX-99.B5(f)(ii) Sub-Advisory Contract on behalf of the Asset
Allocation Master Portfolio
EX-99.B5(g)(i) Investment Advisory Contract on behalf of the
Corporate Stock Master Portfolio
EX-99.B5(g)(ii) Sub-Advisory Contract on behalf of the Corporate
Stock Master Portfolio
EX-99.B5(h)(i) Investment Advisory Contract on behalf of the U.S.
Government Allocation Master Portfolio
EX-99.B5(h)(ii) Sub-Advisory Contract on behalf of the U.S.
Government Allocation Master Portfolio
EX-99.B11 Consent of Independent Auditors - KPMG Peat Marwick
<PAGE> 1
EXHIBIT 99.B5(d)
INVESTMENT ADVISORY CONTRACT
MASTER INVESTMENT TRUST
111 CENTER STREET
LITTLE ROCK, ARKANSAS 72201
November 29, 1995
Wells Fargo Bank, N.A.
420 Montgomery Street
San Francisco, California 94163
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust")
on behalf of the Tax-Free Money Market Master Portfolio (the "Master
Portfolio") and Wells Fargo Bank, N.A. (the "Adviser") as follows:
1. The Trust is a registered open-end management investment
company currently consisting of four investment portfolios, but which may from
time to time consist of a greater or lesser number of investment portfolios
(the "Master Portfolios"). The Tax-Free Money Market Master Portfolio is one
of the four Master Portfolios. The Trust proposes to engage in the business of
investing and reinvesting the assets of the Master Portfolio in the manner and
in accordance with the investment objective and restrictions specified in the
Trust's Registration Statement, as amended from time to time (the "Registration
Statement"), filed by the Trust under the Investment Company Act of 1940 (the
"Act"). Copies of the Registration Statement have been furnished to the
Adviser. Any amendments to the Registration Statement shall be furnished to
the Adviser promptly.
2. The Trust is engaging the Adviser to manage the investing and
reinvesting of the Master Portfolio's assets and to provide the advisory
services specified elsewhere in this contract to the Master Portfolio, subject
to the overall supervision of the Board of Trustees of the Trust. Pursuant to
an administration agreement between the Trust and an administrator (the
"Administrator") on behalf of the Master Portfolios, the Trust has engaged the
Administrator to provide the administrative services specified therein.
3. (a) The Adviser shall make investments for the account of
the Master Portfolio in accordance with the Adviser's best judgment and
consistent with the investment objective and restrictions set forth in the
Trust's Registration Statement, the Act and the provisions of the Internal
Revenue Code of 1986, as amended, relating to regulated investment companies,
subject to policy decisions adopted by the Trust's Board of Trustees. The
Adviser shall advise the 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 Company understands that the Adviser, in rendering its
services to the Fund hereunder, may delegate certain advisory responsibilities
hereunder to a sub-adviser (the "Sub-Adviser"), provided that the Adviser shall
continue to supervise and monitor the performance of the duties delegated to
the Sub-Adviser and provided that any such delegation will not relieve the
Adviser of its duties and obligations under this Contract. The Adviser will
not seek to amend any such Sub-Advisory Contract to materially alter the
obligations of the parties unless the Adviser gives the Company at least 60
days' prior written notice thereof.
5. Except as provided in the Trust's advisory contracts and
administration agreement, the Trust shall bear all costs of its operations,
including the compensation of its trustees who are not affiliated with the
Adviser, the Administrator or any of their affiliates; advisory and
administration fees; governmental fees; interest charges; taxes; fees and
expenses of its independent auditors, legal counsel, transfer agent and
dividend disbursing agent; expenses of redeeming Interests; expenses of
preparing and printing Part As, Holders' reports, notices, proxy statements and
reports to regulatory agencies; travel expenses of trustees, officers and
employees; office supplies; insurance premiums and certain expenses relating to
insurance coverage; trade association membership dues; brokerage and other
expenses connected with the execution of portfolio securities transactions;
fees and expenses of any custodian, including those for keeping books and
accounts and calculating the net asset value per share of the Master Portfolio;
expenses of Holders' meetings; expenses relating to the issuance, and any
registration and qualification of, Interests of the Master Portfolio; pricing
services, if any; organizational expenses; and any extraordinary expenses.
Expenses attributable to one or more, but not all, of the Master Portfolios are
to be charged against the assets of the relevant Master Portfolios. General
expenses of the Trust are allocated among the Master Portfolios in a manner
proportionate to the net assets of each Master Portfolio, on a transactional
basis or on such other basis as the Board of Trustees deems equitable.
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 0.30% of the
average daily value (as determined on each day that such value is determined
for the Master Portfolio at the time set forth in the Registration Statement
for determining net asset value per share) of the Master Portfolio's net assets
during the preceding month. If the fee payable to the Adviser pursuant to this
paragraph 7 begins to accrue after the beginning of any month or if this
contract terminates before the end of any month, the fee for the period from
the effective date to the end of that month or from the beginning of that month
to the termination date, respectively, shall be prorated according to the
proportion that the period bears to the full month in which the effectiveness
or termination occurs. For purposes of calculating each such monthly fee, the
value of the Master Portfolio's net assets shall be computed in the manner
specified in the Registration Statement and the Trust's Declaration of Trust
for the computation of the value of the Master Portfolio's net assets in
connection with the determination of the net asset value of Master Portfolio
Interests.
8. If in any fiscal year the total expenses of the Master
Portfolio or any registered investment company investing in the Master
Portfolio ("Investing Company") incurred by, or allocated to, the Master
Portfolio or any Investing Company, excluding taxes, interest, brokerage
commissions and other portfolio transaction expenses, other expenditures that
are capitalized in accordance with generally accepted accounting principles,
extraordinary expenses and amounts accrued or paid under any Rule 12b-1 Plan,
but including the fees provided for in paragraph 7 and those provided for
pursuant to the Master Portfolio's and/or Investing Company's administration
agreement ("includable expenses"), exceed the most restrictive expense
limitation applicable to the Master Portfolio and/or Investing Company imposed
by state securities laws or regulations thereunder, as these limitations may be
raised or lowered from time to time, the Adviser shall waive or reimburse that
portion of the excess derived by multiplying the excess by a fraction, the
numerator of which shall be the percentage at which the excess portion
attributable to the fee payable pursuant to this contract is calculated under
paragraph 7 hereof, and the denominator of which shall be the sum of such
percentage plus the percentage at which the excess portion attributable to the
fee payable pursuant to the Master Portfolio's and/or Investing Company's
administration agreement is calculated (the "Applicable Ratio"), but only to
the extent of the fee hereunder for the fiscal year. If the fees payable under
this contract and/or the Master Portfolio's 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
3
<PAGE> 4
the basis of, and applied separately to, the portions of the fees calculated at
the different rates. At the end of each month of the Master Portfolio's fiscal
year, the Master Portfolio shall review the includable expenses accrued during
that fiscal year to the end of the period and shall estimate the contemplated
includable expenses for the balance of that fiscal year. If as a result of
that review and estimation it appears likely that the includable expenses will
exceed the limitations referred to in this paragraph 8 for a fiscal year with
respect to the Master Portfolio, the monthly fee set forth in paragraph 7
payable to the Adviser for such month shall be reduced, subject to a later
adjustment, by an amount equal to the Applicable Ratio times the pro rata
portion (prorated on the basis of the remaining months of the fiscal year,
including the month just ended) of the amount by which the includable expenses
for the fiscal year are expected to exceed the limitations provided for in this
paragraph 8. For purposes of computing the excess, if any, over the most
restrictive applicable expense limitation, the value of the Master Portfolio's
net assets shall be computed in the manner specified in the last sentence of
paragraph 7, and any reimbursements required to be made by the Adviser shall be
made once a year promptly after the end of the Master Portfolio's fiscal year.
9. This contract shall become effective on its execution date and
shall thereafter continue in effect, provided that this contract shall continue
in effect for a period of more than two years from the date hereof only so long
as the continuance is specifically approved at least annually (a) by the vote
of a majority of the Master Portfolio's outstanding voting securities (as
defined in the Act) or by the Trust's Board of Trustees and (b) by the vote,
cast in person at a meeting called for the purpose, of a majority of the
Trust's trustees who are not parties to this contract or "interested persons"
(as defined in the Act) of any such party. This contract may be terminated at
any time by the Trust or the Master Portfolio, without the payment of any
penalty, by a vote of a majority of the Master Portfolio's outstanding voting
securities (as defined in the Act) or by a vote of a majority of the Trust's
entire Board of Trustees on 60 days' written notice to the Adviser or by the
Adviser, at any time after the second anniversary of the effective date of this
contract, on 60 days' written notice to the Trust and the Master Portfolio.
This contract shall terminate automatically in the event of its assignment (as
defined in the Act).
10. Except to the extent necessary to perform the Adviser's
obligations under this contract, nothing herein shall be deemed to limit or
restrict the right of the Adviser, or any affiliate of the Adviser, or any
employee of the Adviser, to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether of
a similar or dissimilar nature, or to render services of any kind to any other
corporation, firm, individual or association.
11. Pursuant to Article V of the Trust's Declaration of Trust, no
Trustee, officer, employee or agent of the Trust shall be subject to any
personal liability whatsoever, in his or her official or individual capacity to
any person, other than to the Trust or its Holders, in connection with Trust
property or the affairs of the Trust, save only that arising from his or her
bad faith, willful misfeasance, gross negligence or reckless disregard of his
or her duty to such person; and all such persons shall look solely to the Trust
property (which may include any applicable 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
4
<PAGE> 5
severally liable (with rights of contribution inter se in proportion to their
respective Interests in the Trust) for the liabilities and obligations of the
Trust in the event that the Trust fails to satisfy such liabilities and
obligations; provided, however, that, to the extent assets are available in the
Trust, the Trust shall indemnify and hold each Holder harmless from and against
any claim or liability to which such Holder may become subject by reason of his
or her being or having been a Holder to the extent that such claim or liability
imposes on the Holder an obligation or liability which, when compared to the
obligations and liabilities imposed on other Holders, is greater than his or
her interest (proportionate share), and shall reimburse such Holder for all
legal and other expenses reasonably incurred by him or her in connection with
any such claim or liability. The rights accruing to a Holder under Section 5.1
of the Trust's Declaration of Trust shall not exclude any other right to which
such Holder may be lawfully entitled, nor shall anything herein contained
restrict the right of the Trust to indemnify or reimburse a Holder in any
appropriate situation even though not specifically provided herein.
Notwithstanding the indemnification procedure described above, it is intended
that each Holder shall remain jointly and severally liable to the creditors as
a legal matter.
In addition, no Trustee, officer, employee or agent of the Trust shall
be liable to the Trust, Holders, or to any Trustee, officer, employee, or agent
thereof for any action or failure to act (including, without limitation, the
failure to compel in any way any former or acting Trustee to redress any breach
of trust) except for his or her own bad faith, willful misfeasance, gross
negligence or reckless disregard of his or her duties.
12. This contract shall be governed by and construed in accordance
with the laws of the State of California.
5
<PAGE> 6
If the foregoing correctly sets forth the agreement between the Trust
and the Adviser, please so indicate by signing and returning to the Trust the
enclosed copy hereof.
Very truly yours,
MASTER INVESTMENT TRUST,
on behalf of the Tax-Free
Money Market Master Portfolio.
By: /s/ R.H. Blank, Jr.
-----------------------------
Name: Richard H. Blank, Jr.
-----------------------------
Title: Chief Operating Officer
-----------------------------
ACCEPTED as of the date
set forth above:
WELLS FARGO BANK, N.A.
By: /s/ Elizabeth Gottfried
-----------------------------
Name: Elizabeth Gottfried
-----------------------------
Title: Vice President
-----------------------------
By: /s/ MJ Niedermeyer
-----------------------------
Name: MJ Niedermeyer
-----------------------------
Title: Executive Vice President
-----------------------------
6
<PAGE> 1
EXHIBIT 99.B5(e)
INVESTMENT ADVISORY CONTRACT
MASTER INVESTMENT TRUST
111 Center Street
Little Rock, Arkansas 72201
December 22, 1995
Wells Fargo Bank, N.A.
420 Montgomery Street
San Francisco, California 94163
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust")
on behalf of the Capital Appreciation Master Portfolio (the "Master Portfolio")
and Wells Fargo Bank, N.A. (the "Adviser") as follows:
1. The Trust is a registered open-end management investment
company currently consisting of five investment portfolios, but which may from
time to time consist of a greater or lesser number of investment portfolios
(the "Master Portfolios"). The Capital Appreciation Master Portfolio is one of
the five Master Portfolios. The Trust proposes to engage in the business of
investing and reinvesting the assets of the Master Portfolio in the manner and
in accordance with the investment objective and restrictions specified in the
Trust's Registration Statement, as amended from time to time (the "Registration
Statement"), filed by the Trust under the Investment Company Act of 1940 (the
"Act"). Copies of the Registration Statement have been furnished to the
Adviser. Any amendments to the Registration Statement shall be furnished to
the Adviser promptly.
2. The Trust is engaging the Adviser to manage the investing and
reinvesting of the Master Portfolio's assets and to provide the advisory
services specified elsewhere in this contract to the Master Portfolio, subject
to the overall supervision of the Board of Trustees of the Trust. Pursuant to
an administration agreement between the Trust and an administrator (the
"Administrator") on behalf of the Master Portfolios, the Trust has engaged the
Administrator to provide the administrative services specified therein.
3. (a) The Adviser shall make investments for the account of
the Master Portfolio in accordance with the Adviser's best judgment and
consistent with the investment objective and restrictions set forth in the
Trust's Registration Statement, the Act and the provisions of the Internal
Revenue Code of 1986, as amended, relating to regulated investment companies,
subject to policy decisions adopted by the Trust's Board of Trustees. The
Adviser shall advise the Trust's officers and Board of Trustees, at such times
as the Trust's Board of Trustees may
<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 0.50% of the
average daily value (as determined on each day that such value is determined
for the Master Portfolio at the time set forth in the Registration Statement
for determining net asset value per share) of the Master Portfolio's net assets
during the preceding month. If the fee payable to the Adviser pursuant to this
paragraph 7 begins to accrue after the beginning of any month or if this
contract terminates before the end of any month, the fee for the period from
the effective date to the end of that month or from the beginning of that month
to the termination date, respectively, shall be prorated according to the
proportion that the period bears to the full month in which the effectiveness
or termination occurs. For purposes of calculating each such monthly fee, the
value of the Master Portfolio's net assets shall be computed in the manner
specified in the Registration Statement and the Trust's Declaration of Trust
for the computation of the value of the Master Portfolio's net assets in
connection with the determination of the net asset value of Master Portfolio
Interests.
8. If in any fiscal year the total expenses of the Master
Portfolio or any registered investment company investing in the Master
Portfolio ("Investing Company") incurred by, or allocated to, the Master
Portfolio or any Investing Company, excluding taxes, interest, brokerage
commissions and other portfolio transaction expenses, other expenditures that
are capitalized in accordance with generally accepted accounting principles,
extraordinary expenses and amounts accrued or paid under any Rule 12b-1 Plan,
but including the fees provided for in paragraph 7 and those provided for
pursuant to the Master Portfolio's and/or Investing Company's administration
agreement ("includable expenses"), exceed the most restrictive expense
limitation applicable to the Master Portfolio and/or Investing Company imposed
by state securities laws or regulations thereunder, as these limitations may be
raised or lowered from time to time, the Adviser shall waive or reimburse that
portion of the excess derived by multiplying the excess by a fraction, the
numerator of which shall be the percentage at which the excess portion
attributable to the fee payable pursuant to this contract is calculated under
paragraph 7 hereof, and the denominator of which shall be the sum of such
percentage plus the percentage at which the excess portion attributable to the
fee payable pursuant to the Master Portfolio's and/or Investing Company's
administration agreement is calculated (the "Applicable Ratio"), but only to
the extent of the fee hereunder for the fiscal year. If the fees payable under
this contract and/or the Master Portfolio's and/or Investing Company's
administration agreement contributing to such excess portion are calculated at
more than one percentage rate, the Applicable Ratio shall be calculated
separately on
3
<PAGE> 4
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
4
<PAGE> 5
Trust) for the liabilities and obligations of the Trust in the event that the
Trust fails to satisfy such liabilities and obligations; provided, however,
that, to the extent assets are available in the Trust, the Trust shall
indemnify and hold each Holder harmless from and against any claim or liability
to which such Holder may become subject by reason of his or her being or having
been a Holder to the extent that such claim or liability imposes on the Holder
an obligation or liability which, when compared to the obligations and
liabilities imposed on other Holders, is greater than his or her interest
(proportionate share), and shall reimburse such Holder for all legal and other
expenses reasonably incurred by him or her in connection with any such claim or
liability. The rights accruing to a Holder under Section 5.1 of the Trust's
Declaration of Trust shall not exclude any other right to which such Holder may
be lawfully entitled, nor shall anything herein contained restrict the right of
the Trust to indemnify or reimburse a Holder in any appropriate situation even
though not specifically provided herein. Notwithstanding the indemnification
procedure described above, it is intended that each Holder shall remain jointly
and severally liable to the creditors as a legal matter.
In addition, no Trustee, officer, employee or agent of the Trust shall
be liable to the Trust, Holders, or to any Trustee, officer, employee, or agent
thereof for any action or failure to act (including, without limitation, the
failure to compel in any way any former or acting Trustee to redress any breach
of trust) except for his or her own bad faith, willful misfeasance, gross
negligence or reckless disregard of his or her duties.
12. This contract shall be governed by and construed in accordance
with the laws of the State of California.
5
<PAGE> 6
If the foregoing correctly sets forth the agreement between the Trust
and the Adviser, please so indicate by signing and returning to the Trust the
enclosed copy hereof.
Very truly yours,
MASTER INVESTMENT TRUST,
on behalf of the Capital Appreciation
Master Portfolio
By: /s/ RICHARD H. BLANK, JR.
-----------------------------
Name: Richard H. Blank, Jr.
-----------------------------
Title: Chief Operating Officer
-----------------------------
ACCEPTED as of the date
set forth above:
WELLS FARGO BANK, N.A.
By: /s/ ELIZABETH A. GOTTFRIED
-----------------------------
Name: Elizabeth A. Gottfried
-----------------------------
Title: Vice President
-----------------------------
By: /s/ MICHAEL J. NIEDERMEYER
-----------------------------
Name: Michael J. Niedermeyer
-----------------------------
Title: Executive Vice President
-----------------------------
6
<PAGE> 1
EXHIBIT 99.B5(f)(i)
INVESTMENT ADVISORY CONTRACT
MASTER INVESTMENT TRUST
111 Center Street
Little Rock, Arkansas 72201
March 12, 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 Asset Allocation 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 eight investment portfolios, but which may from
time to time consist of a greater or lesser number of investment portfolios
(the "Master Portfolios"). The Asset Allocation Master Portfolio is one of the
eight 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 0.50% of the
first $250 million of the Master Portfolio's average daily net assets, 0.40% of
the next $250 million, and 0.30% of the Master Portfolio's assets in excess of
$500 million (as determined on each day that such value is determined for the
Master Portfolio at the time set forth in the Registration Statement for
determining net asset value per share) of the Master Portfolio's net assets
during the preceding month. If the fee payable to the Adviser pursuant to this
paragraph 7 begins to accrue after the beginning of any month or if this
contract terminates before the end of any month, the fee for the period from
the effective date to the end of that month or from the beginning of that month
to the termination date, respectively, shall be prorated according to the
proportion that the period bears to the full month in which the effectiveness
or termination occurs. For purposes of calculating each such monthly fee, the
value of the Master Portfolio's net assets shall be computed in the manner
specified in the Registration Statement and the Trust's Declaration of Trust
for the computation of the value of the Master Portfolio's net assets in
connection with the determination of the net asset value of Master Portfolio
Interests.
8. If in any fiscal year the total expenses of the Master
Portfolio or any registered investment company investing in the Master
Portfolio ("Investing Company") incurred by, or allocated to, the Master
Portfolio or any Investing Company, excluding taxes, interest, brokerage
commissions and other portfolio transaction expenses, other expenditures that
are capitalized in accordance with generally accepted accounting principles,
extraordinary expenses and amounts accrued or paid under any Rule 12b-1 Plan,
but including the fees provided for in paragraph 7 and those provided for
pursuant to the Master Portfolio's and/or Investing Company's administration
agreement ("includable expenses"), exceed the most restrictive expense
limitation applicable to the Master Portfolio and/or Investing Company imposed
by state securities laws or regulations thereunder, as these limitations may be
raised or lowered from time to time, the Adviser shall waive or reimburse that
portion of the excess derived by multiplying the excess by a fraction, the
numerator of which shall be the percentage at which the excess portion
attributable to the fee payable pursuant to this contract is calculated under
paragraph 7 hereof, and the denominator of which shall be the sum of such
percentage plus the percentage at which the excess portion attributable to the
fee payable pursuant to the Master Portfolio's and/or Investing Company's
administration agreement is calculated (the "Applicable Ratio"), but only to
the extent of the fee hereunder for the fiscal year. If the fees payable under
this contract and/or the Master Portfolio's
3
<PAGE> 4
and/or Investing Company's administration agreement contributing to such excess
portion are calculated at more than one percentage rate, the Applicable Ratio
shall be calculated separately on the basis of, and applied separately to, the
portions of the fees calculated at the different rates. At the end of each
month of the Master Portfolio's fiscal year, the Master Portfolio shall review
the includable expenses accrued during that fiscal year to the end of the
period and shall estimate the contemplated includable expenses for the balance
of that fiscal year. If as a result of that review and estimation it appears
likely that the includable expenses will exceed the limitations referred to in
this paragraph 8 for a fiscal year with respect to the Master Portfolio, the
monthly fee set forth in paragraph 7 payable to the Adviser for such month
shall be reduced, subject to a later adjustment, by an amount equal to the
Applicable Ratio times the pro rata portion (prorated on the basis of the
remaining months of the fiscal year, including the month just ended) of the
amount by which the includable expenses for the fiscal year are expected to
exceed the limitations provided for in this paragraph 8. For purposes of
computing the excess, if any, over the most restrictive applicable expense
limitation, the value of the Master Portfolio's net assets shall be computed in
the manner specified in the last sentence of paragraph 7, and any
reimbursements required to be made by the Adviser shall be made once a year
promptly after the end of the Master Portfolio's fiscal year.
9. This contract shall become effective on its execution date and
shall thereafter continue in effect, provided that this contract shall continue
in effect for a period of more than two years from the date hereof only so long
as the continuance is specifically approved at least annually (a) by the vote
of a majority of the Master Portfolio's outstanding voting securities (as
defined in the Act) or by the Trust's Board of Trustees and (b) by the vote,
cast in person at a meeting called for the purpose, of a majority of the
Trust's trustees who are not parties to this contract or "interested persons"
(as defined in the Act) of any such party. This contract may be terminated at
any time by the Trust or the Master Portfolio, without the payment of any
penalty, by a vote of a majority of the Master Portfolio's outstanding voting
securities (as defined in the Act) or by a vote of a majority of the Trust's
entire Board of Trustees on 60 days' written notice to the Adviser or by the
Adviser 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
4
<PAGE> 5
the Trust arising in connection with the affairs of the Trust. Each Holder
shall be jointly and severally liable (with rights of contribution inter se in
proportion to their respective Interests in the Trust) for the liabilities and
obligations of the Trust in the event that the Trust fails to satisfy such
liabilities and obligations; provided, however, that, to the extent assets are
available in the Trust, the Trust shall indemnify and hold each Holder harmless
from and against any claim or liability to which such Holder may become subject
by reason of his or her being or having been a Holder to the extent that such
claim or liability imposes on the Holder an obligation or liability which, when
compared to the obligations and liabilities imposed on other Holders, is
greater than his or her interest (proportionate share), and shall reimburse
such Holder for all legal and other expenses reasonably incurred by him or her
in connection with any such claim or liability. The rights accruing to a
Holder under Section 5.1 of the Trust's Declaration of Trust shall not exclude
any other right to which such Holder may be lawfully entitled, nor shall
anything herein contained restrict the right of the Trust to indemnify or
reimburse a Holder in any appropriate situation even though not specifically
provided herein. Notwithstanding the indemnification procedure described
above, it is intended that each Holder shall remain jointly and severally
liable to the creditors as a legal matter.
In addition, no Trustee, officer, employee or agent of the Trust shall
be liable to the Trust, Holders, or to any Trustee, officer, employee, or agent
thereof for any action or failure to act (including, without limitation, the
failure to compel in any way any former or acting Trustee to redress any breach
of trust) except for his or her own bad faith, willful misfeasance, gross
negligence or reckless disregard of his or her duties.
12. This contract shall be governed by and construed in accordance
with the laws of the State of California.
5
<PAGE> 6
If the foregoing correctly sets forth the agreement between the Trust
and the Adviser, please so indicate by signing and returning to the Trust the
enclosed copy hereof.
Very truly yours,
MASTER INVESTMENT TRUST,
on behalf of the Asset Allocation
Master Portfolio
By: /s/ RICHARD H. BLANK, JR.
-----------------------------
Name: Richard H. Blank, Jr.
-----------------------------
Title: Chief Operating Officer
-----------------------------
ACCEPTED as of the date
set forth above:
WELLS FARGO BANK, N.A.
By: /s/ ELIZABETH A. GOTTFRIED
-----------------------------
Name: Elizabeth A. Gottfried
-----------------------------
Title: Vice President
-----------------------------
By: /s/ MICHAEL J. NIEDERMEYER
-----------------------------
Name: Michael J. Niedermeyer
-----------------------------
Title: Executive Vice President
-----------------------------
6
<PAGE> 1
EXHIBIT 99.B5(f)(ii)
SUB-ADVISORY CONTRACT
Asset Allocation Master Portfolio
MASTER INVESTMENT TRUST
111 Center Street
Little Rock, Arkansas 72201
March 12, 1996
BZW BARCLAYS GLOBAL
FUND ADVISORS
345 Montgomery Street
San Francisco, California 94163
Dear Sirs:
This will confirm the agreement by and among Wells Fargo Bank, N.A.
(the "Adviser"), Master Investment Trust (the "Trust"), on behalf of the Asset
Allocation Master Portfolio, and BZW Barclays Global Fund Advisors (the "Sub-
Adviser") as follows:
1. The Trust is a registered open-end management investment
company currently consisting of eight investment portfolios, but which may from
time to time consist of a greater or lesser number of investment portfolios
(the "Master Portfolios"). The Asset Allocation Master Portfolio is one of the
eight 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 has engaged the Adviser to manage the investing and
reinvesting of the Master Portfolio's assets and to provide the advisory
services specified elsewhere in the Investment Advisory Contract between the
Trust and the Adviser, dated as of the date hereof, subject to the overall
supervision of the Board of Trustees of the Trust. Pursuant to an
Administration Agreement between the Trust, on behalf of the Master Portfolio,
and an administrator (the "Administrator"), the Trust has engaged the
Administrator to provide the administrative services specified therein.
3. (a) The Adviser hereby employs the Sub-Adviser to perform
for the Master Portfolio certain advisory services and the Sub-Adviser hereby
accepts such employment. The Adviser shall retain the authority to establish
and modify, from time to time, the investment strategies and approaches
followed by the Sub-Adviser, subject, in all respects, to the supervision and
direction of the Trust's Board of Trustees and subject to compliance with the
investment objective, policies and restrictions set forth in the Registration
Statement.
(b) Subject to the overall supervision and control of the
Adviser and the Trust, the Sub-Adviser shall be responsible for investing and
reinvesting the Master Portfolio's assets in a manner consistent with the
investment strategies and approaches referenced in subparagraph (a),
<PAGE> 2
above. In this regard, the Sub-Adviser, in accordance with the investment
objective, policies and restrictions set forth in the Registration Statement,
shall be responsible for implementing and monitoring the performance of the
investment model employed with respect to the Master Portfolio and shall
furnish to the Adviser periodic reports on the investment activity and
performance of the Master Portfolio. The Sub-Adviser shall also furnish such
additional reports and information as the Adviser and the Trust's Board of
Trustees and officers shall reasonably request.
(c) The Sub-Adviser shall, at its expense, employ or
associate with itself such persons as the Sub- Adviser believes appropriate to
assist it in performing its obligations under this contract.
4. The Adviser shall be responsible for the fees paid to the
Sub-Adviser for its services thereunder. The Sub-Adviser agrees that it shall
have no claim against the Trust or the Master Portfolio respecting compensation
under this contract. In consideration of the services to be rendered by the
Sub-Adviser under this contract, the Adviser shall pay the Sub-Adviser a fee on
the first business day of each calendar month, at the annual rate of 0.20% 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 Sub-Adviser
pursuant to this Paragraph 4 begins to accrue on a day after the first day 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 the month or from the
beginning of that month to the termination date, shall be prorated according to
the proportion that such period bears to the full month in which the
effectiveness or termination occurs. For purposes of calculating the 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
shares.
5. The Sub-Adviser shall give the Trust the benefit of the
Sub-Adviser's best judgment and efforts in rendering services under this
contract. As consideration and as an inducement to the Sub-Adviser's
undertaking to render these services, the Trust and the Adviser agree that the
Sub-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
Sub-Adviser against any liability to the Adviser, the Trust or its shareholders
to which the Sub-Adviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of the
Sub-Adviser's duties under this contract or by reason of reckless disregard of
its obligations and duties thereunder.
6. This contract shall become effective as of 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 specifically for the purpose of
continuing this Sub-Advisory Contract, 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, upon 60 days' written
notice to the Sub-Adviser, by the Trust, 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. The Sub-Adviser may terminate this contract on 60 days' written
notice to the Trust. This contract shall terminate automatically in the event
of its assignment (as defined in the Act).
2
<PAGE> 3
7. Except to the extent necessary to perform the Sub-Adviser's
obligations under this contract, nothing herein shall be deemed to limit or
restrict the right of the Sub-Adviser, or any affiliate of the Sub-Adviser, or
any employee of the Sub-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.
8. Pursuant to Article V of the Trust's Declaration of Trust, no
Trustee, officer, employee or agent of the Trust shall be subject to any
personal liability whatsoever, in his or her official or individual capacity to
any person, other than to the Trust or its Holders, in connection with Trust
property or the affairs of the Trust, save only that arising from his or her
bad faith, willful misfeasance, gross negligence or reckless disregard of his
or her duty to such person; and all such persons shall look solely to the Trust
property (which may include any applicable insurance) for satisfaction of
claims of any nature against a Trustee, officer, employee or agent of the Trust
arising in connection with the affairs of the Trust. Each Holder shall be
jointly and severally liable (with rights of contribution inter se in
proportion to their respective Interests in the Trust) for the liabilities and
obligations of the Trust in the event that the Trust fails to satisfy such
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.
9. This contract shall be governed by and construed in accordance
with the laws of the State of California.
3
<PAGE> 4
If the foregoing correctly sets forth the agreement between the
Trust, the Adviser and the Sub-Adviser, please so indicate by signing and
returning to the Trust the enclosed copy hereof.
Very truly yours,
BZW BARCLAYS GLOBAL FUND ADVISORS
By: /s/ DONALD LUSKIN
-----------------------------
Name: Donald Luskin
-----------------------------
Title: Vice Chairman
-----------------------------
By: /s/ VIN BENCIVENGA
-----------------------------
Name: Vin Bencivenga
-----------------------------
Title: Chief Fiduciary Officer
-----------------------------
ACCEPTED as of the date
set forth above:
MASTER INVESTMENT TRUST
on behalf of Asset Allocation
Master Portfolio
By: /s/ RICHARD H. BLANK, JR.
-----------------------------
Name: Richard H. Blank, Jr.
-----------------------------
Title: Chief Operating Officer
-----------------------------
WELLS FARGO BANK, N.A.
By: /s/ ELIZABETH A. GOTTFRIED
-----------------------------
Name: Elizabeth A. Gottfried
-----------------------------
Title: Vice President
-----------------------------
4
<PAGE> 1
EXHIBIT 99.B5(g)(i)
INVESTMENT ADVISORY CONTRACT
MASTER INVESTMENT TRUST
111 Center Street
Little Rock, Arkansas 72201
March 12, 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 Corporate Stock 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 eight investment portfolios, but which may from
time to time consist of a greater or lesser number of investment portfolios
(the "Master Portfolios"). The Corporate Stock Master Portfolio is one of the
eight 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 0.50% of the
first $250 million of the Master Portfoloio's average daily net assets, 0.40%
of the next $250 million, and 0.30% of the Master Portfolio's assets in excess
of $500 million (as determined on each day that such value is determined for
the Master Portfolio at the time set forth in the Registration Statement for
determining net asset value per share) of the Master Portfolio's net assets
during the preceding month. If the fee payable to the Adviser pursuant to this
paragraph 7 begins to accrue after the beginning of any month or if this
contract terminates before the end of any month, the fee for the period from
the effective date to the end of that month or from the beginning of that month
to the termination date, respectively, shall be prorated according to the
proportion that the period bears to the full month in which the effectiveness
or termination occurs. For purposes of calculating each such monthly fee, the
value of the Master Portfolio's net assets shall be computed in the manner
specified in the Registration Statement and the Trust's Declaration of Trust
for the computation of the value of the Master Portfolio's net assets in
connection with the determination of the net asset value of Master Portfolio
Interests.
8. If in any fiscal year the total expenses of the Master
Portfolio or any registered investment company investing in the Master
Portfolio ("Investing Company") incurred by, or allocated to, the Master
Portfolio or any Investing Company, excluding taxes, interest, brokerage
commissions and other portfolio transaction expenses, other expenditures that
are capitalized in accordance with generally accepted accounting principles,
extraordinary expenses and amounts accrued or paid under any Rule 12b-1 Plan,
but including the fees provided for in paragraph 7 and those provided for
pursuant to the Master Portfolio's and/or Investing Company's administration
agreement ("includable expenses"), exceed the most restrictive expense
limitation applicable to the Master Portfolio and/or Investing Company imposed
by state securities laws or regulations thereunder, as these limitations may be
raised or lowered from time to time, the Adviser shall waive or reimburse that
portion of the excess derived by multiplying the excess by a fraction, the
numerator of which shall be the percentage at which the excess portion
attributable to the fee payable pursuant to this contract is calculated under
paragraph 7 hereof, and the denominator of which shall be the sum of such
percentage plus the percentage at which the excess portion attributable to the
fee payable pursuant to the Master Portfolio's and/or Investing Company's
administration agreement is calculated (the "Applicable Ratio"), but only to
the extent of the fee hereunder for the fiscal year. If the fees payable under
this contract and/or the Master Portfolio's
3
<PAGE> 4
and/or Investing Company's administration agreement contributing to such excess
portion are calculated at more than one percentage rate, the Applicable Ratio
shall be calculated separately on the basis of, and applied separately to, the
portions of the fees calculated at the different rates. At the end of each
month of the Master Portfolio's fiscal year, the Master Portfolio shall review
the includable expenses accrued during that fiscal year to the end of the
period and shall estimate the contemplated includable expenses for the balance
of that fiscal year. If as a result of that review and estimation it appears
likely that the includable expenses will exceed the limitations referred to in
this paragraph 8 for a fiscal year with respect to the Master Portfolio, the
monthly fee set forth in paragraph 7 payable to the Adviser for such month
shall be reduced, subject to a later adjustment, by an amount equal to the
Applicable Ratio times the pro rata portion (prorated on the basis of the
remaining months of the fiscal year, including the month just ended) of the
amount by which the includable expenses for the fiscal year are expected to
exceed the limitations provided for in this paragraph 8. For purposes of
computing the excess, if any, over the most restrictive applicable expense
limitation, the value of the Master Portfolio's net assets shall be computed in
the manner specified in the last sentence of paragraph 7, and any
reimbursements required to be made by the Adviser shall be made once a year
promptly after the end of the Master Portfolio's fiscal year.
9. This contract shall become effective on its execution date and
shall thereafter continue in effect, provided that this contract shall continue
in effect for a period of more than two years from the date hereof only so long
as the continuance is specifically approved at least annually (a) by the vote
of a majority of the Master Portfolio's outstanding voting securities (as
defined in the Act) or by the Trust's Board of Trustees and (b) by the vote,
cast in person at a meeting called for the purpose, of a majority of the
Trust's trustees who are not parties to this contract or "interested persons"
(as defined in the Act) of any such party. This contract may be terminated at
any time by the Trust or the Master Portfolio, without the payment of any
penalty, by a vote of a majority of the Master Portfolio's outstanding voting
securities (as defined in the Act) or by a vote of a majority of the Trust's
entire Board of Trustees on 60 days' written notice to the Adviser or by the
Adviser 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
4
<PAGE> 5
the Trust arising in connection with the affairs of the Trust. Each Holder
shall be jointly and severally liable (with rights of contribution inter se in
proportion to their respective Interests in the Trust) for the liabilities and
obligations of the Trust in the event that the Trust fails to satisfy such
liabilities and obligations; provided, however, that, to the extent assets are
available in the Trust, the Trust shall indemnify and hold each Holder harmless
from and against any claim or liability to which such Holder may become subject
by reason of his or her being or having been a Holder to the extent that such
claim or liability imposes on the Holder an obligation or liability which, when
compared to the obligations and liabilities imposed on other Holders, is
greater than his or her interest (proportionate share), and shall reimburse
such Holder for all legal and other expenses reasonably incurred by him or her
in connection with any such claim or liability. The rights accruing to a
Holder under Section 5.1 of the Trust's Declaration of Trust shall not exclude
any other right to which such Holder may be lawfully entitled, nor shall
anything herein contained restrict the right of the Trust to indemnify or
reimburse a Holder in any appropriate situation even though not specifically
provided herein. Notwithstanding the indemnification procedure described
above, it is intended that each Holder shall remain jointly and severally
liable to the creditors as a legal matter.
In addition, no Trustee, officer, employee or agent of the Trust shall
be liable to the Trust, Holders, or to any Trustee, officer, employee, or agent
thereof for any action or failure to act (including, without limitation, the
failure to compel in any way any former or acting Trustee to redress any breach
of trust) except for his or her own bad faith, willful misfeasance, gross
negligence or reckless disregard of his or her duties.
12. This contract shall be governed by and construed in accordance
with the laws of the State of California.
5
<PAGE> 6
If the foregoing correctly sets forth the agreement between the Trust
and the Adviser, please so indicate by signing and returning to the Trust the
enclosed copy hereof.
Very truly yours,
MASTER INVESTMENT TRUST,
on behalf of the Corporate Stock
Master Portfolio
By: /s/ RICHARD H. BLANK, JR.
-----------------------------
Name: Richard H. Blank, Jr.
-----------------------------
Title: Chief Operating Officer
-----------------------------
ACCEPTED as of the date
set forth above:
WELLS FARGO BANK, N.A.
By: /s/ ELIZABETH A. GOTTFRIED
-----------------------------
Name: Elizabeth A. Gottfried
-----------------------------
Title: Vice President
-----------------------------
By: /s/ MICHAEL J. NIEDERMEYER
-----------------------------
Name: Michael J. Niedermeyer
-----------------------------
Title: Executive Vice President
-----------------------------
6
<PAGE> 1
EXHIBIT 99.B5(g)(ii)
SUB-ADVISORY CONTRACT
Corporate Stock Master Portfolio
MASTER INVESTMENT TRUST
111 Center Street
Little Rock, Arkansas 72201
March 12, 1996
BZW BARCLAYS GLOBAL
FUND ADVISORS
345 Montgomery Street
San Francisco, California 94163
Dear Sirs:
This will confirm the agreement by and among Wells Fargo Bank, N.A.
(the "Adviser"), Master Investment Trust (the "Trust"), on behalf of the
Corporate Stock Master Portfolio, and BZW Barclays Global Fund Advisors (the
"Sub- Adviser") as follows:
1. The Trust is a registered open-end management investment
company currently consisting of eight investment portfolios, but which may from
time to time consist of a greater or lesser number of investment portfolios
(the "Master Portfolios"). The Corporate Stock Master Portfolio is one of the
eight 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 has engaged the Adviser to manage the investing and
reinvesting of the Master Portfolio's assets and to provide the advisory
services specified elsewhere in the Investment Advisory Contract between the
Trust and the Adviser, dated as of the date hereof, subject to the overall
supervision of the Board of Trustees of the Trust. Pursuant to an
Administration Agreement between the Trust, on behalf of the Master Portfolio,
and an administrator (the "Administrator"), the Trust has engaged the
Administrator to provide the administrative services specified therein.
3. (a) The Adviser hereby employs the Sub-Adviser to perform
for the Master Portfolio certain advisory services and the Sub-Adviser hereby
accepts such employment. The Adviser shall retain the authority to establish
and modify, from time to time, the investment strategies and approaches
followed by the Sub-Adviser, subject, in all respects, to the supervision and
direction of the Trust's Board of Trustees and subject to compliance with the
investment objective, policies and restrictions set forth in the Registration
Statement.
(b) Subject to the overall supervision and control of the
Adviser and the Trust, the Sub-Adviser shall be responsible for investing and
reinvesting the Master Portfolio's assets in a manner consistent with the
investment strategies and approaches referenced in subparagraph (a),
<PAGE> 2
above. In this regard, the Sub-Adviser, in accordance with the investment
objective, policies and restrictions set forth in the Registration Statement,
shall be responsible for implementing and monitoring the performance of the
investment model employed with respect to the Master Portfolio and shall
furnish to the Adviser periodic reports on the investment activity and
performance of the Master Portfolio. The Sub-Adviser shall also furnish such
additional reports and information as the Adviser and the Trust's Board of
Trustees and officers shall reasonably request.
(c) The Sub-Adviser shall, at its expense, employ or
associate with itself such persons as the Sub- Adviser believes appropriate to
assist it in performing its obligations under this contract.
4. The Adviser shall be responsible for the fees paid to the
Sub-Adviser for its services thereunder. The Sub-Adviser agrees that it shall
have no claim against the Trust or the Master Portfolio respecting compensation
under this contract. In consideration of the services to be rendered by the
Sub-Adviser under this contract, the Adviser shall pay the Sub-Adviser a fee on
the first business day of each calendar month, at the annual rate of 0.08 % 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. The Sub-Adviser will also receive an
annual payment of $40,000. If the fee payable to the Sub-Adviser pursuant to
this Paragraph 4 begins to accrue on a day after the first day 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 the month or from the beginning of that
month to the termination date, shall be prorated according to the proportion
that such period bears to the full month in which the effectiveness or
termination occurs. For purposes of calculating the 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 shares.
5. The Sub-Adviser shall give the Trust the benefit of the
Sub-Adviser's best judgment and efforts in rendering services under this
contract. As consideration and as an inducement to the Sub-Adviser's
undertaking to render these services, the Trust and the Adviser agree that the
Sub-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
Sub-Adviser against any liability to the Adviser, the Trust or its shareholders
to which the Sub-Adviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of the
Sub-Adviser's duties under this contract or by reason of reckless disregard of
its obligations and duties thereunder.
6. This contract shall become effective as of 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 specifically for the purpose of
continuing this Sub-Advisory Contract, 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, upon 60 days' written
notice to the Sub-Adviser, by the Trust, 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. The Sub-Adviser may terminate this contract on 60 days' written
notice to the Trust. This contract shall terminate automatically in the event
of its assignment (as defined in the Act).
2
<PAGE> 3
7. Except to the extent necessary to perform the Sub-Adviser's
obligations under this contract, nothing herein shall be deemed to limit or
restrict the right of the Sub-Adviser, or any affiliate of the Sub-Adviser, or
any employee of the Sub-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.
8. Pursuant to Article V of the Trust's Declaration of Trust, no
Trustee, officer, employee or agent of the Trust shall be subject to any
personal liability whatsoever, in his or her official or individual capacity to
any person, other than to the Trust or its Holders, in connection with Trust
property or the affairs of the Trust, save only that arising from his or her
bad faith, willful misfeasance, gross negligence or reckless disregard of his
or her duty to such person; and all such persons shall look solely to the Trust
property (which may include any applicable insurance) for satisfaction of
claims of any nature against a Trustee, officer, employee or agent of the Trust
arising in connection with the affairs of the Trust. Each Holder shall be
jointly and severally liable (with rights of contribution inter se in
proportion to their respective Interests in the Trust) for the liabilities and
obligations of the Trust in the event that the Trust fails to satisfy such
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.
9. This contract shall be governed by and construed in accordance
with the laws of the State of California.
3
<PAGE> 4
If the foregoing correctly sets forth the agreement between the
Trust, the Adviser and the Sub-Adviser, please so indicate by signing and
returning to the Trust the enclosed copy hereof.
Very truly yours,
BZW BARCLAYS GLOBAL FUND ADVISORS
By: /s/ DONALD LUSKIN
-----------------------------
Name: Donald Luskin
-----------------------------
Title: Vice Chairman
-----------------------------
By: /s/ VIN BENCIVENGA
-----------------------------
Name: Vin Bencivenga
-----------------------------
Title: Chief Fiduciary Officer
-----------------------------
ACCEPTED as of the date
set forth above:
MASTER INVESTMENT TRUST
on behalf of the Corporate Stock Master Portfolio
By: /s/ RICHARD H. BLANK, JR.
-----------------------------
Name: Richard H. Blank, Jr.
-----------------------------
Title: Chief Operating Officer
-----------------------------
WELLS FARGO BANK, N.A.
By: /s/ ELIZABETH A. GOTTFRIED
-----------------------------
Name: Elizabeth A. Gottfried
-----------------------------
Title: Vice President
-----------------------------
4
<PAGE> 1
EXHIBIT 99.B5(h)(i)
INVESTMENT ADVISORY CONTRACT
MASTER INVESTMENT TRUST
111 Center Street
Little Rock, Arkansas 72201
March 12, 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 U.S. Government Allocation 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 eight investment portfolios, but which may from
time to time consist of a greater or lesser number of investment portfolios
(the "Master Portfolios"). The U.S. Government Allocation Master Portfolio is
one of the eight 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 0.50% of the
first $250 million of the Master Portfoloio's average daily net assets, 0.40%
of the next $250 million, and 0.30% of the Master Portfolio's assets in excess
of $500 million (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
3
<PAGE> 4
and/or Investing Company's administration agreement is calculated (the
"Applicable Ratio"), but only to the extent of the fee hereunder for the fiscal
year. If the fees payable under this contract and/or the Master Portfolio's
and/or Investing Company's administration agreement contributing to such excess
portion are calculated at more than one percentage rate, the Applicable Ratio
shall be calculated separately on the basis of, and applied separately to, the
portions of the fees calculated at the different rates. 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
4
<PAGE> 5
the Trust arising in connection with the affairs of the Trust. Each Holder
shall be jointly and severally liable (with rights of contribution inter se in
proportion to their respective Interests in the Trust) for the liabilities and
obligations of the Trust in the event that the Trust fails to satisfy such
liabilities and obligations; provided, however, that, to the extent assets are
available in the Trust, the Trust shall indemnify and hold each Holder harmless
from and against any claim or liability to which such Holder may become subject
by reason of his or her being or having been a Holder to the extent that such
claim or liability imposes on the Holder an obligation or liability which, when
compared to the obligations and liabilities imposed on other Holders, is
greater than his or her interest (proportionate share), and shall reimburse
such Holder for all legal and other expenses reasonably incurred by him or her
in connection with any such claim or liability. The rights accruing to a
Holder under Section 5.1 of the Trust's Declaration of Trust shall not exclude
any other right to which such Holder may be lawfully entitled, nor shall
anything herein contained restrict the right of the Trust to indemnify or
reimburse a Holder in any appropriate situation even though not specifically
provided herein. Notwithstanding the indemnification procedure described
above, it is intended that each Holder shall remain jointly and severally
liable to the creditors as a legal matter.
In addition, no Trustee, officer, employee or agent of the Trust shall
be liable to the Trust, Holders, or to any Trustee, officer, employee, or agent
thereof for any action or failure to act (including, without limitation, the
failure to compel in any way any former or acting Trustee to redress any breach
of trust) except for his or her own bad faith, willful misfeasance, gross
negligence or reckless disregard of his or her duties.
12. This contract shall be governed by and construed in accordance
with the laws of the State of California.
5
<PAGE> 6
If the foregoing correctly sets forth the agreement between the Trust
and the Adviser, please so indicate by signing and returning to the Trust the
enclosed copy hereof.
Very truly yours,
MASTER INVESTMENT TRUST,
on behalf of the U.S. Government
Allocation Master Portfolio
By: /s/ RICHARD H. BLANK, JR.
-----------------------------
Name: Richard H. Blank, Jr.
-----------------------------
Title: Chief Operating Officer
-----------------------------
ACCEPTED as of the date
set forth above:
WELLS FARGO BANK, N.A.
By: /s/ ELIZABETH A. GOTTFRIED
-----------------------------
Name: Elizabeth A. Gottfried
-----------------------------
Title: Chief Operating Officer
-----------------------------
By: /s/ MICHAEL J. NIEDERMEYER
-----------------------------
Name: Michael J. Niedermeyer
-----------------------------
Title: Executive Vice President
-----------------------------
6
<PAGE> 1
EXHIBIT 99.B5(h)(ii)
SUB-ADVISORY CONTRACT
U.S. Government Allocation Master Portfolio
MASTER INVESTMENT TRUST
111 Center Street
Little Rock, Arkansas 72201
March 12, 1996
BZW BARCLAYS GLOBAL
FUND ADVISORS
345 Montgomery Street
San Francisco, California 94163
Dear Sirs:
This will confirm the agreement by and among Wells Fargo Bank, N.A.
(the "Adviser"), Master Investment Trust (the "Trust"), on behalf of the U.S.
Government Allocation Master Portfolio, and BZW Barclays Global Fund Advisors
(the "Sub-Adviser") as follows:
1. The Trust is a registered open-end management investment
company currently consisting of eight investment portfolios, but which may from
time to time consist of a greater or lesser number of investment portfolios
(the "Master Portfolios"). The U.S. Government Allocation Master Portfolio is
one of the eight 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 has engaged the Adviser to manage the investing and
reinvesting of the Master Portfolio's assets and to provide the advisory
services specified elsewhere in the Investment Advisory Contract between the
Trust and the Adviser, dated as of the date hereof, subject to the overall
supervision of the Board of Trustees of the Trust. Pursuant to an
Administration Agreement between the Trust, on behalf of the Master Portfolio,
and an administrator (the "Administrator"), the Trust has engaged the
Administrator to provide the administrative services specified therein.
3. (a) The Adviser hereby employs the Sub-Adviser to perform
for the Master Portfolio certain advisory services and the Sub-Adviser hereby
accepts such employment. The Adviser shall retain the authority to establish
and modify, from time to time, the investment strategies and approaches
followed by the Sub-Adviser, subject, in all respects, to the supervision and
direction of the Trust's Board of Trustees and subject to compliance with the
investment objective, policies and restrictions set forth in the Registration
Statement.
(b) Subject to the overall supervision and control of the
Adviser and the Trust, the Sub-Adviser shall be responsible for investing and
reinvesting the Master Portfolio's assets in a manner consistent with the
investment strategies and approaches referenced in subparagraph (a),
<PAGE> 2
above. In this regard, the Sub-Adviser, in accordance with the investment
objective, policies and restrictions set forth in the Registration Statement,
shall be responsible for implementing and monitoring the performance of the
investment model employed with respect to the Master Portfolio and shall
furnish to the Adviser periodic reports on the investment activity and
performance of the Master Portfolio. The Sub-Adviser shall also furnish such
additional reports and information as the Adviser and the Trust's Board of
Trustees and officers shall reasonably request.
(c) The Sub-Adviser shall, at its expense, employ or
associate with itself such persons as the Sub- Adviser believes appropriate to
assist it in performing its obligations under this contract.
4. The Adviser shall be responsible for the fees paid to the
Sub-Adviser for its services thereunder. The Sub-Adviser agrees that it shall
have no claim against the Trust or the Master Portfolio respecting compensation
under this contract. In consideration of the services to be rendered by the
Sub-Adviser under this contract, the Adviser shall pay the Sub-Adviser a fee on
the first business day of each calendar month, at the annual rate of 0.15% 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. The Sub-Adviser will also receive an
annual payment of $40,000. If the fee payable to the Sub-Adviser pursuant to
this Paragraph 4 begins to accrue on a day after the first day 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 the month or from the beginning of that
month to the termination date, shall be prorated according to the proportion
that such period bears to the full month in which the effectiveness or
termination occurs. For purposes of calculating the 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 shares.
5. The Sub-Adviser shall give the Trust the benefit of the
Sub-Adviser's best judgment and efforts in rendering services under this
contract. As consideration and as an inducement to the Sub-Adviser's
undertaking to render these services, the Trust and the Adviser agree that the
Sub-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
Sub-Adviser against any liability to the Adviser, the Trust or its shareholders
to which the Sub-Adviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of the
Sub-Adviser's duties under this contract or by reason of reckless disregard of
its obligations and duties thereunder.
6. This contract shall become effective as of 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 specifically for the purpose of
continuing this Sub-Advisory Contract, 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, upon 60 days' written
notice to the Sub-Adviser, by the Trust, 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. The Sub-Adviser may terminate this contract on 60 days' written
notice to the Trust. This contract shall terminate automatically in the event
of its assignment (as defined in the Act).
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7. Except to the extent necessary to perform the Sub-Adviser's
obligations under this contract, nothing herein shall be deemed to limit or
restrict the right of the Sub-Adviser, or any affiliate of the Sub-Adviser, or
any employee of the Sub-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.
8. Pursuant to Article V of the Trust's Declaration of Trust, no
Trustee, officer, employee or agent of the Trust shall be subject to any
personal liability whatsoever, in his or her official or individual capacity to
any person, other than to the Trust or its Holders, in connection with Trust
property or the affairs of the Trust, save only that arising from his or her
bad faith, willful misfeasance, gross negligence or reckless disregard of his
or her duty to such person; and all such persons shall look solely to the Trust
property (which may include any applicable insurance) for satisfaction of
claims of any nature against a Trustee, officer, employee or agent of the Trust
arising in connection with the affairs of the Trust. Each Holder shall be
jointly and severally liable (with rights of contribution inter se in
proportion to their respective Interests in the Trust) for the liabilities and
obligations of the Trust in the event that the Trust fails to satisfy such
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.
9. 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, the Adviser and the Sub-Adviser, please so indicate by signing and
returning to the Trust the enclosed copy hereof.
Very truly yours,
BZW BARCLAYS GLOBAL FUND ADVISORS
By: /s/ DONALD LUSKIN
-----------------------------
Name: Donald Luskin
-----------------------------
Title: Vice Chairman
-----------------------------
By: /s/ VIN BENCIVENGA
-----------------------------
Name: Vin Bencivenga
-----------------------------
Title: Chief Fiduciary Officer
-----------------------------
ACCEPTED as of the date
set forth above:
MASTER INVESTMENT TRUST
on behalf of U.S. Government
Allocation Master Portfolio
By: /s/ RICHARD H. BLANK, JR.
-----------------------------
Name: Richard H. Blank, Jr.
-----------------------------
Title: Chief Operating Officer
-----------------------------
WELLS FARGO BANK, N.A.
By: /s/ ELIZABETH A. GOTTFRIED
-----------------------------
Name: Elizabeth A. Gottfried
-----------------------------
Title: Vice President
-----------------------------
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EXHIBIT 99.B11
Independent Auditors' Consent
The Board of Trustees
Master Investment Trust
We consent to the incorporation by reference in the Master Investment Trust
Amendment No. 8 to the Registration Statement Number 811-6415 on Form N-1A
under the Investment Company Act of 1940 of our report dated February 14, 1996,
on the financial statements and financial highlights of the Asset Allocation
Fund, California Tax-Free Bond Fund, California Tax-Free Income Fund, Corporate
Stock Fund, Diversified Income Fund, Ginnie Mae Fund, Growth and Income Fund,
Short-Intermediate U.S. Government Income Fund and U.S. Government Allocation
Fund (nine of the funds comprising Stagecoach Funds, Inc.) for the year ended
December 31, 1995.
We consent to the inclusion of our report dated February 14, 1996, on the
financial statements and financial highlights of the Asset Allocation Fund,
California Tax-Free Bond Fund, California Tax-Free Money Market Fund, Money
Market Fund, Municipal Income Fund, Short-Term Government-Corporate Income
Fund, Short-Term Municipal Income Fund, Strategic Growth Fund, U.S. Government
Income Fund, U.S. Treasury Money Market Fund and Variable Rate Government Fund
(eleven of the funds comprising Overland Express Funds, Inc.) for the year
ended December 31, 1995, which report has been included in the Statement of
Additional Information. We also consent to the inclusion of our report dated
February 14, 1996, on the financial statements of the Short-Term
Government-Corporate Income Master Portfolio and Short-Term Municipal Income
Master Portfolio (two of the master portfolio's comprising Master Investment
Trust) for the year ended December 31, 1995, which report has been included in
the Statement of Additional Information.
We consent to the inclusion of our report dated February 14, 1996, on the
financial statements and financial highlights of the Overland Sweep Fund (one
of the funds comprising Overland Express Funds, Inc.) for the year ended
December 31, 1995, which report has been included in the Statement of
Additional Information. We also consent to the inclusion of our report dated
February 14, 1996, on the financial statements of the Cash Investment Trust
Master Portfolio (one of the master portfolio's comprising Master Investment
Trust) for the year ended December 31, 1995, which report has been included
in the Statement of Additional Information.
We also consent to the reference to our firm under the heading "Independent
Auditors" in the Statement of Additional Information.
San Francisco, California /s/ KPMG Peat Marwick LLP
March 19, 1996
