MASTER INVESTMENT TRUST, POS AMI, 1997-01-31

MASTER INVESTMENT TRUST
POS AMI, 1997-01-31

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<PAGE> 1
As filed with the Securities and Exchange Commission
on January 31, 1997

Registration No. 811-6415
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

---------------

FORM N-1A

AMENDMENT NO. 10 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
<PAGE> 2
EXPLANATORY NOTE

This Amendment No.10 to the Registration Statement of Master
Investment Trust (the "Trust") is being filed to add to the Trust's
Registration Statement the audited financial statements and certain related
financial information for the fiscal period ended September 30, 1996 for the
Trust's Asset Allocation, Corporate Stock and U.S. Government Allocation Master
Portfolios.

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.

<PAGE> 3
Master Investment Trust
Cross Reference Sheet

<TABLE>
<CAPTION>
Form N-1A Item Number
- ---------------------

Part A Prospectus Caption
- ------ ------------------
<S> <C>
4 General Description of Registrant; Investment
Objectives; Additional Permitted Investment
Activities of the Master Portfolios; Investment
Policies
5 Management of the Master Portfolios; Management of
the Trust; Investment Adviser,
Custodian and Transfer Agent; Sponsor,
Administrator and Placement Agent; Expenses
6 Capital Stock and Other Securities; Organization
and Interests; Dividends and Distributions; Taxes
7 Purchase of Securities; Determination of Net Asset
Value;
8 Redemption or Repurchase
9 Not Applicable

<CAPTION>
Part B Statement of Additional Information
- ------ -----------------------------------
<S> <C>
10 Cover Page
11 Table of Contents
12 General Information and History
13 Investment Objectives and Policies; Investment
Restrictions; Additional Permitted
Investment Activities
14 Management of the Trust
15 Control Persons and Principal Holders of Securities
16 Investment Advisory and Other Services
17 Brokerage Allocation and Other Practices
18 Capital Stock and Other Securities
19 Purchase, Redemption and Pricing of Securities
20 Tax Status
21 Underwriters
22 Calculation of Performance Data
23 Financial Information

<CAPTION>
Part C Other Information
- ------ -----------------
<S> <C>
24-32 Information required to be included in Part C is
set forth under the appropriate Item, so numbered,
in Part C of this Document.
</TABLE>

<PAGE> 4
MASTER INVESTMENT TRUST
PART A
Dated February 1, 1997

Responses to Items 1 through 3 have been omitted pursuant to paragraph F.4. of
the General Instructions to Form N-1A.

ITEM 4. GENERAL DESCRIPTION OF REGISTRANT.

Master Investment Trust (the "Trust") is a no-load, diversified,
open-end management investment company which was organized as a business trust
under the laws of Delaware on August 15, 1991. The Trust is a "series fund,"
which is a mutual fund divided into separate portfolios. The Trust currently
offers the following diversified portfolios: the Asset Allocation Master
Portfolio, Capital Appreciation Master Portfolio, Cash Investment Trust Master
Portfolio (the "CIT Master Portfolio"), Corporate Stock Master Portfolio,
Short-Term Municipal Income Master Portfolio (the "Municipal Income Master
Portfolio"), Short-Term Government-Corporate Income Master Portfolio (the
"Government-Corporate Income Master Portfolio"), Small Cap Master Portfolio,
Tax-Free Money Market Master Portfolio and the U.S. Government Allocation
Master Portfolio (each, a "Master Portfolio," and collectively, the "Master
Portfolios"). Each Master Portfolio is treated as a separate entity for certain
matters under the Investment Company Act of 1940, as amended (the "1940 Act"),
and for other purposes. An interestholder of one Master Portfolio is not deemed
to be an interestholder of any other Master Portfolio. As described below, for
certain matters Trust interestholders vote together as a group; as to others
they vote separately by Master Portfolio. From time to time, other series may
be established and sold pursuant to other offering documents.

The primary investors in the Master Portfolios are the corresponding
funds of Overland Express Funds, Inc. ("Overland Express") and Stagecoach
Funds, Inc. ("Stagecoach Funds"). These include the National Tax-Free
Institutional Money Market, Overland Sweep, Short-Term Municipal Income,
Short-Term Government-Corporate Income, Small Cap Strategy and Strategic Growth
Funds of Overland Express and the Aggressive Growth, Asset Allocation,
Corporate Stock, National Tax-Free Money Market Mutual, Small Cap and U.S.
Government Allocation Funds of Stagecoach Funds. Each Fund invests all of its
assets in the corresponding Master Portfolio of the Trust, rather than in a
portfolio of securities. Each Master Portfolio has substantially the same
investment objective as the corresponding Fund or Funds. Therefore, each Fund's
investment experience will correspond directly with its Master Portfolio's
investment experience. Shares of the Master Portfolios may be purchased only by
other investment companies or similar accredited investors (as defined below).

The Strategic Growth Fund of Overland Express was previously a
"stand-alone" fund and did not invest its assets in a single master portfolio.
On February 20, 1996, the Strategic Growth Fund converted to a master/feeder
structure and began investing substantially all of its assets in the Capital
Appreciation Master Portfolio. The Aggressive Growth Fund of Stagecoach Funds,
which commenced operations on March 5, 1996, also invests substantially all its
assets in the Capital Appreciation Master Portfolio. The Asset Allocation,
Corporate Stock and U.S. Government Allocation Funds of Stagecoach Funds,
converted to feeder funds in a master master/feeder structure on April 29,
1996, and invest substantially all of their assets in the Asset Allocation,
Corporate Stock and U.S. Government Allocation Master Portfolios, respectively.
The Small Cap Strategy Fund of Overland Express and the Small Cap Fund of
Stagecoach Funds, each of which commenced operations on September 16, 1996,
invest substantially all of their assets in the Small Cap Master Portfolio.

Wells Fargo Bank, N.A. ("Wells Fargo Bank") serves as each Master
Portfolio's investment adviser. Barclays Global Fund Advisors ("BGFA") serves
as investment sub-adviser to the Corporate Stock, Asset Allocation and U.S.
Government Allocation Master Portfolios. The other Master Portfolios do not
retain an investment sub-adviser. Stephens Inc. ("Stephens") serves as each
Master Portfolio's sponsor, administrator and placement agent. Beneficial
interests in the Trust are issued solely in private placement transactions that
do not involve any "public offering" within the meaning of Section 4(2) of the
Securities Act of 1933, as amended (the "1933 Act"). Investments in the Trust
may only be made by registered broker/dealers or by investment companies,
insurance company separate accounts, common or commingled trust funds, group
trusts or similar organizations or entities that are "accredited investors"
within the

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meaning of Regulation D under the 1933 Act. This registration statement, as
amended, does not constitute an offer to sell, or the solicitation of an offer
to buy, any "security" within the meaning of the 1933 Act.

A. INVESTMENT OBJECTIVES

1. ASSET ALLOCATION MASTER PORTFOLIO

The Asset Allocation Master Portfolio's investment objective is to
seek over the long term a high level of total return, including net realized
and unrealized capital gains and net investment income, consistent with
reasonable risk. The Master Portfolio seeks to achieve its objective by
pursuing an asset allocation strategy. This strategy is based upon the premise
that these asset classes, from time to time, are undervalued or overvalued
relative to each other by the market and that undervalued asset classes
represent relatively better long-term, risk-adjusted investment opportunities.
Timely, low-cost shifts among common stocks, U.S. Treasury bonds and money
market instruments (as determined by their perceived relative overvaluation or
undervaluation) can therefore produce attractive investment returns. Using this
strategy, BGFA, as sub-adviser to the Master Portfolio, regularly determines
the appropriate mix of asset classes, and the portfolio of the Master Portfolio
is periodically adjusted to achieve this mix.

In determining the recommended mix, BGFA uses an investment model
developed over the past [17] years, which is presently used as a basis for
managing large employee benefit trust funds and other institutional accounts.
The Asset Allocation Model, which is proprietary to BGFA, analyzes extensive
financial data from numerous sources and recommends a portfolio allocation
among common stocks, U.S. Treasury bonds and money market instruments. As
further described in "Additional Information About Permitted Investment
Activities of the Master Portfolios," BGFA bases its investment decisions on
the Asset Allocation Model's recommendations. At any given time, substantially
all of the Master Portfolio's assets may be invested in a single asset class
and the relative allocation among the asset classes may shift significantly
from time to time.

The Asset Allocation Master Portfolio's assets will be invested as
follows:

Stock Investments. In making its stock investments, the Master
Portfolio invests in the common stocks which comprise the S&P 500 Index(1)
using, to the extent feasible, the same weighting formula used by that index.
The Master Portfolio does not individually select common stocks on the basis of
traditional investment analysis.

Bond Investments. The Master Portfolio purchases U.S. Treasury bonds
with maturities greater than 20 years. The bond portion of the portfolio of the
Master Portfolio is generally managed to attain an average maturity of between
22 and 28 years for the U.S. Treasury bonds held. This form of debt instrument
has been selected by BGFA because of the relatively low transaction costs of
buying and selling U.S. Treasury bonds and because of the low default risk
associated with such instruments.

Money Market Investments. The money market instrument portion of the
portfolio of the Master Portfolio generally will be invested in high-quality
money market instruments, including U.S. Government obligations, obligations of
domestic and foreign banks, short-term corporate debt instruments and
repurchase agreements.

A more complete description of the Asset Allocation Model, certain
trading policies relating to the implementation of the model's recommendations,
and the Master Portfolio's investments is found under "Additional Information
About Permitted Investment Activities of the Master Portfolios" and in Part B.

- ---------------
(1) The Asset Allocation Master Portfolio is not sponsored, endorsed, sold
or promoted by Standard & Poor s, and Standard & Poor s makes no representation
regarding the advisability of investing in the Master Portfolio.

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<PAGE> 6
2. CAPITAL APPRECIATION MASTER PORTFOLIO

The investment objective of the Capital Appreciation Master Portfolio
is to provide investors with an above- average level of capital appreciation.
The Capital Appreciation Master Portfolio seeks to achieve its investment
objective through the active management of a broadly diversified portfolio of
equity securities of companies expected to experience strong growth in
revenues, earnings and assets.

The Master Portfolio invests primarily in common stocks that Wells
Fargo Bank, as the Master Portfolio's investment adviser, believes have
better-than-average prospects for appreciation. These stocks may have some of
the following characteristics:

- Low or no dividends

- Smaller market capitalizations

- Less market liquidity

- Relatively short operating histories

- Aggressive capitalization structures (including high debt levels)

- Involvement in rapidly growing/changing industries and/or new
technologies

Under normal market conditions, the Master Portfolio will hold at
least 20 common stock issues spread across multiple industry groups, with the
majority of these holdings consisting of established growth companies,
turnaround or acquisition candidates, or attractive larger capitalization
companies.

Additionally, it is expected that the Master Portfolio will from time
to time acquire securities through initial public offerings, and will acquire
and hold common stocks of smaller and newer issuers. It is expected that no
more than 40% of the Master Portfolio's assets will be invested in these highly
aggressive issues at one time. There may be some additional risks associated
with investments in smaller and/or newer companies because their shares tend to
be less liquid than securities of larger companies. Further, shares of small
and new companies are generally more sensitive to purchase and sale
transactions and changes in the issuer's financial condition and, therefore,
the prices of such stocks may be more volatile than those of larger company
stocks.

From time to time Wells Fargo Bank may determine that conditions in
the securities markets make pursuing the Master Portfolio's basic investment
strategy inconsistent with the best interests of the Master Portfolio's
investors. At such times, Wells Fargo Bank may use temporary alternative
strategies, primarily designed to reduce fluctuations in the value of the
Master Portfolio's assets. In implementing these temporary "defensive"
strategies, the Master Portfolio may invest in preferred stock or
investment-grade debt securities that are convertible into common stock and in
money market securities. It is expected that these temporary "defensive"
investments will not exceed 30% of the Master Portfolio's total assets.

The Master Portfolio pursues an active trading investment strategy,
and the length of time the Master Portfolio has held a particular security is
not generally a consideration in investment decisions. Accordingly, the Master
Portfolio's portfolio turnover rate may be higher than that of other funds that
do not pursue an active trading investment strategy. Portfolio turnover
generally involves some expense to the Master Portfolio, including brokerage
commissions or dealer mark-ups and other transactions costs on the sale of
securities and the reinvestment in other securities. Portfolio turnover also
can generate short-term capital gains tax consequences.

Though the Master Portfolio will hold a number of larger
capitalization stocks, under normal market conditions, and subject to the
additional risks described above, more than 50% of the Master Portfolio's total
assets will be invested in companies with smaller to medium capitalizations.
The Master Portfolio will invest primarily in

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<PAGE> 7
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 ("NRSROs"), such as Moody's, S&P, or unrated securities
determined by Wells Fargo Bank to be of comparable quality. Securities rated in
the fourth lowest rating category (i.e., rated "BBB" by S&P or "Baa" by Moody's
are regarded by S&P as having an adequate capacity to pay interest and repay
principal, but changes in economic conditions or other circumstances are more
likely to lead to a weakened capacity to make such repayments. Moody's
considers such securities as having speculative characteristics.

3. CASH INVESTMENT TRUST MASTER PORTFOLIO

The investment objective of the CIT Master Portfolio is to provide its
investors with a high level of current income, while preserving capital and
liquidity. The CIT Master Portfolio seeks to achieve its investment objective
by investing only in U.S. dollar-denominated "Eligible Securities" with
remaining maturities not exceeding 397 days (13 months), as defined in Rule
2a-7 under the 1940 Act, and seeks to maintain a dollar-weighted average
portfolio maturity of 90 days or less. An Eligible Security is a security that
is determined to present minimal credit risks and is rated in one of the two
highest rating categories by the required number of nationally recognized
statistical rating organizations or, if unrated, is determined to be of
comparable quality to such rated securities. These determinations are made by
Wells Fargo Bank, as the Master Portfolio's investment adviser, under
guidelines adopted by the Trust's Board of Trustees, although in certain
instances, the Board of Trustees must approve or ratify the Master Portfolio's
investments. The Board of Trustees of the Trust (or Wells Fargo Bank under
authority delegated to it as investment adviser to the Master Portfolio)
determines on an ongoing basis that any Eligible Securities purchased present
minimal credit risks. The CIT Master Portfolio endeavors to maintain a stable
net asset value of $1.00 per share; however, there is no assurance that this
objective can be achieved.

The Eligible Securities in which the CIT Master Portfolio may invest
are:

(i) obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities (including government-sponsored
enterprises) ("U.S. Government obligations");

(ii) negotiable certificates of deposit, fixed time deposits,
bankers' acceptances or other short- term obligations of U.S.
banks (including foreign branches) that have more than $1
billion in total assets at the time of investment and are
members of the Federal Reserve System or are examined by the
Comptroller of the Currency or whose deposits are insured by
the Federal Deposit Insurance Corporation ("FDIC");

(iii) commercial paper rated at the date of purchase "P-1" by
Moody's Investors Service, Inc. ("Moody's") or "A-1+" or "A-1"
by Standard & Poor's Corporation ("S&P");

(iv) commercial paper unrated at the date of purchase but secured
by a letter of credit from a U.S. bank that meets the above
criteria for investment;

(v) certain floating- and variable-rate instruments (discussed
below);

(vi) certain repurchase agreements (discussed below); and

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(vii) short-term, U.S. dollar-denominated obligations of U.S.
branches of foreign banks that at the time of investment have
more than $10 billion, or the equivalent in other currencies,
in total assets.

4. CORPORATE STOCK MASTER PORTFOLIO

The investment objective of the Corporate Stock Master Portfolio is to
approximate to the extent practicable the total rate of return of substantially
all the common stocks comprising the Standard & Poor's 500 Composite Stock
Price Index (the "S&P 500 Index")(2).

The Master Portfolio seeks to create, to the extent feasible, a
portfolio which substantially replicates the total return of the securities
comprising the S&P 500 Index, taking into consideration redemptions, sales of
additional shares and other adjustments described below. The Master Portfolio
is not managed through traditional methods of fund management, which typically
involve frequent changes in a portfolio of securities on the basis of economic,
financial and market analyses. Therefore, brokerage costs, transfer taxes and
certain other transaction costs for the Master Portfolio may be lower than
those incurred by non-index, traditionally managed funds. Precise replication
of the holdings of the Master Portfolio and the capitalization weighting of the
securities in the S&P 500 Index is not feasible, but the Master Portfolio seeks
correlation between the price and total return performance of securities
comprising the S&P Index and the investment results of the Master Portfolio.
The Master Portfolio will attempt to achieve, in both rising and falling
markets, a correlation of at least 95% between the total return of its net
assets before expenses and the total return of the S&P 500 Index. There can be
no assurance that the Master Portfolio will achieve this correlation.

The Master Portfolio may invest some of its assets in high-quality
money market instruments, which include U.S. Government obligations,
obligations of domestic and foreign banks, repurchase agreements, commercial
paper (including variable amount master demand notes) and short-term corporate
debt obligations. Such investments are made on an ongoing basis to provide
liquidity and, to a greater extent on a temporary basis, when there is an
unexpected or abnormal level of investor purchases or redemptions of Master
Portfolio shares or because of unusual market conditions which limit the Master
Portfolio's ability to invest effectively its assets in accordance with its
investment strategies. In addition, the Master Portfolio may engage in
securities lending to increase its income and may use stock index futures and
option thereon as a substitute for a comparable market position in the
underlying securities.

5. SHORT-TERM GOVERNMENT-CORPORATE INCOME MASTER PORTFOLIO

The investment objective of the Government-Corporate Income Master
Portfolio is to provide investors with current income while managing principal
volatility. The Master Portfolio seeks to achieve its investment objective by
investing in obligations issued by the U.S. Government, its agencies and
instrumentalities and investment-grade corporate obligations. The securities
that the Master Portfolio may purchase include U.S. Treasury bonds, notes and
bills; obligations of the U.S. Government, its agencies and instrumentalities,
(including government-sponsored enterprises); corporate bonds and notes,
asset-backed securities and money market instruments. The Master Portfolio
seeks to manage principal volatility by diversifying its assets among
permissible investments based, in part, on their duration, maturity or other
characteristics that affect the sensitivity of such investments to changes in
market interest rates. There can, of course, be no assurance that the Master
Portfolio will achieve its investment objective.

The portfolio turnover rate for the Government-Corporate Income Master
Portfolio for the year ended December 31, 1995 was 227.0%. Portfolio turnover
generally involves some expenses to the Master Portfolio including dealer mark-
ups and other transaction costs on the sale of securities and the reinvestment
in other securities. A high

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(2) The S&P 500 Index is an unmanaged index of stocks comprised of 500
companies, including industrial, financial, utility and transportation
companies. Standard & Poor s, S&P, S&P 500, Standard & Poor s 500, and 500 are
trademarks of McGraw-Hill, Inc. The Corporate Stock Master Portfolio is not
sponsored, endorsed, sold or promoted by Standard & Poor s, and Standard & Poor
s makes no representation regarding the advisability of investing in the Master
Portfolio.

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portfolio turnover rate should not result in the Master Portfolio paying
substantially more brokerage costs, since most transactions in government
securities are effected on a principal basis. Portfolio turnover can also
generate capital gains tax consequences.

The U.S. Treasury bonds in which the Master Portfolio invests
typically have maturities greater than 20 years; the U.S. Treasury notes in
which the Master Portfolio invests typically have maturities ranging from 2 to
10 years. The U.S. Treasury bills in which the Master Portfolio invests
generally have maturities of up to 1 year and are issued on a discount basis.

6. SHORT-TERM MUNICIPAL INCOME MASTER PORTFOLIO

The investment objective of the Municipal Income Master Portfolio is
to provide investors with a high level of income exempt from federal income
tax, while managing principal volatility.

Wells Fargo Bank, as investment adviser to the Municipal Income Master
Portfolio, pursues the objective of the Master Portfolio by investing (under
normal market conditions) substantially all of the assets of the Master
Portfolio in the following types of municipal obligations that pay interest
which is exempt from federal income tax: bonds, notes and commercial paper
issued by or on behalf of states, territories, and possessions of the United
States, the District of Columbia, and their political subdivisions, agencies
instrumentalities (including government-sponsored enterprises) and authorities,
the interest on which, in the opinion of counsel to the issuer or bond counsel
is exempt from federal income tax. These municipal obligations and the taxable
investments described below may bear interest at rates that are not fixed
("floating- and variable-rate instruments"). The Municipal Income Master
Portfolio seeks to manage principal volatility by diversifying its assets among
permissible investments based, in part, on their duration, maturity or other
characteristics that affect their sensitivity to changes in market interest
rates. There can, of course, be no assurance that the Master Portfolio will
achieve its investment objective.

As a fundamental policy, at least 80% of the net assets of the
Municipal Income Master Portfolio are invested (under normal market conditions)
in municipal obligations that pay interest which is exempt from federal income
tax. However, as a matter of general operating policy, the Municipal Income
Master Portfolio seeks to have substantially all of its assets invested in such
municipal obligations. The Municipal Income Master Portfolio's investment
adviser may rely either on the opinion of counsel to the issuer of the
municipal obligations or bond counsel or on IRS rulings regarding the tax
treatment of these obligations. In addition, the Municipal Income Master
Portfolio may invest 25% or more of its assets in municipal obligations that
are related in such a way that an economic, business or political development
or change affecting one such obligation could also affect the other
obligations. For example, the Municipal Income Master Portfolio may own
different municipal obligations which pay interest based on the revenues of
similar types of projects. The Municipal Income Master Portfolio may also
invest in certain U.S. government obligations and money market instruments.

The portfolio turnover rate of the Municipal Income Master Portfolio
for the year ended December 31, 1995 was 46.0%. Portfolio turnover generally
involves some expenses to the Municipal Income Master Portfolio, including
dealer mark-ups and other transaction costs on the sale of securities and the
reinvestment in other securities. A high portfolio turnover rate should not
result in the Municipal Income Master Portfolio paying substantially more
brokerage commissions, since most transactions in Municipal Obligations are
effected on a principal basis. Portfolio turnover can also generate capital
gains tax consequences.

7. SMALL CAP MASTER PORTFOLIO

The Small Cap Master Portfolio's investment objective is to seek
above-average long-term capital appreciation in order to provide investors with
a rate of total return exceeding that of the Russell 2000 Index (before fees
and expenses) over a time horizon of three to five years. The Master Portfolio
seeks to provide above-average capital growth for investors willing to assume
above-average risk.

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The Small Cap Master Portfolio seeks to achieve this investment
objective through the active management of a broadly diversified portfolio of
growth-oriented common stocks. The Master Portfolio invests primarily in
companies with market capitalizations between $50 million and $1 billion at the
time of acquisition, although it may sometimes invest in companies with
capitalizations greater or less than these amounts. The Master Portfolio
invests primarily in common stocks of domestic and foreign companies believed
by Wells Fargo Bank, as investment adviser to be characterized by new or
innovative products, services or processes and to have above-average prospects
for capital appreciation. The Master Portfolio will sell the common stock of
any company in its investment portfolio after such company's market
capitalization exceeds $2 billion.

Equity Securities -- The equity securities in the Master Portfolio's
investment portfolio may have some of the following characteristics:

- Low or no dividends

- Smaller market capitalizations (less than $1 billion)

- Less market liquidity

- Newly public companies (i.e., recent initial public offering)

- Relatively short operating histories

- Aggressive capitalization structures (including high debt levels)

- Involvement in rapidly growing/changing industries and/or new
technologies

Under normal market conditions, the Master Portfolio holds at least 20
common stock issues spread across multiple industry groups and sectors of the
economy. The majority of these holdings consist of smaller capitalization
companies, established growth companies and turnaround or acquisition
candidates. The Master Portfolio may invest in securities through initial
public offerings of companies whose securities have been offered to the general
public for three months or less ("IPOs") and may invest in securities of
start-up companies and other newer issuers. It is expected that no more than
20% of the Master Portfolio's assets will be invested in these highly
aggressive issues at one time.

Under ordinary market conditions, up to 5% of the Master Portfolio's
net assets will be invested in convertible debt securities that are not either
rated in the four highest rating categories by one or more nationally
recognized statistical rating organizations ("NRSROs"), such as Moody's
Investor Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P"), or
unrated securities determined by Wells Fargo to be of comparable quality.
Securities rated in the fourth highest rating category (i.e., rated "BBB" by
S&P or "Baa" by Moody's) are regarded by S&P as having an adequate capacity to
pay interest and repay principal, but changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make such
repayments. Moody's considers such securities as having speculative
characteristics.

From time to time Wells Fargo may determine that conditions in the
securities markets make pursuing the Master Portfolio's basic investment
strategy inconsistent with the best interests of the Master Portfolio's
investors. At such times, Wells Fargo may use temporary alternative strategies,
primarily designed to reduce fluctuations in the value of the Master
Portfolio's assets. In implementing these temporary "defensive" strategies, the
Master Portfolio may invest in preferred stock or investment-grade debt
securities and in money market securities. It is expected that these temporary
"defensive" investments will not exceed 35% of the Master Portfolio's total
assets.

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<PAGE> 11
or dealer mark-ups and other transactions costs on the sale of securities and
the reinvestment in other securities. Portfolio turnover also can generate
capital gains tax consequences.

There may be some additional risks associated with investments in
smaller capitalization companies, IPOs and start-up companies or other newer
issuers. Such companies tend to have limited operating histories and their
securities tend to be less liquid than securities of larger companies. Further,
the market price of such companies' securities is generally more sensitive to
changes in the issuer's financial condition and current economic trends and,
therefore, the prices of such companies' securities may be more volatile than
those of larger companies.

8. TAX-FREE MONEY MARKET MASTER PORTFOLIO

The investment objective of the Tax-Free Money Market Master Portfolio
is to provide investors with a high level of income exempt from federal income
tax, while preserving capital and liquidity. The Master Portfolio seeks to
achieve its investment objective by investing in high-quality, short-term U.S.
dollar denominated money market instruments, primarily municipal obligations,
with remaining maturities not exceeding 13 months. The Tax-Free Money Market
Master Portfolio seeks to maintain a stable net asset value of $1.00 per share;
however, there can be no assurance that this objective will be achieved.

Wells Fargo Bank, as investment adviser to the Tax-Free Money Market
Master Portfolio, pursues the objective of the Master Portfolio by investing
(under normal market conditions) substantially all of the assets of the Master
Portfolio in the following types of municipal obligations that pay interest
which is exempt from federal income tax: bonds, notes and commercial paper
issued by or on behalf of states, territories and possessions of the United
States (including the District of Columbia), and their political subdivisions,
agencies, instrumentalities (including government-sponsored enterprises) and
authorities, the interest on which, in the opinion of counsel to the issuer or
bond counsel, is exempt from federal income tax. These 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 found under
"Appendix -- Additional Investment Policies."

As a matter of fundamental policy, at least 80% of the net assets of
the Master Portfolio are invested (under normal market conditions) in municipal
obligations that pay interest which is exempt from federal income tax and is
not subject to the federal alternative minimum tax. However, as a matter of
general operating policy, the Master Portfolio seeks to have substantially all
of its assets invested in such municipal obligations. The Master Portfolio's
investment adviser may rely either on the opinion of bond counsel or of counsel
to the issuer of the municipal obligations. In addition, the Master Portfolio
may invest 25% or more of its assets in municipal obligations that are related
in such a way that an economic, business or political development or change
affecting one such obligation would also affect the other obligations. These
municipal obligations may include obligations which pay interest based on the
revenues of similar types of projects, such as pollution control bonds,
electric and gas utilities bonds and water authority bonds. Adverse economic
conditions or conditions or developments affecting a particular state,
municipality or issuing authority could impact the obligations issued by such
entities and decrease the value of the Master Portfolio's investments in such
obligations.

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9. U.S. GOVERNMENT ALLOCATION MASTER PORTFOLIO

The U.S. Government Allocation Master Portfolio's investment objective
is to seek over the long term a high level of total return, including net
realized and unrealized capital gains and net investment income, consistent
with reasonable risk. The Master Portfolio seeks to achieve its objective by
pursuing a strategy of allocating and reallocating its investments among the
following three classes of debt instruments: long-term U.S. Treasury bonds,
intermediate-term U.S. Treasury notes, and short-term money market instruments.
This strategy is based upon the premise that these asset classes from time to
time are overvalued or undervalued relative to each other by the market and
that undervalued asset classes represent relatively better long-term investment
opportunities. Timely, low-cost shifts among such securities (as determined by
their perceived relative overvaluation or undervaluation) can therefore produce
attractive long-term investment returns. Using this strategy, BGFA regularly
determines the recommended mix of asset classes, and the portfolio of the
Master Portfolio is periodically adjusted to achieve this mix. Under normal
market conditions, the Master Portfolio will invest at least 65% of the value
of its total assets in U.S. Government obligations.

In determining the recommended mix, BGFA uses an investment model
which is presently used as a basis for managing large employee benefit trust
funds and other institutional accounts. The model, which is proprietary to
BGFA, analyzes risk, correlation and expected return data and recommends a
portfolio allocation among the three classes of debt instruments. As further
described in the "Additional Information About Permitted Investment Activities
of the Master Portfolios," BGFA bases its investment decisions on the model's
recommendations. At any given time, substantially all of the Master Portfolio's
assets may be invested in a single asset class, and the relative allocation
among the asset classes may shift significantly from time to time. The Master
Portfolio is not designed to profit from short-term market changes. Instead, it
is designed for investors with investment horizons of five years and greater.

The U.S. Government Allocation Fund's assets will be invested and
reinvested in the following types of debt instruments:

Long-Term Investments. The Master Portfolio purchases U.S. Treasury
bonds with maturities greater than 20 years. This portion of the portfolio of
the Master Portfolio is generally managed to attain an average maturity of
between 22 and 28 years.

Intermediate-Term Investments. The Master Portfolio purchases U.S.
Treasury notes with maturities generally ranging from 5 to 7 years. This
portion of the portfolio of the Master Portfolio is generally managed to attain
an average maturity of approximately 6 years.

Short-Term Investments. The Master Portfolio purchases short-term
money market instruments with remaining maturities of one year or less. This
portion of the portfolio of the Master Portfolio may be invested in various
types of short-term money market instruments, including U.S. Government
obligations, commercial paper, bankers' acceptances, certificates of deposit,
fixed time deposits, and repurchase agreements. Obligations of both domestic
and foreign banks may be included.

U.S. Government obligations have been selected as the Fund's principal
investments because of their relatively low purchase and sale transaction costs
and because of the low default risk associated with them (i.e., they are issued
or guaranteed as to principal and interest by the U.S. Government, its agencies
or instrumentalities, including government-sponsored enterprises). The Master
Portfolio may use interest rate futures and options thereon as a substitute for
a comparable market position.

A key component of the U.S. Government Allocation model is a set of
assumptions concerning expected risk and return and investor attitudes toward
risk, which are incorporated into the allocation decision. The principal inputs
of financial data to the model currently are: (i) yields on 90-day U.S.
Treasury bills, 5-year U.S. Treasury notes, and 30- year U.S. Treasury 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

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investment allocations significantly from time to time, its performance may
differ from funds which invest in one asset class or from funds with a constant
mix of assets.

A more complete description of the model and the Master Portfolio's
investments and investment activities is contained in "Additional Information
About Permitted Investment Activities of the Master Portfolios" and in the Part
B.

B. ADDITIONAL PERMITTED INVESTMENT ACTIVITIES FOR ALL MASTER PORTFOLIOS

Set forth below, except where otherwise indicated, is a description of
certain permitted investments for each Master Portfolio.

U.S. Government Obligations

Each of the Master Portfolios may invest in U.S. Government
obligations. U.S. Government obligations include securities issued or
guaranteed as to principal and interest by the U.S. Government and supported by
the full faith and credit of the U.S. Treasury. U.S. Treasury obligations
differ mainly in the length of the maturity. Treasury bills, the most
frequently issued marketable government securities, have a maturity of up to
one year and are issued on a discount basis. U.S. Government obligations also
include securities issued or guaranteed by federal agencies or
instrumentalities, including government-sponsored enterprises. Some obligations
of agencies or instrumentalities of the U.S. Government are supported by the
full faith credit of the United States or U.S. Treasury guarantees; others, by
the right of the issuer or guarantor to borrow from the U.S. Treasury; still
others, by the discretionary authority of the U.S. Government to purchase
certain obligations of the agency or instrumentality; and others, only by the
credit of the agency or instrumentality issuing the obligation. In the case of
obligations not backed by the full faith and credit of the United States, the
investor must look principally to the agency or instrumentally issuing or
guaranteeing the obligation for ultimate repayment, which agency or
instrumentality may be privately owned. There can be no assurance that the U.S.
Government will provide financial support to its agencies or instrumentalities
where it is not obligated to do so. In addition, U.S. Government obligations
are subject to fluctuations in market value due to fluctuations in market
interest rates. As a general matter, the value of debt instruments, including
U.S. Government obligations, declines when market interest rates increase and
rises when market interest rates decrease. Certain types of U.S. Government
obligations are subject to fluctuations in yield or value due to their
structure or contract terms.

The Tax-Free Money Market Master Portfolio may invest in various types
of U.S. Government obligations provided the remaining maturities of such
obligations do not exceed thirteen months.

Floating- and Variable-Rate Instruments

Certain of the debt instruments that each Master Portfolio may
purchase bear interest at rates that are not fixed, but float or vary with, for
example, changes in specified market rates or indices or at specified
intervals. These floating- and variable- rate instruments typically have
maturities of more than thirteen months but may carry a demand feature that
would permit the holder to tender them back to the issuer at par value prior to
maturity. The Master Portfolios may purchase certificates of participation in
pools of floating- and variable- rate instruments from banks or other financial
institutions. With respect to the pass-through tax status of these
certificates, Wells Fargo Bank, as investment adviser, may rely upon either the
opinion of counsel or IRS rulings regarding the tax-exempt status of these
certificates.

Wells Fargo Bank, as investment adviser to the Master Portfolios (or,
if applicable, BGFA, as investment sub- adviser to certain of the Master
Portfolios), monitors on an ongoing basis the ability of an issuer of a demand
instrument to pay principal and interest on demand. Events affecting the
ability of the issuer of a demand instrument to make payment when due may occur
between the time a Master Portfolio elects to demand payment and the time
payment is due, thereby affecting the Master Portfolio's ability to obtain
payment at par. Wells Fargo Bank (or BGFA, as applicable), in accordance with
guidelines approved by the Trust's Board of Trustees, determines the liquidity
of any instruments which have a demand feature that is not exercisable within
seven days, provided that an active secondary market exists.

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The Municipal Income Master Portfolio may invest in variable-rate
instruments with a maximum final maturity of up to 30 years, provided the
period remaining until the next readjustment of the instrument's interest rate,
or the period remaining until the principal amount can be recovered through
demand, is less than 5 years.

A Master Portfolio may, in accordance with policies of the Securities
and Exchange Commission ("Commission"), account for these instruments as
maturing at the next interest-rate readjustment date or the date at which such
Master Portfolio may tender the instrument back to the issuer, whichever is
later. The Tax-Free Money Market Master Portfolio may invest in floating- and
variable-rate obligations even if they carry stated maturities in excess of
thirteen months, upon compliance with certain conditions of Commission rules,
in which case such obligations may be treated in accordance with these
conditions as having maturities not exceeding thirteen months.

Repurchase Agreements

Each Master Portfolio may enter into repurchase agreements wherein the
seller of a security to such Master Portfolio agrees to repurchase that
security from the Master Portfolio at a mutually agreed-upon time and price.
The period of maturity is usually quite short, often overnight or a few days,
although it may extend over a number of months. Each Master Portfolio may enter
into repurchase agreements only with respect to obligations that could
otherwise be purchased by such Master Portfolio. All repurchase agreements will
be fully collateralized based on values that are marked to market daily. While
the maturities of the underlying securities in a repurchase agreement
transaction may be greater than 13 months, the term of any repurchase agreement
on behalf of a Master Portfolio will always be less than 13 months. If the
seller defaults and the value of the underlying securities has declined, a
Master Portfolio may incur a loss. In addition, if bankruptcy proceedings are
commenced with respect to the seller of the security, a Master Portfolio's
disposition of the security may be delayed or limited. The Master Portfolios
enter into repurchase agreements only with registered broker/dealers and
commercial banks that meet guidelines established by the Board of Trustees of
the Trust and that are not affiliated with such Master Portfolio's adviser or
sub-adviser. The Master Portfolios may enter into pooled repurchase agreement
transactions with other funds advised by Wells Fargo Bank.

The Municipal Income, Government-Corporate Income and Capital
Appreciation Master Portfolios may not enter into a repurchase agreement with a
maturity of more than seven days, if, as a result, more than 15% of the market
value of such Master Portfolio's total net assets will be invested in
repurchase agreements with maturities of more than seven days and securities
that are illiquid by virtue of the absence of a readily available market or
legal or contractual restrictions on resale. The CIT and Tax-Free Money Market
Master Portfolios may not enter into a repurchase agreement with a maturity of
more than seven days, if, as a result, more than 10% of the market value of
Master Portfolio's total net assets will be invested in repurchase agreements
with maturities of more than seven days, restricted securities and illiquid
securities. A Master Portfolio will only enter into repurchase agreements with
registered broker/dealers that report to the New York Federal Reserve Bank or
their affiliates and commercial banks that meet guidelines established by the
Board of Trustees and are not affiliated with Wells Fargo Bank.

Foreign Obligations and Securities

The Asset Allocation, Capital Appreciation, Corporate Stock, Tax-Free
Money Market and U.S. Government Allocation Master Portfolios may each invest
up to 25%, and the CIT Master Portfolio may invest up to 5%, of its assets in
high-quality, short-term (13 months or less) debt obligations of foreign
branches of U.S. banks or U.S. branches of foreign banks that are denominated
in and pay interest in U.S. dollars. The Small Cap Fund may invest up to 25% of
its assets in securities of foreign governmental and private issuers that are
denominated in and pay interest in U.S. dollars. These securities may take the
form of American Depositary Receipts ("ADRs"), Canadian Depositary Receipts
("CDRs"), European Depositary Receipts ("EDRs"), International Depositary
Receipts ("IDRs") and Global Depositary Receipts ("GDRs") or other similar
securities convertible into securities of foreign issuers. These securities may
not necessarily be denominated in the same currency as the securities into
which they may be converted. ADRs (sponsored or unsponsored) are receipts
typically issued by a U. S. bank or trust company and traded on a U.S. stock
exchange, and CDRs are receipts typically issued by a Canadian bank or trust
company, that evidence ownership of underlying foreign securities. Issuers of
unsponsored ADRs are not contractually obligated to disclose material
information in the U.S. and, therefore, such information may not correlate to
the market value of the unsponsored ADR.

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EDRs and IDRs are receipts typically issued by European banks and trust
companies, and GDRs are receipts issued by either a U.S. or non- U.S. banking
institution, that evidence ownership of the underlying foreign securities.
Generally, ADRs in registered form are designed for use in U.S. securities
markets and EDRs and IDRs in bearer form are designed primarily for use in
Europe.

Investments in foreign obligations and securities involve certain
considerations that are not typically associated with investing in domestic
securities. There may be less publicly available information about a foreign
issuer than about a domestic issuer. Foreign issuers also are not generally
subject to the same accounting, auditing and financial reporting standards or
governmental supervision as domestic issuers. In addition, with respect to
certain foreign countries, interest may be withheld at the source under foreign
income tax laws, and there is a possibility of expropriation or confiscatory
taxation, political, social and monetary instability or diplomatic developments
that could adversely affect investments in, the liquidity of, and the ability
to enforce contractual obligations with respect to, securities of issuers
located in those countries.

Bonds

Certain of the debt instruments purchased by the Municipal Income
Master Portfolio and the Government-Corporate Income Master Portfolio may be
bonds. A bond is an interest-bearing security issued by a company or
governmental unit. The issuer of a bond has a contractual obligation to pay
interest at a stated rate on specific dates and to repay principal (the bond's
face value) periodically or on a specified maturity date. An issuer may have
the right to redeem or "call" a bond before maturity, in which case the
investor may have to reinvest the proceeds at lower market rates.

Most bonds bear interest income at a "coupon" rate that is fixed for
the life of the bond. The value of a fixed rate bond usually rises when market
interest rates fall, and falls when market interest rates rise. Accordingly, a
fixed rate bond's yield (income as a percent of the bond's current value) may
differ from its coupon rate as its value rises or falls.

Other types of bonds bear income at an interest rate that is adjusted
periodically. Because of their adjustable interest rates, the value of
"floating-rate" or "variable-rate" bonds fluctuates much less in response to
market interest rate movements than the value of fixed rate bonds. Also, the
Master Portfolios may treat some of these bonds as having a shorter maturity
for purposes of calculating the weighted average maturity of their investment
portfolios.

Bonds may be senior or subordinated obligations. Senior obligations
generally have the first claim on a corporation's earnings and assets and, in
the event of liquidation, are paid before subordinated debt. Bonds may be
unsecured (backed only by the issuer's general creditworthiness) or secured
(also backed by specified collateral).

Money Market Instruments

Each Master Portfolio, as part of its overall investment strategy or
for temporary defensive purposes, may invest in various kinds of money market
instruments. Investments in money market instruments by each Master Portfolio
(other than the Tax-Free Money Market Master Portfolio) will generally account
for less than 5% of each Master Portfolio's net assets and may be held to,
among other things, maintain cash balances on account of new purchases,
dividends, interest and reserves for redemptions. Each Master Portfolio may
invest in the following high-quality money market instruments: (i) short-term
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, including government-sponsored enterprises ("U.S. Government
obligations"); (ii) negotiable certificates of deposit, bankers' acceptances
and fixed time deposits and other obligations of domestic banks (including
foreign branches) that have more than $1 billion in total assets at the time of
investment and are members of the Federal Reserve System or are examined by the
Comptroller of the Currency or whose deposits are insured by the FDIC; (iii)
commercial paper rated at the date of purchase "P-1" by Moody's Investors
Service, Inc. ("Moody's") or "A-1+" or "A-1" by S&P, or, if unrated, of
comparable quality as determined by Wells Fargo Bank, as investment adviser (or
BGFA, as sub-adviser, as applicable); (iv) non-convertible corporate debt
securities (e.g., bonds and debentures) with remaining maturities at the date
of purchase of no more than one year that are rated at least "Aa" by Moody's or
"AA" by S&P; (v) repurchase agreements; and (vi) short-term, U.S.
dollar-denominated obligations of foreign banks

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(including U.S. branches) that, at the time of investment: (a) have more than
$10 billion, or the equivalent in other currencies, in total assets; (b) are
among the 75 largest foreign banks in the world as determined on the basis of
assets; (c) have branches or agencies in the United States; and (d) in the
opinion of Wells Fargo Bank, as investment adviser (or BGFA, as sub-adviser, as
applicable), are of comparable quality to obligations of U.S. banks which may
be purchased by the Master Portfolios.

Asset-backed Securities

The Government-Corporate Income Master Portfolio may invest in various
types of asset-backed securities. Asset- backed securities are typically backed
by an underlying pool of assets (such as credit card or automobile trade
receivables or corporate loans or bonds) which provides the interest and
principal payments to investors. Credit quality depends primarily on the
quality of the underlying assets and the level of credit support, if any,
provided by the issuer. The underlying assets may be subject to prepayment
which can shorten the life of asset-backed securities and may lower their
return. The value of asset-backed securities may change because of actual or
perceived changes in the creditworthiness of the originator, servicing agent,
or of the financial institution providing the credit support.

Letters of Credit

The CIT Master Portfolio and the Tax-Free Money Market Master
Portfolio may purchase debt obligations, certificates of participation,
commercial paper and other short-term obligations backed by an unconditional
and irrevocable letter of credit of a bank, savings and loan association or
insurance company which assumes the obligation for payment of principal and
interest in the event of default by the issuer. Only banks, savings and loan
associations and insurance companies that, in the opinion of the investment
adviser, are comparable in quality to issuers of other permitted high-quality
investments of the Master Portfolios may be used for letter of credit-backed
investments. Letters of credit issued by domestic bank issuers will be
considered to be obligations of domestic banks excluded from each Master
Portfolio's fundamental investment restriction and the 25% limitation regarding
industry concentration.

Municipal Obligations

The Municipal Income and Tax-Free Money Market Master Portfolios may
invest in various types of municipal securities, subject to their respective
investment objectives and policies. Municipal obligations are issued by states
and municipalities to raise money for various public purposes, including
general purpose financing for state and local governments as well as financing
for specific projects or public facilities. Municipal obligations may be backed
by the full taxing power of a state or municipality, by the revenues from a
specific project or the credit of a private organization. In addition, certain
municipal obligations may be supported by letters of credit furnished by
domestic or foreign banks. Yields on municipal obligations generally depend on
a variety of factors, including: the general conditions of the municipal note
and municipal bond markets; the size and maturity of the particular offering;
the maturity of the obligations; and the rating of the issue or issuer.
Furthermore, any adverse economic conditions or developments affecting a
particular state or municipality could impact the municipal obligations issued
by such entities.

The two principal classifications of municipal obligations are
"general obligation" securities and "revenue" securities. General obligation
securities are secured by the issuer's pledge of its full faith, credit, and
taxing power for the payment of principal and interest. Revenue securities are
payable only from revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise tax or
other specific revenue source such as the user of the facility being financed.
Private activity bonds held by the Master Portfolios are in most cases revenue
securities and are not payable from the unrestricted revenues of the issuer.
Consequently, the credit quality of private activity bonds is usually directly
related to the credit standing of the corporate user of the facility involved.
The Tax-Free Money Market Master Portfolio may invest up to 25% or more of the
current value of its total assets in revenue bonds.

Municipal obligations may include "moral obligation" bonds, which are
normally issued by special purpose public authorities. If the issuer of moral
obligation bonds is unable to meet its debt service obligations from current
revenues, it may draw on a reserve fund, the restoration of which is a moral
commitment but not a legal obligation of

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the state or municipality which created the issuer. An issuer's obligation to
pay principal or interest on an instrument may be backed by an unconditional
bank letter or line of credit, guarantee, or commitment to lend.

Municipal obligations may include variable- or floating-rate
instruments issued by industrial development authorities and other governmental
entities. While there may not be an active secondary market with respect to a
particular instrument purchased by a Master Portfolio, it may demand payment of
the principal and accrued interest on the instrument or may resell it to a
third party as specified in the instruments. The absence of an active secondary
market, however, could make it difficult for a Master Portfolio to dispose of
the instrument if the issuer defaulted on its payment obligation or during
periods the Master Portfolio is not entitled to exercise its demand rights, and
the Master Portfolio could, for these or other reasons, suffer a loss.

Municipal obligations also may include participations in privately
arranged loans to municipal borrowers, some of which may be referred to as
"municipal leases," and units of participation in trusts holding pools of
tax-exempt leases. Such loans in most cases are not backed by the taxing
authority of the issuers and may have limited marketability or may be
marketable only by virtue of a provision requiring repayment following demand
by the lender. Any such loans made by the Master Portfolios may have a demand
provision permitting the Master Portfolios to require payment within seven
days. Participations in such loans, however, may not have such a demand
provision and may not be otherwise marketable. To the extent these securities
are illiquid, they will be subject to a Master Portfolio's limitation on
investments in illiquid securities. As it deems appropriate, Wells Fargo Bank
will establish procedures to monitor the credit standing of each such municipal
borrower, including its ability to meet contractual payment obligations. The
Municipal Income and Tax-Free Money Market Master Portfolios will not purchase
any unrated municipal leases unless the adviser, following procedures approved
by the Trust's Board of Trustees, determines that such leases are of comparable
quality to municipal obligations rated in the top four rating categories by the
requisite NRSROs, that otherwise may be purchased by the Master Portfolios.

Municipal participation interests, which give the purchaser an
undivided interest in one or more underlying municipal obligations, may be
purchased from financial institutions. To the extent that municipal
participation interests are considered to be "illiquid securities," such
instruments are subject to the Master Portfolio's limitation on the purchase of
illiquid securities.

The Tax-Free Money Market Master Portfolio may invest in the
following municipal obligations with remaining maturities not exceeding 13
months:

(i) long-term municipal bonds rated at the date of purchase "Aa"
or better by Moody's or "AA" or better by S&P;

(ii) municipal notes rated at the date of purchase "MIG1" or "MIG2"
(or "VMIG1" or "VMIG2" in the case of an issue having a
variable rate with a demand feature) by Moody's or "SP-1+",
"SP-1" or "SP-2" by S&P; and

(iii) short-term municipal commercial paper rated at the date of
purchase "P-1" by Moody's or "A-1+", "A-1" or "A-2" by S&P.

If a municipal obligation ceases to be rated or is downgraded below an
investment grade rating after purchase by the Municipal Income Master
Portfolio, it may retain or dispose of such security. In any event, the
Municipal Income Master Portfolio does not intend to purchase or retain any
municipal security that is rated below the top four ratings categories by a
nationally recognized statistical rating organization ("NRSRO"), or, if
unrated, is considered by the investment adviser to be of comparable quality.
Securities rated in the fourth highest category are considered to have
speculative characteristics. A description of ratings is contained in the
Appendix to the Part B.

In addition, the Master Portfolios may acquire "stand-by commitments"
from banks or broker/dealers with respect to municipal obligations held in its
portfolios. Under a stand-by commitment, a dealer agrees to purchase at the
Master Portfolio's option specified municipal obligations at a specified price.
The Master Portfolio acquires stand-by

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commitments solely to facilitate portfolio liquidity and without intending to
exercise its rights thereunder for trading purposes.

When-Issued Securities

The Asset Allocation, Government-Corporate Income, Municipal Income
and U.S. Government Allocation Master Portfolios may purchase securities on a
when-issued basis, in which case delivery and payment normally take place after
the date of the commitment to purchase. For the Asset Allocation and U.S.
Government Allocation Master Portfolios delivery and payment normally take
place within 45 days of the commitment date. For the Municipal Income and
Government- Corporate Income Master Portfolios delivery and payment normally
take place within 120 days of the commitment date. The Master Portfolios will
make commitments to purchase securities on a when-issued basis only with the
intention of actually acquiring the securities, but may sell them before the
settlement date if it is deemed advisable. When-issued securities are subject
to market fluctuation, and no income accrues to the purchaser during the period
prior to issuance. The purchase price and the interest rate that are received
on debt securities are fixed at the time the purchaser enters into the
commitment. Purchasing a security on a when-issued basis can involve a risk
that the market price at the time of delivery may be lower than the agreed-upon
purchase price, in which case there could be an unrealized loss at the time of
delivery.

Taxable Investments by the Tax-Free Money Market Master Portfolio

Pending the investment of proceeds from the sale of shares of the
Tax-Free Money Market Master Portfolio or proceeds from sales of portfolio
securities or in anticipation of redemptions or to maintain a "defensive"
posture when, in the opinion of Wells Fargo Bank, as investment adviser, it is
advisable to do so because of market conditions, the Master Portfolio may elect
to invest temporarily up to 20% of the current value of its net assets in cash
reserves, including the following taxable high-quality money market
instruments: (i) U.S. Government obligations; (ii) negotiable certificates of
deposit, bankers' acceptances and fixed time deposits and other obligations of
domestic banks (including foreign branches) that have more than $1 billion in
total assets at the time of investment and are members of the Federal Reserve
System or are examined by the Comptroller of the Currency or whose deposits are
insured by the FDIC; (iii) commercial paper rated at the date of purchase "P-1"
by Moody's or "A-1+" or "A-1" by S&P; (iv) certain repurchase agreements; and
(v) high-quality municipal obligations, the income from which may or may not be
exempt from federal income tax.

Moreover, the Master Portfolio may invest temporarily more than 20% of
its total assets in such securities and in high-quality, short-term municipal
obligations the interest on which is not exempt from federal income tax to
maintain a temporary defensive posture or in an effort to improve after-tax
yield to the Master Portfolio's shareholders when, in the opinion of Wells
Fargo Bank, as investment adviser, it is advisable to do so because of unusual
market conditions.

Other Investment Companies

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 Investment Company Act of 1940 (the "1940 Act"), and provided that (i)
any such purchases will be limited to temporary investments in shares of
unaffiliated investment companies and (ii) the investment adviser will waive its
advisory fees for that portion of each such Master Portfolio's assets so
invested, except when such purchase is part of a plan of merger, consolidation,
reorganization or acquisition. Subject to the limitations of the 1940 Act, the
Master Portfolios may purchase shares of exchange-listed closed-end funds
consistent with pursuing its investment objective. The Master Portfolios do not
intend to invest more than 5% of their respective net assets in such securities
during the coming year.

For temporary investments, the Tax-Free Money Market Master Portfolio
also may invest in shares of other open- end investment companies that invest
exclusively in high-quality short-term securities subject to the limits set
forth under Section 12 of the 1940 Act, provided however, that any such company
has a fundamental policy of investing, under normal market conditions, at least
80% of its net assets in obligations that are exempt from federal

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income tax and are not subject to the federal alternative minimum tax. Such
investment companies can be expected to charge management fees and other
operating expenses that would be in addition to those charged to the Master
Portfolio; however, the Master Portfolio's investment adviser has undertaken to
waive its advisory fees with respect to that portion of the Master Portfolio's
assets so invested, except when such purchase is part of a plan of merger,
consolidation, reorganization or acquisition. Under Section 12(d)(1) the Master
Portfolio, together with any company or companies controlled by it, is
generally prohibited from owning more than 3% of the total outstanding voting
stock of any such investment company, nor may the Master Portfolio, together
with any such company or companies, invest more than 5% of its assets in any
one such investment company or invest more than 10% of its assets in securities
of all such investment companies combined.

Privately Issued Securities (Rule 144A)

The Capital Appreciation and Small Cap Master Portfolios may invest in
privately issued securities that may be resold in accordance with Rule 144A
under the Securities Act of 1933 ("Rule 144A Securities"). Rule 144A Securities
are restricted securities that are not publicly traded. Accordingly, the
liquidity of the market for specific Rule 144A Securities may vary. Wells
Fargo, using guidelines approved by the Trust's Board of Trustees, will
evaluate the liquidity characteristics of each Rule 144A Security proposed for
purchase by the Capital Appreciation and Small Cap Master Portfolios on a
case-by-case basis and will consider the following factors, among others, in
their evaluation: (1) the frequency of trades and quotes for the Rule 144A
Security; (2) the number of dealers willing to purchase or sell the Rule 144A
Security and the number of other potential purchasers; (3) dealer undertakings
to make a market in the Rule 144A Security; and (4) the nature of the Rule 144A
Security and the nature of the marketplace trades (e.g., the time needed to
dispose of the Rule 144A Security, the method of soliciting offers and the
mechanics of transfer). Privately issued securities that are determined by
Wells Fargo Bank to be "illiquid" will be subject to such Master Portfolios'
policy of not investing more than 15% of its net assets in illiquid securities.

Options

The Capital Appreciation and Small Cap Master Portfolios may purchase
or sell options on individual securities and options on indices of securities
as a means of achieving additional return or of hedging the value of the Master
Portfolio's investment portfolio.

Call and Put Options on Specific Securities - The Capital Appreciation
and Small Cap Master Portfolios may each invest up to 15% of their respective
assets, represented by the premium paid, in the purchase of call and put
options in respect of specific securities (or groups of "baskets" of specific
securities). A call option gives the purchaser of the option the right to buy,
and obligates the writer to sell, an underlying security at the exercise price
at any time during the option period. Conversely, a put option gives the
purchaser of the option the right to sell, and obligates the writer to buy, an
underlying security at the exercise price at any time during the option period.
Investments by such Master Portfolios in off-exchange options will be treated
as "illiquid" and therefore subject to the Master Portfolios' policy of not
investing more than 15% of its net assets in illiquid securities.

The Capital Appreciation and Small Cap Master Portfolios may write
covered call option contracts to the extent of 15% of the value of each of
their respective net assets at the time such option contracts are written. A
covered call option is a call option for which the writer of the option owns
the security covered by the option. Covered call options written by such Master
Portfolio expose the Master Portfolios during the term of the option (i) to the
possible loss of opportunity to realize appreciation in the market price of the
underlying security or (ii) to possible loss caused by continued holding of a
security which might otherwise have been sold to protect against depreciation
in the market price of the security.

To close out a covered call option it has written, each Master
Portfolio makes a "closing purchase transaction" by purchasing an option on the
same security or securities with the same exercise price and expiration date as
the covered call option it has written. To close out an option it has
purchased, each Master Portfolio simply sells it. The Master Portfolios will
realize a profit or loss from a closing purchase transaction based upon the
difference between the amount paid to purchase an option and the amount
received from the sale thereof.

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Stock Index Options - The Capital Appreciation and Small Cap Master
Portfolios may purchase call and put options and write covered call options on
stock indices listed on national securities exchanges or traded in the over-
the-counter market to the extent of 15% of the value of their respective net
assets.

The effectiveness of purchasing or writing stock index options will
depend upon the extent to which price movements in the Master Portfolios'
investment portfolio correlate with price movements of the stock index
selected. Because the value of a stock index option depends upon changes to
the price of all stocks comprising the index rather than the price of a
particular stock, whether the Master Portfolios will realize a gain or loss
from the purchase or writing of options on an index depends upon movements in
the price of all stocks in the index, rather than movements in the price of a
particular stock. Accordingly, successful use by the Master Portfolios of
options on stock indices will be subject to Wells Fargo's ability to correctly
analyze movements in the direction of the stock market generally or of
particular industry or market segments.

Warrants

The Capital Appreciation and Small Cap Master Portfolios may invest no
more than 5% of their respective net assets at the time of purchase in warrants
(other than those that have been acquired in units or attached to other
securities) and not more than 2% of their net assets in warrants which are not
listed on the New York or American Stock Exchange. Warrants represent rights to
purchase securities at a specific price valid for a specific period of time.
The prices of warrants do not necessarily correlate with the prices of the
underlying securities. The Master Portfolios may only purchase warrants on
securities in which the respective Master Portfolios may invest directly.

Emerging Markets

The Capital Appreciation, Corporate Stock and Small Cap Master
Portfolios may each invest up to 25% of their respective assets in American
Depositary Receipts ("ADRs") and similar instruments. The Capital
Appreciation and Small Cap Master Portfolios may each invest up to 15% of their
respective assets in equity securities of companies in "emerging markets." The
Master Portfolio consider countries with emerging markets to include the
following: (i) countries with an emerging stock market as defined by the
International Finance Corporation; (ii) countries with low- to middle-income
economies according to the International Bank for Reconstruction and
Development (more commonly referred to as the World Bank); and (iii) countries
listed in World Bank publications as developing. The adviser may invest in
those emerging markets that have a relatively low gross national product per
capita, compared to the world's major economies, and which exhibit potential
for rapid economic growth. The adviser believes that investment in equity
securities of emerging market issuers offers significant potential for
long-term capital appreciation.

Equity securities of emerging market issuers may include common stock,
preferred stocks (including convertible preferred stocks) and warrants; bonds,
notes and debentures convertible into common or preferred stock; equity
interests in foreign investment funds or trusts and real estate investment
trust securities. The Capital Appreciation and Small Cap Master Portfolios may
invest in ADRs, CDRs, GDRs, EDRs, and IDRs of such issuers.

Emerging market countries include, but are not limited to: Argentina,
Brazil, Chile, China, the Czech Republic, Columbia, Ecuador, Greece, Hong Kong,
Indonesia, India, Malaysia, Mexico, the Philippines, Poland, Portugal, Peru,
Russia, Singapore, South Africa, Thailand, Taiwan and Turkey. A company is
considered in a country, market or region if it conducts its principal business
activities there, namely, if it derives a significant portion (at least 50%) of
its revenues or profits from goods produced or sold, investments made, or
services performed therein or has at least 50% of its assets situated in such
country, market or region.

There are special risks involved in investing in emerging-market
countries. Most are heavily dependent on international trade, and some are
especially vulnerable to recessions in other countries. Many of these countries
are also sensitive to world commodity prices. Some countries may still have
obsolete financial systems, economic problems or archaic legal systems. In
addition, many of these nations are experiencing political and social
uncertainties. Many investments in emerging markets can be considered
speculative, and their prices can be much more volatile than in the

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more developed nations of the world. This difference reflects the greater
uncertainties of investing in less established markets and economies. The
financial markets of emerging markets countries are generally less well
capitalized and thus securities of issuers based in such countries may be less
liquid.

Corporate Reorganizations

The Capital Appreciation and Small Cap Master Portfolios may invest in
securities for which a tender or exchange offer has been made or announced, and
in securities of companies for which a merger, consolidation, liquidation or
similar reorganization proposal has been announced if, in the judgment of Wells
Fargo, there is a reasonable prospect of capital appreciation significantly
greater than the added portfolio turnover expenses inherent in the short term
nature of such transactions. The principal risk associated with such
investments is that such offers or proposals may not be consummated within the
time and under the terms contemplated at the time of the investment, in which
case, unless such offers or proposals are replaced by equivalent or increased
offers or proposals which are consummated, the Master Portfolios may sustain a
loss.

Short-Term Corporate Debt Instruments

Each of Corporate Stock Master Portfolio, Asset Allocation Master
Portfolio, and U.S. Government Allocation Master Portfolios may invest in
commercial paper (including variable amount master demand notes), which refers
to short- term, unsecured promissory notes issued by corporations to finance
short-term credit needs. Commercial paper is usually sold on a discount basis
and has a maturity at the time of issuance not exceeding nine months. Variable
amount master demand notes are demand obligations that permit the investment of
fluctuating amounts at varying market rates of interest pursuant to
arrangements between the issuer and a commercial bank acting as agent for the
payee of such notes whereby both parties have the right to vary the amount of
the outstanding indebtedness on the notes.

Each such Master Portfolio also may invest in non-convertible
corporate debt securities (e.g., bonds and debentures) with no more than one
year remaining to maturity at the date of settlement. Each such Master
Portfolio will invest only in such corporate bonds and debentures that are
rated at the time of purchase at least "Aa" by Moody's or "AA" by S&P.

Futures Contracts and Options Transactions

General. Each of Corporate Stock Master Portfolio, Asset Allocation
Master Portfolio, and U.S. Government Allocation Master Portfolio may engage in
futures contracts and options transactions. A futures transaction involves a
firm agreement to buy or sell a commodity or financial instrument at a
particular price on a specified future date, while an option transaction
generally involves a right, which may or may not be exercised, to buy or sell a
commodity or financial instrument at a particular price on a specified future
date. Futures contracts and options are standardized and exchange-traded, where
the exchange serves as the ultimate counterparty for all contracts.
Consequently, the only credit risk on futures contracts is the creditworthiness
of the exchange. Futures contracts, however, are subject to market risk (i.e.,
exposure to adverse price changes).

Such Master Portfolios may trade futures contracts and options on
futures contracts in U.S. domestic markets, such as the Chicago Board of Trade
and the International Monetary Market of the Chicago Mercantile Exchange.

Such Master Portfolios' futures transactions must constitute
permissible transactions pursuant to regulations promulgated by the Commodity
Futures Trading Commission. In addition, the Master Portfolios may not engage
in futures transactions if the sum of the amount of initial margin deposits and
premiums paid for unexpired options on futures contracts, other than those
contracts entered into for bona fide hedging purposes, would exceed 5% of the
liquidation value of such Master Portfolio's assets, after taking into account
unrealized profits and unrealized losses on such contracts; provided, however,
that in the case of an option on a futures contract that is in-the-money at the
time of purchase, the in-the-money amount may be excluded in calculating the 5%
liquidation amount. Pursuant to regulations and/or published positions of the
SEC, such Master Portfolio may be required to segregate cash or high quality
money

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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 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.

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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 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 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.

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The use of derivatives by such Master Portfolios also is subject to
broadly applicable investment policies. For example, a Master Portfolio may not
invest more than a specified percentage of its assets in "illiquid securities,"
including those derivatives that do not have active secondary markets. Nor may
such Master Portfolio use certain derivatives without establishing adequate
"cover" in compliance with SEC rules limiting the use of leverage.

Loans of Portfolio Securities

The Corporate Stock Master Portfolio, Asset Allocation Master
Portfolio, and the U.S. Government Allocation Master Portfolio may each lend
securities from its portfolio to brokers, dealers and financial institutions
(but not individuals) if cash, U.S. Government obligations or other
high-quality debt instruments equal to at least 100% of the current market
value of the securities loan (including accrued interest thereon) plus the
interest payable to the Fund with respect to the loan is maintained with the
Master Portfolio. In determining whether to lend a security to a particular
broker, dealer or financial institution, the Master Portfolio's investment
adviser will consider all relevant facts and circumstances, including the
creditworthiness of the broker, dealer or financial institution. Any loans of
portfolio securities will be fully collateralized based on values that are
marked to market daily. Any securities that a Master Portfolio may receive as
collateral will not become part of the Master Portfolio's investment portfolio
at the time of the loan and, in the event of a default by the borrower, the
Master Portfolio, if permitted by law, will dispose of such collateral except
for such part thereof that is a security in which the Master Portfolio is
permitted to invest. During the time securities are on loan, the borrower will
pay the Master Portfolio any accrued income on those securities, and the Master
Portfolio may invest the cash collateral and earn additional income or receive
an agreed-upon fee from a borrower that has delivered cash-equivalent
collateral. Each Master Portfolio will not lend securities having a value that
exceeds 30% of the current value of its total assets. Loans of securities by a
Master Portfolio will be subject to termination at the Master Portfolio's or
the borrower's option. A Master Portfolio may pay reasonable administrative and
custodial fees in connection with a securities loan and may pay a negotiated
portion of the interest or fee earned with respect to the collateral to the
borrower or the placing broker. Borrowers and placing brokers may not be
affiliated, directly or indirectly, with the Company, the Trust, the investment
adviser, or the Distributor.

Temporary Investments of the Short-Term Municipal Income Master Portfolio

The Municipal Income Master Portfolio may elect to invest temporarily
up to 20% of its net assets in U.S. Government obligations, negotiable
certificates of deposit, bankers acceptance and fixed time deposits and other
obligations of domestic banks (including foreign branches) that have more than
$1 billion in total assets at the time of investment and are members of the
Federal Reserve System or are examined by the Comptroller of the Currency or
whose deposits are insured by the FDIC; commercial paper rated at the date of
purchase "P-1" by Moody's or "A-1+" or "A-1" by Standard & Poor's Corporation
("S&P"); high-quality taxable municipal obligations; shares of taxable or
tax-free money market mutual funds; and repurchase agreements. Finally, the
Municipal Income Master Portfolio may invest temporarily in shares of other
open-end, management investment companies, subject to the limitations of
Section 12(d)(1) of the 1940 Act. Purchases of shares of other investment
companies will be limited to temporary investments in shares of unaffiliated
investment companies, and the Master Portfolio's investment adviser will waive
its fee for that portion of the Master Portfolio's assets so invested, except
when such purchase is part of a plan of merger, consolidation, reorganization
or acquisition. Such temporary investments would most likely be made for cash
management purposes or when there is an unexpected or abnormal level of
investor purchases or redemptions of shares of the Municipal Income Master
Portfolio or because of unusual market conditions. The income from these
temporary investments and investment activities may be subject to federal
income tax. However, as stated above, Wells Fargo Bank seeks to invest
substantially all of the Municipal Income Master Portfolio's assets in
securities exempt from such tax. A more complete description of tax- free
municipal obligations, taxable money market instruments and other investment
activities is contained in the section entitled "Additional Information About
Permitted Investment Activities of the Master Portfolios."

C. INVESTMENT POLICIES

Each Master Portfolio's investment objective and the classification of
each Master Portfolio as "diversified" may not be changed without the approval
of a majority vote of the Master Portfolio's investors.

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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 Government-Corporate Income Master Portfolio may borrow from
banks up to 10% of the current value of its net assets only for temporary
purposes in order to meet redemptions, and these borrowings may be secured by
the pledge of up to 10% of the current value of such Master Portfolio's net
assets (but investments may not be purchased while any such outstanding
borrowing exceeds 5% of the respective Master Portfolio's net assets). As a
matter of fundamental policy, the Municipal Income Master Portfolio and the
Government-Corporate Income Master Portfolio each may not invest more than 25%
of its assets (i.e., concentrate) in any particular industry, excluding: (1)
U.S. Government Obligations; and (2) municipal obligations (for the purpose of
this restriction, private activity bonds and notes shall not be deemed
municipal obligations if the payment of principal and interest on such bonds or
notes is the ultimate responsibility of non- governmental issuers). As a matter
of nonfundamental policy, the Municipal Income and Government-Corporate Income
Master Portfolios may each invest up to 15% of the current value of its net
assets in securities that are illiquid by virtue of the absence of a readily
available market or legal or contractual restrictions on resale and fixed time
deposits that are subject to withdrawal penalties and that have maturities of
more than seven days. Disposing of illiquid securities may involve additional
costs and require additional time.

Except during temporary defensive periods, the Municipal Income Master
Portfolio and the Government-Corporate Income Master Portfolio each seeks to
maintain an average weighted maturity of between 90 days and 2 years. The
maximum stated maturity of the Municipal Income Master Portfolio's investments
will not exceed 5 years for each individual security (though the maximum stated
maturity of certain variable-rate instruments purchased by the Master Portfolio
may be more than five years). The Government-Corporate Income Master Portfolio
may invest in obligations of any maturity.

As a matter of fundamental policy the Tax-Free Money Market Master
Portfolio may (i) borrow from banks up to 10% of the current value of its net
assets only for temporary purposes in order to meet redemptions, and these
borrowings may be secured by the pledge of up to 10% of the current value of
its net assets (but investments may not be purchased while any such outstanding
borrowing in excess of 5% of its net assets exists); (ii) may not make loans of
portfolio securities or other assets, except that loans for purpose of this
restriction will not include the purchase of fixed time deposits, repurchase
agreements, commercial paper and other short-term obligations, and other types
of debt instruments commonly sold in a public or private offering; and (iii)
may not purchase the securities of issuers conducting their principal business
activity in the same industry if, immediately after the purchase and as a
result thereof, the value of the Master Portfolio's investments in that
industry would be 25% or more of the current value of 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

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securities, fixed time deposits that are subject to withdrawal penalties and
that have maturities of more than seven days, and restricted securities (which
are securities that must be registered under the Securities Act of 1933 before
they may be offered or sold to the public), unless a state imposes a lower
limit.

As matters of fundamental policy, the Capital Appreciation Master
Portfolio may: (i) not purchase securities of any issuer (except U.S.
Government obligations) if as a result, with respect to 75% of the Master
Portfolio's assets, more than 5% of the value of the Master Portfolio's total
assets would be invested in the securities of such issuer or the Master
Portfolio would own more than 10% of the outstanding voting securities of such
issuer; (ii) borrow from banks up to 10% of the current value of its net assets
for temporary purposes only in order to meet redemptions, and these borrowings
may be secured by the pledge of up to 10% of the current value of its net
assets (but investments may not be purchased while any such outstanding
borrowings exceed 5% of its net assets); (iii) make loans of portfolio
securities in accordance with its investment policies; and (iv) not invest 25%
or more of its assets (i.e., concentrate) in any particular industry, except
that the Master Portfolio may invest 25% or more of its assets in U.S.
Government obligations. With respect to fundamental investment policy (iii)
above, the Master Portfolio does not intend to make loans of its portfolio
securities during the coming year.

As a matter of non-fundamental policy, the Capital Appreciation Master
Portfolio may invest up to 15% of the current value of its net assets in
illiquid securities. For this purpose, illiquid securities include, among
others, (a) securities that are illiquid by virtue of the absence of a readily
available market or legal or contractual restrictions on resale, (b) fixed time
deposits that are subject to withdrawal penalties and that have maturities of
more than seven days, and (c) repurchase agreements not terminable within seven
days. Disposing of illiquid or restricted securities may involve additional
costs and require additional time.

In addition, as matters of fundamental policy, the Corporate Stock
Master Portfolio may: (i) not purchase securities of any issuer (except
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities) if as a result more than 5% of the value of the total assets
of the Master Portfolio would be invested in the securities of such issuer or
the Master Portfolio would own more than 10% of the outstanding voting
securities of such issuer, provided that a Master Portfolio may invest all its
assets in a diversified, open-end management investment company, or a series
thereof, with the same investment objective, policies and restrictions as such
Master Portfolio, without regard to the limitations set forth in this clause
(i); (ii) borrow from banks up to 20% of the current value of its net assets
for temporary purposes only in order to meet redemptions, and these borrowings
may be secured by the pledge of up to 20% of the current value of its net
assets (but investments may not be purchased while any such outstanding
borrowing in excess of 5% of its net assets exists); (iii) make loans of
portfolio securities in accordance with its investment policies; and (iv) not
invest 25% or more of its assets (i.e., concentrate) in any particular
industry, except that (a) the Master Portfolio is permitted to concentrate its
assets in any one industry for the same period as does the S&P 500 Index and
(b) the Master Portfolio may invest 25% or more of its assets in obligations of
the U.S. Government, its agencies or instrumentalities. With respect to
Fundamental Policy (ii) above, the Master Portfolio presently does not intend
to put at risk more than 5% of its assets during the coming year. With respect
to Fundamental Policy (i), it may be possible that the Trust would own more
than 10% of the outstanding voting securities of an issuer.

As a matter of non-fundamental policy, the Corporate Stock Master
Portfolio may not invest more than 15% of its net assets in illiquid
securities, including repurchase agreements having maturities of more than
seven days.

As matters of fundamental policy, each of the Asset Allocation Master
Portfolio and the U.S. Government Allocation Master Portfolio may: (i) not
purchase securities of any issuer (except securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities) if as a result more
than 5% of the value of such Master Portfolio's total assets would be invested
in the securities of such issuer or such Master Portfolio would own more than
10% of the outstanding voting securities of such issuer, provided that such
Master Portfolio may invest all its assets in a diversified, open-end
management investment company, or a series thereof, with the same investment
objective, policies and restrictions as such Master Portfolio, without regard
to the limitations set forth in this clause (i); (ii) borrow from banks up to
20% of the current value of its net assets for temporary purposes only in order
to meet redemptions, and these borrowings may be secured by the pledge of up to
20% of the current value of its net assets (but investments may not be
purchased while any such outstanding borrowings exceed 5% of its net assets);
(iii) make loans of portfolio securities in

23
<PAGE> 27
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.

In addition, as matters of fundamental policy, the Small Cap Master
Portfolio may, among other things: (i) not purchase securities of any issuer
(except U.S. Government obligations) if as a result, with respect to 75% of the
Master Portfolio's assets, more than 5% of the value of the Master Portfolio's
total assets would be invested in the securities of such issuer or the Master
Portfolio would own more than 10% of the outstanding voting securities of such
issuer; (ii) borrow from banks up to 10% of the current value of its net assets
for temporary purposes only in order to meet redemptions, and these borrowings
may be secured by the pledge of up to 10% of the current value of its net
assets (but investments may not be purchased while any such outstanding
borrowings exceed 5% of its net assets); (iii) not make loans of portfolio
securities having a value that exceeds 33 1/3% of the current value of its net
assets; and (iv) not invest 25% or more of its assets (i.e., concentrate) in
any particular industry, except that the Master Portfolio may invest 25% or
more of its assets in U.S. Government obligations.

As a matter of non-fundamental policy, the Small Cap Master Portfolio
may invest up to 15% of the current value of its net assets in illiquid
securities. For this purpose, illiquid securities include, among others: (i)
securities that are illiquid by virtue of the absence of a readily available
market or legal or contractual restrictions on resale; (ii) fixed time deposits
that are subject to withdrawal penalties and that have maturities of more than
seven days; and (iii) repurchase agreements not terminable within seven days.
Disposing of illiquid or restricted securities may involve additional costs and
require additional time.

D. THE ASSET ALLOCATION AND U.S. GOVERNMENT ALLOCATION MODELS

Asset Allocation Model. BGFA, as sub-adviser to the Asset Allocation
Master Portfolio, manages the investments of the Master Portfolio using a
computer model developed over the past seventeen years. BGFA compares the Asset
Allocation Master Portfolio's investments daily to the Asset Allocation Model's
recommended allocation. The investment model recommends allocations among each
asset class in 10% increments only. Recommended reallocations are implemented
in accordance with trading policies that have been designed to take advantage
of market opportunities and to reduce transaction costs. Under current trading
policies employed by BGFA, recommended reallocations may be implemented
promptly upon receipt of recommendations or may not be acted upon for as long
as two or three months thereafter depending on factors such as the percentage
change from previous recommendations and the consistency of recommended
reallocations over a period of time.

The Asset Allocation Master Portfolio generally invests the net
proceeds from the sale of interests in the Master Portfolio and liquidates
existing Master Portfolio investments to meet net redemption requirements in a
manner that best allows the Fund's existing asset allocation to follow that
recommended by the Model. Notwithstanding any recommendation of the model to
the contrary, the Asset Allocation Master Portfolio generally maintains at
least that portion of its assets in money market instruments reasonably
considered necessary to meet redemption requirements. In

24
<PAGE> 28
general, cash maintained for short-term liquidity needs is only invested in
U.S. Treasury bills, shares of other mutual funds and repurchase agreements.
There is no requirement that the Fund maintain positions in any particular
asset class or classes.

BGFA manages other portfolios which also invest in accordance with the
Asset Allocation Model. The performance of each of those other portfolios is
likely to vary among themselves and from the performance of the Master
Portfolio. Such variation in performance is primarily due to different
equilibrium asset mix assumptions used for the various portfolios, timing
differences in the implementation of the model's recommendations and
differences in expenses and liquidity requirements.

There are 500 common stocks, including Wells Fargo & Company stock,
which make up the S&P 500 Index. S&P occasionally makes changes in the S&P 500
Index based on its criteria for inclusion of stocks in the S&P 500 Index. The
S&P 500 Index is market-capitalization-weighted so that each stock in the S&P
500 Index represents its proportion of the total market value of all stocks in
the S&P 500 Index. In making its stock investments, the policy of the Asset
Allocation Fund is to invest its assets in substantially the same stocks, and
in substantially the same percentages, as the S&P 500 Index, including Wells
Fargo & Company stock.

U.S. Government Allocation Model. BGFA, as sub-adviser to the U.S.
Government Asset Allocation Master Portfolio, manages the investments of the
Master Portfolio using a computer model developed over the past seventeen
years. BGFA compares the U.S. Government Allocation Master Portfolio's
investments daily to the U.S. Government Allocation Model's recommended
allocation. Recommended reallocations will be implemented in accordance with
trading policies that have been designed to take advantage of market
opportunities and to reduce transaction costs. Under current trading policies
employed by BGFA, recommended reallocations may be implemented promptly upon
receipt of recommendations or may not be acted upon for as long as two to three
months thereafter depending on factors such as the percentage change from
previous recommendations and the consistency of recommended reallocations over
a period of time.

The U.S. Government Allocation Master Portfolio generally invests the
net proceeds from the sale of interests in the Master Portfolio and liquidates
existing Master Portfolio investments to meet net redemption requirements in a
manner that best allows the Master Portfolio's existing asset allocation to
follow the allocation recommended by the computer Model. Notwithstanding any
recommendation of the computer Model to the contrary, the Master Portfolio will
generally maintain at least that portion of its assets in money market
instruments reasonably considered necessary to meet redemption requirements. In
general, cash maintained for short-term liquidity needs is only invested in
U.S. Treasury bills, shares of other mutual funds and repurchase agreements.
There is no requirement that the Master Portfolio maintain positions in any
particular asset class or classes.

BGFA manages other funds which invest in accordance with a
substantially similar version of the Model. The performance of each of those
other funds is likely to vary among themselves and from the performance of the
Master Portfolio. Such variation in performance is primarily due to timing
differences in the implementation of the Model's recommendations; differences
in expenses 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.

25
<PAGE> 29
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 Government-Corporate
Income, Municipal Income, National Tax-Free Institutional Money Market,
Overland Sweep, Small Cap Strategy and Strategic Growth Funds of Overland
Express and the Aggressive Growth, Asset Allocation, Corporate Stock, National
Tax-Free Money Market Mutual, Small Cap and U.S. Government Allocation Funds of
Stagecoach Funds each invests all of its 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 Funds, each Master
Portfolio may sell its shares to certain other mutual funds or other accredited
investors. The expenses and, correspondingly, the returns of other investment
options in a Master Portfolio may differ from those of a Fund.

ITEM 5. MANAGEMENT OF THE TRUST.

The Trust's Board of Trustees provides broad supervision over the
affairs of each Master Portfolio of the Trust. The Trust has retained the
services of Wells Fargo Bank as investment adviser to each Master Portfolio,
and Stephens as sponsor, administrator and placement agent. The Board of
Trustees is responsible for the general management of the Master Portfolios and
supervises the actions of Wells Fargo Bank and Stephens in their capacities as
adviser, sponsor, administrator and placement agent. Additional information
regarding the Officers and Trustees of the Trust is included in Part B under
"Management of the Trust."

Investment Adviser -- Pursuant to separate Advisory Contracts, each Master
Portfolio is advised by Wells Fargo Bank, 420 Montgomery Street, San Francisco,
California 94105, a wholly owned subsidiary of Wells Fargo & Company. Wells
Fargo Bank, one of the largest banks in the United States, was founded in 1852
and is the oldest bank in the western United States. As of September 30, 1996,
Wells Fargo Bank and its affiliates provided investment advisory services for
over $54 billion of assets of individuals, trusts, estates and institutions.
Currently, Wells Fargo Bank serves as investment adviser or sub-adviser to five
other registered open-end management investment companies, each of which
consists of several separately managed investment portfolios.

Portfolio Managers -- Ms. Tamyra Thomas assumed responsibility as portfolio
co-manager for the day-to-day management of the portfolio of the
Government-Corporate Income Master Portfolio as of July 16, 1996. Ms. Thomas is
a senior vice- president and the chief fixed income investment officer of the
Investment Management Group Policy Committee. Ms. Thomas has managed bond
portfolios for over a decade. She currently manages in excess of 1 billion of
long-term taxable bond portfolios for various foundations, defined benefit
plans and other clients. Prior to joining Wells Fargo Bank in early 1988, she
held a number of senior investment positions for the Valley Bank & Trust
Company of Utah including vice president and manager of the investment
department and chairman of the Trust Investment Committee. She holds a B.S.
from the University of Utah and was past president of the Utah Bond Club. Ms.
Thomas is a chartered financial analyst.

Ms. Madeline Gish also assumed responsibility as portfolio co-manager
for the day-to-day management of the portfolio of the Government-Corporate
Income Master Portfolio as of July 16, 1996. Ms. Gish joined Wells Fargo Bank
in 1989 as the portfolio coordinator for the Mutual Funds Division and played
an integral part in the rapid growth of the Overland Express Funds. Since
joining the fixed-income group in 1992, Madeline has assisted in the research
and trading for the adjustable-rate mortgage fund and is currently managing
taxable liquidity portfolios. She holds a bachelor of science degree in
business administration from the University of Kansas and is a chartered
financial analyst candidate.

Mr. Scott Smith also assumed responsibility as portfolio co-manager
for the day-to-day management of the portfolio of the Government-Corporate
Income Master Portfolio as of July 16, 1996. He joined Wells Fargo Bank in 1988
as a taxable money market portfolio specialist. His experience includes a
position with a private money

26
<PAGE> 30
management firm with mutual fund investment operations. Mr. Smith holds a B.A.
degree from the University of San Diego and is a chartered financial analyst.

Mr. Jeff L. Weaver has acted as portfolio co-manager to the
Government-Corporate Income Master Portfolio since May 1, 1996. Mr. Weaver
joined Wells Fargo Bank after three years as a short-term fixed income trader
and portfolio manager in the investment management group of Bankers Trust
Company in New York. He holds a B.A. in economics from the University of
Colorado and is a chartered financial analyst candidate. Mr. Weaver also
co-manages the Money Market Fund of Overland Express Funds, Inc.

Ms. Laura L. Milner, portfolio co-manager of the Municipal Income
Master Portfolio, joined Wells Fargo Bank in 1988. Her background includes over
seven years experience specializing in short- and long-term municipal
obligations with Salomon Brothers. She is a member of the National Federation
of Municipal Analysts and its California chapter.

Mr. David Klug, portfolio co-manager for the Municipal Income Master
Portfolio, has managed municipal bond portfolios for Wells Fargo Bank for over
nine years. Prior to joining Wells Fargo Bank, he managed the municipal bond
portfolio for a major property and casualty insurance company. His investment
experience exceeds 20 years and includes all aspects of tax-exempt fixed-income
investments. He holds an M.B.A. from the University of Chicago and is a member
of the National Federation of Municipal Analysts and its California Chapter.
Mr. Klug and Ms. Milner have co-managed the Municipal Income Master Portfolio
since its inception in May 1994.

Mr. Jon Hickman, as manager of the Growth Equity Team, is responsible
as co-manager for the Capital Appreciation Master Portfolio and has performed
such duties since the Capital Appreciation Master Portfolio's inception in
March 1996. Mr Hickman has also managed the Strategic Growth Fund of Overland
Express Funds, Inc., the predecessor fund to the Capital Appreciation Master
Portfolio, since its inception on January 20,1993. In September of 1996, Mr.
Hickman assumed responsibility as co-manager of the Small Cap Master Portfolio.
Mr. Hickman had also co-managed the Small Capitalization Growth Fund from
November 1994 until the sale of its assets to the Small Cap Master Portfolio in
September 1995. Mr Hickman has over sixteen years' experience in the investment
management field. He joined Wells Fargo Bank in 1986 managing equity and
balanced portfolios for individuals and employee benefit plans. He is a senior
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.

Mr. Steve Enos assists Mr. Hickman with the day-to-day management of
the Capital Appreciation Master Portfolio. In addition, as portfolio
co-manager of the Small Cap Master Portfolio since its inception in September
of 1996, Mr. Enos assists Mr. Hickman with the day-to-day management of the
Master Portfolio. Mr. Enos co-managed the Small Capitalization Growth Fund from
November 1994 until the sale of its assets to the Small Cap Master Portfolio in
September, 1996. Mr. Enos joined Wells Fargo in 1993 and is a member of the
Wells Fargo Bank Growth Equity Team. He began his career with First Interstate
Bank, where he was assistant vice president and portfolio manager. From 1991 to
1993, Mr. Enos was a principal at Dolan Capital Management where he managed
both personal and pension portfolios. Mr. Enos received his undergraduate
degree in economics from the University of California at Davis. Mr. Enos is a
Chartered Financial Analyst and a member of the Association for Investment
Management and Research.

Advisory Fees. Under the Advisory Contracts, Wells Fargo Bank has
agreed to furnish to each Master Portfolio investment guidance and policy
direction in connection with the daily portfolio management of the Master
Portfolios. Pursuant to the Advisory Contracts, Wells Fargo Bank also
furnishes to the Board of Trustees of the Trust periodic reports on the
investment strategy and performance of each Master Portfolio.

For its services under the applicable Advisory Contracts, Wells Fargo
Bank is entitled to a monthly advisory fee at the annual rate of 0.25% of the
average daily net assets of the CIT Master Portfolio, 0.50% of the average
daily net assets of the Capital Appreciation Master Portfolio, 0.50% of the
average daily net assets of the Municipal Income Master Portfolio, 0.50% of the
average daily net assets of the Government-Corporate Income Master Portfolio,
0.60% of the average daily net assets of the Small Cap Master Portfolio, and
0.30% of the average daily net assets of the Tax-

27
<PAGE> 31
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 Barclays Global Investors, N.A. ("BGI") and an
indirect subsidiary of Barclays Bank PLC. 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 period
ended December 31, 1995. Wells Fargo Bank waived all advisory fees paid to it
by the Municipal Income Master Portfolio and the Government-Corporate Income
Master Portfolio for advisory services during the period ended December 31,
1995.

Prior to the conversion to a master-feeder structure by the Strategic
Growth Fund of Overland Express (the "predecessor fund" to the Capital
Appreciation Master Portfolio), Wells Fargo Bank provided advisory services
directly to the Strategic Growth Fund. Wells Fargo Bank was entitled to receive
a monthly advisory fee at the annual rate of 0.50% of the average daily net
assets of such Fund as compensation for its advisory services. For the year
ended December 31, 1995, the Fund paid to Wells Fargo Bank an amount equal to
0.50% of its average daily net assets.

Prior to the conversion by the Asset Allocation, Corporate Stock and
U.S. Government Allocation Funds of Stagecoach Funds, (the "predecessor funds"
to the Asset Allocation, Corporate Stock and U.S. Government Allocation Master
Portfolios) to master-feeder structure, Wells Fargo Bank was entitled to
receive a monthly advisory fee at the annual rate of 0.50% of the first $250
million of each such Fund's average daily net assets, 0.40% of the next $250
million, and 0.30% of each such Fund's assets in excess of $500 million. For
the periods below, Wells Fargo Bank was paid amounts equal to the indicated
percentages of the average daily net assets of the Asset Allocation, Corporate
Stock and U.S. Government Allocation Funds or Master Portfolios, respectively,
as compensation for advisory services to such Funds/Master Portfolios.
<TABLE>
<CAPTION>
Advisory Fees Paid
------------------
Year Ended Period Ended
Fund/Master Portfolio December 31, 1995 September 30, 1996(1)
- ---------------------- ----------------- ---------------------
<S> <C> <C> <C>
o Asset Allocation 0.37% 0.37%
o Corporate Stock 0.50% 0.47%
o U.S. Government Allocation 0.50% 0.50%
</TABLE>

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<PAGE> 32

- ------------------
(1) From January 1 to April 28, 1996, Wells Fargo Bank was paid advisory
fees by each Fund; after the conversion, from April 29 to September 30, 1996,
Wells Fargo Bank was paid advisory fees by each Master Portfolio. The fee rate
did not change after conversion.

For the periods below, WFNIA and BGFA were paid by Wells Fargo Bank
amounts equal to the indicated percentages of the average daily net assets of
the Asset Allocation, Corporate Stock and U.S. Government Allocation Funds or
Master Portfolios, respectively, as compensation for sub-advisory services to
such Funds/Master Portfolios.

<TABLE>
<CAPTION>
Sub-Advisory Fees Paid to WFNIA Sub-Advisory Fees Paid to BGFA
------------------------------- ------------------------------
Fund/Master Portfolio Year Ended Period Ended
---------------------- December 31, 1995 September 30, 1996(1)
----------------- ---------------------
<S> <C> <C> <C>
o Asset Allocation 0.20% 0.20%
o Corporate Stock 0.09% 0.09%
o U.S. Government Allocation 0.18% 0.18%
</TABLE>

- ---------------
(1) From January 1 to April 28, 1996, BGFA was paid sub-advisory fees by
Wells Fargo Bank on behalf of each Fund; after the conversion, from April 29 to
September 30, 1996, BGFA was paid sub-advisory fees by Wells Fargo Bank on
behalf of each Master Portfolio. The fee rate did not change after conversion.

Purchase and sale orders of the securities held by each Master
Portfolio may be combined with those of other accounts that Wells Fargo Bank
manages or advises, and for which it has brokerage placement authority, in the
interest of seeking the most favorable overall net results. When Wells Fargo
Bank determines that a particular security should be bought or sold for a
Master Portfolio of the Trust and other accounts managed by Wells Fargo Bank,
Wells Fargo Bank undertakes to allocate those transactions among the
participants equitably. From time to time, each Master Portfolio, to the extent
consistent with its investment objective, policies and restrictions, may invest
in securities of companies with which Wells Fargo Bank has a lending
relationship.

Custodian and Transfer Agent -- Wells Fargo Bank has been retained to act as
the custodian (the "Custodian") for each Master Portfolio of the Trust other
than the Corporate Stock, Asset 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.

Administrator and Co-Administrator -- Subject to the overall supervision of the
Trust's Board of Trustees, Wells Fargo Bank and Stephens as administrator and
co-administrator, respectively, provide the Master Portfolio's with
administrative services, including general supervision of each Master Portfolio
operation, coordination of the other services provided to each Master
Portfolio, compilation of information for reports to the SEC and the state
securities commissions, preparation of proxy statements and shareholder
reports, and general supervision of data compilation in connection with
preparing periodic reports to the Trust's Trustees and officers. Wells Fargo
Bank and Stephens also furnish office space and certain facilities to conduct
each Master Portfolio's business, and Stephens compensates the Trust's
Trustees, officers and employees who are affiliated with Stephens. For these
administrative services, Wells Fargo Bank and Stephens are not entitled to
receive any fees from the Master Portfolios so long as they receive fees for
similar services provided to the corresponding feeder funds. Wells Fargo Bank
and Stephens may delegate certain of their administrative duties to
sub-administrators. Stephens, 111 Center Street, Little Rock, Arkansas 72201,
previously served as sole administrator for each Master Portfolio of the Trust.
For providing administrative services to the CIT Master Portfolio, Stephens was
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 was entitled to receive 0.05% of such Master Portfolio's
average daily net assets. The other Master Portfolios did not pay a fee for
administrative services.

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<PAGE> 33

Sponsor and Placement Agent -- Stephens is a full service broker/dealer and
investment advisory firm. Stephens and its predecessor have been providing
securities and investment services for more than 60 years, including
discretionary portfolio management services since 1983. Stephens currently
manages investment portfolios for pension and profit sharing plans, individual
investors, foundations, insurance companies and university endowments. The
Trust will not purchase securities from Stephens, Wells Fargo Bank, or their
respective affiliates, as principal, without an exemptive order from the
Commission. Stephens is located at 111 Center Street, Little Rock, Arkansas
72201 and also serves as placement agent for each Master Portfolio's shares.

Expenses -- Each Master Portfolio's Advisory Contract and Administration
Agreement provide that if, in any fiscal year, the total aggregate expenses of
a Master Portfolio incurred by, or allocated to, the Master Portfolio and other
investment companies investing in a Master Portfolio (excluding taxes,
interest, brokerage commissions and other portfolio transaction expenses,
expenditures that are capitalized in accordance with generally accepted
accounting principles, extraordinary expenses and amounts accrued or paid under
any distribution plan) exceed the most restrictive expense limitation
applicable to such investment companies imposed by the securities laws or
regulations of the states in which such investment companies' shares are
registered for sale, Wells Fargo Bank and Stephens shall waive their fees
proportionately under the Advisory Contract and Administration Agreement,
respectively, for the fiscal year to the extent of the excess, or reimburse the
excess, but only to the extent of their respective fees. The Advisory Contracts
and the Administration Agreements further provide that the total expenses of
each Master Portfolio shall be reviewed monthly so that, to the extent the
annualized expenses for such month exceed the most restrictive applicable
annual expense limitation, the monthly fees under the Advisory Contract and the
Administration Agreement of each Master Portfolio shall be reduced as
necessary. The most stringent applicable state restriction for investment
companies limits these expenses for any fiscal year to 2.50% of the first $30
million of an investment company's average net assets, 2% of the next $70
million of average net assets and 1.50% of the average net assets in excess of
$100 million.

Except for the expenses borne by Stephens and Wells Fargo Bank, each
Master Portfolio bears all costs of its operations, including the compensation
of its trustees who are not officers or employees of Stephens or Wells Fargo
Bank or any of their affiliates. For the year ended December 31, 1995, total
expenses, before and after waivers and reimbursements, expressed as a
percentage of average daily net assets, were as follows for the indicated
Master Portfolios and the Predecessor Fund of the Capital Appreciation Master
Portfolio -- the Strategic Growth Fund:

<TABLE>
<CAPTION>
Total Expenses
---------------
Year Ended
December 31, 1995
-----------------
Before After
Master Portfolio/Fund Waivers Waivers
- --------------------- -------- -------
<S> <C> <C> <C>
CIT Master Portfolio 0.33% 0.30%
Government-Corporate Income Master Portfolio 1.72% 0.00%
Municipal Income Master Portfolio 0.80% 0.00%
Strategic Growth Fund Class A 1.38% 1.28%
Class D 2.09% 2.02%
</TABLE>

30
<PAGE> 34
For the period begun April 29, 1996 (commencement of operations) and
ended September 30, 1996, the indicated Master Portfolios' total expenses
expressed as a percentage of average daily net assets before and after waivers
and reimbursements, were as follows:
<TABLE>
<CAPTION>
Period Ended September 30, 1996
-------------------------------
Before After
Master Portfolio Waivers Waivers
- ----------------- -------- --------
<S> <C> <C>
Asset Allocation 0.92% 0.91%

Corporate Stock 1.08% 1.01%

U.S. Government Allocation 1.26% 1.16%
</TABLE>

For the year ended December 31, 1995 and the fiscal period ended
September 30, 1996, the indicated Funds' total expenses expressed as a
percentage of average daily net assets before and after waivers and
reimbursements, were as follows:

<TABLE>
<CAPTION>
Year Ended Fiscal Period Ended
December 31, 1995 September 30, 1996
----------------- ------------------
Before After Before After
Fund Waivers Waivers Waivers Waivers
---- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Asset Allocation Class A 0.84% 0.84% 0.90% 0.90%
Class B 1.76% 1.53% 1.56% 1.14%

Corporate Stock 1.00% 0.96% 1.08% 1.01%

U.S. Government Allocation Class A 1.07% 1.04% 1.20% 1.12%
Class B 2.36% 1.65% 2.21% 1.92%
</TABLE>

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 paid and nonassessable, and the Interests
have no preemptive rights. A more detailed statement of the rights of investors
is contained in Part B.

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<PAGE> 35
PRINCIPAL HOLDERS OF SECURITIES AS OF JANUARY 3, 1997:

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
STAGECOACH FUNDS % OWNED OVERLAND EXPRESS % OWNED OF
MASTER PORTFOLIO FEEDER FUND OF MASTER FEEDER FUND MASTER
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Small Cap Small Cap 87.28% Small Cap Strategy 12.72%
- --------------------------------------------------------------------------------------------------------------------
Tax-Free Money Market National Tax-Free 15.78% National Tax-Free 84.22%
Money Market Mutual Institutional Money Market
- --------------------------------------------------------------------------------------------------------------------
Capital Appreciation Aggressive Growth 21.61% Strategic Growth 78.39%
- --------------------------------------------------------------------------------------------------------------------
Asset Allocation Asset Allocation 99.99% N/A N/A
- --------------------------------------------------------------------------------------------------------------------
Corporate Stock Corporate Stock 99.99% N/A N/A
- --------------------------------------------------------------------------------------------------------------------
U.S. Govt. Allocation U.S. Govt. Allocation 99.99% N/A N/A
- --------------------------------------------------------------------------------------------------------------------
Cash Investment Trust N/A N/A Overland Sweep 99.99%
- --------------------------------------------------------------------------------------------------------------------
Government-Corporate Income N/A N/A Short-Term Govt.-Corp. Income 99.99%
- --------------------------------------------------------------------------------------------------------------------
Municipal Income N/A N/A Short-Term Municipal Income 99.99%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>

Each of the above Funds owning at least 25% of the outstanding
interests in a corresponding Master Portfolio of MIT could be considered to be
a "controlling person" of such Master Portfolio for purposes of the 1940 Act.
Overland Express and Stagecoach Funds are Maryland corporations and registered
open-end management investment companies located at 111 Center Street, Little
Rock, Arkansas 72201.

The Trust reserves the right, without the approval of interestholders,
to create and issue interests in the Master Portfolios. Any interests so
created in a Master Portfolio would participate equally in the earnings,
dividends and assets of the particular Master Portfolio. Interests in any new
master portfolio would participate equally in the earnings, dividends and
assets of the new master portfolio. The Trust currently offers nine separate
Master Portfolios. The previously single Master Portfolio is now referred to
as the CIT Master Portfolio. The eight other Master Portfolios are -- the
Asset Allocation Master Portfolio, the Capital Appreciation Master Portfolio,
the Corporate Stock Master Portfolio, the Government-Corporate Income Master
Portfolio, the Municipal Income Master Portfolio, the Small Cap Master
Portfolio, the Tax-Free Money Market Master Portfolio, and the U.S. Government
Allocation Master Portfolio.

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 Portfolio Interests involve certain investment risks, including
the possible loss of principal. The price and investment return of each
interest in a Master Portfolio will fluctuate and are not guaranteed.

DIVIDENDS AND DISTRIBUTIONS

CIT MASTER PORTFOLIO -- The Net Income (as defined below) of the CIT
Master Portfolio is allocated daily to all investors of record as of 9:00 a.m.
(Pacific time) on each day that Wells Fargo Bank is open (a "Bank Business
Day"). Currently, Wells Fargo Bank is closed on New Year's Day, Martin Luther
King's Day (the third Monday in January), President's Day (the third Monday in
February), Memorial Day (the last Monday in May), Independence Day, Labor Day,
Columbus Day (the second Monday in October), Veteran's Day, Thanksgiving Day,
and Christmas Day (each, a "Bank Holiday") and also on Saturdays and Sundays.
Net Income for a Saturday, Sunday or Bank Holiday is allocated to investors of
record as of 9:00 a.m. (Pacific time) on the previous Bank Business Day.

The Net Income of the CIT Master Portfolio (from the time of the
immediately preceding determination thereof) consists of (i) all income
accrued, less the amortization of any premium, on the assets of the CIT Master
Portfolio, less (ii) all actual and accrued expenses of the CIT Master
Portfolio determined in accordance with generally accepted accounting
principles. Interest income includes discount earned (including both original
issue and market

32
<PAGE> 36
discount) on discount paper accrued ratably to the date of maturity and any net
realized short-term gains or losses on the assets of the CIT Master Portfolio.

Dividends and any capital gain distributions paid by the CIT Master
Portfolio will be reinvested in additional Interests in that Master Portfolio
at net asset value and credited to an investor's account on the payment date.

OTHER MASTER PORTFOLIOS -- The net investment income of the Asset
Allocation, Capital Appreciation, Corporate Stock, Government-Corporate Income,
Municipal Income, Small Cap and U.S. Government Allocation Master Portfolios is
allocated daily to all investors of record in such Master Portfolios as of 1:00
p.m. (Pacific time) on any day the New York Stock Exchange is open (a "Business
Day"). Currently, the Exchange is closed on New Year's Day, Presidents' Day
(the third Monday in February), Good Friday, Memorial Day (the last Monday in
May), Independence Day, Labor Day, Veterans Day, Thanksgiving Day and Christmas
Day (each, a "Holiday") and Saturdays and Sundays. The net investment income of
the Tax-Free Money Market Master Portfolio is allocated to all investors of
record on each Business Day and also on Good Friday. Net investment income for
a Saturday, Sunday or Holiday is allocated to investors of record as of 1:00
p.m. (Pacific time) on the preceding business day.

Dividends and any capital gains distributions paid by a Master
Portfolio will be reinvested in the investor's interest in that Master
Portfolio of the Trust at net asset value and credited to the investor's
account on the payment date.

TAXES

Based on the method of operation of the Trust, the Trust believes that
it will qualify for federal income tax purposes as a partnership. The Trust
therefore believes that it will not be subject to any federal income tax on its
income and any net capital gains. However, each investor in a Master Portfolio
of the Trust will be taxed on its allocable share of that Master Portfolio's
ordinary income and any capital gain in determining its federal income tax
liability. The determination of such share will be made in accordance with the
Internal Revenue Code of 1986, as amended, (the "Code") and regulations
promulgated thereunder.

It is intended that each Master Portfolio's assets, income and
distributions be managed in such a way that a regulated investment company
investing in a Master Portfolio will be able to satisfy the requirements of
Subchapter M of the Code, assuming that the investment company invested all of
its assets in that Master Portfolio of the Trust.

------------------

Investor inquiries should be directed to the Master Investment Trust,
111 Center Street, Little Rock, Arkansas 72201.

ITEM 7. PURCHASE OF SECURITIES.

Interests in the CIT Master Portfolio may be purchased on any Bank
Business Day. Interests in the Asset Allocation, Capital Appreciation,
Corporate Stock, Municipal Income, Government-Corporate Income, Small Cap,
Tax-Free Money Market, and U.S. Government Allocation Master Portfolios may be
purchased on any Business Day. Interests in the Tax-Free Money Market Master
Portfolio may also be purchased on Good Friday.

The Trust is a no-load, open-end management investment company which
was organized as a business trust under the laws of Delaware on August 15,
1991. The Trust is composed of nine Master Portfolios: the Asset Allocation,
Capital Appreciation, CIT, Corporate Stock, Short-Term Government-Corporate
Income, Short-Term Municipal Income, Small Cap, Tax- Free Money Market, and
U.S. Government Allocation Master Portfolios, each of which is a diversified
investment portfolio. Beneficial interests in the Trust are issued solely in
private placement transactions that do not involve any "public offering" within
the meaning of Section 4(2) of the 1933 Act. Investments in the Trust may only
be made by registered broker/dealers or by investment companies, insurance
company separate accounts, common or commingled trust funds, group trusts or
similar organizations or entities that are "accredited investors" within the

33
<PAGE> 37
meaning of Regulation D under the 1933 Act. This Amendment to the registration
statement does not constitute an offer to sell, or the solicitation of an offer
to buy, any "security" within the meaning of the 1933 Act.

There is no minimum initial or subsequent purchase amount required for
investment in a Master Portfolio. The Trust reserves the right to reject any
purchase order. If accepted by the Trust, investments in a Master Portfolio may
be made in exchange for securities that are eligible for acquisition by such
Master Portfolio as described in this Part A. All dividends, interest,
subscription, or other rights pertaining to such securities shall become the
property of the Master Portfolio of the Trust and must be delivered to the
Trust by the investor upon receipt from the issuer.

A Master Portfolio will not accept securities in exchange for
Interests unless: (1) such securities are, at the time of the exchange,
eligible for purchase by that Master Portfolio; (2) the investor represents and
agrees that all securities offered to be exchanged are not subject to any
restrictions upon their sale by the Master Portfolio under the Securities Act
of 1933 or under the laws of the country in which the principal market for such
securities exists, or otherwise; (3) the value of any such security (except
U.S. Government securities) being exchanged together with any other securities
of the same issuer owned by a Master Portfolio will not exceed 5% of the net
assets of the Master Portfolio of the Trust immediately after the transaction;
and (4) such securities are consistent with the Master Portfolio's investment
objective and policies, as applied by Wells Fargo Bank.

Interests in a Master Portfolio are offered continuously at the net
asset value next determined after a purchase order is effective without a sales
load. Purchase orders for Interests in the CIT and Tax-Free Money Market Master
Portfolios are effected if received by 9:00 a.m. (Pacific time) on any Bank
Business Day or Business Day, respectively. Purchase orders for Interests in
the Municipal Income and Government-Corporate Income Master Portfolios are
effected if received by 1:00 p.m. (Pacific time) on any Business Day.

DETERMINATION OF NET ASSET VALUE

CIT AND TAX-FREE MONEY MARKET MASTER PORTFOLIOS -- The net asset value
of the CIT Master Portfolio is determined as of 9:00 a.m. (Pacific time) on
each Bank Business Day. The net asset value of the the Tax-Free Money Market
Master Portfolio is determined as of 12:00 noon and 1:00 p.m. (Pacific time) on
each Business Day. The net asset value of each of the CIT Master Portfolio and
the Tax-Free Money Market Master Portfolio is determined by adding the value of
the respective Master Portfolio's investments plus cash and other assets,
deducting liabilities and their dividing the result by the number of
outstanding interests in such Master Portfolio. It is anticipated that the net
asset value of an interest in the CIT Master Portfolio or the Tax-Free Money
Market Master Portfolio will remain stable at $1.00 per share, although no
assurance can be given that each Master Portfolio will maintain a stable net
asset value on a continuing basis.

The CIT Master Portfolio and the Tax-Free Money Market Master
Portfolio each uses the amortized cost method to value its portfolio
securities. The amortized cost method involves valuing a security at its cost
and amortizing any discount or premium over the period until maturity,
generally without regard to the impact of fluctuating interest rates on the
market value of the security.

OTHER MASTER PORTFOLIOS -- The net asset value of each of the Capital
Appreciation, Municipal Income, Government-Corporate Income, Small Cap,
Corporate Stock, Asset Allocation and the U.S. Government Allocation Master
Portfolios is determined on each Business Day. The net asset value per interest
in each of these Master Portfolios is determined by dividing the value of the
total net assets of the Master Portfolio by the total number of outstanding
Interests.

The value of the net assets of each of these Master Portfolios (other
than debt obligations maturing in 60 days or less) is determined at the close
of regular trading on the Exchange, which is currently 1:00 p.m. (Pacific
time). Except for debt obligations with remaining maturities of 60 days or
less, which are valued at amortized cost, assets are valued at current market
prices, or if such prices are not readily available, at fair value as
determined in good faith by the Trust's Board of Trustees. Prices used for such
valuation may be provided by independent pricing services.

34
<PAGE> 38
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.

35
<PAGE> 39

MASTER INVESTMENT TRUST
TELEPHONE: (800) 643-9691
PART B
Dated February 1, 1997

---------------------------------

ITEM 10. COVER PAGE.

Master Investment Trust (the "Trust") is a registered, open-end,
management investment company. The Trust is a "series fund," which is a mutual
fund divided into separate portfolios. By this offering document the Trust is
offering the following diversified portfolios: the Asset Allocation Master
Portfolio, the Capital Appreciation Master Portfolio, the Cash Investment Trust
Master Portfolio (the "CIT Master Portfolio"), the Corporate Stock Master
Portfolio, the Short-Term Government-Corporate Income Master Portfolio (the
"Government-Corporate Income Master Portfolio"), the Short- Term Municipal
Income Master Portfolio (the "Municipal Income Master Portfolio"), the Small
Cap Master Portfolio, the Tax-Free Money Market Master Portfolio and the U.S.
Government Allocation Master Portfolio (each a "Master Portfolio" and
collectively the "Master Portfolios"). This Part B should be read in
conjunction with the Trust's Part A, also dated February 1, 1997. All terms
used in this Part B that are defined in Part A have the meanings assigned in
Part A. A copy of Part A may be obtained without charge by writing Stephens
Inc. ("Stephens"), the Trust's sponsor, administrator and placement agent, at
111 Center Street, Little Rock, Arkansas 72201, or calling Stephens at the
telephone number indicated above.

The Trust's Registration Statement, as amended, including the Trust's
Part A, the Part B and any exhibits filed therewith, may be examined at the
office of the Securities and Exchange Commission ("SEC") in Washington, D.C.
Statements contained in the Trust's Part A or Part B as to the contents of any
contract or other document referred to herein or in the Part A are not
necessarily complete, and, in each instance, reference is made to the copy of
such contract or other document filed as exhibits to the Trust's Registration
Statements, each such statement being qualified in all respects by such
reference.
<PAGE> 40
ITEM 11. TABLE OF CONTENTS.

<TABLE>
<CAPTION>
PAGE
<S> <C>
Item 10. Cover Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Item 11. Table Of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Item 12. General Information and History . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Item 13. Investment Objectives and Policies . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Item 14. Management of the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Item 15. Control Persons and Principal Holders of Securities . . . . . . . . . . . . . . . . 27

Item 16. Investment Advisory and Other Services . . . . . . . . . . . . . . . . . . . . . . . 27

Item 17. Brokerage Allocation and Other Practices . . . . . . . . . . . . . . . . . . . . . . 32

Item 18. Capital Stock and Other Securities . . . . . . . . . . . . . . . . . . . . . . . . . 35

Item 19. Purchase, Redemption and Pricing of Securities . . . . . . . . . . . . . . . . . . . 36

Item 20. Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Item 21. Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Item 22. Calculations of Performance Data . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Item 23. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
</TABLE>

2
<PAGE> 41
ITEM 12. GENERAL INFORMATION AND HISTORY.

Not applicable.

ITEM 13. INVESTMENT OBJECTIVES AND POLICIES.

The following information supplements and should be read in
conjunction with Item 4 in Part A.

A. ASSET ALLOCATION, CORPORATE STOCK AND U.S. GOVERNMENT ALLOCATION
MASTER PORTFOLIOS

The investment objective of each of the Asset Allocation, Corporate
Stock and U.S. Government Allocation Master Portfolios is as described in Part
A. The investment restrictions and additional permitted investment activities
applicable to each such Master Portfolio are as described below.

FUNDAMENTAL INVESTMENT POLICIES. 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.

No Master Portfolio 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);

(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;

(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;

3
<PAGE> 42
(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 its investment
policies.

NON-FUNDAMENTAL INVESTMENT POLICIES. Each of the Corporate Stock,
Asset Allocation and U.S. Government Allocation Master Portfolios is subject to
the following non-fundamental policies which may be changed by a majority vote
of the Board of Trustees of the Trust at any time and without approval of the
shareholders.

No Master Portfolio may:

(1) purchase or retain securities of any issuer if the officers or
Trustees of the Trust or Wells Fargo Bank owning beneficially more than
one-half of one percent (0.50%) of the securities of the issuer together owned
beneficially more than 5% of such securities;

(2) purchase securities of issuers who, with their predecessors,
have been in existence less than three years, unless the securities are fully
guaranteed or insured by the U.S. Government, a state, commonwealth,
possession, territory, the District of Columbia or by an entity in existence at
least three years, or the securities are backed by the assets and revenues of
any of the foregoing if, by reason thereof, the value of its aggregate
investments in such securities will exceed 5% of its total assets;

(3) purchase securities of unseasoned issuers, including their
predecessors, which have been in operation for less than three years, and
equity securities of issuers which are not readily marketable if by reason
thereof the value of its aggregate investment in such classes of securities
will exceed 5% of its total assets; or

(4) invest more than 15% of its net assets in illiquid securities,
including repurchase agreements maturing in more than seven days.

In addition, the Master Portfolios may invest in shares of other
open-end, management investment companies, subject to the limitations of
Section 12(d)(1) of the 1940 Act, provided that any such purchases will be
limited to temporary investments in shares of unaffiliated investment companies
and Wells Fargo Bank will waive its advisory fees for that portion of the
Master Portfolios' assets so invested, except when such purchase is part of a
plan of merger, consolidation, reorganization or acquisition.

4
<PAGE> 43
The Trust may make commitments more restrictive than the restrictions
listed above, so as to permit the sale of shares of a feeder fund that invests
in the Master Portfolio in certain states. Should the Trust determine that a
commitment is no longer in the best interest of the Master Portfolio and its
shareholders, the Trust reserves the right to revoke the commitment by
terminating the sale of such Master Portfolio's shares in the state involved.

B. CAPITAL APPRECIATION MASTER PORTFOLIO

As discussed in Part A, the investment objective of the Capital
Appreciation Master Portfolio is to provide investors with an above- average
level of capital appreciation. It seeks to achieve this objective through the
active management of a broadly diversified portfolio of equity securities of
companies expected to experience strong growth in revenues, earnings and
assets.

FUNDAMENTAL INVESTMENT POLICIES. The Capital Appreciation Master
Portfolio is subject to the following investment restrictions, all of which are
fundamental policies.

The Capital Appreciation Master Portfolio may not:

(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;

(5) make investments for the purpose of exercising control or
management;

(6) issue senior securities except that the Master Portfolio may
borrow from banks up to 10% of the current value of its net assets for
temporary purposes only in order to meet redemptions, and these borrowings may
be secured by the pledge of up to 10% of the current value of its net assets
(but investments may not be purchased while any such outstanding borrowings
exceed 5% of its net assets);

(7) make loans of portfolio securities having a value that exceeds
50% of the current value of its total assets, provided that, this restriction
does not apply to the purchase of fixed time deposits, repurchase agreements,
commercial paper and other types of debt instruments commonly sold in a public
or private offering; nor

(8) purchase securities of any issuer (except securities issued by
the U.S. Government, its agencies or instrumentalities ) if, as a result, with
respect to 75% of its total assets, more than 5% of the value of its total
assets would be invested in the securities of any one issuer or, with respect
to 100% of its total assets the Master Portfolio's ownership would be more than
10% of the outstanding voting securities of such issuer. With respect to
fundamental investment policy (7), the Master Portfolio does not intend to loan
its portfolio securities during the coming year.

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NON-FUNDAMENTAL INVESTMENT POLICIES. The Capital Appreciation Master
Portfolio is subject to the following non- fundamental investment policies.
These restrictions may be changed by a vote of a majority of the Trustees of
the Trust at any time.

The Capital Appreciation Master Portfolio may not:

(1) purchase or retain securities of any issuer if the officers or
Trustees of the Master Portfolio or its investment adviser owning beneficially
more than one-half of one percent (0.5%) of the securities of the issuer
together owned beneficially more than 5% of such securities;

(2) purchase or sell real estate limited partnership interests;

(3) write, purchase or sell puts, calls or options or any
combination thereof, except to the extent described in Part A and except that
the Master Portfolio may purchase securities with put rights in order to
maintain liquidity;

(4) invest in securities of issuers who, with their predecessors,
have been in existence less than three years, unless the securities are fully
guaranteed or insured by the U.S. Government if, by reason thereof, the value
of its aggregate investment in such securities will exceed 5% of its total
assets;

(5) purchase securities of any issuer (except securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if, as a
result, more than 5% of the value of the Master Portfolio's total assets would
be invested in the securities of any one issuer; nor

(6) invest more than 15% of the Master Portfolio's net assets in
illiquid securities. For this purpose, illiquid securities include, among
others, (a) securities that are illiquid by virtue of the absence of a readily
available market or legal or contractual restrictions on resale, (b) fixed time
deposits that are subject to withdrawal penalties and that have maturities of
more than seven days, and (c) repurchase agreements not terminable within seven
days.

(7) In addition, as a matter of non-fundamental investment policy,
the Master Portfolio may invest in shares of other open-end, management
investment companies, subject to the limitations of Section 12(d)(1) of the
Act, provided that any such purchases will be limited to temporary investments
in shares of unaffiliated investment companies and the investment adviser will
waive its advisory fees for that portion of the Master Portfolio's assets so
invested, except when such purchase is part of a plan of merger, consolidation,
reorganization or acquisition. The Master Portfolio does not intend to invest
more than 5% of its net assets in such securities during the coming year.

As a matter of non-fundamental policy, the Master Portfolio may invest
up to 25% of their respective net assets in the securities of foreign
governmental issuers that are denominated in and pay interest in U.S. dollars.

C. CASH INVESTMENT TRUST MASTER PORTFOLIO

As described in Part A, the investment objective of the CIT Master
Portfolio is to provide its investors with a high level of current income,
while preserving capital and liquidity. The CIT Master Portfolio seeks to
achieve its investment objective by investing in high-quality, short-term
instruments. There can, of course, be no assurance that the CIT Master
Portfolio will achieve its investment objective. The investment objective of
the CIT Master Portfolio may not be changed without the approval of the
investors in the Master Portfolio.

FUNDAMENTAL INVESTMENT POLICIES. The CIT Master Portfolio is subject
to the following investment restrictions, all of which are fundamental
policies.

The CIT Master Portfolio may not:

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<PAGE> 45
(1) purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after the purchase and
as a result thereof, the value of the CIT Master Portfolio's investments in
that industry would exceed 25% of the current value of its respective total
assets, provided that there is no limitation with respect to investments in (i)
obligations of the United States Government, its agencies or instrumentalities,
and (ii) obligations of domestic banks (for purposes of this restriction,
domestic bank obligations do not include obligations of U.S. branches of
foreign banks or obligations of foreign branches of U.S. banks);

(2) purchase or sell real estate or real estate limited
partnership interests (other than money market securities secured by real
estate or interests therein or securities issued by companies that invest in
real estate or interests therein), commodities or commodity contracts;

(3) purchase securities on margin (except for short-term credits
necessary for the clearance of transactions) or make short sales of securities;

(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.

NON-FUNDAMENTAL INVESTMENT POLICIES. The CIT Master Portfolio is
subject to the following non-fundamental policies.

The CIT Master Portfolio may not:

(1) purchase or retain securities of any issuer if the officers,
or trustees of the Trust or the CIT Master Portfolio's investment adviser
owning beneficially more than one-half of one percent (0.5%) of the securities
of the issuer together owned beneficially more than 5% of such securities;

(2) purchase interests, leases, or limited partnership interests
in oil, gas, or other mineral exploration or development programs;

(3) invest in securities of issuers who, with their predecessors,
have been in existence less than three years, unless the securities are fully
guaranteed or insured by the U.S. Government, a state, commonwealth,
possession, territory, the District of Columbia or by an entity in existence at
least three years, or the securities are backed by the

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<PAGE> 46
assets and revenues of any of the foregoing if, by reason thereof, the value of
the CIT Master Portfolio's aggregate investments in such securities will exceed
5% of its total assets; or

(4) invest more than 10% of the current value of its net assets in
repurchase agreements maturing in more than seven days, fixed time deposits
that are subject to withdrawal penalties and that have maturities of more than
seven days, restricted securities (which are securities that must be registered
under the Securities Act of 1933 before they may be offered or sold to the
public), and illiquid securities.

As provided in Rule 2a-7 under the Act, the CIT Master Portfolio may
only purchase "Eligible Securities" (as defined in Rule 2a-7) and may purchase
such securities only if, immediately after such purchase, the CIT Master
Portfolio would have no more than 5% of its total assets in "First Tier
Securities" (as defined in Rule 2a-7) of any one issuer, excluding government
securities and except as otherwise permitted for temporary purposes and for
certain guarantees and unconditional puts; the CIT Master Portfolio would own
no more than 10% of the voting securities of any one issuer; the CIT Master
Portfolio would have no more than 5% of its total assets in "Second Tier
Securities" (as defined in Rule 2a-7); and the CIT Master Portfolio would have
no more than the greater of $1 million or 1% of its total assets in Second Tier
Securities of any one issuer.

C. SHORT-TERM MUNICIPAL INCOME MASTER PORTFOLIO AND SHORT-TERM
GOVERNMENT-CORPORATE INCOME MASTER PORTFOLIO

FUNDAMENTAL INVESTMENT POLICIES. As described in Part A, the
investment objective of the Government-Corporate Income Master Portfolio is to
provide investors with current income while managing principal volatility. The
Master Portfolio seeks to achieve its investment objective by investing in
obligations issued by the U.S. Government, its agencies and instrumentalities
and investment-grade corporate obligations.

As described in Part A, the investment objective of the Municipal
Income Master Portfolio is to provide investors with a high level of income
exempt from federal income tax, while managing principal volatility. The
Municipal Income Master Portfolio seeks to achieve its investment objective by
investing (under normal market conditions) substantially all of the assets of
the Master Portfolio in the following types of municipal obligations that pay
interest which is exempt from federal income tax: bonds, notes and commercial
paper issued by or on behalf of states, territories, and possessions of the
United States, the District of Columbia, and their political subdivisions,
agencies instrumentalities and authorities, the interest on which, in the
opinion of counsel to the issuer or bond counsel is exempt from federal income
tax.

The Municipal Income Master Portfolio and the Government- Corporate
Income Master Portfolio are subject to the following investment restrictions,
all of which are fundamental policies. The investment restrictions of each such
Master Portfolio cannot be changed without approval by the holders of a
majority (as defined in the 1940 Act) of the outstanding voting securities of
such Master Portfolio, as the case may be.

The Municipal Income Master Portfolio and the Government-Corporate
Income Master Portfolio may not:

(1) purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after the purchase and
as a result thereof, the value of such Master Portfolio's investments in that
industry would exceed 25% of the current value of the Master Portfolio's total
assets, provided that there is no limitation with respect to: (1) investments
in securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities; and (2) municipal securities (for the purpose of this
restriction, private activity bonds and notes shall not be deemed municipal
securities if the payment of principal and interest on such bonds or notes is
the ultimate responsibility of non-governmental issuers); and provided further
that there is no limitation with respect to investments by the Master Portfolio
in securities issued by registered investment companies;

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<PAGE> 47
(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;

(5) make investments for the purpose of exercising control or
management;

(6) purchase puts, calls, straddles, spreads, or any combination
thereof, except that each Master Portfolio may purchase securities with put
rights in order to maintain liquidity;

(7) issue senior securities, except that each Master Portfolio may
borrow from banks up to 10% of the current value of its net assets for
temporary purposes only in order to meet redemptions, and these borrowings may
be secured by the pledge of up to 10% of the current value of its net assets
(but investments may not be purchased by a Master Portfolio while any such
outstanding borrowing exceeds 5% of its net assets);

(8) purchase securities of any issuer (except securities issued or
guaranteed by the U.S. Government, its agencies and instrumentalities) if, as a
result, with respect to 75% of the total assets, more than 5% of the value of
each Master Portfolio's total assets would be invested in the securities of any
one issuer or such Master Portfolio would own more than 10% of the outstanding
voting securities of such issuer; or

(9) lend their portfolio securities having a value that exceeds
50% of the current value of their total assets, provided that, for purposes of
this restriction, loans will not include the purchase of fixed time deposits,
repurchase agreements, commercial paper and other types of debt instruments
commonly sold in a public or private offering. The Master Portfolios do not
intend to make loans of their portfolio securities during the coming year.

NON-FUNDAMENTAL INVESTMENT POLICIES. The Municipal Income Master
Portfolio and the Government-Corporate Income Master Portfolio are subject to
the following non-fundamental policies. These restrictions may be changed by
vote of a majority of the Trustees of the Trust at any time.

The Municipal Income Master Portfolio and the Government-Corporate
Income Master Portfolio may not:

(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;

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<PAGE> 48
(5) invest more than 15% of the current value of their net assets
in repurchase agreements maturing in more than seven days, fixed time deposits
that are subject to withdrawal penalties and that have maturities of more than
seven days and other illiquid securities;

(6) purchase, hold or deal in real estate limited partnerships; or

(7) engage in any short sales other than short sales against the
box.

D. SMALL CAP MASTER PORTFOLIO

The investment objective of the Small Cap Master Portfolio is as
described in Part A. The investment restrictions and additional permitted
investment activities applicable to such Master Portfolio are as described
below.

FUNDAMENTAL INVESTMENT POLICIES. The Small Cap Master Portfolio has
adopted the following investment restrictions, all of which are fundamental
policies.

The Small Cap Master Portfolio may not:

(1) purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after the purchase and
as a result thereof, the value of the Master Portfolio's investments in that
industry would equal or exceed 25% of the current value of the Master
Portfolio's total assets, provided that there is no limitation with respect to
investments in securities issued or guaranteed by the United States Government,
its agencies or instrumentalities; and provided further, that the Master
Portfolio may invest all its assets in a diversified, open-end management
investment company, or a series thereof, with substantially the same investment
objective, policies and restrictions as the Master Portfolio, without regard to
the limitations set forth in this paragraph (1);

(2) purchase or sell real estate (other than securities secured by
real estate or interests therein or securities issued by companies that invest
in real estate or interests therein, including mortgage passthrough
securities), commodities or commodity contracts or interests in oil, gas, or
other mineral exploration or development programs;

(3) purchase securities on margin (except for short-term credits
necessary for the clearance of transactions) or make short sales of securities;

(4) underwrite securities of other issuers, except to the extent
that the purchase of permitted investments directly from the issuer thereof or
from an underwriter for an issuer and the later disposition of such securities
in accordance with the Master Portfolio's investment program may be deemed to
be an underwriting; and provided further, that the purchase by the Master
Portfolio of securities issued by a diversified, open-end management investment
company, or a series thereof, with substantially the same investment objective,
policies and restrictions as the Master Portfolio shall not constitute an
underwriting for purposes of this paragraph (4);

(5) make investments for the purpose of exercising control or
management; provided that the Master Portfolio may invest all its assets in a
diversified, open-end management company, or a series thereof, with
substantially the same investment objective, policies and restrictions as the
Master Portfolio, without regard to the limitations set forth in this paragraph
(5);

(6) issue senior securities, except that the Master Portfolio may
borrow from banks up to 10% of the current value of its net assets for
temporary purposes only in order to meet redemptions, and these borrowings may
be secured by the pledge of up to 10% of the current value of its net assets
(but investments may not be purchased while any such outstanding borrowings
exceed 5% of its net assets);

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<PAGE> 49
(7) make loans of portfolio securities having a value that exceeds
33 1/3% of the current value of its total assets, provided that, this
restriction does not apply to the purchase of fixed time deposits, repurchase
agreements, commercial paper and other types of debt instruments commonly sold
in a public or private offering; nor

(8) purchase securities of any issuer (except securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if, as a
result, with respect to 75% of its total assets, more than 5% of the value of
its total assets would be invested in the securities of any one issuer or, with
respect to 100% of its total assets, the Master Portfolio's ownership would be
more than 10% of the outstanding voting securities of such issuer, provided
that the Master Portfolio may invest all its assets in a diversified, open-end
management investment company, or a series thereof, with substantially the same
investment objective, policies and restrictions as such Master Portfolio,
without regard to the limitations set forth in this paragraph (8).

With respect to fundamental investment policy (7), the Master
Portfolio does not intend to loan its portfolio securities during the coming
year.

NON-FUNDAMENTAL INVESTMENT POLICIES. The Small Cap Master Portfolio is
subject to the following investment restrictions, all of which are
non-fundamental policies. These restrictions may be changed by a vote of a
majority of the Trustees of MIT at any time.

The Small Cap Master Portfolio may not:

(1) purchase or retain securities of any issuer if the officers or
trustees of the Master Portfolio or its Investment Adviser owning beneficially
more than one-half of one percent (0.5%) of the securities of the issuer
together own beneficially more than 5% of such securities;

(2) purchase or sell real estate limited partnership interests;

(3) invest in securities of issuers who, with their predecessors,
have been in existence less than three years, unless the securities are fully
guaranteed or insured by the U.S. Government if, by reason thereof, the value
of its aggregate investment in such securities will exceed 5% of its total
assets;

(4) purchase securities of any issuer (except securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if, as a
result, more than 5% of the value of the Master Portfolio's total assets would
be invested in the securities of any one issuer;

(5) invest more than 15% of the Master Portfolio's net assets in
illiquid securities. For this purpose, illiquid securities include, among
others, (a) securities that are illiquid by virtue of the absence of a readily
available market or legal or contractual restrictions on resale, (b) fixed time
deposits that are subject to withdrawal penalties and that have maturities of
more than seven days, and (c) repurchase agreements not terminable within seven
days;

(6) In addition, as a matter of non-fundamental policy, the Master
Portfolio may invest in shares of other open-end, management investment
companies, subject to the limitations of Section 12(d)(1) of the Act, provided
that any such purchases will be limited to temporary investments in shares of
unaffiliated investment companies and the Investment Adviser will waive its
advisory fees for that portion of the Master Portfolio's assets so invested,
except when such purchase is part of a plan of merger, consolidation,
reorganization or acquisition; nor

(7) invest more than 25% of their respective net assets in
securities of foreign governmental and foreign private issues that are
denominated in and pay interest in U.S. dollars.

Notwithstanding any other investment policy or limitation (whether or
not fundamental), the Master Portfolio may invest all of its assets in the
securities of a single open-end management investment company with
substantially the

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same fundamental investment objective, policies and limitations as the Master
Portfolio. A decision to so invest all of its assets may, depending on the
circumstances applicable at the time, require approval of shareholders.

E. TAX-FREE MONEY MARKET MASTER PORTFOLIO

As described in Part A, the investment objective of the Tax-Free Money
Market Master Portfolio is to provide investors with a high level of income
exempt from federal income tax, while preserving capital and liquidity. The
Master Portfolio seeks to achieve its investment objective by investing in
high-quality, short-term U.S. dollar denominated money market instruments,
primarily municipal obligations, with remaining maturities not exceeding 13
months. There can, of course, be no assurance that the Tax-Free Money Market
Master Portfolio will achieve its investment objective. The investment
objective of the Tax-Free Money Market Master Portfolio may not be changed
without the approval of the investors in such Master Portfolio.

FUNDAMENTAL INVESTMENT POLICIES. 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;

(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;

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<PAGE> 51
(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.

NON-FUNDAMENTAL INVESTMENT POLICIES. The Tax-Free Money Market Master
Portfolio is subject to the following non-fundamental policies.

The Tax-Free Money Market Master Portfolio may not:

(1) purchase or retain securities of any issuer if the officers or
Trustees of the Trust or the investment adviser owning beneficially more than
one-half of one percent (0.5%) of the securities of the issuer together owned
beneficially more than 5% of such securities;

(2) purchase interests, leases, or limited partnership interests
in oil, gas, or other mineral exploration or development programs;

(3) purchase securities of issuers who, with their predecessors,
have been in existence less than three years, unless the securities are fully
guaranteed or insured by the U.S. Government, a state, commonwealth,
possession, territory, the District of Columbia or by an entity in existence at
least three years, or the securities are backed by the assets and revenues of
any of the foregoing if, by reason thereof, the value of its aggregate
investments in such securities will exceed 5% of its total assets; and

(4) purchase securities of unseasoned issuers, including their
predecessors, which have been in operation for less than three years, and
equity securities of issuers which are not readily marketable if by reason
thereof the value of the Master Portfolio's aggregate investment in such
classes of securities will exceed 5% of its total assets.

The Master Portfolio may invest in shares of other open-end,
management investment companies, subject to the limitations of Section 12(d)(1)
of the 1940 Act, provided that any such purchases will be limited to temporary
investments in shares of unaffiliated investment companies. However, the
investment adviser will waive its advisory fees for that portion of the Master
Portfolio's assets so invested, except when such purchase is part of a plan of
merger, consolidation, reorganization or acquisition. In addition, these
unaffiliated investment companies must have a

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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

The following information supplements and should be read in conjunction with
the sections in Part A entitled "Investment Objectives and Policies" and
"Additional Information About Permitted Investment Activities."

Unrated and Downgraded Investments. The Asset Allocation, CIT,
Corporate Stock, Tax-Free Money Market and U.S. Government Allocation Master
Portfolios may purchase instruments that are not rated if, in the opinion of
the investment adviser, such obligations are of comparable quality to other
rated investments that are permitted to be purchased by the Master Portfolio.
After purchase a security may cease to be rated or its rating may be reduced
below the minimum required for purchase by the Master Portfolio. Neither event
requires an immediate sale of such security when a security ceases to be rated,
provided that the Board of Trustees determines that such security presents
minimal credit risks and, provided further that when a security rating is
downgraded below the eligible quality for investment or no longer presents
minimal credit risks, the board finds that disposal of the portfolio security
would not be in the best interests of the Master Portfolio. To the extent the
ratings given by Moody's or S&P may change as a result of changes in such
organizations or their rating systems, the Master Portfolio will attempt to use
comparable ratings as standards for investments in accordance with the
investment policies contained in its Part A and in this Part B. The ratings of
Moody's and S&P are more fully described in the Appendix to this Part B.

When-Issued Securities. The Municipal Income Master Portfolio and the
Government-Corporate Income Master Portfolio may purchase securities on a
when-issued basis, in which case, delivery and payment normally take place
within 120 days after the date of the commitment to purchase. Certain of the
securities in which the U.S. Government Allocation Master Portfolio and the
Asset Allocation Master Portfolio may invest also will be purchased on a
when-issued basis, in which case delivery and payment normally take place
within 45 days after the date of the commitment to purchase. The
Government-Corporate Income Master Portfolio does not intend to invest more
than 5% of its net assets in when-issued securities during the coming year.

Each such Master Portfolio will segregate cash, U.S. Government
obligations or other high-quality debt instruments in an amount at least equal
in value to the Master Portfolio's commitments to purchase when-issued
securities. If the value of these assets declines, the Master Portfolio will
segregate additional liquid assets on a daily basis so that the value of the
segregated assets is equal to the amount of such commitments.

Municipal Bonds. As discussed in Part A, the two principal
classifications of municipal bonds in which the Tax- Free Money Market Master
Portfolio and the Municipal Income Master Portfolio may invest are "general
obligation" and "revenue" bonds. Municipal bonds are debt obligations issued to
obtain funds for various public purposes, including the construction of a wide
range of public facilities such as bridges, highways, housing, hospitals, mass
transportation, schools, streets and water and sewer works. Other public
purposes for which municipal bonds may be issued include the refunding of
outstanding obligations and obtaining funds for general operating expenses or
to loan

14
<PAGE> 53
to other public institutions and facilities. Industrial development bonds are a
specific type of revenue bond backed by the credit and security of a private
user. Certain types of industrial development bonds are issued by or on behalf
of public authorities to obtain funds to provide privately-operated housing
facilities, sports facilities, convention or trade show facilities, airport,
mass transit, port or parking facilities, air or water pollution control
facilities and certain local facilities for water supply, gas, electricity, or
sewage or solid waste disposal. The Tax-Free Money Market Master Portfolio may
not invest more than 25% of its assets in industrial development bonds.
Assessment bonds, wherein a specially created district or project area levies a
tax (generally on its taxable property) to pay for an improvement or project
may be considered a variant of either category. There are, of course, other
variations in the types of municipal bonds, both within a particular
classification and between classifications, depending on numerous factors.
Subject to their investment objectives and policies, the Tax-Free Money Market
Master Portfolio and the Municipal Income Master Portfolio are not limited with
respect to which category of municipal bonds they may acquire.

Municipal Notes. The Municipal Income Master Portfolio and the
Tax-Free Money Market Master Portfolio may invest in municipal notes. Municipal
notes include, but are not limited to, tax anticipation notes ("TANs"), bond
anticipation notes ("BANs"), revenue anticipation notes ("RANs") and
construction loan notes. Notes sold as interim financing in anticipation of
collection of taxes, a bond sale or receipt of other revenues are usually
general obligations of the issuer.

TANs. An uncertainty in a municipal issuer's capacity to raise taxes
as a result of a decline in its tax base or a rise in delinquencies could
adversely affect the issuer's ability to meet its obligations on outstanding
TANs. Furthermore, some municipal issuers mix various tax proceeds into a
general fund that is used to meet obligations other than those of the
outstanding TANs. Use of such a general fund to meet various obligations could
affect the likelihood of making payments on TANs.

BANs. The ability of a municipal issuer to meet its obligations on its
BANs is primarily dependent on the issuer's adequate access to the longer term
municipal bond market and the likelihood that the proceeds of such bond sales
will be used to pay the principal of, and interest on, BANs.

RANs. A decline in the receipt of certain revenues, such as
anticipated revenues from another level of government, could adversely affect
an issuer's ability to meet its obligations on outstanding RANs. In addition,
the possibility that the revenues would, when received, be used to meet other
obligations could affect the ability of the issuer to pay the principal of, and
interest on, RANs.

The values of outstanding municipal securities will vary as a result
of changing market evaluations of the ability of the issuers of such securities
to meet interest and principal payments (i.e., credit risk). Such values will
also change in response to changes in the interest rates payable on new issues
of municipal securities (i.e., market risk). Should such interest rates rise,
the value of outstanding securities, including those held in the portfolio of
the Municipal Income Master Portfolio, will decline and (if purchased at par
value) they would sell at a discount. If interest rates fall, the values of
outstanding securities will generally increase and (if purchased at par value)
they would sell at a premium. Changes in the value of municipal securities held
by the Municipal Income Master Portfolio and the Tax-Free Money Market Master
Portfolio arising from these or other factors will cause changes in the net
asset value per share of such Master Portfolios.

Letters of Credit. Certain of the debt obligations (including
municipal securities, certificates of participation, commercial paper and other
short-term obligations) which the Asset Allocation, Corporate Stock, U.S.
Government Allocation and Tax Free Money Market Master Portfolios may purchase
may be backed by an unconditional and irrevocable letter of credit of a bank,
savings and loan association or insurance company which assumes the obligation
for payment of principal and interest in the event of default by the issuer.
Only banks, savings and loan associations and insurance companies which, in the
opinion of Wells Fargo Bank, are of comparable quality to issuers of other
permitted investments of such Master Portfolios may be used for letter of
credit-backed investments, provided that the Trust's Board approves or ratifies
such investments. For purposes of the Tax Free Money Market Master Portfolio's

15
<PAGE> 54
fundamental policy on concentrations, letters of credit issued by domestic bank
issuers will be considered to be obligations of domestic banks excluded from
the 25% limitation regarding industry concentration (see fundamental investment
restriction number (1) above).

Loans of Portfolio Securities. Each of the Asset Allocation,
Corporate Stock, U.S. Government Allocation and Tax Free Money Market Master
Portfolios may lend securities from their portfolios to brokers, dealers and
financial institutions (but not individuals) if cash, U.S. Government
obligations or other high-quality debt instruments equal to at least 100% of
the current market value of the securities loan (including accrued interest
thereon) plus the interest payable to such Master Portfolio with respect to the
loan is maintained with the Master Portfolio. In determining whether to lend a
security to a particular broker, dealer or financial institution, Wells Fargo
Bank will consider all relevant facts and circumstances, including the
creditworthiness of the broker, dealer, or financial institution. Any loans of
portfolio securities will be fully collateralized based on values that are
marked to market daily. The Master Portfolios will not enter into any portfolio
security lending arrangement having a duration of longer than one year. Any
securities that such Master Portfolio may receive as collateral will not become
part of the Master Portfolio's portfolio at the time of the loan and, in the
event of a default by the borrower, the Master Portfolio will, if permitted by
law, dispose of such collateral except for such part thereof that is a security
in which the Master Portfolio is permitted to invest. During the time
securities are on loan, the borrower will pay the Master Portfolio any accrued
income on those securities, and the Master Portfolio may invest the cash
collateral and earn additional income or receive an agreed-upon fee from a
borrower that has delivered cash-equivalent collateral. None of the Master
Portfolios will lend securities having a value that exceeds 33 1/3% of the
current value of its total assets. Loans of securities by any of the Master
Portfolios will be subject to termination at the Master Portfolio's or the
borrower's option. The Master Portfolios may pay reasonable administrative and
custodial fees in connection with a securities loan and may pay a negotiated
portion of the interest or fee earned with respect to the collateral to the
borrower or the placing broker. Borrowers and placing brokers may not be
affiliated, directly or indirectly, with the Company, the Trust, Wells Fargo
Bank, or Stephens.

ADDITIONAL PERMITTED INVESTMENT ACTIVITIES - PERTAINING ONLY TO THE CORPORATE
STOCK, ASSET ALLOCATION AND U.S. GOVERNMENT ALLOCATION FUNDS

Asset Allocation Model. A key component of the Asset Allocation Model
is a set of assumptions concerning expected risk and return and investor
attitudes toward risk which are incorporated into the asset allocation
decision. The principal inputs of financial data to the Asset Allocation Model
currently are (i) consensus estimates of the earnings, dividends and payout
ratios on a broad cross-section of common stocks as reported by independent
financial reporting services which survey a broad cross-section of Wall Street
analysts, (ii) the estimated current yield to maturity on new long-term
corporate bonds rated "AA" by S&P, (iii) the present yield on money market
instruments, (iv) the historical statistical standard deviation in investment
return for each class of asset, and (v) the historical statistical correlation
of investment returns among the various asset classes in which the Asset
Allocation Master Portfolio invests. Using these data, the Asset Allocation
Model is run daily to determine the recommended asset allocation. The model's
recommendations are presently made in 10% increments.

Pass-Through Obligations. The Master Portfolios may invest in
pass-through obligations that are supported by the full faith and credit of the
U.S. Government (such as those issued by the Government National Mortgage
Association) or those that are guaranteed by an agency or instrumentality of
the U.S. Government or government-sponsored enterprise (such as the Federal
National Mortgage Association or the Federal Home Loan Mortgage Corporation) or
bonds collateralized by any of the foregoing.

Futures Contracts and Options Transactions --

Stock Index Options. The Master Portfolios may purchase and write
(i.e., sell) put and call options on stock indices as a substitute for
comparable market positions in the underlying securities. Options on stock
indices are similar to options on stock except that (a) the expiration cycles
of stock index options are monthly, while those of stock options

16
<PAGE> 55
are currently quarterly, and (b) the delivery requirements are different.
Instead of giving the right to take or make delivery of stock at a specified
price, an option on a stock index gives the holder the right to receive a cash
"exercise settlement amount" equal to (i) the amount , if any, by which the
fixed exercise price of the option exceeds, in the case of a put, or is less
than, in the case of a call, the closing value of the underlying index on the
date of exercise, multiplied by (ii) a fixed "index multiplier." Receipt of
this cash amount depends upon the closing level of the stock index upon which
the option is based being greater than, in the case of a call, or less than, in
the case of a put, the exercise price of the option. The amount of cash
received is equal to such difference between the closing price of the index and
the exercise price of the option expressed in dollars multiplied by a specified
multiplier. The writer of the option is obligated, in return for the premium
received, to make delivery of this amount. The writer may offset a position in
stock index options prior to expiration by entering into a closing transaction
on an exchange, or the writer may let the option expire unexercised.

Futures Contracts and Options on Futures Contracts. Each Master
Portfolio may enter into futures contracts and may purchase and write options
thereon. Upon the exercise of an option on a futures contract, the writer of
the option delivers to the holder of the option the futures position and the
accumulated balance in the writer's futures margin account, which represents
the amount by which the market price of the futures contract exceeds, in the
case of a call, or is less than, in the case of a put, the exercise price of
the option on the futures contract. The potential loss related to the purchase
of options on futures contracts is limited to the premium paid for the option
(plus transaction costs). Because the value of the option is fixed at the time
of sale, there are no daily cash payments to reflect changes in the value of
the underlying contract; however, the value of the option may change daily, and
that change would be reflected in the net asset value of the relevant Master
Portfolio.

Foreign Currency Transactions. If a Master Portfolio enters into a
foreign currency transaction or forward contract, such Master Portfolio
deposits, if required by applicable regulations, with the Trust's custodian
cash or highgrade debt securities in a segregated account of the Master
Portfolio in an amount at least equal to the value of the Master Portfolio's
total assets committed to the consummation of the forward contract. If the
value of the securities placed in the segregated account declines, additional
cash or securities are placed in the account so that the value of the account
equals the amount of the Master Portfolio's commitment with respect to the
contract.

At or before the maturity of a forward contract, a Master Portfolio
either may sell a portfolio security and make delivery of the currency, or may
retain the security and offset its contractual obligation to deliver the
currency by purchasing a second contract pursuant to which such Master
Portfolio obtains, on the same maturity date, the same amount of the currency
which it is obligated to deliver. If the Master Portfolio retains the portfolio
security and engages in an offsetting transaction, such Master Portfolio, at
the time of execution of the offsetting transaction, incurs a gain or a loss to
the extent that movement has occurred in forward contract prices. Should
forward prices decline during the period between the Master Portfolio's
entering into a forward contract for the sale of a currency and the date it
enters into an offsetting contract for the purchase of the currency, the Master
Portfolio will realize a gain to the extent the price of the currency it has
agreed to sell exceeds the price of the currency it has agreed to purchase.
Should forward prices increase, the Master Portfolio will suffer a loss to the
extent the price of the currency it has agreed to purchase exceeds the price of
the currency it has agreed to sell.

The cost to a Master Portfolio of engaging in currency transactions
varies with factors such as the currency involved, the length of the contract
period and the market conditions then prevailing. Because transactions in
currency exchange usually are conducted on a principal basis, no fees or
commissions are involved. Wells Fargo Bank (or BGFA, as applicable) considers
on an ongoing basis the creditworthiness of the institutions with which a
Master Portfolio enters into foreign currency transactions. The use of forward
currency exchange contracts does not eliminate fluctuations in the underlying
prices of the securities, but it does establish a rate of exchange that can be
achieved in the future. If a devaluation generally is anticipated, the Master
Portfolio may not be able to contract to sell the currency at a price above the
devaluation level it anticipates.

17
<PAGE> 56
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.

The use of derivatives by the Master Portfolios also is subject to
broadly applicable investment policies. For example, a Master Portfolio may not
invest more than a specified percentage of its assets in "illiquid securities,"
including those derivatives that do not have active secondary markets. Nor may
a Master Portfolio use certain derivatives without establishing adequate
"cover" in compliance with SEC rules limiting the use of leverage.

ITEM 14. MANAGEMENT OF THE TRUST

The following information supplements and should be read in
conjunction with the Section in Part A entitled "Management of the Trust".

Trustees and Officers. The principal occupations during the past five
years of the Trustees and principal executive officer of the Trust are listed
below. The address of each, unless otherwise indicated, is 111 Center Street,
Little Rock, Arkansas 72201. Trustees deemed to be "interested persons" of the
Trust for purposes of the Investment Company Act of 1940 (the "1940 Act") are
indicated by an asterisk.

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
NAME, ADDRESS AND AGE POSITION DURING PAST 5 YEARS
<S> <C> <C>
Jack S. Euphrat, 74 Trustee Private Investor.
415 Walsh Road
Atherton, CA 94027

R. Greg Feltus, 45 Trustee Senior Vice President of Stephens; Manager
Chairman and President of Financial Services Group; President of
Stephens Insurance Services Inc.; Senior
Vice President of Stephens Sports
Management Inc.; and President of Investors
Brokerage Insurance Inc.

Thomas S. Goho, 54 Trustee T. B. Rose Faculty Fellow-Business, Wake
321 Beechcliff Court Forest University, Calloway School of
Winston-Salem, NC 27104 Business and Accountancy; Associate
Professor of Finance of the School of
Business and Accounting at Wake Forest
University since 1983.

</TABLE>

18
<PAGE> 57

<TABLE>
<S> <C> <C>
Joseph N. Hankin, 55 Trustee President, Westchester Community College
75 Grasslands Road since 1971; President of Hartford Junior
Valhalla, N.Y. 10595 College from 1967 to 1971; Adjunct
Professor of Columbia University Teachers
College since 1976.

*W. Rodney Hughes, 70 Trustee Private Investor
31 Dellwood Court
San Rafael, CA 94901

Robert M. Joses, 78 Trustee Private Investor
47 Dowitcher Way
San Rafael, CA 94901

*J. Tucker Morse, 52 Trustee Private Investor; Real Estate Developer;
10 Legrae Street Chairman of Renaissance Properties Ltd.;
Charleston, SC 29401 President of Morse Investment Corporation;
and Co-Managing Partner of Main Street
Ventures

Richard H. Blank, Jr., 40 Chief Operating Officer, Associate of Financial Services Group of
Secretary and Treasurer Stephens; Director of Stephens Sports
Management Inc.; and Director of Capo Inc.
</TABLE>

19
<PAGE> 58
COMPENSATION TABLE

<TABLE>
<CAPTION>
Year Ended December 31, 1995 Period Ended September 30, 1996
---------------------------- -------------------------------

Aggregate Total Compensation Aggregate Total Compensation
Compensation from Registrant Compensation from Registrant
Name and Position from Registrant and Fund Complex from Registrant and Fund Complex
----------------- --------------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
Jack S. Euphrat $0 $39,750 $9,750 $29,250
Trustee

*R. Greg Feltus 0 0 $-0- $-0-
Trustee

Thomas S. Goho 0 39,750 $9,750 $29,250
Trustee

Joseph N. Hankin N/A N/A $-0- $-0-
Trustee

*Zoe Ann Hines 0 0 $-0- $-0-
Trustee
(resigned as of Septemner
6, 1996)

*W. Rodney Hughes 0 37,000 $8,250 $24,750
Trustee

Robert M. Joses 0 39,000 $9,750 $29,250
Trustee

*J. Tucker Morse 0 33,250 $8,250 $24,750
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. The Trust,
Overland Express Funds, Inc., Stagecoach Funds, Inc., Stagecoach Trust and Life
& Annuity Trust are considered to be members of the same fund complex as such
term is defined in Form N-1A under the 1940 Act (the "Wells Fargo Fund
Complex"). MasterWorks Funds Inc., Master Investment Portfolio, and Managed
Series Investment Trust together form a separate fund complex (the "BGFA Fund
Complex"). Each of the Trustees and Officers of the Company serves in the
identical capacity as directors and officers or as trustees and/or officers of
each registered open-end management investment company in both the Wells Fargo
and BGFA Fund Complexes, except for Joseph N. Hankin, who only serves the
aforementioned members of the Wells Fargo Fund Complex, and Zoe Ann Hines who,
after September 6, 1996, only serves the aforementioned members of the BGFA
Fund Complex. The Trustees are compensated 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 retirement
benefits or deferred compensation from the Trust or any other member of each
fund complex.

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<PAGE> 59
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES AS OF JANUARY 3,
1997.

<TABLE>
<CAPTION>
STAGECOACH FUNDS % OWNED OVERLAND EXPRESS % OWNED OF
MASTER PORTFOLIO FEEDER FUND OF MASTER FEEDER FUND MASTER
<S> <C> <C> <C> <C>
Small Cap Small Cap 87.28% Small Cap Strategy 12.72%
Tax-Free Money Market National Tax-Free 15.78% National Tax-Free 84.22%
Money Market Mutual Institutional Money Market
Capital Appreciation Aggressive Growth 21.61% Strategic Growth 78.39%
Asset Allocation Asset Allocation 99.99% N/A N/A
Corporate Stock Corporate Stock 99.99% N/A N/A
U.S. Govt. Allocation U.S. Govt. Allocation 99.99% N/A N/A
Cash Investment Trust N/A N/A Overland Sweep 99.99%
Government-Corporate Income N/A N/A Short-Term Govt.-Corp. Income 99.99%

Municipal Income N/A N/A Short-Term Municipal Income 99.99%
</TABLE>

Each of the above Funds owning at least 25% of the outstanding
interests in a corresponding Master Portfolio of MIT could be considered to be
a "controlling person" of such Master Portfolio for purposes of the 1940 Act.
Overland Express Funds, Inc. and Stagecoach Funds, Inc. are Maryland
corporations and registered open-end management investment companies located at
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") 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

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<PAGE> 60
Master Portfolio, the Sub-Advisory Agreement has an initial two-year term, and
will thereafter be subject to annual approval by (i) the Trust's Board of
Trustees or (ii) vote of a majority (as defined in the 1940 Act) of the
outstanding securities of such Master Portfolio, provided that in either event
the continuance also is approved by a majority of the Trust's Board of Trustees
who are not interested persons (as defined in the 1940 Act) of the Master
Portfolio or BGFA, by vote cast in person at a meeting called for the purpose
of voting on such approval. As to each Master Portfolio, the Sub-Advisory
Agreement is terminable without penalty, on 60 days' written notice, by the
Trust's Board of Trustees or by vote of the holders of a majority of such
Master Portfolio's interests. The Sub-Advisory Agreement terminates
automatically upon an assignment (as defined in the 1940 Act).

BGFA was created by the reorganization of Wells Fargo Nikko Investment
Advisors ("WFNIA"), a former affiliate of Wells Fargo Bank, with and into an
affiliate of Wells Fargo Institutional Trust Company N.A. Subject to the
direction of the Trust's Board of Trustees and the overall supervision and
control of Wells Fargo Bank and the Trust, BGFA is responsible for investing
and reinvesting the Master Portfolios' assets. BGFA has agreed to furnish to
Wells Fargo Bank periodic reports on the investment activity and performance of
the Master Portfolios, and such additional reports and information as Wells
Fargo Bank and the Trust's Board of Trustees and officers shall reasonably
request.

ADVISORY AND SUB-ADVISORY FEES . For the years ended December 31,
1993, 1994 and 1995, the CIT Master Portfolio, the Municipal Income Master
Portfolio and the Government-Corporate Income Master Portfolio paid to Wells
Fargo Bank the advisory fees indicated below and Wells Fargo Bank waived the
indicated amounts:

<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
Fees Fees Fees Fees Fees Fees
Paid Waived Paid Waived Paid Waived
---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C>
Cash Investment Trust $861,200 $0 $1,245,341 $ 81,344 $1,902,572 $ 255,082
Government-Corporate(1) N/A N/A $ 0 $ 131 $ 0 $ 11,944
Municipal Income(1) N/A N/A $ 0 $ 7,879 $ 0 $ 62,512
- ------------
</TABLE>
(1) The Government-Corporate Income Master Portfolio and the Municipal Income
Master Portfolio commenced operations on September 19, 1994 and June 3, 1994,
respectively.

For the period begun January 1, 1996 and ended April 28, 1996, and the
period begun April 29, 1996 and ended September 30, 1996, the Asset Allocation,
Corporate Stock, and U.S. Government Allocation Funds and their corresponding
Master Portfolios paid to Wells Fargo Bank the advisory fees indicated below as
compensation for advisory services to such Funds/Master Portfolios and Wells
Fargo Bank waived the indicated amounts:
<TABLE>
<CAPTION>
Advisory Fees
-------------

Period Begun January 1, 1996 Period Begun April 29, 1996
and Ended April 28, 1996 and Ended September 30, 1998(1)
----------------------------- --------------------------------
Fund/Master Portfolio Fees Paid Fees Waived Fees Paid Fees Waived
- --------------------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
o Asset Allocation $1,353,641 $0 $1,764,081 $0
o Corporate Stock $538,107 $0 $710,941 $0
o U.S. Government Allocation $231,278 $0 $308,379 $0

</TABLE>

- ---------------
(1) From January 1 to April 28, 1996, Wells Fargo Bank was paid advisory
fees by each Fund; after the conversion, from April 29 to September 30, 1996,
Wells Fargo Bank was paid advisory fees by each Master Portfolio. The fee rate
did not change after conversion.

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:

22
<PAGE> 61
<TABLE>
<CAPTION>
1993 1994 1995

Fees Fees Fees Fees Fees Fees
Fund Paid Waived Paid Waived Paid Waived
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Asset Allocation $3,136,581 $0 $3,907,880 $0 $3,814,364 $0

Corporate Stock $1,248,207 $0 $1,259,739 $0 $1,398,439 $0

Strategic Growth $0 $ 68,217 $ 197,689 $9,550 $ 302,821 $0

U.S. Government $1,090,400 $0 $1,034,079 $0 $ 680,049 $0
Allocation
</TABLE>

For the years ended December 31, 1993, 1994 and 1995, Wells Fargo Bank
paid to WFNIA the fees indicated below as compensation for sub-advisory
services to the Funds. For the period begun January 1 and ended September 30,
1996, Wells Fargo Bank paid to BGFA the fees indicated below as compensation
for sub-advisory services to the Funds and Master Portfolios, respectively.

<TABLE>
<CAPTION>
Sub-Advisory Fees Paid to WFNIA Sub-Advisory Fees Paid to BGFA
------------------------------- ------------------------------

Year Ended Year Ended Year Ended Period Ended
Fund/Master Portfolio 1993 1994 1995 September 30, 1996(1)
---------------------- ---- ---- ---- ---------------------
<S> <C> <C> <C> <C>
Asset Allocation $1,586,982 $2,106,980 $2,043,249 $1,715,245
Corporate Stock $ 239,319 $ 241,489 $ 269,787 $ 242,005
U.S. Government
Allocation $ 366,951 $ 353,761 $ 244,478 $ 192,067
</TABLE>

- ------------
(1) From January 1 to April 28, 1996, BGFA was paid sub-advisory fees by
Wells Fargo Bank on behalf of each Fund; after the conversion, from April 29 to
September 30, 1996, BGFA was paid sub-advisory fees by Wells Fargo Bank on
behalf of each Master Portfolio. The fee rate did not change after conversion.

Morrison & Foerster LLP, counsel to the Company and the Trust and
special counsel to Wells Fargo Bank, BGFA, and Barclays Global Investors, N.A.
("BGI"), has advised the Company, the Trust, Wells Fargo Bank, BGFA, BGI and
each Master Portfolio that (i) Wells Fargo Bank should be able to perform the
services contemplated by the Investment Advisory Contracts, the Agency
Agreements and the applicable Custody Agreements without violation of the
Glass-Steagall Act, (ii) BGFA should be able to perform the services
contemplated in the Sub- Advisory Agreement and Part A relating to certain of
the Master Portfolios, and (iii) BGI should be able to perform the services
contemplated in the applicable Custody 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 AND CO-ADMINISTRATOR. MIT has retained Wells Fargo Bank as
Administrator and Stephens as Co-Administrator on behalf of each Master
Portfolio. Under the respective Administration and Co-Administration Agreements
among Wells Fargo Bank, Stephens and MIT, Wells Fargo Bank and Stephens shall
provide as administrative services, among other things: (i) general supervision
of each Master Portfolio's operations, including coordination of the services
performed by the investment adviser, transfer agent, custodian, shareholder
servicing agent(s), independent auditors and legal counsel, regulatory
compliance, including the compilation of information for documents such as
reports to, and filings with, the SEC and state securities commissions, and
preparation of proxy statements and shareholder reports for each Master
Portfolio; and (ii) general supervision relative to the compilation of data
required for the preparation of periodic reports distributed to MIT's Officers
and Trustees. Wells Fargo Bank and Stephens also furnish office space and
certain facilities required for conducting the Master Portfolios' business
together with ordinary clerical and bookkeeping services. Stephens pays the
compensation of MIT's Trustees, Officers and employees who are affiliated with
Stephens. The Administrator and Co-Administrator are not entitled to receive
any fees from the Master Portfolio's so long as they receive fees for similar
services provided to the corresponding feeder funds. The Trust previously
retained Stephens to serve as sole administrator on behalf of each Master
Portfolio.

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<PAGE> 62
The Asset Allocation, Capital Appreciation, Corporate Stock,
Government-Corporate Income, Municipal Income, Small Cap and U.S. Government
Allocation Master Portfolios were not charged administrative fees so long as
Stephens was entitled to administrative fees payable by feeder funds that invest
substantially all of their assets in the applicable Master Portfolio. The CIT
and Tax-Free Money Market Master Portfolios paid Stephens a monthly fee at the
annual rate of 0.025% and 0.05% of their respective average daily net assets as
compensation for providing administrative services.

As compensation for administrative services, Stephens was entitled to
receive monthly fees calculated from the average daily net assets of each of
the following Funds at the indicated annual percentage rates: 0.03% for the
Aggressive Growth, Asset Allocation, Corporate Stock and U.S. Government
Allocation Funds; 0.15% for the Government- Corporate Income, Municipal Income
and Strategic Growth Funds; 0.05% and 0.10% respectively, for the Small Cap
Fund and Small Cap Strategy Fund. For the Short-Term Government-Corporate
Income and Short-Term Municipal Income Funds, the fee decreases from 0.15% to
0.10% for assets in excess of $200 million.

For the years ended December 31, 1993, 1994 and 1995, and the fiscal
period ended September 30, 1996, the Asset Allocation, Corporate Stock and U.S.
Government Allocation Funds paid administrative fees to Stephens as follows:
<TABLE>
<CAPTION>
Administrative Fees
-------------------

Year Ended Year Ended Year Ended Fiscal Period Ended
Fund 12/31/93 12/31/94 12/31/95 9/30/96(1)
- ---- -------- -------- -------- ----------
<S> <C> <C> <C> <C>
Asset Allocation Fund $238,347 $315,787 $306,436 $257,419
Corporate Stock Fund $ 74,804 $ 75,748 $ 92,555 $ 79,533
U.S. Government Allocation Fund $ 65,395 $ 62,168 $ 40,803 $ 32,354
</TABLE>
- ------------
(1) The Asset Allocation, Corporate Stock and U.S. Government Allocation
Funds of Stagecoach Funds have changed their fiscal year end to September 30.

For the years ended December 31, 1993, 1994 and 1995, the CIT and
Tax-Free Money Market Master Portfolios and the below-listed feeder Funds of
the Capital Appreciation, Small Cap, Short-Term Government-Corporate Income and
Short- Term Municipal Income Master Portfolios paid administrative fees to
Stephens as follows:

<TABLE>
<CAPTION>
Administrative Fees
-------------------

Year Ended Year Ended Year Ended
Fund or Master Portfolio 12/31/93 12/31/94 12/31/95
- ------------------------ -------- -------- --------
<S> <C> <C> <C>
CIT Master Portfolio $86,120 $142,669 $215,765
Tax-Free Money Market Master Portfolio N/A N/A N/A
Short-Term Government-Corporate Income Fund N/A $ 392(1) $ 3,560
Short-Term Municipal Income Fund N/A $ 2,497(1) $ 19,436
Small Cap Strategy Fund N/A N/A N/A(1)

Strategic Growth Fund $20,483 $ 62,623 $ 91,128
</TABLE>
- ------------

24
<PAGE> 63
(1) The Short-Term Municipal Income, Short-Term Government-Corporate Income
and Small Cap Strategy Funds commenced operations on June 3, 1994, September
19, 1994, September 16, 1996, respectively.

CUSTODIAN. -- Wells Fargo Bank acts as Custodian to all of the Trust's Master
Portfolios other than the Asset Allocation, Corporate Stock, and U.S.
Government Allocation Master Portfolios, for which WFITC acted as Custodian
through December 31, 1995 and BGI became Custodian on January 1, 1996.

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 and the fiscal period ended
September 30, 1996, the Asset Allocation, Corporate Stock and U.S. Government
Allocation Master Portfolios and their corresponding Funds did not pay any
custody fees. For the year ended December 31, 1995, the CIT Master Portfolio
paid Wells Fargo Bank $149,559 for its services as custodian and Wells Fargo
Bank waived all of the custodian fees payable to it by the Municipal Income and
Government- Corporate Income Master Portfolios. For the year ended December 31,
1995, the Strategic Growth Fund paid Wells Fargo Bank $22,191 for its services
as custodian to such Fund.

TRANSFER AND DIVIDEND DISBURSING AGENT. 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 period begun April 29 (commencement of operations) and ended
September 30, 1996, the indicated Master Portfolios did not pay any transfer
and dividend disbursing agency fees to Wells Fargo Bank.

Wells Fargo Bank also acts as transfer and dividend disbursing agent
for the feeder funds which were the predecessor funds to the Asset Allocation,
Corporate Stock and U.S. Government Allocation Funds. The transfer and
dividend disbursing agent is reimbursed for all reasonable out of pocket
expenses in connection with the performance of such services and is paid
transactional fees on a per account basis. For the year ended December 31,
1995 and the period ended September 30, 1996, the indicated Funds paid transfer
and dividend disbursing agency fees to Wells Fargo Bank as follows:
<TABLE>
<CAPTION>
Year Ended Fiscal Period Ended
Fund December 31, 1995 September 30, 1996(1)
- ---- ----------------- ------------------
<S> <C> <C>
Asset Allocation $470,918 $662,394
Corporate Stock $43,987 $153,589

U.S. Government Allocation $95,715 $77,292
- ------------
</TABLE>
(1) The Asset Allocation, Corporate Stock and U.S. Government Allocation
Funds changed their fiscal year end to September 30, 1996. These figures
reflect fee waivers.

25
<PAGE> 64
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.

Except for the portfolio securities of the Asset Allocation and
Corporate Stock Master Portfolios, 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.

As to the Asset Allocation and Corporate Stock Master Portfolios,
purchases and sales of equity securities on a securities exchange usually are
effected through brokers who charge a negotiated commission for their services.
Commission rates are established pursuant to negotiations with the broker based
on the quality and quantity of execution services provided by the broker in
light of generally prevailing rates. Orders may be directed to any broker
including, to the extent and in the manner permitted by applicable law,
Stephens or Wells Fargo Securities Inc. In the over- the- counter-market,
securities are generally traded on a "net" basis with dealers acting as
principal for their own accounts without a stated commission, although the
price of the security usually includes a profit to the dealer. In underwritten
offerings, securities are purchased at a fixed price that includes an amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount.

Debt securities normally are purchased or sold from or to dealers
serving as market makers for the securities at a net price. A Master Portfolio
also may purchase portfolio securities in underwritten offerings or directly
from an issuer. Generally debt obligations are traded on a net 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.

In assessing the best overall terms available for any transaction,
Wells Fargo Bank considers factors deemed relevant, including the breadth of
the market in the security, the price of the security, the financial condition
and execution capability of the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a continuing
basis. Wells Fargo Bank may cause the Master Portfolios to pay a

26
<PAGE> 65
broker/dealer which furnishes brokerage and research services a higher
commission than that which might be charged by another broker/dealer for
effecting the same transaction, provided that Wells Fargo Bank determines in
good faith that such commission is reasonable in relation to the value of the
brokerage and research services provided by such broker/dealer, viewed in terms
of either the particular transaction or the overall responsibilities of Wells
Fargo Bank. Such brokerage and research services might consist of reports and
statistics relating to specific companies or industries, general summaries of
groups of stocks or bonds and their comparative earnings and yields, or broad
overviews of the stock, bond, and government securities markets and the
economy.

Supplementary research information so received is in addition to, and
not in lieu of, services required to be performed by Wells Fargo Bank and does
not reduce the advisory fees payable by the Master Portfolios. The Board of
Trustees will periodically review the commissions paid by the Master Portfolios
to consider whether the commissions paid over representative periods of time
appear to be reasonable in relation to the benefits inuring to the Master
Portfolios. It is possible that certain of the supplementary research or other
services received will primarily benefit one or more other investment companies
or other accounts for which investment discretion is exercised. Conversely,
the Master Portfolios may be the primary beneficiary of the research or
services received as a result of portfolio transactions effected for such other
account or investment company.

Under Section 28(e) of the Securities Exchange Act of 1934, an adviser
shall not be "deemed to have acted unlawfully or to have breached its fiduciary
duty" solely because under certain circumstances it has caused the account to
pay a higher commission than the lowest available. To obtain the benefit of
Section 28(e), an adviser must make a good faith determination that the
commissions paid are "reasonable in relation to the value of the brokerage and
research services provided . . . viewed in terms of either that particular
transaction or its overall responsibilities with respect to the accounts as to
which it exercises investment discretion and that the services provided by a
broker provide an adviser with lawful and appropriate assistance in the
performance of its investment decision-making responsibilities." Accordingly,
the price to a Master Portfolio in any transaction may be less favorable than
that available from another broker/dealer if the difference is reasonably
justified by other aspects of the portfolio execution services offered.

Broker/dealers utilized by Wells Fargo Bank may furnish statistical,
research and other information or services which are deemed by Wells Fargo Bank
to be beneficial to a Master Portfolio's investment programs. Research
services received from brokers supplement Wells Fargo Bank's own research and
may include the following types of information: statistical and background
information on industry groups and individual companies; forecasts and
interpretations with respect to U.S. and foreign economies, securities,
markets, specific industry groups and individual companies; information on
political developments; portfolio management strategies; performance
information on securities and information concerning prices of securities; and
information supplied by specialized services to Wells Fargo Bank and to MIT's
Trustees with respect to the performance, investment activities and fees and
expenses of other mutual funds. Such information may be communicated
electronically, orally or in written form. Research services may also include
the providing of equipment used to communicate research information, the
arranging of meetings with management of companies and the providing of access
to consultants who supply research information.

The outside research assistance is useful to Wells Fargo Bank since
the brokers utilized by Wells Fargo Bank as a group tend to follow a broader
universe of securities and other matters than the staff of Wells Fargo Bank can
follow. In addition, this research provides Wells Fargo Bank with a diverse
perspective on financial markets. Research services which are provided to Wells
Fargo Bank by brokers are available for the benefit of all accounts managed or
advised by Wells Fargo Bank. It is the opinion of Wells Fargo Bank that this
material is beneficial in supplementing their research and analysis; and,
therefore, it may benefit the Master Portfolios by improving the quality of
Wells Fargo Bank's investment advice. The advisory fees paid by the Master
Portfolios are not reduced because Wells Fargo Bank receives such services.

27
<PAGE> 66
BROKERAGE COMMISSIONS. For the years ended December 31, 1993, 1994 and 1995
the Funds paid, and for the period begun January 1, 1996 and ended September
30, 1996 the indicated Funds/Master Portfolios paid, the following for
brokerage commissions:
<TABLE>
<CAPTION>
Brokerage Commissions(1)
---------------------

Year Ended Year Ended Year Ended Period Ended
Fund / Master Portfolio 12/31/93 12/31/94 12/31/95 9/30/96(2)
- ------------------------ -------- -------- -------- ----------
<S> <C> <C> <C> <C>
Asset Allocation $294,861 $99,002 $34,488 $0
Corporate Stock $30,123 $31,896 $8,696 $0
U.S. Government Allocation $0 $0 $0 $0
- ------------------------
</TABLE>
(1) During the periods shown, none of the Funds paid brokerage commissions
to affiliated brokers.

(2) This period reflects amounts paid by the corresponding Master
Portfolios which commenced operations on April 29, 1996.

<TABLE>
<CAPTION>
Brokerage Commissions
----------------------

Year Ended Year Ended Year Ended
Fund or Master Portfolio 12/31/93 12/31/94 12/31/95
- ------------------------ -------- -------- --------
<S> <C> <C> <C>
CIT Master Portfolio N/A $0 $0
Short-Term Government-Corporate Income Fund N/A $0 $0
Short-Term Municipal Income Fund N/A $0 $0
Small Cap Strategy Fund N/A N/A N/A
Strategic Growth Fund N/A $171,356 $190,359
Tax-Free Money Market Master Portfolio N/A N/A N/A
</TABLE>

SECURITIES OF REGULAR BROKER DEALERS -- As of December 31, 1995, the Master
Portfolios/Funds owned securities of their "regular brokers or dealers" or
their parents, as defined in the 1940 Act as follows: the CIT Master Portfolio
and the Government-Corporate Income Master Portfolio held debt securities of
Goldman Sachs in amounts equal to $52,415,000 and $93,000, respectively; the
Strategic Growth Fund held a Goldman Sachs Pooled Repurchase Agreement in an
amount equal to $1,638,000; the Asset Allocation Fund owned securities of J.P.
Morgan & Co., Inc. in an amount equal to $1,895,104. The Corporate Stock and
U.S. Government Allocation Funds did not own such securities as of said date.

As of September 30, 1996, the Asset Allocation, Corporate Stock and
U.S. Government Allocation Master Portfolios did not own any securities of
their "regular brokers or dealers" or their parents, as defined in the 1940
Act.

<PAGE> 67

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 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

29
<PAGE> 68
of two-thirds of its investors (with the vote of each being in proportion to
the amount of their investment) or (ii) by the Trustees of the Trust by written
notice to the Master Portfolio's investors. In the event of the liquidation or
dissolution of a Master Portfolio, investors are entitled to receive their pro
rata share of all assets available for distribution.

ITEM 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES.

Beneficial interests in the Trust are issued solely in private
placement transactions that do not involve any "public offering" within the
meaning of Section 4(2) of the Securities Act of 1933, as amended (the "1933
Act"). Investments in a Master Portfolio of the Trust may only be made by
registered broker/dealers or by investment companies, insurance company
separate accounts, common or commingled trust funds, group trusts or similar
organizations or entities that are "accredited investors" within the meaning of
Regulation D under the 1933 Act. This registration statement does not
constitute an offer to sell, or the solicitation of an offer to buy, any
"security" within the meaning of the 1933 Act.

Net asset value per interest of the CIT Master Portfolio of the Trust
is determined by the Custodian of the Trust on each Bank Business Day. Net
asset value per interest of the Capital Appreciation Master Portfolio, the
Government-Corporate Income Master Portfolio, the Municipal Income Master
Portfolio, the Tax-Free Money Market Master Portfolio, the Corporate Stock
Master Portfolio, the Asset Allocation Master Portfolio, and the U.S.
Government Allocation Master Portfolio is determined by the Custodian of the
Trust on each Business Day.

CIT MASTER PORTFOLIO AND THE TAX-FREE MONEY MARKET MASTER PORTFOLIO -- As
indicated in Part A, the CIT Master Portfolio and the Tax-Free Money Market
Master Portfolio each uses the amortized cost method to determine the value of
its portfolio securities pursuant to Rule 2a-7 under the Act. The amortized
cost method involves valuing a security at its cost and amortizing any discount
or premium over the period until maturity, regardless of the impact of
fluctuating interest rates on the market value of the security. While this
method provides certainty in valuation, it may result in periods during which
the value, as determined by amortized cost, is higher or lower than the price
that the Master Portfolio would receive if the security were sold. During these
periods the yield to investors may differ somewhat from that which could be
obtained from a similar fund that uses a method of valuation based upon market
prices. Thus, during periods of declining interest rates, if the use of the
amortized cost method resulted in a lower value of the Master Portfolio's
portfolio on a particular day, a prospective investor in the Master Portfolio
would be able to obtain a somewhat higher yield than would result from
investment in a fund using solely market values, and existing Master Portfolio
investors would receive correspondingly less income. The converse would apply
during periods of rising interest rates.

Rule 2a-7 provides that, in order to value its portfolio using the
amortized cost method, the Master Portfolio must maintain a dollar- weighted
average portfolio maturity of 90 days or less, purchase securities having
remaining maturities (as defined in Rule 2a-7) of thirteen months or less, and
invest only in Eligible Securities determined by the Board of Trustees to
present minimal credit risks. The maturity of an instrument is generally deemed
to be the period remaining until the date when the principal amount thereof is
due or the date on which the instrument is to be redeemed. However, Rule 2a-7
provides that the maturity of an instrument may be deemed shorter in the case
of certain instruments, including certain variable- and floating-rate
instruments subject to demand features. Pursuant to the Rule, the Board has
established procedures designed to stabilize, to the extent reasonably
possible, the Master Portfolio's net asset value. Such procedures include
review of a Master Portfolio's holdings by the Board of Trustees at such
intervals as it may deem appropriate to determine whether the Master
Portfolio's net asset value calculated by using available market quotations
deviates within 1/2 of the 1% of the value based on amortized cost. The extent
of any deviation is examined by the Board of Trustees. If such deviation
exceeds 1/2 of 1%, the Board promptly considers what action, if any, will be
initiated. In the event the Board determines that a deviation exists that may
result in material dilution or other unfair results to investors, the Board
will take such corrective action as it regards as necessary and appropriate,
including the sale of portfolio instruments prior to maturity to realize
capital gains or losses or to shorten average portfolio maturity, withholding
dividends or establishing a net asset value by using available market
quotations.

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<PAGE> 69
OTHER MASTER PORTFOLIOS -- The net asset value of the Asset Allocation, Capital
Appreciation, Corporate Stock, Government-Corporate Income, Municipal Income,
Small Cap and U.S. Government Allocation Master Portfolios is determined on
each Business Day.

The net asset value per interest for these Master Portfolios is
determined by dividing the value of the total assets of a Master Portfolio less
the Master Portfolio's liabilities by the total number of outstanding
interests. The value of assets of these Master Portfolios (other than debt
obligations maturing in 60 days or less) is determined at the close of regular
trading on the New York Stock Exchange, which is currently 1:00 p.m. Pacific
time. Except for debt obligations with remaining maturities of 60 days or less
which are valued at amortized cost, assets are valued at current market prices,
or if such prices are not readily available, at fair value as determined in
good faith by the Board of Trustees. The valuation may be provided by
independent pricing services.

ITEM 20. TAX STATUS.

Under the anticipated method of operation of the Master Portfolios of
the Trust, none of the Master Portfolios will be subject to any federal income
tax. However each investor in a Master Portfolio will be taxed on its share (as
determined in accordance with the governing instruments of the Trust) of a
Master Portfolio's taxable income in determining the investor's income tax
liability. The determination of such share will be made in accordance with the
Internal Revenue Code of 1986, as amended, ("Code") and regulations promulgated
thereunder. Each Master Portfolio's taxable year-end is December 31. Although,
as described above, the Master Portfolios will not be subject to federal income
tax, each will file appropriate income tax returns.

It is intended that each Master Portfolio's assets, income and
distributions will be managed in such a way that a regulated investment company
investing in a Master Portfolio of the Trust will be able to satisfy the
requirements of Subchapter M of the Code, assuming that the investment company
invested substantially all of its assets in a Master Portfolio. Each Master
Portfolio will be treated as a non-publicly traded partnership rather than a
regulated investment company or a corporation under the Code. As a non-publicly
traded partnership under the Code, any interest, dividends and gains or losses
of a Master Portfolio of the Trust will be deemed to have been "passed through"
to investors in such Master Portfolio, regardless of whether such interest,
dividends or gains have been distributed by the Master Portfolio. Accordingly,
if a Master Portfolio were to accrue but not distribute any interest, dividends
or gains, an investor would be deemed to have realized and recognized its
proportionate share of interest, dividends or gains without receipt of any
corresponding distribution. However, each Master Portfolio will seek to
minimize recognition by investors of interest, dividends or gains without a
corresponding distribution.

Investors' capital accounts will be adjusted on a daily basis to
reflect additional investments or withdrawals and any increase or decrease in
net asset value. For purposes of determining fair market value of the CIT
Master Portfolio's and the Tax-Free Money Market Master Portfolio's assets,
such Master Portfolios use the amortized cost method of valuation under Rule
2a-7 under the Act. The investments of other Master Portfolios are valued each
business day using available market quotations or at fair value as determined
by one or more independent primary services (collectively the "Service")
approved by the Trust's Board of Trustees. The Service may use available market
quotations, employ electronic data processing techniques and/or a matrix system
to determine valuations. The Service's procedures are reviewed by the Trust's
officers under the general supervision of the Trust's Board of Trustees.
Expenses and fees, including advisory fees, are accrued daily and are taken
into account for the purpose of determining the net asset value of a Master
Portfolio's shares.

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

31
<PAGE> 70
which constitute accredited investors, as defined in the regulations adopted
under the 1933 Act, may continuously invest in a Master Portfolio of the Trust.

ITEM 22. CALCULATIONS OF PERFORMANCE DATA.

Not applicable.

ITEM 23. FINANCIAL INFORMATION.

The unaudited financial statements and portfolio of investments for
the Capital Appreciation, Cash Investment Trust, Short-Term
Government-Corporate Income and Short-Term Municipal Income Master Portfolios
and for the corresponding Funds of Overland Express Funds, Inc. ("Overland")
are hereby incorporated by reference to the Overland Semi-Annual Reports dated
June 30, 1996, as filed with the SEC on September 6, 1996.

The portfolio of investments, audited financial statements and
independent auditor's report for the year ended December 31, 1995 for the Cash
Investment Trust, Short-Term Municipal Income and Short-Term
Government-Corporate Income Master Portfolios are hereby incorporated by
reference to the Overland Annual Reports, as filed with the SEC on March 8,
1996.

The audited financial statements and portfolio of investments for the
Asset Allocation, Capital Appreciation, Corporate Stock, Small Cap, Tax-Free
Money Market and U.S. Government Allocation Master Portfolios and for the
corresponding Funds of Stagecoach Funds, Inc. ("Stagecoach") are hereby
incorporated by reference to the Stagecoach Semi-Annual Reports dated September
30, 1996, as filed with the SEC on December 9, 1996.

32
<PAGE> 71
APPENDIX

The following is a description of the ratings given by Moody's and S&P
to corporate and municipal bonds, municipal notes, and corporate and municipal
commercial paper.

Corporate and Municipal Bonds

Moody's: The four highest ratings for corporate and municipal bonds
are "Aaa,"Aa,"A" and "Baa." Bonds rated "Aaa" are judged to be of the "best
quality" and carry the smallest amount of investment risk. Bonds rated "Aa" are
of "high quality by all standards," but margins of protection or other elements
make long-term risks appear somewhat greater than "Aaa" rated bonds. Bonds
rated "A" possess many favorable investment attributes and are considered to be
upper medium grade obligations. Bonds rated "Baa" are considered to be medium
grade obligations; interest payments and principal security appear adequate for
the present, but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds have
speculative characteristics as well. Moody's applies numerical modifiers: 1, 2
and 3 in each rating category from "Aa" through "Baa" in its rating system.
The modifier 1 indicates that the security ranks in the higher end of its
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end.

S&P: The four highest ratings for corporate and municipal bonds are
"AAA,"AA,"A" and "BBB." Bonds rated "AAA" have the highest ratings assigned by
S&P and have an extremely strong capacity to pay interest and repay principal.
Bonds rated "AA" have a "very strong capacity to pay interest and repay
principal" and differ "from the highest rated issued only in small degree."
Bonds rated "A" have a "strong capacity" to pay interest and repay principal,
but are "somewhat more susceptible" to adverse effects of changes in economic
conditions or other circumstances than bonds in higher rated categories. Bonds
rated "BBB" are regarded as having an "adequate capacity" to pay interest and
repay principal, but changes in economic conditions or other circumstances are
more likely to lead to a "weakened capacity" to make such repayments. The
ratings from "AA" to "BBB" may be modified by the addition of a plus or minus
sign to show relative standing within the category.

Municipal Notes

Moody's: The highest ratings for state and municipal short-term
obligations are "MIG 1,"MIG 2," and "MIG 3" (or "VMIG 1,"VMIG 2" and "VMIG 3"
in the case of an issue having a variable rate demand feature). Notes rated
"MIG 1" or "VMIG 1" are judged to be of the "best quality." Notes rated "MIG 2"
or "VMIG 2" are of "high quality," with margins of protections "ample although
not as large as in the preceding group." Notes rated "MIG 3" or "VMIG 3" are of
"favorable quality," with all security elements accounted for, but lacking the
strength of the preceding grades.

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."

33
<PAGE> 72
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.

34
<PAGE> 73

PART C

OTHER INFORMATION

Item 24. Financial Statements and Exhibits.

(a) Financial Statements:

The portfolio of investments, audited financial statements and
independent auditors' report for the fiscal period ended
September 30, 1996 for the Asset Allocation, Corporate Stock and
U.S. Government Allocation Master Portfolios are hereby
incorporated by reference to the Stagecoach Funds, Inc. (SEC
File Nos. 33-42927; 811-6419) Annual Reports, as filed with the
SEC on December 9, 1996

The portfolio of investments, audited financial statements and
independent auditor's report for the year ended December 31,
1995 for the Cash Investment Trust, Short-Term Municipal Income
and Short-Term Government-Corporate Income Master Portfolios
are hereby incorporated by reference to the Overland Express
Funds, Inc. (SEC File Nos. 33-16296; 811-8275) Annual Reports, as
filed with the SEC on March 8, 1996.

(b) Exhibits:

<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
1(a) - Declaration of Trust, incorporated by reference
to the Registration Statement on Form N-1A
filed on September 24, 1991.

1(b) - Certificate of Amendment to the Declaration of
Trust, incorporated by reference to Amendment
No. 3 filed on May 2, 1994.

1(c) - Amendment to the Declaration of Trust,
incorporated by reference to Amendment No. 6
filed on November 29, 1995.

1(d) - Amendment to the Declaration of Trust, filed
herewith.

2 - By-Laws, incorporated by reference to the
Registration Statement on Form N-1A filed on
September 24, 1991.

3 - Not Applicable.

4 - Not Applicable.

5(a) - Amended Advisory Contract with Wells Fargo
Bank, N.A. on behalf of the Cash Investment
Trust Master Portfolio, incorporated by
reference to Amendment No. 3 filed on May 2,
1994.

5(b) - Advisory Contract with Wells Fargo Bank, N.A.
on behalf of the Short-Term Municipal Income
Master Portfolio, incorporated by reference to
Amendment No. 6 filed on November 29, 1995.
</TABLE>

C-1
<PAGE> 74
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>

5(c) - Advisory Contract with Wells Fargo Bank, N.A.
on behalf of the Short-Term
Government-Corporate Income Master Portfolio,
incorporated by reference to Amendment No. 6
filed on November 29, 1995.

5(d) - Investment Advisory Contract with Wells Fargo
Bank, N.A. on behalf of the Tax-Free Money
Market Master Portfolio, incorporated by
reference to Amendment No. 8 filed on March 21,
1996.

5(e) - Investment Advisory Contract with Wells Fargo
Bank, N.A. on behalf of the Capital
Appreciation Master Portfolio, incorporated by
reference to Amendment No. 8 filed on March 21,
1996.

5(f)(i) - Investment Advisory Contract with Wells Fargo
Bank, N.A. on behalf of the Asset Allocation
Master Portfolio, incorporated by reference to
Amendment No. 8 filed on March 21, 1996.

5(f)(ii) - Sub-Advisory Contract with BZW Barclays Global
Fund Advisors on behalf of the Asset
Allocation Master Portfolio, incorporated by
reference to Amendment No. 8 filed on March
21, 1996.

5(g)(i) - Investment Advisory Contract with Wells Fargo
Bank, N.A. on behalf of the Corporate Stock
Master Portfolio, incorporated by reference to
Amendment No. 8 filed on March 21, 1996.

5(g)(ii) - Sub-Advisory Contract with BZW Barclays Global
Fund Advisors on behalf of the Corporate Stock
Master Portfolio, incorporated by reference to
Amendment No. 8 filed on March 21, 1996.

5(h)(i) - Investment Advisory Contract with Wells Fargo
Bank, N.A. on behalf of the U.S. Government
Allocation Master Portfolio, incorporated by
reference to Amendment No. 8 filed on March
21, 1996.

5(h)(ii) - Sub-Advisory Contract with BZW Barclays Global
Fund Advisors on behalf of the U.S. Government
Allocation Master Portfolio, incorporated by
reference to Amendment No. 8 filed on March
21, 1996.

5(i) - Investment Advisory Contract with Wells Fargo
Bank, N.A. on behalf of the Small Cap Master
Portfolio, filed herewith.
</TABLE>

C-2
<PAGE> 75
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>

6 - Amended Placement Agent Agreement, incorporated
by reference to Amendment No. 9 filed on
September 6, 1996.

7 - Not Applicable.

8(a) - Custody Agreement with Wells Fargo Bank, N.A.,
incorporated by reference to Amendment No. 9
filed on September 6, 1996.

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. 9 filed on September 6, 1996.

9(b) - Amended Administration Agreement with Stephens
Inc. incorporated by reference to Amendment
No. 9 filed on September 6, 1996.

10 - Not Applicable.

11 - Not Applicable.

12 - Not Applicable.

13 - Investment Letter, incorporated by reference to
the Registration Statement on Form N-1A filed
on September 24, 1991.

14 - Not Applicable.

15 - Not Applicable.

16 - Not Applicable.

17 - Not Applicable.
</TABLE>

Item 25. Persons Controlled by or under Common Control with Registrant.

No person is controlled by or under common control with
Registrant.

C-3
<PAGE> 76

Item 26. Number of Holders of Securities.

As of December 1, 1996, the number of record holders of each
Master Portfolio of the Registrant was as follows:

<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
Cash Investment Trust Master Portfolio 2

Short-Term Municipal Income Master Portfolio 2

Short-Term Government-Corporate Income Master Portfolio 3

Tax-Free Money Market Master Portfolio 3

Capital Appreciation Master Portfolio 3

Asset Allocation Master Portfolio 2

Corporate Stock Master Portfolio 2

U.S. Government Allocation Master Portfolio 2

Small Cap Master Portfolio 3
</TABLE>

Item 27. Indemnification.

Article V of the Registrant's Declaration of Trust limits the
liability and, in certain instances, provides for mandatory indemnification of
the Registrant's trustees, officers, employees, agents and holders of
beneficial interests in the Trust and its Master Portfolios. In addition, the
Trustees are empowered under Section 3.9 of the Registrant's Declaration of
Trust to obtain such insurance policies as they deem necessary.

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

C-4
<PAGE> 77
Wells Fargo & Company. Set forth below are the names and principal
businesses of the directors and executive officers of Wells Fargo Bank who are
or during the past two fiscal years have been engaged in any other business,
profession, vocation or employment of a substantial nature for their own
account or in the capacity of director, officer, employee, partner or trustee.
All the directors of Wells Fargo Bank also serve as directors of Wells Fargo &
Company.

<TABLE>
<CAPTION>
Name and Position Principal Business(es) and Address(es)
at Wells Fargo Bank During at Least the Last Two Fiscal Years
- ------------------- -----------------------------------------
<S> <C>
H. Jesse Arnelle Senior Partner of Arnelle & Hastie
Director 455 Market Street
San Francisco, CA 94105

Director of FPL Group, Inc.
700 Universe Blvd., P.O. Box 14000
North Palm Beach, FL 33408

William R. Breuner General Partner in Breuner Associates, Breuner Properties and
Director Breuner-Pavarnick Real Estate Developers. Retired Chairman of
the Board of Directors of John Breuner Co.
2300 Clayton Road, Suite 1570
Concord, CA 94520

Vice Chairman of the California State Railroad Museum Foundation.
111 I Street
Old Sacramento, CA 95814

William S. Davila President and Director of The Vons Companies, Inc.
Director 618 Michillinda Avenue
Arcadia, CA 91007

Officer of Western Association of Food Chains
825 Colorado Blvd. #203
Los Angeles, CA 90041

Rayburn S. Dezember Director of CalMat Co.
Director 3200 San Fernando Road
Los Angeles, CA 90065

Director of Tejon Ranch Co.
P.O. Box 1000
Lebec, CA 93243
</TABLE>

C-5
<PAGE> 78
<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>
Director of Turner Casting Corp.
P.O. Box 1099
Cudahy, CA 90201

Director of The Bakersfield Californian
P.O. Box 440
1707 I Street
Bakersfield, CA 93302

Director of Kern County Economic Development Corp.
P.O. Box 1229
2700 M Street, Suite 225
Bakersfield, CA 93301

Chairman of the Board of Trustees of Whittier College
13406 East Philadelphia Avenue
P.O. Box 634
Whittier, CA 90608

Paul Hazen Chairman of the Board of Directors of Wells Fargo & Company
Chairman of the 420 Montgomery Street
Board of Directors 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 Graduate School of
Director Business, Stanford University
MBA Admissions Office
Stanford, CA 94305
</TABLE>

C-6
<PAGE> 79
<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>
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 Pacific
Director Enterprises
633 West Fifth Street
Los Angeles, CA 90071

Trustee of Mutual Life Insurance Company
of New York
1740 Broadway
New York, NY 10019

Director of Newhall Management Corporation
23823 Valencia Blvd.
Valencia, CA 91355

Trustee of University of Southern California
University Park TGF 200
665 Exposition Blvd.
Los Angeles, CA 90089

Ellen M. Newman President of Ellen Newman Associates
Director 323 Geary Street, Suite 507
San Francisco, CA 94102
</TABLE>

C-7
<PAGE> 80
<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>
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 of Pacific
Director 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 Board of Directors
Director of Wells Fargo & Company
420 Montgomery Street
San Francisco, CA 94105

Director of Ford Motor Company
The American Road
Dearborn, MI 48121

Director of Hospital Corporation of America, HCA-Hospital Corp.
of America
One Park Plaza
Nashville, TN 37203

Director of Pacific Gas and Electric Company
77 Beale Street
San Francisco, CA 94105

Director of Newhall Management Corporation
23823 Valencia Blvd.
Valencia, CA 91355
</TABLE>

C-8
<PAGE> 81
<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>
Donald B. Rice President, Chief Operating Officer and Director of Teledyne,
Director Inc.
2049 Century Park East
Los Angeles, CA 90067

Director of Vulcan Materials Company
One Metroplex Drive
Birmingham, AL 35209

Retired Secretary of the Air Force

Susan G. Swenson President and Chief Executive Officer of Cellular One
Director 651 Gateway Blvd.
San Francisco, CA 94080

Chang-Lin Tien Chancellor of University of California at Berkeley
Director UC at Berkeley
Berkeley, CA 94720

John A. Young President, Director and Chief Executive Officer of
Director Hewlett-Packard Company
3000 Hanover Street
Palo Alto, CA 94304

Director of Chevron Corporation
225 Bush Street
San Francisco, CA 94104

William F. Zuendt Director of 3Com Corp.
President 5400 Bayfront Plaza
P.O. Box 58145
Santa Clara, CA 95052

Director of MasterCard International
888 Seventh Avenue
New York, NY 10106

Trustee of Golden Gate University
536 Mission Street
San Francisco, CA 94163
</TABLE>

C-9
<PAGE> 82

BZW Barclays Global Fund Advisors ("BGFA"), a wholly-owned subsidiary
of BZW Barclays Global Investors, N.A. ("BGI", formerly, Wells Fargo
Institutional Trust Company), serves as sub-adviser to the Asset Allocation,
Corporate Stock and U.S. Government Allocation Master Portfolios of the Trust
and as adviser or sub-adviser to certain other open-end management investment
companies

The directors and officers of BGFA consist primarily of persons who
during the past two years have been active in the investment management
business of the former sub-adviser to the Predecessor Funds, Wells Fargo Nikko
Investment Advisors ("WFNIA") and, in some cases, the service business of BGI.
With the exception of Irving Cohen, each of the directors and executive
officers of BGFA will also have substantial responsibilities as directors
and/or officers of BGI. To the knowledge of the Registrant, except as set forth
below, none of the directors or executive officers of BGFA is or has been at
any time during the past two fiscal years engaged in any other business,
profession, vocation or employment of a substantial nature.

<TABLE>
<CAPTION>
Name and Position Principal Business(es) During at
at BGFA Least the Last Two Fiscal Years
- ------- -------------------------------
<S> <C>
Frederick L.A. Grauer Chairman and Director of WFNIA and WFITC+
Chairman, Director

Donald L. Luskin Chief Executive Officer of WFNIA's Defined Contribution Group+
Vice Chairman & Director

Irving Cohen Chief Financial Officer and Chief Operating Officer of Barclays Bank
Director PLC, New York Branch and Chief Operating Officer of Barclays Group,
Inc. (USA)*: previously Chief Financial Officer of Barclays de Zoete
Wedd Securities Inc. (1994)*

Andrea M. Zolberti Chief Financial Officer of WFNIA and WFITC+
Chief Financial Officer

Vincent J. Bencivenga Previously Vice President at State Street Bank & Trust Company++
Chief Fiduciary Officer
</TABLE>

* 222 Broadway, New York, New York, 10038.

+ 45 Fremont Street, San Francisco, California 94105.

++ One Financial Center, Boston, Massachusetts 02111.

C-10
<PAGE> 83
Item 29. Principal Underwriters.

(a) Stephens Inc., placement agent for the Registrant, does not
presently act as investment adviser for any registered investment companies,
but does act as principal underwriter for Overland Express Funds, Inc.,
MasterWorks Funds Inc., Stagecoach Trust and Stagecoach Funds, Inc. and is the
exclusive placement agent for Master Investment Portfolio, Managed Series
Investment Trust and Life & Annuity Trust, each of which is a registered series
management investment company and has acted as principal underwriter for the
Liberty Term Trust, Inc., Nations Government Income Term Trust 2003, Inc.,
Nations Government Income Term Trust 2004, Inc. and the Managed Balanced Target
Maturity Fund, Inc., which are closed-end management investment companies and
Nations Fund Trust, Nations Funds, Inc., Nations Fund Portfolio, Inc. and The
Capitol Mutual Funds, which are open-end management investment companies.

(b) Information with respect to each director and officer of the
principal underwriter is incorporated by reference to Form ADV and Schedules A
and D filed by Stephens Inc. with the Securities and Exchange Commission
pursuant to the Investment Advisers Act of 1940 (SEC File No. 501-15510).

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 Master Portfolios" in Part A of this Registration Statement and "Item 16
Investment Advisory and Other Services" in Part B of this Registration
Statement, Registrant is not a party to any management-related service
contract.

C-11
<PAGE> 84
Item 32. Undertakings.

(a) Not applicable.

(b) Not applicable.

(c) Registrant undertakes to hold a special meeting of its
shareholders for the purpose of voting on the question of
removal of a trustee or trustees if requested in writing
by the holders of at least 10% of each Master Portfolio,
the outstanding voting securities of Master Investment
Trust and to assist in communicating with other
shareholders as required by Section 16(c) of the
Investment Company Act of 1940.

C-12
<PAGE> 85
SIGNATURES

Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant has duly caused this Amendment to its Registration Statement on Form
N-1A to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Little Rock, State of Arkansas, on the 30th day of January ,
1997.

MASTER INVESTMENT TRUST

By: /s/Richard H. Blank, Jr.
Richard H. Blank, Jr.
Secretary and Treasurer
(Principal Financial Officer)

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman, President (Principal
- ------------------------- Executive Officer) and Trustee
(R. Greg Feltus)

/s/ Richard H. Blank, Jr. Chief Operating Officer, 1/30/97
- ------------------------- Secretary and Treasurer
(Richard H. Blank, Jr.) (Principal Financial Officer)

* Trustee
- -------------------------
(Jack S. Euphrat)

* Trustee
- -------------------------
(Thomas S. Goho)

* Trustee
- -------------------------
(Joseph N. Hankin)

* Trustee
- -------------------------
(W. Rodney Hughes)

* Trustee
- -------------------------
(Robert M. Joses)

* Trustee
- -------------------------
(J. Tucker Morse)
</TABLE>

*By: /s/Richard H. Blank, Jr.
------------------------
(Richard H. Blank, Jr.)
As Attorney-in-Fact
January 30, 1997

<PAGE> 86
MASTER INVESTMENT TRUST
File No. 811-6415
Amendment No. 10 to the
Registration Statement on Form N-1A
Under the Investment Company Act of 1940

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
NUMBER
<S> <C>
EX-99.B1(d) Amendment to the Declaration of Trust

EX-99.B5(i) Investment Advisory Contract on behalf of
the Small Cap Master Portfolio
</TABLE>

<PAGE> 1
EXHIBIT 99.B1(d)

AMENDMENT TO THE DECLARATION OF TRUST
BY THE BOARD OF TRUSTEES
OF
MASTER INVESTMENT TRUST
(A DELAWARE BUSINESS TRUST)

WHEREAS, under the "Trust Property" Section of Article I of the
Declaration of Trust, as amended (the "Declaration"), the Trustees are fully
empowered to establish and designate new series of Interests in accordance with
the provisions of Section 9.8; and further, that the Trustees are authorized to
fix and determine the variations in the relative rights and preferences as
between the different series; and

WHEREAS, pursuant to Article IX, Section 9.8(f), of the Declaration,
the establishment and designation of any series of Interests shall become
effective upon the execution by a majority of the current Trustees of an
instrument setting forth the establishment and designation and the relative
rights and preferences of such series, or as otherwise provided in such
instrument; which instrument shall be considered an amendment to the
Declaration; and no vote of the Holders being necessary under Article X,
Sections 10.4(a) and (b), of the Declaration, to make an amendment; and

WHEREAS, the Trustees have, in March of 1994, previously approved new
series of the Trust through their granted powers; namely, the Short-Term
Municipal Income Master Portfolio (formerly, the 1-3 Year Duration Municipal
Income Master Portfolio), the Short-Term Government-Corporate Income Master
Portfolio (formerly, the 1-3 Year Duration Full Faith and Credit Master
Portfolio), and the now terminated 1-3 Year Duration Government Income Master
Portfolio;

WHEREAS, the Trustees have, in October of 1995, previously approved
new series of the Trust through their granted powers; namely, the Asset
Allocation Master Portfolio, Corporate Stock Master Portfolio, Tax-Free Money
Market Master Portfolio and U.S. Government Allocation Master Portfolio;

WHEREAS, the Trustees have, in November of 1995, previously approved a
new series of the Trust through their granted powers; namely, the Capital
Appreciation Master Portfolio,

NOW THEREFORE:

The undersigned, being all of the Trustees of Master Investment Trust
(the "Trust"), hereby adopt the following resolutions to establish a new series
to serve as a master portfolio for corresponding feeder funds of Overland
Express Funds, Inc. and Stagecoach Funds, Inc.:

1
<PAGE> 2

RESOLVED, that pursuant to the powers vested in the Trustees, a new
series of Interests be, and hereby is, established and designated as the "Small
Cap Master Portfolio" (the "New Series"); and

FURTHER RESOLVED, that the New Series shall have exactly the same
preferences, privileges, limitations, and rights, including voting and dividend
rights, as the previously existing series; and

FURTHER RESOLVED, that only the Interests in the New Series shall be
subject to the expenses and fees of the New Series; and further, the New Series
shall be subject to a pro rata portion of the general expenses and fees of the
Trust, as are the previously existing series; and

FURTHER RESOLVED, that the Trustees hereby amend the Declaration by
adding Section 9.8(g) to Article IX under the "Series of Interests" section:

"9.8 SERIES OF INTERESTS

(g) THE SERIES ARE COMPRISED OF THE FOLLOWING PORTFOLIOS:
ASSET ALLOCATION MASTER PORTFOLIO, CAPITAL APPRECIATION MASTER
PORTFOLIO, CASH INVESTMENT TRUST MASTER PORTFOLIO, CORPORATE
STOCK MASTER PORTFOLIO, SHORT-TERM GOVERNMENT-CORPORATE
INCOME MASTER PORTFOLIO (FORMERLY, 1-3 YEAR DURATION FULL
FAITH AND CREDIT MASTER PORTFOLIO), SHORT-TERM MUNICIPAL
INCOME MASTER PORTFOLIO (FORMERLY, 1-3 YEAR DURATION
MUNICIPAL INCOME MASTER PORTFOLIO), SMALL CAP MASTER
PORTFOLIO, TAX-FREE MONEY MARKET MASTER PORTFOLIO, AND U.S.
GOVERNMENT ALLOCATION MASTER PORTFOLIO. "

; and

FURTHER RESOLVED, that the appropriate Officers of the Trust be, and
each hereby is, authorized and directed to prepare and file with the Securities
and Exchange Commission, and with such state securities commissions and
authorities as they deem advisable, any material relating to this Amendment to
the Declaration, and an amendment to the Registration Statement of the Trust on
Form N-1A, containing such current information and revisions as such Officer(s)
deems necessary or appropriate to reflect the changes effected at this meeting,
with advice of counsel, in their sole discretion, and to prepare and file a
certificate of amendment or a certificate of amended and restated Declaration
of Trust with the Secretary of State of the State of Delaware and take any and
all such other actions as and when the Officer taking such action, with advice
of counsel, deems necessary or advisable to effect the purpose and intent of
the foregoing resolutions; and

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FURTHER RESOLVED, such changes to be effective immediately upon the
filing with the Secretary of State of the State of Delaware of a written
certificate evidencing such clarification to the Declaration of Trust; and

FURTHER RESOLVED, that this instrument is to be filed with the minutes
of the Trust's Board of Trustees.

Dated: As of September 6, 1996 /s/ Jack S. Euphrat
Jack S. Euphrat

Dated: As of September 6, 1996 /s/ R. Greg Feltus
R. Greg Feltus

Dated: As of September 6, 1996 /s/ Thomas S. Goho
Thomas S. Goho

Dated: As of September 6, 1996 /s/ Zoe Ann Hines
Zoe Ann Hines

Dated: As of September 6, 1996 /s/ W. Rodney Hughes
W. Rodney Hughes

Dated: As of September 6, 1996 /s/ Robert M. Joses
Robert M. Joses

Dated: As of September 6,1996 /s/ J. Tucker Morse
J. Tucker Morse

<PAGE> 1
EXHIBIT 99.B5(i)

INVESTMENT ADVISORY CONTRACT

MASTER INVESTMENT TRUST
111 Center Street
Little Rock, Arkansas 72201

September 6, 1996

Wells Fargo Bank, N.A.
420 Montgomery Street
San Francisco, California 94163

Dear Sirs:

This will confirm the agreement between the undersigned (the "Trust")
on behalf of the Small Cap Master Portfolio (the "Master Portfolio") and Wells
Fargo Bank, N.A. (the "Adviser") as follows:

1. The Trust is a registered open-end management investment company
currently consisting of a number of investment portfolios (the "Master
Portfolios"). The Small Cap Master Portfolio is one of these Master Portfolios.
The Trust proposes to engage in the business of investing and reinvesting the
assets of the Master Portfolio in the manner and in accordance with the
investment objective and restrictions specified in the Trust's Registration
Statement, as amended from time to time (the "Registration Statement"), filed
by the Trust under the Investment Company Act of 1940 (the "Act"). Copies of
the Registration Statement have been furnished to the Adviser. Any amendments
to the Registration Statement shall be furnished to the Adviser promptly.

2. The Trust is engaging the Adviser to manage the investing and
reinvesting of the Master Portfolio's assets and to provide the advisory
services specified elsewhere in this contract to the Master Portfolio, subject
to the overall supervision of the Board of Trustees of the Trust. Pursuant to
an administration agreement between the Trust and an administrator (the
"Administrator") on behalf of the Master Portfolios, the Trust has engaged the
Administrator to provide the administrative services specified therein.

3. (a) The Adviser shall make investments for the account of the
Master Portfolio in accordance with the Adviser's best judgment and consistent
with the investment objective and restrictions set forth in the Trust's
Registration Statement, the Act and the provisions of the Internal Revenue Code
of 1986, as amended, relating to regulated investment companies, subject to
policy decisions adopted by the Trust's Board of Trustees. The Adviser shall
advise the Trust's officers and Board of Trustees, at such times as the Trust's
Board of Trustees may specify, of investments made for the Master Portfolio and
shall, when requested by the Trust's officers or Board of Trustees, supply the
reasons for making particular investments.
<PAGE> 2

(b) The Adviser shall provide to the Master Portfolio investment
guidance and policy direction in connection with its daily management of the
Master Portfolio's assets, including oral and written research, analysis,
advice, statistical and economic data and information and judgments, and shall
furnish to the Trust's Board of Trustees periodic reports on the investment
strategy and performance of the Master Portfolio and such additional reports
and information as the Trust's Board of Trustees and officers shall reasonably
request.

(c) The Adviser shall pay the costs of printing and distributing all
materials relating to the Master Portfolio prepared by it, or prepared at its
request, other than such costs relating to proxy statements, Part As, reports
for holders of beneficial interests ("Interests") of the Master Portfolio
("Holders") and other materials distributed to existing or prospective Holders
on behalf of the Master Portfolio.

(d) The Adviser shall, at its expense, employ or associate with
itself such persons as the Adviser believes appropriate to assist it in
performing its obligations under this contract.

4. The 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.

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

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to the Adviser's undertaking to render these services, the Trust agrees that
the Adviser shall not be liable under this contract for any mistake in judgment
or in any other event whatsoever except for lack of good faith, provided that
nothing in this contract shall be deemed to protect or purport to protect the
Adviser against any liability to the Trust or its Holders to which the Adviser
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of the Adviser's duties under this contract or by
reason of reckless disregard of its obligations and duties hereunder.

7. In consideration of the services to be rendered by the Adviser
under this contract, the Master Portfolio shall pay the Adviser a monthly fee
on the first business day of each month, at the annual rate of 0.60% of the
average daily value (as determined on each day that such value is determined
for the Master Portfolio at the time set forth in the Registration Statement
for determining net asset value per share) of the Master Portfolio's net assets
during the preceding month. If the fee payable to the Adviser pursuant to this
paragraph 7 begins to accrue after the beginning of any month or if this
contract terminates before the end of any month, the fee for the period from
the effective date to the end of that month or from the beginning of that month
to the termination date, respectively, shall be prorated according to the
proportion that the period bears to the full month in which the effectiveness
or termination occurs. For purposes of calculating each such monthly fee, the
value of the Master Portfolio's net assets shall be computed in the manner
specified in the Registration Statement and the Trust's Declaration of Trust
for the computation of the value of the Master Portfolio's net assets in
connection with the determination of the net asset value of Master Portfolio
Interests.

8. If in any fiscal year the total expenses of the Master Portfolio or
any registered investment company investing in the Master Portfolio ("Investing
Company") incurred by, or allocated to, the Master Portfolio or any Investing
Company, excluding taxes, interest, brokerage commissions and other portfolio
transaction expenses, other expenditures that are capitalized in accordance
with generally accepted accounting principles, extraordinary expenses and
amounts accrued or paid under any Rule 12b-1 Plan, but including the fees
provided for in paragraph 7 and those provided for pursuant to the Master
Portfolio's and/or Investing Company's administration agreement ("includable
expenses"), exceed the most restrictive expense limitation applicable to the
Master Portfolio and/or Investing Company imposed by state securities laws or
regulations thereunder, as these limitations may be raised or lowered from time
to time, the Adviser shall waive or reimburse that portion of the excess
derived by multiplying the excess by a fraction, the numerator of which shall
be the percentage at which the excess portion attributable to the fee payable
pursuant to this contract is calculated under paragraph 7 hereof, and the
denominator of which shall be the sum of such percentage plus the percentage at
which the excess portion attributable to the fee payable pursuant to the Master
Portfolio's and/or Investing Company's administration agreement is calculated
(the "Applicable Ratio"), but only to the extent of the fee hereunder for the
fiscal year. If the fees payable under this contract and/or the Master
Portfolio's and/or Investing Company's administration agreement contributing to
such excess portion are calculated at more than one percentage rate, the
Applicable Ratio shall be calculated separately on 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

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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 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

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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 without giving effect to the choice of
law provisions thereof.

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If the foregoing correctly sets forth the agreement between the Trust
and the Adviser, please so indicate by signing and returning to the Trust the
enclosed copy hereof.

Very truly yours,

MASTER INVESTMENT TRUST,
on behalf of the Small Cap Master Portfolio

By: /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 Fund Administration
----------------------------------

By: /s/Robert Bissell
-----------------
Name: Robert Bissell
--------------
Title: Senior Vice President
---------------------