<PAGE>
- ---------------------
SEMI-ANNUAL
- ---------------------
REPORT
- ---------------------
National Tax-Free
Money Market
Mutual Fund
JUNE 30, 1996
<PAGE>
TABLE OF CONTENTS
LETTER TO SHAREHOLDERS iii
MANAGER COMMENTS 1
NATIONAL TAX-FREE MONEY MARKET MUTUAL FUND
Statement of Assets and Liabilities 2
Statement of Operations 3
Statements of Changes in Net Assets 4
Financial Highlights 5
Notes to the Financial Statements 6
PORTFOLIO OF INVESTMENTS
National Tax-Free Money Market Mutual Fund 9
MASTER INVESTMENT TRUST
Statement of Assets and Liabilities 15
Statement of Operations 16
Statements of Changes in Net Assets 17
Notes to the Financial Statements 18
LIST OF ABBREVIATIONS 20
STAGECOACH FUNDS:
-------------------------------------------------------------------------
- ARE NOT FDIC INSURED MONEY MARKET MUTUAL FUNDS SEEK
- ARE NOT GUARANTEED BY WELLS FARGO TO MAINTAIN A STABLE NET ASSET [NO FDIC]
BANK VALUE OF $1.00 PER SHARE,
- ARE NOT DEPOSITS OR OBLIGATIONS HOWEVER, THERE CAN BE NO
OF THE BANK ASSURANCE THAT THE FUNDS WILL
- INVOLVE INVESTMENT RISK, MEET THIS OBJECTIVE. YIELDS
INCLUDING POSSIBLE LOSS OF WILL VARY WITH MARKET
PRINCIPAL CONDITIONS.
---------------------
i
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
- ---------------------
ii
<PAGE>
LETTER TO SHAREHOLDERS
- ------------------
TO OUR SHAREHOLDERS:
INFLATION CONCERNS MAY SPUR FED ACTION
The story of the financial markets for the first six months of 1996 was the
concern that "too much strength" in the economy would increase inflation and
force the Federal Reserve (the "Fed") to raise the federal funds target rate to
slow economic growth. While those concerns pushed long-term interest rates up
about a full percentage point since the end of 1995, sending 30-year Treasury
bonds over the 7.00% mark in June, money market mutual funds did not benefit
from increased yields.
In part, money market mutual fund yields remained relatively stable because the
Fed has not in fact raised rates. The federal funds discount rate establishes
the "floor" for interest rates throughout the economy and is one of the most
direct influences on money market yields. When this rate is increased, money
becomes more expensive to borrow, slowing economic activity. The Fed had lowered
interest rates several times over the past year, fueling to some extent the
stock market's strong performance over that time, but reducing returns for money
market funds.
Inflation is a valid concern for investors since inflation can erode the
long-term real return on an investment portfolio. There is not, however, a
consensus on how severe a problem inflation currently is. Certain signs that
usually indicate inflation, such as increased wages, lower unemployment and
stronger than expected economic growth, have not been validated by the
Department of Labor's Consumer Price Index, which continues to show inflation in
the acceptable 2 to 3.00% range. Nonetheless, most analysts now expect the Fed
to increase the federal funds target rate at least once, and possibly twice,
during the remainder of the year.
THE ROLE OF MONEY MARKET MUTUAL FUNDS
It may seem that the interests of money market and long-term mutual funds are
contrary, since an increase in interest rates can have a negative impact on both
the stock and bond markets, while increasing money market yields. It is
important to keep in mind, however, that these investments serve different ends.
Ideally, money market mutual funds are most suitable for short-term investments.
Money market funds are managed to provide current income and to maintain a net
asset value of one dollar per share. This reduces the possibility of loss of
principal and is intended to provide better yields than other short-term
alternatives. (There is, of course, no guarantee that they can achieve these
goals.)
Long-term funds, whether invested in equities or fixed-income securities,
increase the possibility of loss of principal, particularly in the short-term,
and are intended for investors with longer time horizons than money market
investors. Just as most investors have a variety
---------------------
iii
<PAGE>
LETTER TO SHAREHOLDERS
of needs and objectives, a balanced portfolio generally has a mixture of long-
and short-term investments.
A COMMITMENT TO INVESTMENT QUALITY
We believe a conservative, straightforward approach is the most effective long-
term investment strategy, and we offer a variety of Stagecoach Funds to meet a
broad range of investment goals. On the following pages you will find reports
from the investment adviser and portfolio managers of each of the Funds,
offering insight into individual fund performance and strategies, portfolio
holdings and other helpful information.
We appreciate your participation in the Stagecoach Funds. We will continue
working diligently to help you realize your financial goals.
STAGECOACH FAMILY OF FUNDS, AUGUST 1996
- ---------------------
iv
<PAGE>
NATIONAL TAX-FREE MONEY MARKET MUTUAL FUND
- --------------------
INVESTMENT ADVISOR Q&A
WHAT WAS THE SEVEN-DAY YIELD AS OF JUNE 30, 1996?
The seven-day yield as of the end of June was 2.84%.
WHAT FACTORS MOST INFLUENCE MONEY MARKET YIELDS?
Money market yields are most influenced by the federal funds target rate which
is set by the Fed. In late January, the Fed lowered the target rate from 5.50%
to 5.25% in response to a stagnant economy and low infliaton. This was the last
in a series of rate cuts which had the effect of dragging down money market
rates over the last year. During the second quarter a different story emerged as
the U.S. economy heated up, led by strengths in employment, the housing sector
and auto sales. This increased speculation that the Fed would reverse its recent
direction and raise rates during 1996. That has not yet occured.
Investors interested in tracking yields in the money market sector would find
the 3-month London Interbank Offered Rate (LIBOR) a helpful indication of
interest rates along with the federal funds target rate. At the end of 1995, the
federal funds target rate was at 5.50% and 3-month LIBOR was at 5.62%. As of
June 30, 1996 the federal funds target rate was at 5.25% and 3-month LIBOR was
at 5.53%.
WHAT DO YOU EXPECT TO HAVE HAPPEN FOR THE REMAINDER OF THIS YEAR?
The Fed appears to have adopted a neutral stance for the time being regarding
interest rates, despite the growing market consensus that an increase is likely.
Fed action depends on how it perceives the rate of inflation. Demand for
tax-free money market funds continues to be steady, which could help support
returns.
HOW DIRECT A RELATIONSHIP IS THERE BETWEEN INVESTOR CONFIDENCE IN A PARTICULAR
STATE'S ECONOMY AND THE RESALE VALUE OF ITS DEBT INSTRUMENTS? ARE EXTERNAL
FACTORS LIKE INFLATION MORE IMPORTANT?
Generally inflation has the largest impact on fixed-income performance. In
municipals, state income tax rates also have a large influence. For example,
even when California's economy was at its weakest, there was strong demand for
California tax-free money market funds due to the relatively high (9.3%) maximum
individual tax rate. If concerns develop that a state municipal issuer might
have trouble meeting its obligations, it could certainly affect the liquidity of
those securities.
DURING PERIODS OF GENERALLY LOWER RATES, DOES THE FUND GO "SHOPPING" FOR THE
BEST DEALS? HOW DOES IT SELECT INVESTMENTS?
Regardless of the level of interest rates, the Fund is always looking for the
best deals without compromising credit quality. The Fund monitors the municipal
bond market nation-wide and seizes opportunities as they present themselves.
Over a period of time, the "best deals" and the highest credit quality may be
found in a variety of regions.
---------------------
1
<PAGE>
STATEMENT OF ASSETS & LIABILITIES (UNAUDITED) - JUNE 30, 1996
<TABLE>
<CAPTION>
NATIONAL
TAX-FREE
MONEY
MARKET
MUTUAL
FUND
<S> <C>
- -----------------------------------------------------------
ASSETS
INVESTMENTS:
In interests in Master Portfolio, at
value $ 3,003,304
Receivables:
Interest 13,368
Due from administrator (Note 2) 12,496
Organization expenses, net of
amortization 13,574
TOTAL ASSETS 3,042,742
LIABILITIES
Payables:
Distribution to shareholders 12,078
Organizational costs 18,000
Due to administrator 440
Accrued expenses 13,994
TOTAL LIABILITIES 44,512
NET ASSETS
$ 2,998,230
Net assets consist of:
Paid-in capital $ 2,998,393
Undistributed net realized gain (loss)
on investments (163)
Net unrealized appreciation
(depreciation) of investments 0
NET ASSETS $ 2,998,230
COMPUTATION OF NET ASSET VALUE AND
OFFERING PRICE (NOTE 4):
Net assets $ 2,998,230
Shares outstanding 2,998,393
Net asset value per share and offering
price $ 1.00
- -----------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
- ------------------------
2
<PAGE>
STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
For the Period From April 2, 1996 (commencement of operations) to June 30, 1996
NATIONAL
TAX-FREE
MONEY
MARKET
MUTUAL
FUND
<S> <C>
- -----------------------------------------------------------
INVESTMENT INCOME ALLOCATED FROM MASTER
PORTFOLIO
Interest $ 15,942
Expenses (1,317)
NET INVESTMENT INCOME ALLOCATED FROM
MASTER PORTFOLIO 14,625
EXPENSES (NOTE 2)
Administration fees 220
Distribution fees 220
Shareholder servicing fees 1,102
Transfer agency fees 440
Amortization of organization expenses 4,377
Legal and audit fees 4,255
Shareholder reports 2,918
Registration fees 7,329
Directors fees 1,119
Other 419
TOTAL EXPENSES 22,399
Less:
Waived Fees and Reimbursed Expenses
(Note 2) (20,858)
NET EXPENSES 1,541
NET INVESTMENT INCOME 13,084
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on sale of
investments allocated from Master
Portfolio (163)
NET GAIN (LOSS) ON INVESTMENTS (163)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 12,921
- -----------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
---------------------
3
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
For The Period From April 2, 1996 (commencement of operations) to June 30, 1996
NATIONAL
TAX-FREE
MONEY
MARKET
MUTUAL
FUND
<S> <C>
- -----------------------------------------------------------
INCREASE IN NET ASSETS
OPERATIONS:
Net investment income $ 13,084
Net realized gain (loss) on sale of
investments (163)
NET INCREASE (DECREASE) IN NET ASSETS 12,921
RESULTING FROM OPERATIONS
Distributions to shareholders:
From net investment income (13,084)
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 10,127,881
Net asset value of shares issued in
reinvestment of dividend distributions 1,130
Cost of shares redeemed (7,132,850)
NET INCREASE IN NET ASSETS RESULTING
FROM CAPITAL SHARE TRANSACTIONS (NOTE 4) 2,996,161
INCREASE IN NET ASSETS 2,995,998
NET ASSETS
Beginning net assets 2,232
ENDING NET ASSETS $ 2,998,230
SHARES ISSUED AND REDEEMED
Shares sold 10,130,113
Shares issued in reinvestment of
dividends and distributions 1,130
Shares redeemed (7,133,850)
NET INCREASE IN SHARES OUTSTANDING 2,997,393
- -----------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
- ---------------------
4
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
NATIONAL
TAX-FREE
MONEY MARKET
MUTUAL FUND
---------------
(UNAUDITED)
FROM
APRIL 2, 1996
(COMMENCEMENT
OF OPERATIONS)
TO JUNE 30,
1996
<S> <C>
- ---------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $1.00
---------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.01
LESS DISTRIBUTIONS:
Dividends from net investment income (0.01)
---------------
NET ASSET VALUE, END OF PERIOD $1.00
---------------
---------------
TOTAL RETURN (NOT ANNUALIZED)+ 0.83%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $2,998
Number of shares outstanding, end of period (000) 2,998
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets(1) 0.33%
Ratio of net investment income to average net assets(2) 2.76%
- ---------------------------------------------------------------------------------------
(1) Ratio of expenses to average net assets prior to waived fees and
reimbursed expenses 4.80%
(2) Ratio of net investment loss to average net assets prior to waived
fees and reimbursed expenses (1.67)%
- ---------------------------------------------------------------------------------------
</TABLE>
+ TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
---------------------
5
<PAGE>
STAGECOACH FUNDS - JUNE 30, 1996 (UNAUDITED)
- -----------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The National Tax-Free Money Market Mutual Fund (the "Fund") is a series of
Stagecoach Funds, Inc. (the "Company"), which is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end investment
company. The Company commenced operations on January 1, 1992, and consists of
ten separate diversified funds: the Aggressive Growth, Asset Allocation,
Corporate Stock, Diversified Income, Ginnie Mae, Growth and Income, Money Market
Mutual, National Tax-Free Money Market, Short-Intermediate U.S. Government
Income and U.S. Government Allocation Funds; and three non-diversified funds:
the California Tax-Free Bond, California Tax-Free Income and California Tax-Free
Money Market Mutual Funds. These financial statements represent only the
National Tax-Free Money Market Mutual Fund.
The following significant accounting policies are consistently followed by the
Fund in the preparation of their 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 ("Interests") of the National Tax-Free Money
Market Master Portfolio (the "Master Portfolio") of the Master Investment Trust
(the "Trust"). The Master Portfolio has the same investment objective as the
Fund. The value of the Fund's investment in the Master Portfolio reflects the
Fund's interest in the net assets of the Master Portfolio (5.59%) at June 30,
1996. The Master Portfolio 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.
The Master Portfolio uses the amortized cost method to value its portfolio
securities and seeks to maintain a constant net asset value of $1.00 per share;
however, there can be no assurance that the Master Portfolio will meet this
goal. The amortized cost method involves valuing a security at its cost plus
accretion of discount or minus premium amortized over the period until maturity,
which approximates market value.
- ---------------------
6
<PAGE>
STAGECOACH FUNDS - JUNE 30, 1996 (UNAUDITED)
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Securities transactions are accounted for on the date the securities are
purchased or sold (trade date). Interest income is accrued daily. Realized gains
or losses are reported on the basis of identified cost of securities delivered.
Bond discounts and premiums are accreted or amortized as required by the
Internal Revenue Code.
REPURCHASE AGREEMENTS
Transactions involving purchases of securities under agreements to resell
("repurchase agreements") are treated as collateralized financing transactions
and are recorded at their contracted resale amounts. These repurchase
agreements, if any, are detailed in the Master Portfolio's Portfolio of
Investments. The Master Portfolio's adviser pools the Master Portfolio's cash
with other funds and invests in repurchase agreements entered into by the Master
Portfolio and other funds. The repurchase agreement 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 Master Portfolio at June 30, 1996, was collateralized by
U.S. government obligations. The repurchase agreements were entered into on June
28, 1996.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends to shareholders from net investment income of the Fund are declared
daily and distributed monthly. Any distributions to shareholders from net
realized capital gains are declared and distributed annually.
FEDERAL INCOME TAXES
It is the Fund's policy is to comply with the requirements of the Internal
Revenue Code that are applicable to regulated investment companies and to
distribute substantially all 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.
ORGANIZATION EXPENSES
Stephens Inc. ("Stephens"), the Fund's administrator and distributor, has
charged the Fund for expenses incurred in connection with the organization and
initial registration. Such expenses are being amortized by the Fund on a
straightline basis over 60 months from the date the Fund or share classes
commenced operations.
2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a contract on behalf of the Fund with WFB, whereby
WFB has agreed to provide transfer agency and shareholder servicing for the
Fund. Under the transfer agency agreement, WFB is entitled to be paid on an
annual rate of 0.10% of the Fund's average daily net assets. For providing
shareholder servicing WFB is entitled to an annual rate of 0.25% of the Fund's
average daily net assets.
---------------------
7
<PAGE>
STAGECOACH FUNDS - JUNE 30, 1996 (UNAUDITED)
FEES WAIVED AND EXPENSES REIMBURSED
Fees waived and expenses reimbursed for the period from April 2, 1996
(commencement of operations) to June 30, 1996 were as follows:
<TABLE>
<CAPTION>
EXPENSES
FEES WAIVED REIMBURSED
FUND BY WFB FROM STEPHENS
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
National Tax-Free Money Market Mutual Fund $ 1,541 $ 19,317
</TABLE>
Fee waivers and expense reimbursements continue at the discretion of WFB and
Stephens, respectively.
The Company has entered into administration and distribution agreements on
behalf of the Fund with Stephens. Under the agreements, Stephens has agreed to
provide supervisory, administrative and distribution services to the Fund. For
providing supervisory and administrative services, the Fund has agreed to pay
Stephens a monthly fee at the annual rate of 0.05% of the Fund's average daily
net assets.
The Company has adopted a Plan pursuant to Rule 12b-1 under the 1940 Act (the
"Plan"), whereby the 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 0.05% of the Fund's average daily net assets. The Fund
may participate in joint distribution activities with any of the other funds, in
which event, expenses reimbursed out of the assets of the Fund may be
attributable, in part, to the distribution-related activities of another fund.
Generally, the expenses attributable to joint distribution activities are
allocated among all of the funds in proportion to their relative net asset
sizes.
For the period from April 2, 1996 (commencement of operations) to June 30, 1996
the National Tax-Free Money Market Mutual Fund paid Stephens $220 in
distribution fees.
Certain officers and directors of the Company are also officers of Stephens. At
June 30, 1996, Stephens owned less than 1% of the shares outstanding of the
Fund.
3. CAPITAL SHARES TRANSACTIONS
As of June 30, 1996, there were 17 billion shares of $.001 par value capital
stock authorized by the Company. Transactions in capital shares for the period
from April 2, 1996 (commencement of operations) to June 30, 1996 are disclosed
in detail in the Statement of Changes in Net Assets.
- ---------------------
8
<PAGE>
MASTER INVESTMENT TRUST - TAX-FREE MONEY MARKET MASTER PORTFOLIO (UNAUDITED)
- -----------------------------------------
PORTFOLIO OF INVESTMENTS - 6/30/96
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS + - 98.95%
ALASKA - 2.42%
$ 1,300,000 Valdez AK Marine Terminal Revenue Exxon
Pipeline Co V/R 3.50 % 12/01/33 $ 1,300,000
ARIZONA - 2.61%
$ 1,400,000 Maricopa County AZ PCR Arizona Public Service
Co V/R Series D LOC - Bank of America 3.55 % 05/01/29 $ 1,400,000
COLORADO - 4.09%
$ 900,000 Colorado State Student Loan Obligation Bond
Authority V/R AMT Series A LOC - SLMA 3.40 % 07/01/00 $ 900,000
1,300,000 Englewood CO IDA Revenue V/R 3.45 12/01/10 1,300,000
--------------
$ 2,200,000
CONNECTICUT - 0.19%
$ 100,000 Connecticut State HFA V/R Series G AMBAC
Insured 3.45 % 05/15/18 $ 100,000
DELAWARE - 1.12%
$ 600,000 Delaware State Waste Disposal and Sewer
Facilities Geigy Corp V/R AMT Series A LOC -
Union Bank of Switzerland 3.65 % 03/01/26 $ 600,000
DISTRICT OF COLUMBIA - 2.98%
$ 1,600,000 Washington DC EDFA Catholic University V/R
Series A LOC - Sanwa Bank Ltd 3.55 % 12/01/09 $ 1,600,000
</TABLE>
- -------------------------------------------------------------------
+ SECURITIES WITH MATURITIES IN EXCESS OF 397 DAYS ARE SUBJECT TO A DEMAND
FEATURE WHICH REDUCES THE
REMAINING MATURITY.
---------------------------
9
<PAGE>
MASTER INVESTMENT TRUST - TAX-FREE MONEY MARKET MASTER PORTFOLIO (UNAUDITED)
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS + (CONTINUED)
FLORIDA - 9.77%
$ 1,400,000 Florida HFA MFHR V/R LOC - Citibank 3.35 % 12/01/07 $ 1,400,000
2,000,000 Indian River FL Hospital CP LOC - Kredietbank
NV 3.70 09/10/96 2,000,000
600,000 Sarasota County FL Hospital CP LOC - Sumitomo
Bank Ltd 3.65 07/31/96 600,000
1,250,000 Volusia FL MFHR Sun Point Apartment Project V/R
Series H LOC - Citibank 3.35 12/01/05 1,250,000
--------------
$ 5,250,000
GEORGIA - 8.77%
$ 800,000 Georgia State Municipal Electric Authority CP
Multiple LOC's 3.55 % 07/11/96 $ 800,000
1,000,000 Georgia State Municipal Electric Authority CP
Multiple LOC's 3.55 07/12/96 1,000,000
2,910,000 Georgia State Municipal Electric Authority CP
Multiple LOC's 3.55 10/10/96 2,910,000
--------------
$ 4,710,000
INDIANA - 5.96%
$ 3,200,000 Jasper County IN PCR CP LOC - Union Bank of
Switzerland 3.35 % 08/16/96 $ 3,200,000
KANSAS - 2.23%
$ 1,200,000 Burlington KS Kansas City Power & Light CP LOC
- Societe Generale 3.45 % 09/24/96 $ 1,200,000
</TABLE>
- ---------------------------------------------------------------------------
+ SECURITIES WITH MATURITIES IN EXCESS OF 397 DAYS ARE SUBJECT TO A DEMAND
FEATURE WHICH REDUCES THE
REMAINING MATURITY.
- ---------------------------
10
<PAGE>
MASTER INVESTMENT TRUST - TAX-FREE MONEY MARKET MASTER PORTFOLIO (UNAUDITED)
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS + (CONTINUED)
LOUISIANA - 1.67%
$ 300,000 New Orleans LA Aviation Board Revenue V/R
Series B MBIA Insured 3.25 % 08/01/16 $ 300,000
200,000 New Orleans LA Aviation Board Revenue V/R
Series C MBIA Insured 3.25 08/01/11 200,000
400,000 West Feliciana Parish LA PCR Gulf State Utility
Company Project V/R LOC - Canadian Imperial
Bank of Commerce 3.60 04/01/16 400,000
--------------
$ 900,000
MASSACHUSETTS - 3.72%
$ 2,000,000 Massachusettes State Health Facilities CP
Harvard University 3.55 % 10/29/96 $ 2,000,000
MICHIGAN - 10.24%
$ 2,000,000 Delta County MI EDA Mead Escanola Paper CP LOC
- Swiss Bank 3.50 % 08/19/96 $ 2,000,000
1,000,000 Michigan State Fund Limited Obligation Revenue
V/R 3.55 09/01/30 1,000,000
1,500,000 Midland MI Economic Development Corp Limited
Obligation Revenue Dow Chemical Co V/R
Project B 3.55 12/01/15 1,500,000
1,000,000 Midland MI Economic Development Corp Obligatory
Revenue Dow Chemical Co V/R AMT Series A 3.65 12/01/23 1,000,000
--------------
$ 5,500,000
MINNESOTA - 3.72%
$ 2,000,000 Southern Minnesota State Municipal Power CP LOC
- Credit Suisse 3.60 % 10/16/96 $ 2,000,000
</TABLE>
- -------------------------------------------------------------------
+ SECURITIES WITH MATURITIES IN EXCESS OF 397 DAYS ARE SUBJECT TO A DEMAND
FEATURE WHICH REDUCES THE
REMAINING MATURITY.
---------------------------
11
<PAGE>
MASTER INVESTMENT TRUST - TAX-FREE MONEY MARKET MASTER PORTFOLIO (UNAUDITED)
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS + (CONTINUED)
MISSOURI - 1.12%
$ 600,000 Perry MO PCR Leaf River Forest Project V/R LOC
- Credit Suisse 3.60 % 03/01/02 $ 600,000
NEW YORK - 7.82%
$ 700,000 New York City NY GO V/R Series B FGIC Insured 3.75 % 10/01/20 $ 700,000
1,100,000 New York City NY MUD Water and Sewer Revenue
V/R Series A FGIC Insured 3.75 06/15/25 1,100,000
1,500,000 New York State PCR V/R Series A LOC - Toronto
Dominion Bank 3.55 07/01/15 1,500,000
900,000 New York State V/R Subseries A8 LOC - Sanwa
Bank Ltd 3.65 08/01/17 900,000
--------------
$ 4,200,000
NORTH CAROLINA - 2.51%
$ 1,350,000 Charlotte NC Airport Revenue V/R Series A MBIA
Insured 3.30 % 07/01/16 $ 1,350,000
OHIO - 2.05%
$ 1,100,000 Ohio State Development Authority Cincinnati Gas
& Electric V/R Series A LOC - ABN Amro of
North America 3.50 % 09/01/30 $ 1,100,000
OREGON - 1.12%
$ 600,000 Port St Helens OR PCR Portland General Electric
Company V/R LOC - Canadian Imperial Bank of
Commerce 3.55 % 04/01/10 $ 600,000
PENNSYLVANIA - 1.86%
$ 1,000,000 Delaware County PA PCR Philadelphia Electric CP
FGIC Insured 3.60 % 09/10/96 $ 1,000,000
</TABLE>
- ---------------------------------------------------------------------------
+ SECURITIES WITH MATURITIES IN EXCESS OF 397 DAYS ARE SUBJECT TO A DEMAND
FEATURE WHICH REDUCES THE
REMAINING MATURITY.
- ---------------------------
12
<PAGE>
MASTER INVESTMENT TRUST - TAX-FREE MONEY MARKET MASTER PORTFOLIO (UNAUDITED)
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS + (CONTINUED)
RHODE ISLAND - 2.79%
$ 1,500,000 Rhode Island State Industrial Facilities Corp
Blackstone Valley Electric Co V/R LOC - Bank
of New York 3.40 % 12/01/14 $ 1,500,000
SOUTH CAROLINA - 0.74%
$ 400,000 Charleston County SC Industrial Revenue V/R
Massey Coal Terminal Corp LOC - Morgan
Guaranty Trust 3.60 % 01/01/07 $ 400,000
TEXAS - 11.82%
$ 2,350,000 Brazos River TX Harbor Navigation District CP
Dow Chemical Project 3.55 % 10/08/96 $ 2,350,000
1,000,000 Guadalupe-Blanco River Authority Texas PCR
Central Power & Light Co V/R LOC - ABN Amro
of North America 3.60 11/01/15 1,000,000
1,000,000 Gulf Coast Waste Disposal Authority PCR Exxon
Project V/R 3.55 06/01/20 1,000,000
1,000,000 North Central TX HFFA V/R Series B MBIA Insured 3.80 10/01/15 1,000,000
1,000,000 North Texas State Higher Education Authority
Student Loan Revenue V/R AMT Series A AMBAC
Insured 3.40 04/01/36 1,000,000
--------------
$ 6,350,000
UTAH - 5.40%
$ 1,500,000 Salt Lake City UT Pooled Hospital Revenue CP
LOC - West Deutsche Lenderbank 3.45 % 11/24/96 $ 1,500,000
1,400,000 Utah State Intermountain Power Agency CP LOC -
Swiss Bank 3.60 11/14/96 1,400,000
--------------
$ 2,900,000
</TABLE>
- -------------------------------------------------------------------
+ SECURITIES WITH MATURITIES IN EXCESS OF 397 DAYS ARE SUBJECT TO A DEMAND
FEATURE WHICH REDUCES THE
REMAINING MATURITY.
---------------------------
13
<PAGE>
MASTER INVESTMENT TRUST - TAX-FREE MONEY MARKET MASTER PORTFOLIO (UNAUDITED)
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS + (CONTINUED)
WASHINGTON - 0.74%
$ 400,000 Washington State HFA Revenue V/R Series E 3.55 % 10/01/05 $ 400,000
WYOMING - 1.49%
$ 200,000 Uinta County WY PCR Chevron USA Inc Project V/R 3.00 %(F) 08/18/20 $ 200,000
600,000 Uinta County WY PCR Chevron USA Inc V/R 3.50 12/01/22 600,000
--------------
$ 800,000
TOTAL SHORT-TERM INSTRUMENTS $ $53,160,000
(Cost $53,160,000)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $53,160,000)* (Note 1) 98.95% $ 53,160,000
Other Assets and Liabilities, Net 1.05 566,117
------ --------------
TOTAL NET ASSETS 100.00% $ 53,726,117
------ --------------
------ --------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
+ SECURITIES WITH MATURITIES IN EXCESS OF 397 DAYS ARE SUBJECT TO A
DEMAND FEATURE WHICH REDUCES THE REMAINING MATURITY.
(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.
- ------------------------
14
<PAGE>
STATEMENT OF ASSETS & LIABILITIES (UNAUDITED) - JUNE 30, 1996
<TABLE>
<CAPTION>
MASTER
INVESTMENT
TRUST
TAX-FREE
MONEY MARKET
MASTER
PORTFOLIO
<S> <C>
- ---------------------------------------------------------
ASSETS
INVESTMENTS:
In securities, at market value (see
cost below) $ 53,160,000
Cash 571,651
Receivables:
Dividends and interest 179,998
TOTAL ASSETS 53,911,649
LIABILITIES
Payables:
Distribution to shareholders 159,530
Due to sponsor and distributor (Note
2) 4,426
Due to adviser (Note 2) 18,706
Other 2,870
TOTAL LIABILITIES 185,532
TOTAL NET ASSETS $ 53,726,117
INVESTMENTS AT COST (NOTE 3) $ 53,160,000
- ---------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------------------
15
<PAGE>
STATEMENT OF OPERATIONS (UNAUDITED) - FOR THE PERIOD ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
MASTER
INVESTMENT
TRUST
TAX-FREE
MONEY
MARKET
MASTER
PORTFOLIO(1)
<S> <C>
- -------------------------------------------------------
INVESTMENT INCOME
Interest $ 471,950
TOTAL INVESTMENT INCOME 471,950
EXPENSES (NOTE 2)
Advisory fees 38,945
Amortization of organization expenses 4,426
Other 4,549
TOTAL EXPENSES 47,920
Less:
Waived fees and reimbursed expenses
(Note 2) (8,869)
NET EXPENSES 39,051
NET INVESTMENT INCOME (LOSS) $ 432,899
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (1)
Net realized gain (loss) on sale of
investments (2,223)
NET GAIN (LOSS) ON INVESTMENTS (2,223)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 430,676
- -------------------------------------------------------
</TABLE>
(1) THE MASTER PORTFOLIO COMMENCED OPERATIONS ON APRIL 2, 1996.
The accompanying notes are an integral part of these financial statements.
- ------------------------
16
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MASTER
INVESTMENT
TRUST
TAX-FREE
MONEY MARKET
MASTER
PORTFOLIO
------------
(UNAUDITED)
PERIOD ENDED
JUNE 30,
1996(1)
<S> <C>
- ---------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss) $ 432,899
Net realized gain (loss) on sale of
investments (2,223)
NET INCREASE (DECREASE) RESULTING FROM
OPERATIONS 430,676
NET INCREASE IN NET ASSETS RESULTING
FROM UNIT TRANSACTIONS 53,292,109
INCREASE (DECREASE) IN NET ASSETS 53,722,785
NET ASSETS:
Beginning net assets 3,332
ENDING NET ASSETS $ 53,726,117
- ---------------------------------------------------------
</TABLE>
(1) THE MASTER PORTFOLIO COMMENCED OPERATIONS APRIL 2, 1996.
The accompanying notes are an integral part of these financial statements.
---------------------
17
<PAGE>
MASTER INVESTMENT TRUST -- JUNE 30, 1996 (UNAUDITED)
- -----------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The Tax-Free Money Market Master Portfolio (the "Master Portfolio") is a 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 eight series of interests: the Asset
Allocation, Capital Appreciation, Cash Investment Trust, Corporate Stock,
Tax-Free Money Market, Short-Term Government-Corporate Income, Short-Term
Municipal Income and U.S. Government Allocation Master Portfolios. 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 represent only the Tax-Free Money Market
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
The Master Portfolio 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.
The Master Portfolio 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 the Master Portfolio 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
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
- ---------------------
18
<PAGE>
MASTER INVESTMENT TRUST -- JUNE 30, 1996 (UNAUDITED)
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
The Master Portfolio intends to qualify for federal income tax purposes as a
partnership. Management of the Master Portfolio therefore believes that it will
not be subject to any federal or state income tax on its income and net capital
gains (if any). However, each investor in the 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 Portfolio's assets, income, gain/loss 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 the Master Portfolio 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 an advisory contract with WFB on behalf of the Master
Portfolio. Pursuant to the contract, WFB furnishes investment guidance and
policy direction in connection with daily portfolio management of the Master
Portfolio. Under the contract, WFB is entitled to receive a monthly advisory fee
at an annual rate of 0.30% of the average daily net assets.
WAIVED FEES
Waived fees for the period from April 2, 1996 (commencement of operations) to
June 30, 1996, were $8,869. Waived fees continue at the discretion of WFB.
---------------------
19
<PAGE>
LIST OF ABBREVIATIONS
ABAG -- Association of Bay Area Governments
ADR -- American Depository Receipts
AMBAC -- American Municipal Bond Assurance Corporation
AMT -- Alternative Minimum Tax
ARM -- Adjustable Rate Mortgages
BART -- Bay Area Rapid Transit
CDA -- Community Development Authority
CDSC -- Contingent Deferred Sales Charge
CGIC -- Capital Guaranty Insurance Company
CGY -- Capital Guaranty Corporation
CMT -- Constant Maturity Treasury
COFI -- Cost of Funds Index
CONNIE LEE -- Connie Lee Insurance Company
COP -- Certificate of Participation
CP -- Commercial Paper
DW&P -- Department of Water & Power
DWR -- Department of Water Resources
EDFA -- Education Finance Authority
FGIC -- Financial Guaranty Insurance Corporation
FHA -- Federal Housing Authority
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance, Incorporated
GNMA -- Government National Mortgage Association
GO -- General Obligation
HFA -- Housing Finance Authority
HFFA -- Health Facilities Financing Authority
IDA -- Industrial Development Authority
LIBOR -- London Interbank Offered Rate
LOC -- Letter of Credit
MBIA -- Municipal Bond Insurance Association
MFHR -- Multi-Family Housing Revenue
MUD -- Municipal Utility District
PCFA -- Pollution Control Finance Authority
PCR -- Pollution Control Revenue
PFA -- Public Finance Authority
PSFG -- Public School Fund Guaranty
RAW -- Revenue Anticipation Warrants
RDA -- Redevelopment Authority
RDFA -- Redevelopment Finance Authority
R&D -- Research & Development
SFMR -- Single Family Mortgage Revenue
TBA -- To Be Announced
TRAN -- Tax Revenue Anticipation Notes
USD -- Unified School District
V/R -- Variable Rate
- ---------------------
20
