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As filed with the Securities and Exchange Commission
on April 30, 1997
Registration No. 811-6415
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
AMENDMENT NO. 11 TO THE
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
MASTER INVESTMENT TRUST
(formerly Cash Investment Trust)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
111 Center Street, Little Rock, Arkansas 72201
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
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Registrant's Telephone Number, including Area Code:
(800) 458-6589
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 LLP
2000 Pennsylvania Avenue, N.W., Suite 5500
Washington, D.C. 20006-1812
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EXPLANATORY NOTE
This Amendment No. 11 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 year (or period, as applicable) ended
December 31, 1996 for the Trust's Capital Appreciation, Cash Investment Trust,
Short-Term Government-Corporate Income, Short-Term Municipal Income, Small Cap
and Tax-Free Money Market Master Portfolios. This Amendment does not effect
the Registration Statement for the 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.
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Master Investment Trust
Cross Reference Sheet
Form N-1A Item Number
<TABLE>
<CAPTION>
Part A Prospectus Caption
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<S> <C>
4 General Description of Registrant
Investment Objectives
Additional Permitted Investment Activities
Investment Policies
5 Management of the Master Portfolios
Master/Feeder Structure
Management of the Trust
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
Part B Statement of Additional Information
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10 Cover Page
11 Table of Contents
12 General Information and History
13 Investment Objectives and Policies
Investment Restrictions
Additional Permitted Investment Activities
Appendix
14 Management of the Trust
15 Control Persons and Principal Holders of Securities
16 Investment Advisory and Other Services
17 Brokerage Allocation and Other Practices
18 Capital Stock and Other Securities
19 Purchase, Redemption and Pricing of Securities
20 Tax Status
21 Underwriters
22 Calculation of Performance Data
23 Financial Information
Part C Other Information
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24-32 Information required to be included in Part C is set forth under the appropriate Item, so
numbered, in Part C of this Document.
</TABLE>
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MASTER INVESTMENT TRUST
PART A
Dated May 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 and administrator. 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, co-administrator and
placement agent. Beneficial interests in the Trust are issued solely in
private placement transactions that do not involve any "public offering" within
the meaning of Section 4(2) of the Securities Act of 1933, as amended (the
"1933 Act"). Investments in the Trust may only be made by registered
broker/dealers or by investment companies, insurance company separate accounts,
common or commingled trust funds, group trusts or similar organizations or
entities that are "accredited investors" within the meaning of Regulation D
under the 1933 Act. This registration statement, as
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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 a strategy of allocating and reallocating investments among three
asset classes -- common stocks, U.S. Treasury bonds and money market
instruments. This strategy is based upon the premise that asset classes, from
time to time, are either 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 these asset classes (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 (an
"Investment Model" or "Model") developed over the past 18 years, 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
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 implements the Model's
recommendations and monitors the performance of the Model based on its
assessment of current economic conditions and investment opportunities. The
allocation of investments within the portfolio of the Master Portfolio is based
solely on the recommendation of the Model. No person is primarily responsible
for recommending the mix of asset classes held by the Master Portfolio or the
mix of securities within any such asset class. Decisions relating to the
Investment Model are made by various BGFA investment committees.
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
may use stock index futures and options thereon, and interest rate futures and
options thereon, as a substitute for a comparable market position in the
underlying securities.
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 Index1 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.
__________________________________
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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A more complete description of the Model and the Master Portfolio's
investments and investment activities is found under "Additional Information
About Permitted Investment Activities of the Master Portfolios" and in Part B.
2. CAPITAL APPRECIATION MASTER PORTFOLIO
The investment objective of the Capital Appreciation Master Portfolio
is to provide investors with an above- average level of capital appreciation.
The 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 is designed to provide above-average capital
growth for investors willing to assume above-average risk.
Under normal market conditions, the Master Portfolio invests primarily in
equity securities that Wells Fargo Bank, as investment adviser, believes have
better-than-average prospects for appreciation. Though the Master Portfolio
may hold a number of larger capitalization stocks, under normal market
conditions more than 50% of the Master Portfolio's total assets will be
invested in companies whose market capitalizations at the time of acquisition
are within the range of companies listed on the S&P Small Cap 600 Index. As
of December 1996, the capitalization range for the S&P Small Cap 600 Index was
from $40 million to $2.6 billion. The range of the S&P Small Cap 600 Index is
expected to change. The Master Portfolio may invest in companies with a market
capitalization under $40 million or over $2.6 billion if Wells Fargo Bank
believes such investments to be in the best interest of the Master Portfolio.
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. The Master Portfolio also may invest up to 25% of its assets in
American Depositary Receipts ("ADRs") and similar instruments and may invest up
to 15% of its assets in equity securities of companies in emerging or less
developed markets. Additionally, it is expected that the Capital Appreciation
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.
Under ordinary market conditions, at least 65% of the value of the
Master Portfolio's total assets 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.
From time to time Wells Fargo Bank may determine that conditions in
the securities markets make pursuing the Capital Appreciation 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.
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
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investing only in U.S. dollar-denominated securities with remaining maturities
not exceeding 397 days (13 months), as defined under the 1940 Act. The Master
Portfolio seeks to maintain a dollar-weighted average portfolio maturity of 90
days or less. The 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 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;
(iv) certain floating- and variable-rate instruments;
(v) certain repurchase agreements; and
(vi) 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 Corporate Stock Master Portfolio seeks 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 Corporate Stock Master Portfolio seeks to create, to the extent
feasible, a portfolio that 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. Precise
replication of the securities comprising the S&P 500 Index is not feasible, but
the Master Portfolio seeks a high correlation between the price and total
return performance of securities comprising the S&P 500 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 Corporate Stock 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
__________________________________
(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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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. The
Master Portfolio may invest up to 25% of its assets in American Depositary
Receipts and similar instruments. 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 primarily in U.S. Government obligations and investment-grade
corporate obligations. The securities that the Master Portfolio may purchase
include U.S. Treasury bonds, notes and bills; U.S. Government obligations;
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.
Under normal market conditions, the Master Portfolio invests
substantially all of its assets in U.S. Government obligations and corporate
securities, and at least 65% of its assets in income-producing securities. The
Master Portfolio is a flexible portfolio, in that there is no minimum level of
assets that will be invested in either category of investments. The investment
adviser intends, as a general matter, to keep at least 20% of the Master
Portfolio's assets invested in U.S. Government obligations and at least 20% of
its assets invested in corporate securities. The allocation of assets between
these investment categories will vary, depending primarily on their relative
yields.
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 Short-Term Municipal Income Master
Portfolio is to provide investors with a high level of income exempt from
federal income tax, while managing principal volatility.
Wells Fargo Bank, as investment adviser to the Master Portfolio,
pursues the objective of the Master Portfolio by investing (under normal market
conditions) substantially all of the Master Portfolio's assets 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 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 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 Master Portfolio seeks to have
substantially all of its assets invested in such municipal obligations. The
Master Portfolio's investment adviser may rely either on the opinion of counsel
to the issuer of the municipal obligations or bond counsel or on IRS rulings
regarding the tax treatment of these obligations. In
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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.
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 achieve this investment objective through the active management of a
broadly diversified portfolio of growth-oriented common stocks. The Master
Portfolio seeks to provide above-average capital growth for investors willing
to assume above-average risk.
Under normal market conditions, the Master Portfolio invests primarily
in companies whose market capitalizations fall within the capitalization range
of the companies listed on the Russell 2000, although it may sometimes invest
in companies with capitalizations greater or less than these amounts. As of
July 1996, the capitalization range of the Russell 2000 was between $161
million and $1.1 billion. The range is expected to change frequently. The
Master Portfolio will sell the common stock of any company in its investment
portfolio after such company's market capitalization exceeds $2 billion. 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.
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. The Master Portfolio also may invest in
securities of foreign governmental or private issuers and in securities of
issuers in emerging or less-developed markets. The Master Portfolio may invest
up to 25% of its assets in American Depositary Receipts and similar
instruments.
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 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 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 33% of the Master
Portfolio's total assets.
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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.
The Master Portfolio pursues its investment objective by investing
(under normal market conditions) substantially all of its assets 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 Tax-Free Money Market 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 Tax-Free Money Market 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 regarding
the tax treatment of these obligations. In addition, the Master Portfolio may
invest 25% or more of its assets in municipal obligations that are related in
such a way that an economic, business or political development or change
affecting one such obligation would also affect the other obligations. These
municipal obligations may include obligations which pay interest based on the
revenues of similar types of projects, such as pollution control bonds,
electric and gas utilities bonds and water authority bonds. Adverse economic
conditions or conditions or developments affecting a particular state,
municipality or issuing authority could impact the obligations issued by such
entities and decrease the value of the Master Portfolio's investments in such
obligations.
9. U.S. GOVERNMENT ALLOCATION MASTER PORTFOLIO
The U.S. Government Allocation Master Portfolio's investment objective
is to seek over the long term a high level of total return, including net
realized and unrealized capital gains and net investment income, consistent
with reasonable risk. The Master Portfolio seeks to achieve its objective by
pursuing a strategy of allocating and reallocating its investments among the
following three classes of debt instruments: long-term U.S. Treasury bonds,
intermediate-term U.S. Treasury notes, and short-term money market instruments.
This strategy is based upon the premise that these asset classes from time to
time are either 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
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<PAGE> 11
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 (an
"Investment Model" or "Model") developed over the past 18 years, 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 implements the Model's recommendations and monitors the
performance of the Model based on its assessment of current economic conditions
and investment opportunities. The allocation of investments within the
portfolio of the Master Portfolio is based solely on the recommendation of the
Model. No person is primarily responsible for recommending the mix of asset
classes held by the Master Portfolio or the mix of securities within any such
asset class. Decisions relating to the Investment Model are made by various
BGFA investment committees.
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 Master Portfolio'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 5% increments. Because the Master Portfolio may shift its
investment allocations significantly from time to time, its performance may
differ from funds which invest in one asset class or from funds with a constant
mix of assets.
A more complete description of the model and the Master Portfolio's
investments and investment activities is contained in "Additional Permitted
Investment Activities" and in the Part B.
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RISK FACTORS
Investments in a Master Portfolio are not deposits or obligations of
Wells Fargo Bank, are not insured by the FDIC and are not insured against loss
of principal. When the value of securities that a Master Portfolio owns
declines, the value of interests in the Master Portfolio declines also.
Investors should be willing to accept some risk with money invested in a Master
Portfolio.
The portfolio equity securities of the Master Portfolios are subject
to equity market risk. Equity market risk is the risk that stock prices will
fluctuate or decline over short or even extended periods. For the first
quarter of 1997, the stock market, as measured by the S&P 500 Index and other
commonly used indices, was trading at or close to record levels. There can be
no guarantee that these performance levels will continue. The portfolio debt
instruments of the Master Portfolios are subject to credit and interest-rate
risk. Credit risk is the risk that issuers of the debt instruments in which
the Master Portfolios invest may default on the payment of principal and/or
interest. Interest- rate risk is the risk that increases in market interest
rates may adversely affect the value of the debt instruments in which the
Master Portfolios invest and hence the value of your investment in a Master
Portfolio.
The market value of the Master Portfolios' investment in fixed-income
securities will change in response to various factors, such as changes in
interest rates and the relative financial strength of each issuer. During
periods of falling interest rates, the value of fixed-income securities
generally rises. Conversely, during periods of rising interest rates, the
value of such securities generally declines. Debt securities with longer
maturities, which tend to produce higher yields, are subject to potentially
greater price fluctuations than obligations with shorter maturities.
Fluctuations in the market value of fixed-income securities can be reduced, but
not eliminated, by variable- and floating-rate features.
Securities rated in the fourth highest rating category 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. Subsequent to its purchase
by a Master Portfolio, an issue of securities may cease to be rated or its
rating may be reduced below the minimum rating required for purchase by the
Master Portfolios. Securities rated below the fourth highest rating category
(sometimes called "junk bonds") are often considered to be speculative and
involve greater risk of default or price changes due to changes in the issuer's
credit-worthiness. The market prices of these securities may fluctuate more
than higher quality securities and may decline significantly in periods of
general economic difficulty.
There may be some additional risks associated with the Capital
Appreciation and Small Cap Master Portfolios' investments in smaller and/or
newer companies because such companies 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 and may be subject to more
abrupt price movements than securities of larger companies. The equity
securities in the Capital Appreciation and Small Cap Master Portfolios'
portfolios may have some low or no dividends; smaller market capitalizations
(less than $1 billion); newly public companies (i.e., recent initial public
offering); less market liquidity; relatively short operating histories;
aggressive capitalization structures (including high debt levels); and
involvement in rapidly growing/changing industries and/or new technologies.
The Capital Appreciation, Small Cap and Tax-Free Money Market Master
Portfolios may invest in securities of foreign issuers. These investments
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.
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There are special risks involved in investing in emerging-market
countries. Most are heavily dependent on international trade, and some are
especially vulnerable to recessions in other countries. Many of these
countries are also sensitive to world commodity prices. Some countries may
still have obsolete financial systems, economic problems or archaic legal
systems. In addition, many of these nations are experiencing political and
social uncertainties. Many investments in emerging markets can be considered
speculative, and their prices can be much more volatile than in the more
developed nations of the world. This difference reflects the greater
uncertainties of investing in less established markets and economies. The
financial markets of emerging markets countries are generally less well
capitalized and thus securities of issuers based in such countries may be less
liquid.
The adviser may use certain derivative investments or techniques, such
as buying and selling options and futures contracts and entering into currency
exchange contracts or swap agreements, to adjust the risk and return
characteristics of a Master Portfolio's investments. Derivatives are financial
instruments whose value is derived, at least in part, from the price of another
security or a specified asset, index or rate. 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. If the adviser judges market
conditions incorrectly, the use of certain derivatives could result in a loss,
regardless of the adviser's intent in using the derivatives.
The Tax-Free Money Market Master Portfolio may not achieve as high a
level of current income as other mutual funds that do not limit their
investment to the high credit quality instruments in which the Master Portfolio
invests. Under 1940 Act, the Tax-Free Money Market Master Portfolio must
comply with certain investment criteria designed to provide liquidity, reduce
risk, and allow the Master Portfolio to maintain a stable net asset value of
$1.00 per share. Although the Master Portfolio seeks to maintain a stable NAV
of $1.00 per share, there is no assurance that it will be TheeMaster
Portfolio's dollar-weighted average portfolio maturity must not exceed 90 days.
Any security that the Master Portfolio purchases must have a remaining maturity
of not more than 397 days (13 months). In addition, any security that the
Master Portfolio purchases must present minimal credit risks and be of "high
quality." "High quality" means to be rated in the top two rating categories by
the requisite NRSROs or, if unrated, determined to be of comparable quality to
such rated securities by Wells Fargo Bank, as the Master Portfolio's investment
adviser, under guidelines adopted by The Master Portfolio seeks to reduce risk
by investing its assets in securities of various issuers. As such, the Master
Portfolio is considered to be diversified for purposes of the 1940 Act. In
addition, the Master Portfolio emphasizes safety of principal and high credit
quality. In particular, the internal investment policies of the investment
adviser prohibit the purchase of many types of floating-rate derivative
securities that are considered potentially volatile.
Illiquid securities, which may include certain restricted securities,
may be difficult to sell promptly at an acceptable price. Certain restricted
securities may be subject to legal restrictions on resale. Delay or difficulty
in selling securities may result in a loss or be costly to a Master Portfolio.
The following types of derivative securities ARE NOT permitted investments for
the CIT and Tax-Free Money Market Master Portfolios:
# capped floaters (on which interest is not paid when market rates
move above a certain level);
# leveraged floaters (whose interest rate reset provisions are based
on a formula that magnifies changes in interest rates);
# range floaters (which do not pay any interest if market interest
rates move outside of a specified range);
# dual index floaters (whose interest rate reset provisions are tied
to more than one index so that a change in the relationship
between these indices may result in the value of the instrument
falling below face value); and
# inverse floaters (which reset in the opposite direction of their
index).
Additionally, the Master Portfolios may not invest in securities whose
interest rate reset provisions are tied to an index that materially lags
short-term interest rates, such as "COFI floaters." The CIT and Tax-Free Money
Market Master Portfolios may invest only in variable or floating-rate
securities that bear interest at a rate that resets quarterly or
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<PAGE> 14
more frequently and that resets based on changes in standard money market rate
indices such as U.S. Treasury bills, London Interbank Offered Rate ("LIBOR"),
the prime rate, published commercial paper rates, federal funds rates, Public
Securities Associates ("PSA") floaters or JJ Kenney index floaters.
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. Portfolio turnover also can generate short-term capital gains tax
consequences. Each of the Allocation Master Portfolios may shift its
investment allocations significantly from time to time and the performance of
such Master Portfolios may differ from funds which invest in one asset class or
from funds with a stable mix of assets. Further, shifts among asset classes
may result in relatively high portfolio turnover rates. The Capital
Appreciation and Small Cap Master Portfolios pursue an active trading
investment strategy, and the length of time a Master Portfolio has held a
particular security is not generally a consideration in investment decisions.
Accordingly, the portfolio turnover rate for the Capital Appreciation and Small
Cap Master Portfolios may be higher than that of other funds that do not
pursue an active trading investment strategy. A high portfolio turnover rate
should not result in the Government-Corporate and Municipal Income Master
Portfolios paying substantially more brokerage commissions, since most
transactions in government securities and municipal obligations are effected on
a principal basis.
PORTFOLIO TURNOVER
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE PORTFOLIO TURNOVER RATE
MASTER PORTFOLIO PERIOD ENDED SEPTEMBER 30, 1996 YEAR ENDED DECEMBER 31, 1996
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Asset Allocation 28.0% N/A
- ----------------------------------------------------------------------------------------------------------
Capital Appreciation N/A 137.0%
- ----------------------------------------------------------------------------------------------------------
Cash Investment Trust N/A N/A
- ----------------------------------------------------------------------------------------------------------
Corporate Stock 3.0% N/A
- ----------------------------------------------------------------------------------------------------------
Government-Corporate Income N/A 247.0%
- ----------------------------------------------------------------------------------------------------------
Municipal Income N/A 47.0%
- ----------------------------------------------------------------------------------------------------------
Small Cap N/A 28.0%
- ----------------------------------------------------------------------------------------------------------
Tax-Free Money Market N/A N/A
- ----------------------------------------------------------------------------------------------------------
U.S. Government Allocation 87.0% N/A
- ----------------------------------------------------------------------------------------------------------
</TABLE>
B. ADDITIONAL PERMITTED INVESTMENT ACTIVITIES
Set forth below, except where otherwise indicated, is a description of
certain permitted investments for each Master Portfolio. Additional related
information is contained in Part B.
U.S. Government Obligations
The Master Portfolios may invest in obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities ("U.S. Government
obligations"). Payment of principal and interest on U.S. Government
obligations (i) may be backed by the full faith and credit of the United States
(as with U.S. Treasury bills and GNMA Certificates) or (ii) may be backed by
solely by issuing or guaranteeing agency or instrumentality itself (as with
FNMA notes). In the latter case investors must look principally to the agency
or instrumentality issuing or guaranteeing the obligation for ultimate
repayment, which agency or instrumentality may be privately owned. There can
be no assurance that the U.S. Government 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 rise when market rates decrease. Certain types of
U.S. Government obligations are subject to fluctuations in yield or value due
to their structure or contract terms. The Tax-Free Money Market Master
Portfolio may invest in various types of U.S. Government obligations provided
the remaining maturities of such obligations do not exceed thirteen months.
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Floating- and Variable-Rate Instruments
The Master Portfolios may purchase debt instruments with interest rates that
are periodically adjusted at specified intervals or whenever a benchmark rate
or index changes. These adjustments generally limit the increase or decrease
in the amount of interest received on the debt instruments. The floating- and
variable-rate instruments that the Master Portfolios may purchase include
certificates of participation in such obligations. Floating- and variable-rate
instruments are subject to interest-rate risk and credit risk.
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.
Repurchase Agreements
Each Master Portfolio may enter into repurchase transactions in which
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 securities which could
otherwise be purchased by such Master Portfolio, and all repurchase agreements
must be collateralized. A Master Portfolio may incur a loss on a repurchase
transaction if the seller defaults and the value of the underlying collateral
declines or is otherwise limited or if receipt of the security or collateral is
delayed. The Master Portfolios may participate in pooled repurchase agreement
transactions with other funds advised by Wells Fargo Bank.
Foreign Obligations and Securities
The Asset Allocation, 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 Capital Appreciation, Corporate Stock and Small Cap Master
Portfolios each may invest up to 25% of its assets in securities of foreign
governmental and private issuers that are denominated in and pay interest in
U.S. dollars. These securities may take the form of American Depositary
Receipts ("ADRs"), Canadian Depositary Receipts ("CDRs"), European Depositary
Receipts ("EDRs"), International Depositary Receipts ("IDRs") and Global
Depositary Receipts ("GDRs") or other similar securities convertible into
securities of foreign issuers. These securities may not necessarily be
denominated in the same currency as the securities into which they may be
converted. ADRs (sponsored or unsponsored) are receipts typically issued by a
U. S. bank or trust company and traded on a U.S. stock exchange, and CDRs are
receipts typically issued by a Canadian bank or trust company, that evidence
ownership of underlying foreign securities. Issuers of unsponsored ADRs are not
contractually obligated to disclose material information in the U.S. and,
therefore, such information may not correlate to the market value of the
unsponsored ADR. EDRs and IDRs are receipts typically issued by European banks
and trust companies, and GDRs are receipts issued by either a U.S. or non- U.S.
banking institution, that evidence ownership of the underlying foreign
securities. Generally, ADRs in registered form are designed for use in U.S.
securities markets and EDRs and IDRs in bearer form are designed primarily for
use in Europe.
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.
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Emerging Markets
The Capital Appreciation and Small Cap Master Portfolios may each
invest up to 15% of its assets in equity securities of companies in "emerging
markets." The Master Portfolios 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 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.
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).
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<PAGE> 17
Money Market Instruments and Temporary Investments
The Master Portfolios may invest in high-quality money market
instruments, including: (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 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) repurchase agreements; (v) for the Corporate Stock, Asset
Allocation and U.S. Government Allocation Master Portfolios only,
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; and (vi) short-term, U.S.
dollar-denominated obligations of foreign banks (including U.S. branches) that,
at the time of investment: (a) have more than $10 billion, or the equivalent in
other currencies, in total assets; (b) are among the 75 largest foreign banks
in the world as determined on the basis of assets; (c) have branches or
agencies in the United States; and (d) in the opinion of Wells Fargo Bank, as
investment adviser (or BGFA, as sub-adviser, as applicable), are of comparable
quality to obligations of U.S. banks which may be purchased by the Master
Portfolios.
Asset-backed Securities
The Government-Corporate Income Master Portfolio may invest in various
types of asset-backed securities. Asset- backed securities are typically backed
by an underlying pool of assets (such as credit card or automobile trade
receivables or corporate loans or bonds) which provides the interest and
principal payments to investors. Credit quality depends primarily on the
quality of the underlying assets and the level of credit support, if any,
provided by the issuer. The underlying assets may be subject to prepayment
which can shorten the life of asset-backed securities and may lower their
return. Asset-backed securities are subject to interest rate risk, which means
that this value typically declines when interest rates increase. 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
Certain of the debt obligations, certificates of participation,
commercial paper and other short-term obligations which the CIT Master
Portfolio is permitted to purchase may be backed by an unconditional and
irrevocable letter of credit of a bank, savings and loan association or
insurance company that assumes the obligation for payment of principal and
interest in the event of default by the issuer. Letter of credit-backed
investments must, in the opinion of Wells Fargo Bank, be of investment quality
comparable to other permitted high-quality investments of the CIT Master
Portfolio.
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
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<PAGE> 18
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 securities may include "moral obligation" bonds, which are
normally issued by special purpose public authorities. If the issuer of moral
obligation bonds is unable to meet its debt service obligations from current
revenues, it may draw on a reserve fund, the restoration of which is a moral
commitment but not a legal obligation of the state or municipality which
created the issuer. An issuer's obligation to pay principal or interest on an
instrument may be backed by an unconditional bank letter or line of credit,
guarantee, or commitment to lend.
Municipal securities 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 participation interests, which give the purchaser an
undivided interest in one or more underlying municipal obligations, may be
purchased from financial institutions. To the extent that municipal
participation interests are considered to be "illiquid securities," such
instruments are subject to the Master Portfolio's limitation on the purchase of
illiquid securities.
In addition, the Master Portfolios may acquire "stand-by commitments"
from banks or broker/dealers with respect to municipal obligations held in its
portfolios. Under a stand-by commitment, a dealer agrees to purchase at the
Master Portfolio's option specified municipal obligations at a specified price.
The Master Portfolio acquires stand-by commitments solely to facilitate
portfolio liquidity and without intending to exercise its rights thereunder for
trading purposes.
The Municipal Income Master Portfolio may purchase municipal
obligations known as "certificates of participation" which represent undivided
proportional interests in lease payments by a governmental or nonprofit entity.
The lease payments and other rights under the lease provide for and secure the
payments on the certificates. Lease obligations may be limited by applicable
municipal charter provisions or the nature of the appropriation for the lease.
In particular, lease obligations may be subject to periodic appropriation.
Lease obligations also may be abated if the leased property is damaged or
becomes unsuitable for the lessee's purpose. If the entity does not
appropriate funds for future lease payments, the entity cannot be compelled to
make such payments. Furthermore, a lease may or may not provide that the
certificate trustee can accelerate lease obligations upon default. If the
trustee could not accelerate lease obligations upon default, the trustee would
only be able to enforce lease payments as they became due. In the event of a
default or failure of appropriation, it is unlikely that the trustee would be
able to obtain an acceptable substitute source of payment. Certificates of
participation are generally subject to redemption by the issuing municipal
entity under specified circumstances. If a specified event occurs, a
certificate is callable at par either at any interest payment date or, in some
cases, at any time. As a result, certificates of participation are not as
liquid or marketable as other types of municipal obligations and are generally
valued at par or less than par in the open market.
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;
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(ii) municipal notes rated at the date of purchase "MIG1" or "MIG2"
(or "VMIG1" or "VMIG2" in the case of an issue having a
variable rate with a demand feature) by Moody's or "SP-1+",
"SP-1" or "SP-2" by S&P; and
(iii) short-term municipal commercial paper rated at the date of
purchase "P-1" by Moody's or "A-1+", "A-1" or "A-2" by
S&P.
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.
Forward Commitments, When-Issued Purchases and Delayed-Delivery Transactions
The Government-Corporate Income and Municipal Income Master Portfolios
may purchase or sell securities on a when-issued or delayed-delivery basis and
make contracts to purchase or sell securities for a fixed price at a future
date beyond customary settlement time. Securities purchased or sold on a
when-issued, delayed-delivery or forward commitment basis involve a risk of
loss if the value of the security to be purchased declines, or the value of the
security to be sold increases, before the settlement date. Although a Fund
will generally purchase securities with the intention of acquiring them, such
Fund may dispose of securities purchased on a when-issued, delayed-delivery or
a forward commitment basis before settlement when deemed appropriate by Wells
Fargo Bank.
Taxable Investments by the Tax-Free Money Market Master Portfolio
The Tax-Free Money Market Master Portfolio may temporarily invest some
of its assets in taxable cash reserves or certain high-quality, taxable money
market instruments. The Master Portfolio may elect to invest temporarily up to
20% of the current value 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 may also 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.
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"), 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 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, a Master Portfolio
may purchase shares of exchange-listed closed-end funds consistent with
pursuing its investment objective.
Privately Issued Securities (Rule 144A)
The Capital Appreciation, Tax-Free Money Market and Small Cap Master
Portfolios each 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. Delay or difficulty in selling such securities may
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result in a loss to a Fund. Privately issued securities that are determined by
Wells Fargo Bank to be "illiquid" will be subject to each Master Portfolio's
policy of not investing more than 15% of its net assets in illiquid securities.
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.
Corporate Reorganizations
The Capital Appreciation, Corporate Stock 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
The Asset Allocation 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 Asset Allocation, Corporate Stock and U.S.
Government Allocation Master Portfolios 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).
The Asset Allocation, Corporate Stock and U.S. Government Allocation
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
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<PAGE> 21
initial margin deposits and premiums paid for unexpired options on futures
contracts, other than those contracts entered into for bona fide hedging
purposes, would exceed 5% of the liquidation value of such Master Portfolio's
assets, after taking into account unrealized profits and unrealized losses on
such contracts; provided, however, that in the case of an option on a futures
contract that is in-the-money at the time of purchase, the in-the-money amount
may be excluded in calculating the 5% liquidation amount. Pursuant to
regulations and/or published positions of the SEC, such Master Portfolio may be
required to segregate cash or high quality money market instruments in
connection with its futures transactions in an amount generally equal to the
entire value of the underlying position.
Initially, when purchasing or selling futures contracts a Master
Portfolio will be required to deposit with such Master Portfolio's custodian in
the broker's name an amount of cash or cash equivalents up to approximately 10%
of the contract amount. This amount is subject to change by the exchange or
board of trade on which the contract is traded, and members of such exchange or
board of trade may impose their own higher requirements. This amount is known
as "initial margin" and is in the nature of a performance bond or good faith
deposit on the contract that is returned to the Master Portfolio upon
termination of the futures position, assuming all contractual obligations have
been satisfied. Subsequent payments, known as "variation margin," to and from
the broker will be made daily as the price of the index or securities
underlying the futures contract fluctuates, making the long and short positions
in the futures contract more or less valuable. At any time prior to the
expiration of a futures contract, a Master Portfolio may elect to close the
position by taking an opposite position, at the then prevailing price, thereby
terminating its existing position in the contract.
Although the Master Portfolios intend to purchase or sell futures
contracts only if there is an active market for such contracts, no assurance
can be given that a liquid market will exist for any particular contract at any
particular time. Many futures exchanges and boards of trade limit the amount of
fluctuation permitted in futures contract prices during a single trading day.
Once the daily limit has been reached in a particular contract, no trades may
be made that day at a price beyond that limit or trading may be suspended for
specified periods during the trading day. Futures contracts prices could move
to the limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and potentially
subjecting such Master Portfolios to substantial losses. If it is not possible,
or the Master Portfolio determines not, to close a futures position in
anticipation of adverse price movements, such Master Portfolio will be required
to make daily cash payments of variation margin.
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract (a long
position if the option is a call and a short 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. The Asset Allocation and U.S. Government
Allocation 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 by the Asset Allocation and U.S. Government Allocation Master
Portfolios 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 Corporate Stock and Small Cap Master Portfolios
each 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 its net 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.
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When a Master Portfolio writes an option on a stock index, such Master
Portfolio will place in a segregated account with the Master Portfolio's
custodian cash or liquid securities in an amount at least equal to the market
value of the underlying stock index and will maintain the account while the
option is open or otherwise will cover the transaction.
Stock Index Futures and Options on Stock Index Futures. The Asset
Allocation, Corporate Stock and U.S. Government Allocation 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. There can be
no assurance that a liquid market will exist at the time when a Master
Portfolio seeks to close out a futures contract or a futures option position.
Lack of a liquid market may prevent liquidation of an unfavorable position.
Interest-Rate Futures Contracts and Options on Interest-Rate Futures
Contracts. The Asset Allocation, Corporate Stock and U.S. Government Allocation
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. The Asset Allocation, Corporate Stock
and U.S. Government Allocation 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.
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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 of the Trust.
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 Portfolios use certain derivatives without
establishing adequate "cover" in compliance with SEC rules limiting the use of
leverage.
Call and Put Options on Specific Securities
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.
The Capital Appreciation and Small Cap Master Portfolios may invest in
call and put options on a specific security. The Capital Appreciation Master
Portfolio may invest up to 15% of its 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 Small Cap Master Portfolio may write covered call option and
secured put option contracts. The aggregate value of securities subject to
options written by the Master Portfolio will not exceed 15% of its 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.
Loans of Portfolio Securities
The Asset Allocation, Capital Appreciation, Corporate Stock, Small Cap
and U.S. Government Allocation Master Portfolios may lend securities from their
respective portfolios to brokers, dealers and financial institutions (but not
individuals) in order to increase the return on such Master Portfolio's
portfolio. The value of the loaned securities may not exceed one-third of a
Master Portfolio's total assets and loans of portfolio securities are fully
collateralized based on values that are market-to-market daily. The Master
Portfolios will not enter into any portfolio security lending arrangement
having a duration of longer than one year. The principal risk of portfolio
lending is potential default or insolvency of the borrower. In either of these
cases, a Master Portfolio could experience delays in recovering securities or
collateral or could lose all or part of the value of the loaned securities.
The Master Portfolios may pay reasonable administrative and custodial fees in
connection with loans of portfolio securities and may pay a portion of the
interest or fee earned thereon the borrower or a placing broker.
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-
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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. 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."
Convertible Securities
The Small Cap and Capital Appreciation Master Portfolios may invest in
convertible securities that provide current income and are issued by companies
with the characteristics described herein that have a strong earnings and
credit record. The Master Portfolios may purchase convertible securities that
are fixed-income debt securities or preferred stocks, and which may be
converted at a stated price within a specified period of time into a certain
quantity of the common stock of the same issuer. Convertible securities, while
usually subordinate to similar nonconvertible securities, are senior to common
stocks in an issuer's capital structure. Convertible securities offer
flexibility by providing the investor with a steady income stream (which
generally yields a lower amount than similar nonconvertible securities and a
higher amount than common stocks) as well as the opportunity to take advantage
of increases in the price of the issuer's common stock through the conversion
feature. Fluctuations in the convertible security's price can reflect changes
in the market value of the common stock or changes in market interest rates.
At most, 5% of each Master Portfolio's net assets will be invested, at the time
of purchase, in convertible securities that are not rated in the four highest
rating categories by one or more NRSROs, such as Moody's or S&P, or unrated but
determined by Wells Fargo Bank to be of comparable quality.
C. INVESTMENT POLICIES
Each Master Portfolio's investment objective and the classification of
each Master Portfolio as "diversified" may not be changed without the approval
of a majority vote of the Master Portfolio's investors.
As a matter of fundamental policy, the CIT Master Portfolio: (i) may
borrow from banks up to 10% of the current value of its net assets only for
temporary purposes in order to meet redemptions, and these borrowings may be
secured by the pledge of up to 10% of the current value of its net assets (but
investments may not be purchased while any such outstanding borrowing exceeds
5% of the Master Portfolio's net assets); and (ii) may not invest more than 25%
of its assets (i.e., concentrate) in any particular industry, excluding U.S.
Government obligations and obligations of domestic banks. (Foreign branches of
U.S. banks and U.S. branches of foreign banks are not domestic banks for
purposes of this exclusion.) As a matter of non-fundamental policy, the CIT
Master Portfolio may invest up to 10% of the current value of its 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
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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
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.
22
<PAGE> 26
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 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
23
<PAGE> 27
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 5% 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 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 Allocation Master Portfolio, manages the investments of the Master
Portfolio using a computer model developed over the past EIGHTEEN 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
24
<PAGE> 28
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.
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 and administrator to each
Master Portfolio, and Stephens as sponsor, co-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, co-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
25
<PAGE> 29
western United States. As of April 1, 1997, Wells Fargo Bank and its affiliates
provided investment advisory services for over $57 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 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. Smith is a co-manager of the Overland
Express Variable Rate Government Fund.
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 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
26
<PAGE> 30
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 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 each of the Capital Appreciation, Municipal Income and
Government-Corporate Income Master Portfolios; 0.60% of the average daily net
assets of the Small Cap Master Portfolio, and 0.30% of the average daily net
assets of the Tax- Free Money Market Master Portfolio.
For its services under the Advisory Contracts to the Asset Allocation,
Corporate Stock 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 Asset Allocation, Corporate Stock 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.
BGFA, located at 45 Fremont Street, San Francisco, California 94105,
serves as sub-adviser to the Corporate Stock, Asset Allocation 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 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 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.
27
<PAGE> 31
For the year ended December 31, 1996, Wells Fargo Bank was paid
amounts equal to the indicated percentages of the average daily net assets of
each Master Portfolio as compensation for advisory services:
Advisory Fees Paid
<TABLE>
<CAPTION>
Year/Period* Ended
Master Portfolio December 31, 1996
----------------- -----------------
<S> <C> <C>
o Capital Appreciation 0.50%
o CIT 0.25%
o Government Corporate Income 0.00%
o Municipal Income 0.00%
o Small Cap 0.60%
o Tax-Free Money Market 0.27%
</TABLE>
_________________________
* The Capital Appreciation and Tax-Free Money Market Master Portfolios
commenced operations on February 20, 1996 and April 2, 1996, respectively.
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.
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.
Advisory Fees Paid
<TABLE>
<CAPTION>
Year Ended Period Ended
Fund/Master Portfolio December 31, 1995 September 30, 1996 (1)
---------------------- ----------------- ------------------
<S> <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>
- --------------
(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.
28
<PAGE> 32
<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 Portfolios with
administrative services, including general supervision of each Master
Portfolio's 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 of 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 any 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.
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.
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<PAGE> 33
Expenses 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, 1996, 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:
Total Expenses
<TABLE>
<CAPTION>
Year Ended December 31, 1996
----------------------------
Before After
Waivers and Waivers and
Master Portfolio Reimbursements Reimbursements
---------------- -------------- --------------
<S> <C> <C> <C>
o Capital Appreciation 0.45% 0.45%
o CIT 0.32% 0.02%
o Government Corporate Income 0.81% 0.00%
o Municipal Income 0.69% 0.00%
o Small Cap 0.94% 0.94%
o Tax-Free Money Market 0.24% 0.22%
</TABLE>
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>
Fiscal Period Ended September 30, 1996
--------------------------------------
Before After
Waivers and Waivers and
Master Portfolio Reimbursements Reimbursements
----------------- -------------- --------------
<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
Waivers and Waivers and Waivers and Waivers and
Fund Reimburs. Reimburs. Reimburs. Reimburs.
---- ---------- ---------- ---------- ----------
<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>
30
<PAGE> 34
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.
PRINCIPAL HOLDERS OF SECURITIES AS OF APRIL 1, 1997
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
STAGECOACH FUNDS % OWNED OVERLAND EXPRESS % OWNED
MASTER PORTFOLIO FEEDER FUND OF MASTER FEEDER FUND OF MASTER
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
Asset Allocation Asset 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%
- ----------------------------------------------------------------------------------------------------------------
Capital Appreciation Aggressive Growth 22.30% Strategic Growth 77.70%
- ----------------------------------------------------------------------------------------------------------------
Corporate Stock Corporate Stock 99.99% N/A N/A
- ----------------------------------------------------------------------------------------------------------------
Municipal Income N/A N/A Short-Term Municipal Income 99.99%
- ----------------------------------------------------------------------------------------------------------------
Small Cap Small Cap 89.25% Small Cap Strategy 10.75%
- ----------------------------------------------------------------------------------------------------------------
Tax-Free Money Market National Tax-Free 32.44% National Tax-Free 67.56%
Money Market Mutual Institutional Money Market
- ----------------------------------------------------------------------------------------------------------------
U.S. Govt. Allocation U.S. Govt. Allocation 99.99% N/A N/A
- ----------------------------------------------------------------------------------------------------------------
</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.
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<PAGE> 35
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 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.
_________________________________
32
<PAGE> 36
Investor inquiries should be directed to 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
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. and 1:00 p.m.
(Pacific time) on each Bank Business Day. The net asset value of the Tax-Free
Money Market Master Portfolio is determined as of 9:00 a.m. and 1:00 p.m.
(Pacific time) on each Business Day. 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.
33
<PAGE> 37
The CIT Master Portfolio and the Tax-Free Money Market Master
Portfolio each uses the amortized cost method to value its portfolio
securities. The amortized cost method involves valuing a security at its cost
and amortizing any discount or premium over the period until maturity,
generally without regard to the impact of fluctuating interest rates on the
market value of the security.
OTHER MASTER PORTFOLIOS -- The net asset value of each of the Capital
Appreciation, Municipal Income, Government-Corporate Income, Small Cap,
Corporate Stock, Asset Allocation and the U.S. Government Allocation Master
Portfolios is determined on each Business Day. The net asset value per interest
in each of these Master Portfolios is determined by dividing the value of the
total net assets of the Master Portfolio by the total number of outstanding
Interests.
The value of the net assets of each of these Master Portfolios (other
than debt obligations maturing in 60 days or less) is determined at the close
of regular trading on the Exchange, which is currently 1:00 p.m. (Pacific
time). Except for debt obligations with remaining maturities of 60 days or
less, which are valued at amortized cost, assets are valued at current market
prices, or if such prices are not readily available, at fair value as
determined in good faith by the Trust's Board of Trustees. Prices used for such
valuation may be provided by independent pricing services.
ITEM 8. REDEMPTION OR REPURCHASE.
An investor in a Master Portfolio may withdraw all or a portion of its
investment at any time at the net asset value next determined after a
withdrawal request in proper form is furnished by the investor to the Trust.
The Master Portfolios do not charge for redemption transactions. The proceeds
of a withdrawal are paid by the Trust in federal funds normally on the Business
Day or Bank Business Day, as applicable, the withdrawal is effected, and in the
case of the Tax-Free Money Market Master Portfolio, on the following Business
Day, but in any event within seven days. At a Master Portfolio's option,
payment of redemption proceeds may be made in securities, subject to regulation
by some state securities commissions. Investments in a Master Portfolio of the
Trust may not be transferred.
The right of any investor to receive payment with respect to any
withdrawal may be suspended or the payment of the withdrawal proceeds postponed
during any period in which the Exchange is closed (other than weekends or
Holidays) or trading on the Exchange is restricted, or, to the extent otherwise
permitted by the Act, if an emergency exists.
ITEM 9. PENDING LEGAL PROCEEDINGS.
Not applicable.
34
<PAGE> 38
MASTER INVESTMENT TRUST
TELEPHONE: (800) 643-9691
PART B
Dated May 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 May 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.
1
<PAGE> 39
ITEM 11. TABLE OF CONTENTS.
<TABLE>
<CAPTION>
PAGE
<S> <C> <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 . . . . . . . . . . . . . . . . 21
Item 16. Investment Advisory and Other Services . . . . . . . . . . . . . . . . . . . . . . . 21
Item 17. Brokerage Allocation and Other Practices . . . . . . . . . . . . . . . . . . . . . . 25
Item 18. Capital Stock and Other Securities . . . . . . . . . . . . . . . . . . . . . . . . . 28
Item 19. Purchase, Redemption and Pricing of Securities . . . . . . . . . . . . . . . . . . . 29
Item 20. Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Item 21. Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Item 22. Calculations of Performance Data . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Item 23. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
</TABLE>
2
<PAGE> 40
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.
The Asset Allocation, Corporate Stock and U.S. Government Allocation Master
Portfolios 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 any Master Portfolio's investments in that
industry would be 25% or more of the current value of its total assets,
provided that there is no limitation with respect to investments in (i)
obligations of the United States Government, its agencies or instrumentalities,
(ii) in the case of the Corporate Stock Master Portfolio and the Asset
Allocation Master Portfolio, any industry in which the S&P 500 Index becomes
concentrated to the same degree during the same period, and (iii) in the case
of the Asset Allocation Master Portfolio, money market instruments invested in
the banking industry (but the Master Portfolio will not do so unless the SEC
staff confirms that it does not object to the Master Portfolio reserving
freedom of action to concentrate investments in the banking industry);
(2) purchase or sell real estate or real estate limited partnerships
(other than securities secured by real estate or interests therein or
securities issued by companies that invest in real estate or interests
therein);
(3) purchase or sell commodities or commodity contracts; except that each
Master Portfolio may purchase and sell (i.e., write) options, forward
contracts, futures contracts, including those relating to indices, and options
on futures contracts or indices, and may participate in interest rate and index
swaps;
(4) purchase interests, leases, or limited partnership interests in oil,
gas, or other mineral exploration or development programs;
(5) purchase securities on margin (except for short-term credits necessary
for the clearance of transactions and except for margin payments in connection
with transactions in options, forward contracts, futures contracts, including
those relating to indices, and options on futures contracts or indices) or make
short sales of securities;
(6) underwrite securities of other issuers, except to the extent that the
purchase of permitted investments directly from the issuer thereof or from an
underwriter for an issuer and the later disposition of such securities in
accordance with the Master Portfolio's investment program may be deemed to be
an underwriting;
(7) make investments for the purpose of exercising control or management;
3
<PAGE> 41
(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.
The Asset Allocation, Corporate Stock and U.S. Government Allocation Master
Portfolios may not:
(1) purchase or retain securities of any issuer if the officers or
Trustees of the Trust or Wells Fargo Bank owning beneficially more than
one-half of one percent (0.50%) of the securities of the issuer together owned
beneficially more than 5% of such securities;
(2) purchase securities of issuers who, with their predecessors, have been
in existence less than three years, unless the securities are fully guaranteed
or insured by the U.S. Government, a state, commonwealth, possession,
territory, the District of Columbia or by an entity in existence at least three
years, or the securities are backed by the assets and revenues of any of the
foregoing if, by reason thereof, the value of its aggregate investments in such
securities will exceed 5% of its total assets;
(3) purchase securities of unseasoned issuers, including their
predecessors, which have been in operation for less than three years, and
equity securities of issuers which are not readily marketable if by reason
thereof the value of its aggregate investment in such classes of securities
will exceed 5% of its total assets; or
(4) invest more than 15% of its net assets in illiquid securities,
including repurchase agreements maturing in more than seven days.
In addition, the Master Portfolios may invest in shares of other open-end,
management investment companies, subject to the limitations of Section 12(d)(1)
of the 1940 Act, provided that any such purchases will be limited to temporary
investments in shares of unaffiliated investment companies and Wells Fargo Bank
will waive its advisory fees for that portion of the Master Portfolios' assets
so invested, except when such purchase is part of a plan of merger,
consolidation, reorganization or acquisition.
The Trust may make commitments more restrictive than the restrictions
listed above, so as to permit the sale of shares of a feeder fund that invests
in the Master Portfolio in certain states. Should the Trust determine that a
commitment is no longer in the best interest of the Master Portfolio and its
shareholders, the Trust reserves the right to revoke the commitment by
terminating the sale of such Master Portfolio's shares in the state involved.
4
<PAGE> 42
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:
(1) purchase the securities of issuers conducting their principal business
activity in the same industry if, immediately after the purchase and as a
result thereof, the value of the Master Portfolio's investments in that
industry would equal or exceed 25% of the current value of the Master
Portfolio's total assets, provided that there is no limitation with respect to
investments in securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities;
(2) purchase or sell real estate or real estate limited partnerships
(other than securities secured by real estate or interests therein or
securities issued by companies that invest in real estate or interests
therein), commodities or commodity contracts, or interests in oil, gas, or
other mineral exploration or development programs;
(3) purchase securities on margin (except for short-term credits necessary
for the clearance of transactions) or make short sales of securities;
(4) underwrite securities of other issuers, except to the extent that the
purchase of permitted investments directly from the issuer thereof or from an
underwriter for an issuer and the later disposition of such securities in
accordance with the Master Portfolio's investment program may be deemed to be
an underwriting;
(5) make investments for the purpose of exercising control or management;
(6) issue senior securities except that the Master Portfolio may borrow
from banks up to 10% of the current value of its net assets for temporary
purposes only in order to meet redemptions, and these borrowings may be secured
by the pledge of up to 10% of the current value of its net assets (but
investments may not be purchased while any such outstanding borrowings exceed
5% of its net assets);
(7) make loans of portfolio securities having a value that exceeds 50% of
the current value of its total assets, provided that, this restriction does not
apply to the purchase of fixed time deposits, repurchase agreements, commercial
paper and other types of debt instruments commonly sold in a public or private
offering; nor
(8) purchase securities of any issuer (except securities issued by the
U.S. Government, its agencies or instrumentalities ) if, as a result, with
respect to 75% of its total assets, more than 5% of the value of its total
assets would be invested in the securities of any one issuer or, with respect
to 100% of its total assets the Master Portfolio's ownership would be more than
10% of the outstanding voting securities of such issuer. With respect to
fundamental investment policy (7), the Master Portfolio does not intend to loan
its portfolio securities during the coming year.
NON-FUNDAMENTAL INVESTMENT POLICIES. The Capital Appreciation Master
Portfolio is subject to the following non- fundamental investment policies.
These restrictions may be changed by a vote of a majority of the Trustees of
the Trust at any time.
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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:
(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)
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obligations of domestic banks (for purposes of this restriction, domestic bank
obligations do not include obligations of U.S. branches of foreign banks or
obligations of foreign branches of U.S. banks);
(2) purchase or sell real estate or real estate limited partnership
interests (other than money market securities secured by real estate or
interests therein or securities issued by companies that invest in real estate
or interests therein), commodities or commodity contracts;
(3) purchase securities on margin (except for short-term credits necessary
for the clearance of transactions) or make short sales of securities;
(4) underwrite securities of other issuers, except to the extent that the
purchase of permitted investments directly from the issuer thereof or from an
underwriter for an issuer and the later disposition of such securities in
accordance with the Master Portfolio's investment program may be deemed to be
an underwriting;
(5) make investments for the purpose of exercising control or management;
(6) issue senior securities, except that the CIT Master Portfolio may
borrow from banks up to 10% of the current value of its net assets for
temporary purposes only in order to meet redemptions, and these borrowings may
be secured by the pledge of up to 10% of the current value of its net assets
(but investments may not be purchased while any such borrowing exceeds 5% of
the Master Portfolio's net assets);
(7) write, purchase or sell puts, calls, warrants or options or any
combination thereof, except that the CIT Master Portfolio may purchase
securities with put rights in order to maintain liquidity; or
(8) make loans of portfolio securities or other assets, except that loans
for purposes of this restriction will not include the purchase of fixed time
deposits, repurchase agreements, commercial paper and other short-term
obligations, and other types of debt instruments commonly sold in a public or
private offering.
NON-FUNDAMENTAL INVESTMENT POLICIES. The CIT Master Portfolio is subject to
the following non-fundamental policies.
The CIT Master Portfolio may not:
(1) purchase or retain securities of any issuer if the officers, or
trustees of the Trust or the CIT Master Portfolio's investment adviser owning
beneficially more than one-half of one percent (0.5%) of the securities of the
issuer together owned beneficially more than 5% of such securities;
(2) purchase interests, leases, or limited partnership interests in oil,
gas, or other mineral exploration or development programs;
(3) invest in securities of issuers who, with their predecessors, have
been in existence less than three years, unless the securities are fully
guaranteed or insured by the U.S. Government, a state, commonwealth,
possession, territory, the District of Columbia or by an entity in existence at
least three years, or the securities are backed by the assets and revenues of
any of the foregoing if, by reason thereof, the value of the CIT Master
Portfolio's aggregate investments in such securities will exceed 5% of its
total assets; or
(4) invest more than 10% of the current value of its net assets in
repurchase agreements maturing in more than seven days, fixed time deposits
that are subject to withdrawal penalties and that have maturities of more than
seven days, restricted securities (which are securities that must be registered
under the Securities Act of 1933 before they may be offered or sold to the
public), and illiquid securities.
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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 and the Government-Corporate Income Master Portfolios
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;
(2) purchase or sell real estate (other than securities secured by real
estate or interests therein or securities issued by companies that invest in
real estate or interests therein), commodities or commodity contracts, or
interests in oil, gas, or other mineral exploration or development programs;
(3) purchase securities on margin (except for short-term credits necessary
for the clearance of transactions) or make short sales of securities;
(4) underwrite securities of other issuers, except to the extent that the
purchase of permitted investments directly from the issuer thereof or from an
underwriter for an issuer and the later disposition of such securities in
accordance with the Master Portfolio's investment program may be deemed to be
an underwriting;
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(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 and the Government-Corporate Income Master Portfolios
may not:
(1) invest more than 5% of their net assets at the time of purchase in
warrants, or more than 2% of their net assets in warrants which are not listed
on the New York or American Stock Exchange;
(2) purchase or retain securities of any issuer if the officers, directors
or trustees of the Trust or the investment adviser owning beneficially more
than one-half of one percent (0.5%) of the securities of the issuer together
own beneficially more than 5% of such securities;
(3) invest in securities of issuers who, with their predecessors, have
been in existence less than three years, unless the securities are guaranteed
or insured by the U.S. Government, or a state or municipality, or an agency or
instrumentality thereof, if, by reason thereof, the value of a Master
Portfolio's aggregate investment in such securities will exceed 5% of its total
assets;
(4) write, purchase or sell options;
(5) invest more than 15% of the current value of their net assets in
repurchase agreements maturing in more than seven days, fixed time deposits
that are subject to withdrawal penalties and that have maturities of more than
seven days and other illiquid securities;
(6) purchase, hold or deal in real estate limited partnerships; or
(7) engage in any short sales other than short sales against the box.
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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);
(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
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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 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
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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;
(6) issue senior securities, except that the Master Portfolio may borrow
from banks up to 10% of the current value of its net assets for temporary
purposes only in order to meet redemptions, and these borrowings may be secured
by the pledge of up to 10% of the current value of its net assets (but
investments may not be purchased while any such outstanding borrowing in excess
of 5% of its net assets exists);
(7) write, purchase or sell puts, calls, options, warrants or combinations
thereof, except that the Master Portfolio may purchase securities with put
rights in order to maintain liquidity;
(8) purchase securities of any issuer (except securities issued or
guaranteed by the U.S. Government, its agencies and instrumentalities,
including government-sponsored enterprises) if, as a result, with respect to
75% of its total assets, more than 5% of the value of the Master Portfolio's
total assets would be invested in the securities of any one issuer or, with
respect to 100% of its total assets the Master Portfolio's ownership would be
more than 10% of the outstanding voting securities of such issuer; or
(9) make loans except that the Master Portfolio may purchase or hold debt
instruments, lend its portfolio securities or enter into repurchase agreement
transactions in accordance with its investment policies.
With regard to fundamental investment restriction number (1) above, the
Master Portfolio intends to reserve freedom of action to have in excess of 25%
of the value of its total assets invested in obligations of the banking
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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 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.
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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, Government-Corporate Income, Municipal Income, 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 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
14
<PAGE> 52
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, CIT, 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
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, Small Cap Strategy, Capital Appreciation, 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).
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
15
<PAGE> 53
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.
Custodial Receipts for Treasury Securities
The Capital Appreciation and Small Cap Master Portfolios may purchase
participations in trusts that hold U.S. Treasury securities (such as TIGRs and
CATS) or other obligations where the trust participations evidence ownership in
either the future interest payments or the future principal payments on the
obligations. These participations are normally issued at a discount to their
"face value," and can exhibit greater price volatility than ordinary debt
securities because of the way in which their principal and interest are returned
to investors. Investments by a Master Portfolio in such participations will not
exceed 5% of the value of the Master Portfolio's total assets.
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 5% increments.
Pass-Through Obligations. The Master Portfolios may invest in pass-through
obligations that are supported by the full faith and credit of the U.S.
Government (such as those issued by the Government National Mortgage
Association) or those that are guaranteed by an agency or instrumentality of
the U.S. Government or government- sponsored enterprise (such as the Federal
National Mortgage Association or the Federal Home Loan Mortgage Corporation) or
bonds collateralized by any of the foregoing.
Futures Contracts and Options Transactions --
Stock Index Options. The Master Portfolios may purchase and write (i.e.,
sell) put and call options on stock indices as a substitute for comparable
market positions in the underlying securities. Options on stock indices are
similar to options on stock except that (a) the expiration cycles of stock
index options are monthly, while those of stock options are currently
quarterly, and (b) the delivery requirements are different. Instead of giving
the right to take or make delivery of stock at a specified price, an option on
a stock index gives the holder the right to receive a cash "exercise settlement
amount" equal to (i) the amount , if any, by which the fixed exercise price of
the option exceeds, in the case of a put, or is less than, in the case of a
call, the closing value of the underlying index on the date of exercise,
multiplied by (ii) a fixed "index multiplier." Receipt of this cash amount
depends upon the closing level of the stock index upon which the option is
based being greater than, in the case of a call, or less than, in the case of a
put, the exercise price of the option. The amount of cash received is equal to
such difference between the closing price of the index and the exercise price
of the option expressed in dollars multiplied by a specified multiplier. The
writer of the option is obligated, in return for the premium received, to make
delivery of this amount. The writer may offset a position in stock index
options prior to expiration by entering into a closing transaction on an
exchange, or the writer may let the option expire unexercised.
Futures Contracts and Options on Futures Contracts. Each Master Portfolio
may enter into futures contracts and may purchase and write options thereon.
Upon the exercise of an option on a futures contract, the writer of the option
delivers to the holder of the option the futures position and the accumulated
balance in the writer's futures margin account, which represents the amount by
which the market price of the futures contract exceeds, in the case of a call,
or
16
<PAGE> 54
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.
The purchase of options on currency futures allows a Master Portfolio, for
the price of the premium it must pay for the option, to decide whether or not
to buy (in the case of a call option) or to sell (in the case of a put option)
a futures contract at a specified price at any time during the period before
the option expires.
Future Developments. Each Master Portfolio may take advantage of
opportunities in the areas of options and futures contracts and options on
futures contracts and any other derivative investments which are not presently
contemplated for use by such Master Portfolio or which are not currently
available but which may be developed, to the extent such opportunities are both
consistent with a Master Portfolio's investment objective and legally
permissible for the Master Portfolio. Before entering into such transactions or
making any such investment, a Master Portfolio would provide appropriate
disclosure in Part A or this Part B.
Wells Fargo Bank and BGFA use a variety of internal risk management
procedures to ensure that derivatives use is consistent with a Master
Portfolio's investment objective, does not expose the Master Portfolio to undue
risk and is closely monitored. These procedures include providing periodic
reports to the Board of Trustees concerning the use of derivatives.
The use of derivatives by the Master Portfolios also is subject to broadly
applicable investment policies. For example, a Master Portfolio may not invest
more than a specified percentage of its assets in "illiquid securities,"
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<PAGE> 55
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.
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<PAGE> 56
<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;
Chairman Manager of Financial Services Group;
and President 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.
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>
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<PAGE> 57
COMPENSATION TABLE
Year ended December 31, 1996
----------------------------
<TABLE>
<CAPTION>
Total Compensation
Aggregate Compensation from Registrant
Name and Position from Registrant and Fund Complex
----------------- --------------- -----------------
<S> <C> <C>
Jack S. Euphrat $-0- $31,500
Trustee
*R. Greg Feltus $-0- $-0-
Trustee
Thomas S. Goho $-0- $31,500
Trustee
Joseph N. Hankin $-0- $-0-
Trustee
*Zoe Ann Hines $-0- $1,500
Trustee
(resigned as of September 6, 1996)
*W. Rodney Hughes $-0- $26,250
Trustee
Robert M. Joses $-0- $31,500
Trustee
*J. Tucker Morse $-0- $26,250
Trustee
</TABLE>
Trustees of the Trust who are officers or employees of Stephens or Wells
Fargo Bank are not compensated by the Trust for their services but are
reimbursed for all out-of-pocket expenses relating to attendance at board
meetings. Trustees who are affiliated with Stephens or Wells Fargo Bank also do
not receive compensation from the Trust and also are reimbursed for all
out-of-pocket expenses relating to attendance at board meetings. 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> 58
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES AS OF APRIL 1,
1997.
<TABLE>
<CAPTION>
STAGECOACH FUNDS % OWNED OVERLAND EXPRESS % OWNED
MASTER PORTFOLIO FEEDER FUND OF MASTER FEEDER FUND OF MASTER
---------------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Asset Allocation Asset 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%
Capital Appreciation Aggressive Growth 22.30% Strategic Growth 77.70%
Corporate Stock Corporate Stock 99.99% N/A N/A
Municipal Income N/A N/A Short-Term Municipal Income 99.99%
Small Cap Small Cap 89.25% Small Cap Strategy 10.75%
Tax-Free Money Market National Tax-Free 32.44% National Tax-Free 67.56%
Money Market Mutual Institutional Money Market
U.S. Govt. Allocation U.S. Govt. Allocation 99.99% N/A N/A
</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 both 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
21
<PAGE> 59
periodic reports on the investment activity and performance of the Master
Portfolios, and such additional reports and information as Wells Fargo Bank and
the Trust's Board of Trustees and officers shall reasonably request. As to each
Master Portfolio, the Sub-Advisory Agreement has an initial two-year term, and
will thereafter be subject to annual approval by (i) the Trust's Board of
Trustees or (ii) vote of a majority (as defined in the 1940 Act) of the
outstanding securities of such Master Portfolio, provided that in either event
the continuance also is approved by a majority of the Trust's Board of Trustees
who are not interested persons (as defined in the 1940 Act) of the Master
Portfolio or BGFA, by vote cast in person at a meeting called for the purpose
of voting on such approval. As to each Master Portfolio, the Sub-Advisory
Agreement is terminable without penalty, on 60 days' written notice, by the
Trust's Board of Trustees or by vote of the holders of a majority of such
Master Portfolio's interests. The Sub-Advisory Agreement terminates
automatically upon an assignment (as defined in the 1940 Act).
BGFA was created by the reorganization of Wells Fargo Nikko Investment
Advisors ("WFNIA"), a former affiliate of Wells Fargo Bank, with and into an
affiliate of Wells Fargo Institutional Trust Company N.A. Subject to the
direction of the Trust's Board of Trustees and the overall supervision and
control of Wells Fargo Bank and the Trust, BGFA is responsible for investing
and reinvesting the Master Portfolios' assets. BGFA has agreed to furnish to
Wells Fargo Bank periodic reports on the investment activity and performance of
the Master Portfolios, and such additional reports and information as Wells
Fargo Bank and the Trust's Board of Trustees and officers shall reasonably
request.
ADVISORY AND SUB-ADVISORY FEES . For the periods / years ended December 31,
1994, 1995 and 1996, the Master Portfolios below paid to Wells Fargo Bank the
indicated advisory fees and Wells Fargo Bank waived the indicated amounts:
Advisory Fees
<TABLE>
<CAPTION>
1994 1995 1996
Fees Fees Fees Fees Fees Fees
Master Portfolio(1) Paid Waived Paid Waived Paid Waived
---------------- ---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C>
Capital Appreciation N/A N/A N/A N/A $ 739,300 $0
Cash Investment Trust $1,245,341 $81,344 $1,902,572 $255,082 $3,310,083 $0
Government-Corporate Income $0 $ 131 $0 $ 11,944 $0 $ 55,285
Municipal Income $0 $ 7,879 $0 $ 62,512 $0 $104,623
Small Cap N/A N/A N/A N/A $ 52,849 $0
Tax-Free Money Market N/A N/A N/A N/A $ 134,231 $ 16,108
</TABLE>
- -----------------
(1) The following Master Portfolios commenced operations as indicated: Capital
Appreciation -- 2/20/96; Government- Corporate Income -- 9/19/94; Municipal
Income -- 6/3/94; Small Cap -- 9/16/96; Tax-Free Money Market -- 4/2/96.
For the period begun January 1 and ended April 28, 1996, and the period
begun April 29 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:
Advisory Fees(1)
<TABLE>
<CAPTION>
Period Begun January 1, 1996 Period begun April 29, 1996
Fund/Master Portfolio and Ended April 28, 1996 and Ended September 30, 1996
---------------------- ------------------------ ----------------------------
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>
22
<PAGE> 60
(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, 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.-- The Trust 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 the Trust, 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 the Trust'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 the Trust's Trustees,
Officers and employees who are affiliated with Stephens.
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<PAGE> 61
The Administrator and Co-Administrator 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. The Trust previously retained
Stephens to serve as sole administrator on behalf of each Master Portfolio.
Under the prior administration agreements, 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. For the years ended December 31, 1994, 1995 and 1996,
the CIT and Tax-Free Money Market Master Portfolios paid administrative fees to
Stephens as follows:
Administration Fees
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
Master Portfolio 12/31/94 12/31/95 12/31/96
- ---------------- -------- -------- --------
<S> <C> <C> <C>
Cash Investment Trust $142,669 $215,765 $331,009
Tax-Free Money Market(1) N/A N/A N/A
</TABLE>
- ---------------------
(1) The Tax-Free Money Market commenced operations 4/2/96.
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 transactional basis. BGI is not entitled to compensation for
proving custody services so long as BGI is or BGFA receives fees for providing
investment advisory (or sub-advisory) services to the Master Portfolio.
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 did not pay any custody fees.
The following Master Portfolios paid the custody fees shown below for the
year ended December 31, 1996.
<TABLE>
<CAPTION>
Period Ended December 31, 1996(1)
Master Portfolio Custody Fees Paid
- ---------------- ---------------------------------
<S> <C>
Capital Appreciation $34,449
Cash Investment Trust $-0-
Government-Corporate Income $-0-
Municipal Income $-0-
Small Cap $ 2,933
Tax-Free Money Market $-0-
</TABLE>
- ------------------------------
(1) The following Master Portfolios commenced operations in 1996: Capital
Appreciation -- 2/20/96; Small Cap -- 9/16/96; Tax-Free Money Market
-- 4/2/96.
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 year
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<PAGE> 62
ended December 31, 1996, the 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.
For the year ended December 31, 1996, 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.
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.
Purchases of debt securities generally are principal transactions. Debt
securities normally are purchased or sold from or to dealers serving as market
makers for the securities at a net price. Debt securities may also be purchased
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 transactions in debt securities consists primarily of
dealer spreads and underwriting commissions.
None of the Master Portfolios of the Trust have 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 as investment adviser and, where applicable, BGFA as
sub-adviser, are responsible for the Master Portfolios' 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. Wells Fargo Bank and BGFA generally seek reasonably
competitive spreads or commissions.
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<PAGE> 63
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 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
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<PAGE> 64
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.
BROKERAGE COMMISSIONS. For the years ended December 31, 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:
Brokerage Commissions(1)
<TABLE>
<CAPTION>
Year Ended Year Ended Period Ended
Fund / Master Portfolio 12/31/94 12/31/95 9/30/96(2)
- ------------------------ -------- -------- -------
<S> <C> <C> <C> <C>
Asset Allocation $99,002 $34,488 $0
Corporate Stock $31,896 $ 8,696 $0
U.S. Government Allocation $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.
Brokerage Commissions
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
Master Portfolio(1) 12/31/94 12/31/95 12/31/96
- ------------------- -------- -------- --------
<S> <C> <C> <C>
Capital Appreciation N/A N/A $360,060
Cash Investment Trust $0 $0 $0
Government-Corporate Income $0 $0 $0
Municipal Income $0 $0 $0
Small Cap N/A N/A $ 10,840
Tax-Free Money Market N/A N/A $0
</TABLE>
- -----------
(1) The following Master Portfolios commenced operations in 1996: Capital
Appreciation -- 2/20/96; Small Cap -- 9/16/96; Tax-Free Money Market
-- 4/2/96.
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<PAGE> 65
SECURITIES OF REGULAR BROKER DEALERS -- As of December 31, 1996, the Master
Portfolios/Funds owned securities (repurchase agreements) of their "regular
brokers or dealers" or their parents, as defined in the 1940 Act as follows:
<TABLE>
<CAPTION>
J.P. Morgan
Master Portfolio Goldman Sachs HSBC Securities Securities Inc. Morgan Stanley
- ---------------- ------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
Capital Appreciation $ 4,659,000 $5,000,000 $ 9,648,000 N/A
Cash Investment Trust $45,507,000 $9,319,000 $68,637,000 $13,000,000
Government-Corporate Income $ 378,000 N/A $ 300,000 N/A
Municipal Income N/A N/A N/A N/A
Small Cap $ 1,223,000 $1,200,000 $ 800,000 N/A
Tax-Free Money Market N/A N/A N/A N/A
</TABLE>
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.
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.
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The Trust may dispense with annual meetings of investors in any year in
which it is not required to elect Trustees under the 1940 Act. However, the
Trust is required to hold a special meeting of its investors for the purpose of
voting on the question of removal of a Trustee or Trustees if requested in
writing by the holders of at least 10% of the Master Portfolios of the Trust's
outstanding proportionate interests, and to assist in communicating with other
investors as required by Section 16(c) of the 1940 Act.
A Master Portfolio of the Trust may enter into a merger or consolidation,
or sell all or substantially all of its assets, if approved by the vote of
two-thirds of its investors (with the vote of each being in proportion to their
respective percentages of the beneficial interests in the Trust), except that
if the Trustees of the Trust recommend such sale of assets, the approval by
vote of a majority of the investors of a Master Portfolio (with the vote of
each being in proportion to their respective percentages of the beneficial
interests in the Master Portfolio) will be sufficient. A Master Portfolio of
the Trust may also be terminated (i) upon liquidation and distribution of its
assets, if approved by the vote of two-thirds of its investors (with the vote
of each being in proportion to the amount of their investment) or (ii) by the
Trustees of the Trust by written notice to the Master Portfolio's investors. In
the event of the liquidation or dissolution of a Master Portfolio, investors
are entitled to receive their pro rata share of all assets available for
distribution.
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
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<PAGE> 67
instruments, including certain variable- and floating-rate instruments subject
to demand features. Pursuant to the Rule, the Board has established procedures
designed to stabilize, to the extent reasonably possible, the Master
Portfolio's net asset value. Such procedures include review of a Master
Portfolio's holdings by the Board of Trustees at such intervals as it may deem
appropriate to determine whether the Master Portfolio's net asset value
calculated by using available market quotations deviates within 1/2 of the 1%
of the value based on amortized cost. The extent of any deviation is examined
by the Board of Trustees. If such deviation exceeds 1/2 of 1%, the Board
promptly considers what action, if any, will be initiated. In the event the
Board determines that a deviation exists that may result in material dilution
or other unfair results to investors, the Board will take such corrective
action as it regards as necessary and appropriate, including the sale of
portfolio instruments prior to maturity to realize capital gains or losses or
to shorten average portfolio maturity, withholding dividends or establishing a
net asset value by using available market quotations.
OTHER MASTER PORTFOLIOS -- The net asset value of the Asset Allocation, Capital
Appreciation, Corporate Stock, Government-Corporate Income, Municipal Income,
Small Cap and U.S. Government Allocation Master Portfolios is determined on
each Business Day.
The net asset value per interest for these Master Portfolios is determined
by dividing the value of the total assets of a Master Portfolio less the Master
Portfolio's liabilities by the total number of outstanding interests. The value
of assets of these Master Portfolios (other than debt obligations maturing in
60 days or less) is determined at the close of regular trading on the New York
Stock Exchange, which is currently 1:00 p.m. Pacific time. Except for debt
obligations with remaining maturities of 60 days or less which are valued at
amortized cost, assets are valued at current market prices, or if such prices
are not readily available, at fair value as determined in good faith by the
Board of Trustees. The valuation may be provided by independent pricing
services.
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
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<PAGE> 68
reviewed by the Trust's officers under the general supervision of the Trust's
Board of Trustees. Expenses and fees, including advisory fees, are accrued
daily and are taken into account for the purpose of determining the net asset
value of a Master Portfolio's shares.
ITEM 21. UNDERWRITERS.
The distributor and exclusive placement agent for the Master Portfolios is
Stephens, which receives no additional compensation for serving in this
capacity. Registered broker/dealers and investment companies, insurance company
separate accounts, common and commingled trust funds, group trusts and similar
organizations and entities which constitute accredited investors, as defined in
the regulations adopted under the 1933 Act, may continuously invest in a Master
Portfolio of the Trust.
ITEM 22. CALCULATIONS OF PERFORMANCE DATA.
Not applicable.
ITEM 23. FINANCIAL INFORMATION.
The portfolio of investments, audited financial statements and independent
auditors' report for the year ended December 31, 1996 for the Capital
Appreciation, Cash Investment Trust, Short-Term Government-Corporate Income,
Short- Term Municipal Income, Small Cap and Tax-Free Money Market Master
Portfolios and for the corresponding Funds of Overland Express Funds, Inc.
("Overland") are hereby incorporated by reference to the Overland Annual
Reports dated December 31, 1996, as filed with the SEC on March 7 and 11, 1997.
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 Funds Annual Reports dated
September 30, 1996, as filed with the SEC on December 9, 1996.
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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."
A-1
<PAGE> 70
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.
A-2
<PAGE> 71
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 auditors' report for the fiscal year (or period, as
applicable) ended December 31, 1996 for the Capital Appreciation,
Short-Term Government-Corporate Income, Short-Term Municipal Income and
Small Cap Master Portfolios are hereby incorporated by reference to the
Overland Express Funds, Inc. ("Overland") (SEC File Nos. 33-16296;
811-8275) Annual Report, as filed with the SEC on March 11, 1997.
The portfolio of investments, audited financial statements and
independent auditors' report for the fiscal year (or period, as
applicable) ended December 31, 1996 for the Cash Investment Trust
and Tax-Free Money Market Master Portfolios are hereby incorporated
by reference to the Overland Annual Reports, as filed with the SEC
on March 7, 1997.
(b) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
1(a) - Declaration of Trust dated August 14, 1991, filed herewith.
1(b) - Amendment to the Declaration of Trust dated November 15,
1995, filed herewith.
1(c) - Amendment to the Declaration of Trust dated September 18,
1996, incorporated by reference to Amendment No. 10 filed
on January 31, 1997.
2 - By-Laws, filed herewith.
3 - Not Applicable.
4 - Not Applicable.
5(a) - Amended Advisory Contract with Wells Fargo Bank, N.A. on
behalf of Cash Investment Trust Master Portfolio, filed
herewith.
</TABLE>
C-1
<PAGE> 72
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
5(b) - Advisory Contract with Wells Fargo Bank, N.A. on behalf of
the Short-Term Municipal Income Master Portfolio,
incorporated by reference to Amendment No. 6 filed on
November 29, 1995.
5(c) - Advisory Contract with Wells Fargo Bank, N.A. on behalf of
the Short-Term Government-Corporate Income Master Portfolio,
incorporated by reference to Amendment No. 6 filed on
November 29, 1995.
5(d) - Investment Advisory Contract with Wells Fargo Bank, N.A. on
behalf of the Tax-Free Money Market Master Portfolio,
incorporated by reference to Amendment No. 8 filed on March
21, 1996.
5(e) - Investment Advisory Contract with Wells Fargo Bank, N.A. on
behalf of the Capital Appreciation Master Portfolio,
incorporated by reference to Amendment No. 8 filed on March
21, 1996.
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 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 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 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, incorporated by
reference to Amendment No. 10 filed on January 31, 1997.
6 - Amended Placement Agent Agreement, incorporated by reference
to Amendment No. 9 filed on September 6, 1996.
</TABLE>
C-2
<PAGE> 73
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
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.
27.1 - Financial Data Schedule for the Cash Investment Trust
Master Portfolio
27.3 - Financial Data Schedule for the Short-Term Municipal Income
Master Portfolio
27.4 - Financial Data Schedule for the Short-Term Government --
Corporate Income Master Portfolio
27.5 - Financial Data Schedule for the Capital Appreciation Master
Portfolio
27.6 - Financial Data Schedule for the Tax-Free Money Market Master
Portfolio
27.7 - Financial Data Schedule for the Asset Allocation Master
Portfolio
27.8 - Financial Data Schedule for the Corporate Stock Master
Portfolio
27.9 - Financial Data Schedule for the U.S. Government Allocation
Master Portfolio
27.10 - Financial Data Schedule for the Small Cap Master Portfolio
</TABLE>
Item 25. Persons Controlled by or under Common Control with Registrant.
No person is controlled by or under common control with Registrant.
Item 26. Number of Holders of Securities.
As of April 1, 1997, the number of record holders of each Master
Portfolio of the Registrant was as follows:
C-3
<PAGE> 74
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
Cash Investment Trust Master Portfolio 2
Short-Term Municipal Income Master Portfolio 2
Short-Term Government-Corporate Income
Master Portfolio 2
Tax-Free Money Market Master Portfolio 3
Capital Appreciation Master Portfolio 3
Asset Allocation Master Portfolio 2
Corporate Stock Master Portfolio 2
U.S. Government Allocation Master Portfolio 2
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 3.11 of the Registrant's Declaration of
Trust to obtain such insurance policies (including but not limited to, fidelity
bonding and errors and omissions) as they deem necessary.
Item 28. Business and Other Connections of Investment Adviser.
Wells Fargo Bank, N.A. ("Wells Fargo Bank"), a wholly owned subsidiary
of Wells Fargo & Company, serves as investment adviser to the Master Portfolios
of the Registrant and to several other registered open- end management
investment companies. Wells Fargo Bank's business is that of a national
banking association with respect to which it conducts a variety of commercial
banking and trust activities.
To the knowledge of Registrant, none of the directors or executive
officers of Wells Fargo Bank, except those set forth below, is or has been at
any time during the past two fiscal years engaged in any other business,
profession, vocation or employment of a substantial nature, except that certain
executive officers also hold various positions with and engage in business for
Wells Fargo & Company. Set forth below are the names and principal businesses
of the directors and executive officers of Wells Fargo Bank who are or during
the past two fiscal years have been engaged in any other business, profession,
vocation or employment of a substantial nature for
C-4
<PAGE> 75
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
Michael R. Bowlin Chairman of the Board, Chief Executive
Officer, Chief Operating Officer and
President of Atlantic Richfield Co. (ARCO)
Highway 150
Santa Paula, CA 93060
Edward Carson Chairman of the Board and Chief Executive
Officer of First Interstate Bancorp
633 West Fifth Street
Los Angeles, CA 90071
Director of Aztar Corporation
2390 East Camelback Road
Suite 400
Phoenix, AZ 85016
Director of Castle & Cook, Inc.
10900 Wilshire Blvd.
Los Angeles, CA 90024
Director of Terra Industries, Inc.
1321 Mount Pisgah Road
Walnut Creek, CA 94596
William S. Davila President and Director of The Vons
Director Companies, Inc.
618 Michillinda Avenue
Arcadia, CA 91007
Officer of Western Association of
Food Chains
825 Colorado Blvd. #203
Los Angeles, CA 90041
Rayburn S. Dezember Director of CalMat Co.
Director 3200 San Fernando Road
Los Angeles, CA 90065
Director of Tejon Ranch Co.
P.O. Box 1000
Lebec, CA 93243
Director of Turner Casting Corp.
P.O. Box 1099
Cudahy, CA 90201
Director of The Bakersfield
Californian
P.O. Box 440 1707 I Street
Bakersfield, CA 93302
Director of Kern County Economic
Development Corp.
P.O. Box 1229
2700 M Street, Suite 225
Bakersfield, CA 93301
Chairman of the Board of Trustees
of Whittier College
13406 East Philadelphia Avenue
P.O. Box 634
Whittier, CA 90608
</TABLE>
C-5
<PAGE> 76
<TABLE>
<S> <C>
Paul Hazen Chairman of the Board of Directors
Chairman of the of Wells Fargo & Company
Board of Directors 420 Montgomery Street
San Francisco, CA 94105
Director of Pacific Telesis Group
130 Kearny Street
San Francisco, CA 94108
Director of Phelps Dodge Corp.
2600 North Central Avenue
Phoenix, AZ 85004
Director of Safeway Inc.
Fourth and Jackson Streets
Oakland, CA 94660
Robert K. Jaedicke Accounting Professor and Dean
Director Emeritus of
Graduate School of Business,
Stanford University
MBA Admissions Office
Stanford, CA 94305
Director of Homestake Mining Co.
650 California Street
San Francisco, CA 94108
Director of California Water
Service Company
1720 North First Street
San Jose, CA 95112
Director of Boise Cascade Corp.
1111 West Jefferson Street
P.O. Box 50
Boise, ID 83728
Director of Enron Corp.
1400 Smith Street
Houston, TX 77002
Director of GenCorp, Inc.
175 Ghent Road
Fairlawn, OH 44333
</TABLE>
C-6
<PAGE> 77
<TABLE>
<S> <C>
Thomas L. Lee Chairman and Chief Executive
Officer of The Newhall Land
and Farming Company
10302 Avenue 7 1-2
Firebaugh, CA 93622
Director of Calmat Co.
501 El Charro Road
Pleasanton, CA 94588
Director of the Los Angeles
Area Chamber of Commerce
Trustee of the California
Institute of the Arts
Director of First Interstate
Bancorp
633 West Fifth Street
Los Angeles, CA 90071
Ellen M. Newman President of Ellen Newman
Director Associates
323 Geary Street, Suite 507
San Francisco, CA 94102
Chair of Board of Trustees of
University of California at San
Francisco Foundation
250 Executive Park Blvd., Suite
2000
San Francisco, CA 94143
Director of American Conservatory
Theater
30 Grant Avenue
San Francisco, CA 94108
Director of California Chamber of
Commerce
1201 K Street, 12th Floor
Sacramento, CA 95814
Philip J. Quigley Chairman, Chief Executive Officer
Director and
Director of Pacific Telesis Group
130 Kearney Street, Rm. 3700
San Francisco, CA 94108
Director of Varian Associates
3050 Hansen Way
P.O. Box 10800
Palo Alto, CA 94303
Carl E. Reichardt Director of Ford Motor Company
Director 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-7
<PAGE> 78
<TABLE>
<S> <C>
Donald B. Rice President, Chief Operating Officer
Director and Director of
Teledyne, Inc.
2049 Century Park East
Los Angeles, CA 90067
Director of Vulcan Materials
Company
One Metroplex Drive
Birmingham, AL 35209
Retired Secretary of the Air Force
Richard J. Stegemeier Chairman (Emeritus) of Unocal Corp
44141 Yucca Avenue
Lancaster, CA 93434
Director of Foundation Health Corporation
166 4th
Fort Irwin, CA 92310
Director of Halliburton Company
3600 Lincoln Plaza
500 North Alcard Street
Dallas, TX 75201
Director of Northrop Grumman Corp.
1840 Century Park East
Los Angeles, CA 90067
Director of Outboard Marine Corporation
100 SeaHorse Drive
Waukegan, IL 60085
Director of Pacific Enterprises
555 West Fifth Street
Suite 2900
Los Angeles, CA 90031
Director of First Interstate Bancorp
633 West Fifth Street
Los Angeles, CA 90071
Susan G. Swenson President and Chief Executive
Director Officer of Cellular One
651 Gateway Blvd.
San Francisco, CA 94080
David M. Tellep Chairman of the Board and Chief Executive
Officer of Martin Lockheed Martin Corp
6801 Rockledge Drive
Bethesda, MD 20817
Director of Edison International and
Southern California Edison Company
2244 Walnut Grove Ave.
Rosemead, CA 91770
Director of First Interstate
633 West Fifth Street
Los Angeles, CA 90071
Chang-Lin Tien Chancellor of University of
Director California at Berkeley
UC at Berkeley
Berkeley, CA 94720
John A. Young President, Director and Chief
Director Executive Officer of
Hewlett-Packard Company
3000 Hanover Street
Palo Alto, CA 94304
Director of Chevron Corporation
225 Bush Street
San Francisco, CA 94104
William F. Zuendt President and Chief Operating
President Officer of
Wells Fargo & Company
420 Montgomery Street
San Francisco, CA 94105
Director of 3Com Corp.
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-8
<PAGE> 79
Barclays Global Fund Advisors ("BGFA"), a wholly-owned subsidiary of
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. Co-Chairman and Director of BGFA and BGI
Grauer 45 Fremont Street, San Francisco, CA 94105
Co-Chairman and
Director
Patricia Dunn Co-Chairman and Director of BGFA and BGI
Co-Chairman and 45 Fremont Street, San Francisco, CA 94105
Director
Irving Cohen Chief Financial Officer and Chief Operating
Director Officer of Barclays Bank PLC, New York Branch
and Chief Operating Officer of Barclays Group,
Inc. (USA); previously Chief Financial Officer
of Barclays de Zoete Wedd Securities Inc.
(1994) 222 Broadway, New York, NY 10038
Andrea M. Zolberti Chief Financial Officer of BGFA and BGI
Chief Financial 45 Fremont Street, San Francisco, CA 94105
Officer
</TABLE>
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 Life & Annuity Trust, Overland
Express Funds, Inc., MasterWorks Funds Inc. (formerly, Stagecoach Inc.),
Stagecoach Trust and Stagecoach Funds, Inc. and is the exclusive placement
agent for Master Investment Portfolio and Managed Series Investment Trust, each
of which is a registered series management investment company and has acted as
principal underwriter for Nations Government Income Term Trust 2003, Inc.,
Nations Government Income Term Trust 2004, Inc. and the Nations Managed
Balanced Target Maturity Fund, Inc., which are closed-end management investment
companies and Nations Fund Trust, Nations Funds, Inc., Nations Fund Portfolios,
Inc., Nations LifeGoal Funds, Inc. and Nations Institutional Reserves
(formerly, the Capital Mutual Funds), which are open-end management investment
companies.
C-9
<PAGE> 80
(b) Information with respect to each director and officer of the
principal underwriter is incorporated by reference to Form ADV and Schedules A
and D filed by Stephens Inc. with the Securities and Exchange Commission
pursuant to the Investment Advisers Act of 1940 (SEC File No. 501-15510).
(c) Not applicable.
Item 30. Location of Accounts and Records.
(a) The Registrant maintains accounts, books and other documents
required by Section 31(a) of the Investment Company Act of 1940 and the rules
thereunder (collectively, "Records") at the offices of Stephens Inc., 111
Center Street, Little Rock, Arkansas 72201.
(b) Wells Fargo Bank maintains all Records relating to its services as
investment adviser, administrator, 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,
co-administrator and placement agent at 111 Center Street, Little Rock,
Arkansas 72201.
Item 31. Management Services.
Other than as set forth under the captions "Item 5 Management of the
Master Portfolios" in Part A of this Registration Statement and "Item 16
Investment Advisory and Other Services" in Part B of this Registration
Statement, Registrant is not a party to any management-related service
contract.
Item 32. Undertakings.
(a) Not applicable.
(b) Not applicable.
(c) Registrant undertakes to hold a special meeting of its shareholders
for the purpose of voting on the question of removal of a trustee
or trustees if requested in writing by the holders of at least 10%
of each Master Portfolio, the outstanding voting securities of
Master Investment Trust and to assist in communicating with other
shareholders as required by Section 16(c) of the Investment Company
Act of 1940.
C-10
<PAGE> 81
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 29th day of April, 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, April 29, 1997
- --------------------------------- 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)
*By: /s/ Richard H. Blank, Jr.
- ----------------------------------
(Richard H. Blank, Jr.)
As Attorney-in-Fact
April 29, 1997
</TABLE>
<PAGE> 82
MASTER INVESTMENT TRUST
File No. 811-6415
Amendment No. 11 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-27.1 Financial Data Schedule - Cash Investment Trust
Master Portfolio
EX-27.3 Financial Data Schedule - Short-Term Municipal
Income Master Portfolio
EX-27.4 Financial Data Schedule - Short-Term
Government - Corporate Income Master Portfolio
EX-27.5 Financial Data Schedule - Capital Appreciation
Master Portfolio
EX-27.6 Financial Data Schedule - Tax-Free Money Market
Master Portfolio
EX-27.7 Financial Data Schedule - Asset Allocation
Master Portfolio
EX-27.8 Financial Data Schedule - Corporate Stock Master
Portfolio
EX-27.9 Financial Data Schedule - U.S. Government
Allocation Master Portfolio
EX-27.10 Financial Data Schedule - Small Cap Master
Portfolio
EX-99.B(1)(a) Declaration of Trust dated August 14, 1991
EX-99.B(1)(b) Amendment to the Declaration of Trust dated
November 15, 1995
EX-99.B(2) ByLaws dated August 14, 1991
EX-99.B(5)(a) Amended Advisory with Wells Fargo Bank, N.A. on
behalf of the Cash Investment Trust Master
Portfolio
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> CASH INVESTMENT TRUST MASTER PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 2,007,126,741
<INVESTMENTS-AT-VALUE> 2,007,126,741
<RECEIVABLES> 4,266,082
<ASSETS-OTHER> 1,346
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,011,394,169
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8,473,324
<TOTAL-LIABILITIES> 8,473,324
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,003,476,351
<SHARES-COMMON-STOCK> 2,003,908,181
<SHARES-COMMON-PRIOR> 1,210,016,253
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (555,506)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,002,920,845
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 72,350,480
<OTHER-INCOME> 0
<EXPENSES-NET> (3,972,071)
<NET-INVESTMENT-INCOME> 68,378,409
<REALIZED-GAINS-CURRENT> 136,408
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 68,514,817
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (68,378,409)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,858,803,143
<NUMBER-OF-SHARES-REDEEMED> 4,068,536,204
<SHARES-REINVESTED> 5,624,989
<NET-CHANGE-IN-ASSETS> 793,607,138
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,310,083
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,307,858
<AVERAGE-NET-ASSETS> 1,329,267,000
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.30
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> SHORT-TERM MUNICIPAL INCOME MASTER PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 26,313,719
<INVESTMENTS-AT-VALUE> 26,362,034
<RECEIVABLES> 464,691
<ASSETS-OTHER> 1,110
<OTHER-ITEMS-ASSETS> 1,956
<TOTAL-ASSETS> 26,829,791
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 122,314
<TOTAL-LIABILITIES> 122,314
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 26,636,332
<SHARES-COMMON-STOCK> 5,365,597
<SHARES-COMMON-PRIOR> 3,289,733
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 22,830
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 48,315
<NET-ASSETS> 26,707,477
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 946,275
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 946,275
<REALIZED-GAINS-CURRENT> 4,708
<APPREC-INCREASE-CURRENT> (80,537)
<NET-CHANGE-FROM-OPS> 870,446
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (946,275)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,137,509
<NUMBER-OF-SHARES-REDEEMED> 2,175,449
<SHARES-REINVESTED> 113,804
<NET-CHANGE-IN-ASSETS> 10,260,773
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 18,122
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 104,623
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 146,323
<AVERAGE-NET-ASSETS> 21,718,000
<PER-SHARE-NAV-BEGIN> 5.00
<PER-SHARE-NII> 0.22
<PER-SHARE-GAIN-APPREC> (0.02)
<PER-SHARE-DIVIDEND> (0.22)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 4.98
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> SHORT-TERM GOVERNMENT-CORPORATE INCOME MASTER PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 13,977,194
<INVESTMENTS-AT-VALUE> 13,980,109
<RECEIVABLES> 116,335
<ASSETS-OTHER> 1,659
<OTHER-ITEMS-ASSETS> 2,128
<TOTAL-ASSETS> 14,100,231
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 86,857
<TOTAL-LIABILITIES> 86,857
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 14,070,174
<SHARES-COMMON-STOCK> 2,818,516
<SHARES-COMMON-PRIOR> 1,180,190
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (59,715)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,915
<NET-ASSETS> 14,013,374
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 654,198
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> (654,198)
<REALIZED-GAINS-CURRENT> (63,690)
<APPREC-INCREASE-CURRENT> (11,676)
<NET-CHANGE-FROM-OPS> 578,832
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (654,198)
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 4,658,456
<NUMBER-OF-SHARES-REDEEMED> 3,066,620
<SHARES-REINVESTED> 46,489
<NET-CHANGE-IN-ASSETS> 8,090,752
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 3,975
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 55,285
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 90,508
<AVERAGE-NET-ASSETS> 11,181,000
<PER-SHARE-NAV-BEGIN> 5.02
<PER-SHARE-NII> 0.29
<PER-SHARE-GAIN-APPREC> (0.05)
<PER-SHARE-DIVIDEND> (0.29)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 4.97
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> CAPITAL APPRECIATION MASTER PORTFOLIO
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> FEB-20-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 226,836,438
<INVESTMENTS-AT-VALUE> 235,516,785
<RECEIVABLES> 6,300
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 216,031
<TOTAL-ASSETS> 235,739,116
<PAYABLE-FOR-SECURITIES> 16,406
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 221,783
<TOTAL-LIABILITIES> 238,819
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 216,658,030
<SHARES-COMMON-STOCK> 11,840,155
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 10,162,551
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8,680,346
<NET-ASSETS> 235,500,927
<DIVIDEND-INCOME> 163,862
<INTEREST-INCOME> 470,167
<OTHER-INCOME> 0
<EXPENSES-NET> (889,869)
<NET-INVESTMENT-INCOME> (255,840)
<REALIZED-GAINS-CURRENT> 10,162,551
<APPREC-INCREASE-CURRENT> 8,680,346
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<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 255,839
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 19,545,093
<NUMBER-OF-SHARES-REDEEMED> 7,704,938
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 235,500,927
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
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<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 889,869
<AVERAGE-NET-ASSETS> 171,349,000
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> (0.03)
<PER-SHARE-GAIN-APPREC> 19.89
<PER-SHARE-DIVIDEND> 0.03
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<PER-SHARE-NAV-END> 19.89
<EXPENSE-RATIO> 0.60
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> TAX-FREE MONEY MARKET MASTER PORTFOLIO
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> DEC-31-1996
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<ASSETS-OTHER> 268,953
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<TOTAL-ASSETS> 72,395,702
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<TOTAL-LIABILITIES> 278,001
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<PAID-IN-CAPITAL-COMMON> 72,124,489
<SHARES-COMMON-STOCK> 72,124,898
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (6,788)
<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 72,117,701
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,745,046
<OTHER-INCOME> 0
<EXPENSES-NET> (150,514)
<NET-INVESTMENT-INCOME> 1,594,532
<REALIZED-GAINS-CURRENT> (6,788)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1,587,744
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,594,532)
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 637,591,142
<NUMBER-OF-SHARES-REDEEMED> 565,467,444
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 72,117,701
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 166,622
<AVERAGE-NET-ASSETS> 67,610,000
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.02)
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<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.30
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> ASSET ALLOCATION MASTER PORTFOLIO
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> APR-28-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 1,013,212,327
<INVESTMENTS-AT-VALUE> 1,129,773,294
<RECEIVABLES> 39,691,709
<ASSETS-OTHER> 3,147,768
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,172,612,771
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 52,547,439
<TOTAL-LIABILITIES> 52,547,439
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 926,435,546
<SHARES-COMMON-STOCK> 54,106,616
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 77,068,819
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 116,560,967
<NET-ASSETS> 1,120,065,332
<DIVIDEND-INCOME> 5,613,608
<INTEREST-INCOME> 18,383,751
<OTHER-INCOME> 0
<EXPENSES-NET> (1,791,430)
<NET-INVESTMENT-INCOME> 22,205,929
<REALIZED-GAINS-CURRENT> 72,820,164
<APPREC-INCREASE-CURRENT> (55,284,698)
<NET-CHANGE-FROM-OPS> 39,741,395
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (22,205,929)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,916,005
<NUMBER-OF-SHARES-REDEEMED> 4,545,826
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,120,065,332
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,764,081
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,791,430
<AVERAGE-NET-ASSETS> 1,142,577,000
<PER-SHARE-NAV-BEGIN> 20.38
<PER-SHARE-NII> 0.39
<PER-SHARE-GAIN-APPREC> 0.32
<PER-SHARE-DIVIDEND> (0.39)
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<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 20.70
<EXPENSE-RATIO> 0.37
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> CORPORATE STOCK MASTER PORTFOLIO
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> APR-28-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 201,387,650
<INVESTMENTS-AT-VALUE> 370,913,349
<RECEIVABLES> 1,209,965
<ASSETS-OTHER> 3,089
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 372,126,403
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,852,605
<TOTAL-LIABILITIES> 1,852,605
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 191,851,793
<SHARES-COMMON-STOCK> 7,992,176
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 8,896,306
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 169,525,699
<NET-ASSETS> 370,273,798
<DIVIDEND-INCOME> 3,711,397
<INTEREST-INCOME> 46,269
<OTHER-INCOME> 0
<EXPENSES-NET> (738,290)
<NET-INVESTMENT-INCOME> 3,019,376
<REALIZED-GAINS-CURRENT> 3,905,323
<APPREC-INCREASE-CURRENT> 14,221,384
<NET-CHANGE-FROM-OPS> 21,146,083
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,019,376)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 103,342
<NUMBER-OF-SHARES-REDEEMED> 271,208
<SHARES-REINVESTED> 33,048
<NET-CHANGE-IN-ASSETS> 370,273,798
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 710,941
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 738,290
<AVERAGE-NET-ASSETS> 359,544,000
<PER-SHARE-NAV-BEGIN> 44.05
<PER-SHARE-NII> 0.37
<PER-SHARE-GAIN-APPREC> 2.28
<PER-SHARE-DIVIDEND> (0.37)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 46.33
<EXPENSE-RATIO> 0.48
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 9
<NAME> U.S. GOVERNMENT ALLOCATION MASTER PORTFOLIO
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> APR-28-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 101,399,925
<INVESTMENTS-AT-VALUE> 101,351,629
<RECEIVABLES> 44,272,304
<ASSETS-OTHER> 1,923,720
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 147,547,653
<PAYABLE-FOR-SECURITIES> 0
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<OTHER-ITEMS-LIABILITIES> 42,227,254
<TOTAL-LIABILITIES> 42,227,254
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 130,518,487
<SHARES-COMMON-STOCK> 7,352,858
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (25,149,793)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (48,295)
<NET-ASSETS> 105,320,399
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,317,513
<OTHER-INCOME> 0
<EXPENSES-NET> (335,906)
<NET-INVESTMENT-INCOME> 3,981,607
<REALIZED-GAINS-CURRENT> (1,454,942)
<APPREC-INCREASE-CURRENT> 651,125
<NET-CHANGE-FROM-OPS> 3,177,790
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,981,607)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 749,381
<NUMBER-OF-SHARES-REDEEMED> 3,487,557
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 105,320,399
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 308,379
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 335,906
<AVERAGE-NET-ASSETS> 139,399,000
<PER-SHARE-NAV-BEGIN> 14.41
<PER-SHARE-NII> 0.39
<PER-SHARE-GAIN-APPREC> (0.09)
<PER-SHARE-DIVIDEND> (0.39)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.32
<EXPENSE-RATIO> 0.54
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 10
<NAME> SMALL CAP MASTER PORTFOLIO
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> SEP-16-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 33,989,401
<INVESTMENTS-AT-VALUE> 35,759,039
<RECEIVABLES> 292,181
<ASSETS-OTHER> 33,510
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 36,084,730
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 44,866
<TOTAL-LIABILITIES> 44,866
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 35,675,414
<SHARES-COMMON-STOCK> 1,605,218
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,405,188)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,769,638
<NET-ASSETS> 36,039,864
<DIVIDEND-INCOME> 19,028
<INTEREST-INCOME> 68,029
<OTHER-INCOME> 0
<EXPENSES-NET> (84,458)
<NET-INVESTMENT-INCOME> 2,599
<REALIZED-GAINS-CURRENT> (1,405,188)
<APPREC-INCREASE-CURRENT> 1,769,638
<NET-CHANGE-FROM-OPS> 367,049
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,599)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 552,949
<NUMBER-OF-SHARES-REDEEMED> 26,742
<SHARES-REINVESTED> 11,000
<NET-CHANGE-IN-ASSETS> 36,039,864
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 52,849
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 84,458
<AVERAGE-NET-ASSETS> 30,270,000
<PER-SHARE-NAV-BEGIN> 22.31
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0.14
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 22.45
<EXPENSE-RATIO> 0.95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE> 1
EXHIBIT-99.B(1)(a)
DECLARATION OF TRUST
OF
CASH INVESTMENT TRUST
A DELAWARE BUSINESS TRUST
AUGUST 14, 1991
PRINCIPAL PLACE OF BUSINESS:
111 CENTER STREET
LITTLE ROCK, ARKANSAS 72201
<PAGE> 2
DECLARATION OF TRUST
OF
CASH INVESTMENT TRUST
This DECLARATION OF TRUST of the Cash Investment Trust is made on
the 14th day of August, 1991 by the parties signatory hereto, as trustees (such
persons, so long as they shall continue in office in accordance with the terms
of this Declaration of Trust, and all other persons who at the time in question
have been duly elected or appointed as trustees in accordance with the
provisions of this Declaration of Trust and are then in office, in their
capacity as trustees hereunder, are hereinafter called the "Trustees").
W I T N E S S E T H:
WHEREAS, the Trustees desire to form a business trust under the
law of Delaware for the investment and reinvestment of its assets; and
WHEREAS, it is proposed that the trust assets be composed of funds
contributed thereto by the holders of interests in the trust entitled to
ownership rights in the trust;
NOW, THEREFORE, the Trustees hereby declare that they will hold in
trust all cash, securities and other assets which they may from time to time
acquire in any manner as Trustees hereunder, and manage and dispose of the same
for the benefit of the holders of interests in the trust and subject to the
following terms and conditions.
ARTICLE I
The Trust
1 Name. The name of the trust created hereby (the "Trust")
shall be "Cash Investment Trust," and so far as may be practicable the Trustees
shall conduct the Trust's activities, execute all documents and sue or be sued
under that name, which name (and the word "Trust" wherever hereinafter used)
shall not refer to the Trustees in their individual capacities or to the
officers, agents, employees or holders of interest in the Trust. However,
should the Trustees determine that the use of the name of the Trust is not
advisable, they may select such other name for the Trust as they deem proper
and the Trust may hold its property and conduct its activities under such other
name. Any name change shall become effective upon the execution by a majority
of the then Trustees of an instrument setting forth the new name. Any such
instrument shall not require the approval of the holders of interests in the
Trust, but shall have the status of an amendment to this Declaration.
2 Trust Purpose. The purpose of the Trust is to conduct,
operate and carry on the business of an open-end management investment company
registered under the 1940 Act.
3 Definitions. As used in this Declaration, the following
terms shall have the following meanings:
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The "1940 Act" refers to the Investment Company Act of 1940, as
amended from time to time, and the rules and regulations thereunder, as adopted
or amended from time to time.
The terms "Affiliated Person", "Assignment" and "Interested
Person" shall have the meanings given them in the 1940 Act.
"Administrator" shall mean any party furnishing services to the
Trust pursuant to any administrative services contract described in Section 4.1
hereof.
"Book Capital Account" shall mean, for any Holder at any time, the
Book Capital Account of the Holder at such time, determined in accordance with
generally accepted accounting principles, and pursuant to Article VIII of this
Declaration, and based upon the net asset value of the Trust Property
determined in accordance with applicable provisions of the 1940 Act and the
Code. The net asset value of a Holder's Book Capital Account shall be
determined in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)
under the Code. For this purpose, the Trust will use the amortized cost method
of determining fair market value.
"By-Laws" shall mean the By-Laws of the Trust as amended from
time to time.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and the rules and regulations thereunder, as adopted or
amended from time to time.
"Commission" shall mean the Securities and Exchange Commission.
"Declaration" shall mean this Declaration of Trust as amended from
time to time. References in this Declaration to "Declaration", "hereof",
"herein" and "hereunder" shall be deemed to refer to the Declaration rather
than the article or section in which such words appear.
"DBTA" shall mean the Delaware Business Trust Act, Del. Code. Ann.
tit. 12, Sections 3801-3819, as amended from time to time.
"Fiscal Year" shall mean an annual period as determined by the
Trustees unless otherwise provided by the Code or applicable regulations.
"Holders" shall mean as of any particular time any or all holders
of record of Interest in the Trust or in Trust Property, as the case may be, at
such time.
"Institutional Investor(s)" shall mean any registered
broker/dealer, regulated investment company, segregated asset account, foreign
investment company, common or commingled trust fund, group trust or similar
organization or entity that is an "accredited investor" within the meaning of
Regulation D under the Securities Act of 1933.
"Interest(s)" shall mean the interest of a Holder in the Trust or
Trust Property, as the case may be, including all rights, powers and privileges
accorded to Holders in this Declaration, which interest may be expressed as a
percentage, determined by calculating, at such times and on such basis, as the
Trustees shall from time to time determine, the ratio of each Holders' Book
Capital Account balance to the total of all Holders' Book Capital Account
balances. Reference herein to a specified percentage in, or fraction of,
Interests of the Holders, means Holders whose combined Book Capital Accounts
represents such specified percentage or fraction of the Book Capital Accounts
of all Holders.
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"Investment Adviser" shall mean any party furnishing services to
the Trust pursuant to any investment advisory contract described in Section 4.1
hereof.
"Majority Interests Vote" shall mean the vote, at a meeting of the
Holders of Interests in the Trust, of the lesser of (A) 67% or more of the
Interests present or represented at such meeting, provided the Holders of more
than 50% of the Interests in the Trust are present or represented by proxy or
(B) more than 50% of the Interests in the Trust.
"Person" shall mean and include individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities, whether
or not legal entities, and governments and agencies and political subdivisions
thereof.
"Registration Statement" shall mean the currently effective
Registration Statement of the Trust under the 1940 Act.
"Trust Property" shall mean as of any particular time any and all
property, real or personal, tangible or intangible, which at such time is owned
or held by or for the account of the Trust or the Trustees. The Trustees may
authorize the division of Trust Property into two or more series, in accordance
with the provisions of Section 9.8 hereof, in which case all references in this
Declaration to the Trust, Trust Property, Interests therein or Holders thereof
shall be deemed to refer to each such series, as the case may be, except as the
context otherwise requires. Any series of Trust Property shall be established
and designated, and the variations in the relative rights and preferences as
between the different series shall be fixed and determined, by the Trustees.
The voting rights of Interests in the Trust Property shall be governed by
Section 18(f)(2) of the 1940 Act and Rule 18f-2 thereunder, as amended from
time to time, or upon repeal thereof, in such other manner as the Trustees
shall establish in the Trust's By-Laws.
ARTICLE II
Trustees
2 Number and Qualification. The number of Trustees shall be
fixed from time to time by written instrument signed by a majority of the
Trustees so fixed then in office, provided, however, that the number of
Trustees shall in no event be less than three or more than fifteen. Any
vacancy created by an increase in Trustees may be filled by the appointment of
an individual having the qualifications described in this Article made by a
written instrument signed by a majority of the Trustees then in office. Any
such appointment shall not become effective, however, until the individual
named in the written instrument of appointment shall have accepted in writing
such appointment and agreed in writing to be bound by the terms of this
Declaration. No reduction in the number of Trustees shall have the effect of
removing any Trustee from office. Whenever a vacancy in the number of Trustees
shall occur, until such vacancy is filled as provided in Section 2.4 hereof,
the Trustees in office, regardless of their number, shall have all the powers
granted to the Trustees and shall discharge all the duties imposed upon the
Trustees by this Declaration. A Trustee shall be an individual at least 21
years of age who is not under legal disability.
3 Term and Election. Each Trustee named herein, or elected
or appointed prior to the first meeting of the Holders, shall (except in the
event of resignations or removals or vacancies pursuant to Section 2.3 or 2.4
hereof) hold office until his or her successor has been elected at such meeting
and has qualified to serve as Trustee, as required under the 1940 Act.
Beginning with the Trustees elected at the
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first meeting of Holders, each Trustee shall hold office during the lifetime of
this Trust and until its termination as hereinafter provided unless such
Trustee resigns or is removed as provided in Section 2.3 below.
4 Resignation and Removal. Any Trustee may resign (without
need for prior or subsequent accounting) by an instrument in writing signed by
him or her and delivered or mailed to the Chairman, if any, the President or
the Secretary and such resignation shall be effective upon such delivery, or at
a later date according to the terms of the instrument. Any of the Trustees may
be removed by the affirmative vote of the Holders of two-thirds (2/3) of the
Interests or (provided the aggregate number of Trustees, after such removal and
after giving effect to any appointment made to fill the vacancy created by such
removal, shall not be less than the number required by Section 2.1 hereof) with
cause, by the action of two-thirds of the remaining Trustees. Removal with
cause includes, but is not limited to, the removal of a Trustee due to physical
or mental incapacity. Upon the resignation or removal of a Trustee, or his or
her otherwise ceasing to be a Trustee, he or she shall execute and deliver such
documents as the remaining Trustees shall require for the purpose of conveying
to the Trust or the remaining Trustees any Trust Property held in the name of
the resigning or removed Trustee. Upon the death of any Trustee or upon
removal or resignation due to any Trustee's incapacity to serve as trustee, his
or her legal representative shall execute and deliver on his or her behalf such
documents as the remaining Trustees shall require as provided in the preceding
sentence.
5 Vacancies. The term of office of a Trustee shall terminate
and a vacancy shall occur in the event of the death, resignation, adjudicated
incompetence or other incapacity to perform the duties of the office, or
removal, of a Trustee. No such vacancy shall operate to annul this Declaration
or to revoke any existing agency created pursuant to the terms of this
Declaration. In the case of a vacancy, the Holders of at least a majority of
the Interests entitled to vote, acting at any meeting of the Holders held in
accordance with Section 9.1 hereof, or, to the extent permitted by the 1940
Act, a majority vote of the Trustees continuing in office acting by written
instrument or instruments, may fill such vacancy, and any Trustee so elected by
the Trustees or the Holders shall hold office as provided in this Declaration.
6 Meetings. Meetings of the Trustees shall be held from time
to time upon the call of the Chairman, if any, the President, the Chief
Operating Officer, the Secretary, an Assistant Secretary or any two Trustees.
Regular meetings of the Trustees may be held without call or notice at a time
and place fixed by the By-Laws or by resolution of the Trustees. Notice of any
other meeting shall be mailed or otherwise given not less than 24 hours before
the meeting but may be waived in writing by any Trustee either before or after
such meeting. The attendance of a Trustee at a meeting shall constitute a
waiver of notice of such meeting except where a Trustee attends a meeting for
the express purpose of objecting to the transaction of any business on the
ground that the meeting has not been lawfully called or convened. The Trustees
may act with or without a meeting. A quorum for all meetings of the Trustees
shall be one-third of the total number of Trustees, but no less than two
Trustees. Unless provided otherwise in this Declaration, any action of the
Trustees may be taken at a meeting by vote of a majority of the Trustees
present (a quorum being present) or without a meeting by written consent of all
the Trustees. If there be less than a quorum present at any meeting of the
Trustees, a majority of those present may adjourn the meeting until a quorum
shall have been obtained.
Any committee of the Trustees, including an executive committee,
if any, may act with or without a meeting. A quorum for all meetings of any
such committee shall be two or more of the members thereof, unless the Board
shall provide otherwise. Unless provided otherwise in this Declaration, any
action of any such committee may be taken at a meeting by vote of a majority of
the members present (a quorum being present) or without a meeting by written
consent of all of the members.
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With respect to actions of the Trustees and any committee of the
Trustees, Trustees who are Interested Persons of the Trust within the meaning
of Section 1.3 hereof or otherwise interested in any action to be taken may be
counted for quorum purposes under this Section 2.5 and shall be entitled to
vote to the extent permitted by the 1940 Act.
All or any one or more Trustees may participate in a meeting of
the Trustees or any committee thereof by means of a conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other and participating in a meeting pursuant to such
communications system shall constitute presence in person at such meeting,
unless the 1940 Act specifically requires the Trustees to act "in person," in
which case such term shall be construed consistent with Commission or staff
releases or interpretations.
7 Officers; Chairman of the Board. The Trustees shall, from
time to time, elect a President, a Secretary and a Treasurer. The Trustees
shall elect or appoint, from time to time, a Chairman of the Board who shall
preside at all meetings of the Trustees and carry out such other duties as the
Trustees shall designate. The Trustees may elect or appoint or authorize the
President to appoint such other officers or agents with such powers as the
Trustees may deem to be advisable. The Chairman of the Board shall be and the
President, Secretary and Treasurer may, but need not, be a Trustee.
8 By-Laws. The Trustees may adopt and, from time to time,
amend or repeal the By-Laws for the conduct of the business of the Trust.
ARTICLE III
Powers of Trustees
3 General. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust to the same
extent as if the Trustees were the sole owners of the Trust Property and
business in their own right, but with such powers of delegation as may be
permitted by this Declaration. The Trustees may perform such acts as in their
sole discretion are proper for conducting the business of the Trust. The
enumeration of any specific power herein shall not be construed as limiting the
aforesaid power. Such powers of the Trustee may be exercised without order of
or recourse to any court.
4 Investments. The Trustees shall have power to:
(a) conduct, operate and carry on the business of an
investment company;
(b) subscribe for, invest in, reinvest in, purchase or
otherwise acquire, hold, pledge, sell, assign, transfer, exchange, distribute
or otherwise deal in or dispose of the United States and foreign currencies and
related instruments including forward contracts, and securities, including,
common and preferred stock, warrants, bonds, debentures, time notes and all
other evidences of indebtedness, negotiable or non-negotiable instruments,
obligations, certificates of deposit or indebtedness, commercial paper,
repurchase agreements, reverse repurchase agreements, convertible securities,
forward contracts, options, futures contracts, and other securities, including,
without limitation, those issued, guaranteed or sponsored by any state,
territory or possession of the United States and the District of Columbia and
their political subdivisions, agencies and instrumentalities, or by the United
States Government, any foreign government,
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or any agency, instrumentality or political subdivision of the United States
Government or any foreign government, or international instrumentalities, or by
any bank, savings institution, corporation or other business entity organized
under the laws of the United States or under foreign laws; and to exercise any
and all rights, powers and privileges of ownership or interest in respect of
any and all such investments of every kind and description, including, without
limitation, the right to consent and otherwise act with respect thereto, with
power to designate one or more persons, firms, associations, or corporations to
exercise any of said rights, powers and privileges in respect of any of said
instruments; and the Trustees shall be deemed to have the foregoing powers with
respect to any additional securities in which the Trustees may determine to
invest.
The Trustees shall not be limited to investing in obligations
maturing before the possible termination of the Trust, nor shall the Trustees
be limited by any law limiting the investments which may be made by
fiduciaries.
5 Legal Title. Legal title to all the Trust Property shall
be vested in the Trustees as joint tenants except that the Trustees shall have
the power to cause legal title to any Trust Property to be held by or in the
name of one or more of the Trustees, or in the name of the Trust, or in the
name of any other Person on behalf of the Trust on such terms as the Trustees
may determine.
The right, title and interest of the Trustees in the Trust
Property shall vest automatically in each person who may hereafter become a
Trustee upon his or her due election and qualification. Upon the resignation,
removal or death of a Trustee he or she shall automatically cease to have any
right, title or interest in any of the Trust Property, and the right, title and
interest of such Trustee in the Trust Property shall vest automatically in the
remaining Trustees. Such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and delivered.
6 Sale of Interests. Subject to the more detailed provisions
set forth in Articles VII and VIII, the Trustees shall have the power to permit
persons to purchase Interests and to add or reduce, in whole or in part, their
Interest in the Trust.
7 Borrow Money. The Trustees shall have power to borrow
money or otherwise obtain credit and to secure the same by mortgaging, pledging
or otherwise subjecting as security the assets of the Trust, including the
lending of portfolio securities, and to endorse, guarantee, or undertake the
performance of any obligation, contract or engagement of any other person,
firm, association or corporation.
8 Delegation; Committees. The Trustees shall have the power,
consistent with their continuing exclusive authority over the management of the
Trust and the Trust Property, to delegate from time to time to such of their
number or to officers, employees or agents of the Trust the doing of such
things and the execution of such instruments either in the name of the Trust or
the names of the Trustees or otherwise as the Trustees may deem expedient.
9 Collection and Payment. The Trustees shall have power to
collect all property due to the Trust; and to pay all claims, including taxes,
against the Trust Property; to prosecute, defend, compromise or abandon any
claims relating to the Trust Property; to foreclose any security interest
securing any obligations, by virtue of which any property is owned to the
Trust; and to enter into releases, agreements and other instruments.
10 Expenses. The Trustees shall have the power to incur and
pay any expenses which in the opinion of the Trustees are necessary or
incidental to carry out any of the purposes of this Declaration,
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and to pay reasonable compensation from the funds of the Trust to themselves as
Trustees. The Trustees shall fix the compensation of all officers, employees
and Trustees. The Trustees may pay themselves such compensation for special
services, including legal and brokerage services, as they in good faith may
deem reasonable (and subject to any limitations in the 1940 Act), and
reimbursement for expenses reasonably incurred by themselves on behalf of the
Trust.
11 Miscellaneous Powers. The Trustees shall have the power
to: (a) employ or contract with such Persons as the Trustees may deem
desirable for the transaction of the business of the Trust and terminate such
employees or contractual relationships as they consider appropriate; (b) enter
into joint ventures, partnerships and any other combinations or associations;
(c) purchase, and pay for out of Trust Property, insurance policies (including,
but not limited to, fidelity bonding and errors and omission) insuring the
Investment Adviser, Administrator, placement agent, Holders, Trustees,
officers, employees, agents, or independent contractors of the Trust against
all claims arising by reason of holding any such position or by reason of any
action taken or omitted by any such Person in such capacity, whether or not the
Trust would have the power to indemnify such Person against liability; (d)
establish pension, profit- sharing and other retirement, incentive and benefit
plans for any Trustees, officers, employees and agents of the Trust; (e) to the
extent permitted by law, indemnify any Person with whom the Trust has dealings,
including the Investment Adviser, Administrator, placement agent, Holders,
Trustees, officers, employees, agents or independent contractors of the Trust,
to such extent as the Trustees shall determine; (f) guarantee indebtedness or
contractual obligations of others; (g) determine and change the Fiscal Year of
the Trust and the method by which its accounts shall be kept; and (h) adopt a
seal for the Trust, but the absence of such seal shall not impair the validity
of any instrument executed on behalf of the Trust.
12 Further Powers. The Trustees shall have power to conduct
the business of the Trust and carry on its operations in any and all of its
branches and maintain offices, whether within or without the State of Delaware,
in any and all states of the United States of America, in the District of
Columbia, and in any and all commonwealths, territories, dependencies,
colonies, possessions, agencies or instrumentalities of the United States of
America and of foreign countries, and to do all such other things and execute
all such instruments as they deem necessary, proper or desirable in order to
promote the interests of the Trust although such things are not herein
specifically mentioned. Any determination as to what is in the interests of
the Trust made by the Trustees in good faith shall be conclusive. In
construing the provisions of this Declaration, the presumption shall be in
favor of a grant of power to the Trustees. The Trustees will not be required
to obtain any court order to deal with Trust Property.
ARTICLE IV
Investment Advisory, Administrative Services
and Placement Agent Arrangements
4 Investment Advisory and Other Arrangements. The Trustees
may in their discretion, from time to time, enter into investment advisory,
administrative services (including transfer and dividend disbursing agency
services), distribution, fiduciary (including custodian), placement agent,
shareholder servicing and distribution or other service contracts or agreements
whereby the other party to such contract or agreement shall undertake to
furnish the Trustees such investment advisory, administrative, distribution,
fiduciary, placement agent, shareholder servicing and/or other services as the
Trustee shall, from time to time, consider desirable and all upon such terms
and conditions as the Trustees may in their discretion determine.
Notwithstanding any provisions of this Declaration, the Trustees may authorize
any Investment Adviser (subject to such general or specific instructions as the
Trustees may, from time to time, adopt) to
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effect purchases, sales, loans or exchanges of Trust Property on behalf of the
Trustees or may authorize any officer, employee or Trustee to effect such
purchases, sales, loans or exchanges pursuant to recommendations of any such
Investment Adviser (and all without further action by the Trustees). Any such
purchases, sales, loans and exchanges shall be deemed to have been authorized
by all of the Trustees.
5 Parties to Contract. Any contract or agreement of the
character described in Section 4.1 of this Article IV or in the By-Laws of the
Trust may be entered into with any Person, although one or more of the Trustees
or officers of the Trust may be an officer, director, trustee, shareholder, or
member of such other party to the contract or agreement, and no such contract
or agreement shall be invalidated or rendered voidable by reason of the
existence of any such relationship, nor shall any person holding such
relationship be liable merely by reason of such relationship for any loss or
expense to the Trust under or by reason of said contract or agreement or
accountable for any profit realized directly or indirectly therefrom, provided
that the contract or agreement when entered into was reasonable and fair and
not inconsistent with the provisions of this Article IV or the By-Laws. The
same Person may be the other party to contracts or agreements entered into
pursuant to Section 4.1 above or the By-Laws of the Trust, and any individual
may be financially interested or otherwise affiliated with Persons who are
parties to any or all of the contracts or agreements mentioned in this Section
4.2.
ARTICLE V
Limitations of Liability
5 No Personal Liability of Trustees, Officers, Employees,
Agents; Liability of Holders; Indemnification. No Trustee, officer, employee
or agent of the Trust shall be subject to any personal liability whatsoever, in
his or her official or individual capacity to any Person, other than the Trust
or its Holders, in connection with Trust Property or the affairs of the Trust,
save only that arising from his or her bad faith, willful misfeasance, gross
negligence or reckless disregard of his or her duty to such Person; and all
such Persons shall look solely to the Trust Property for satisfaction of claims
of any nature against a Trustee, officer, employee or agent of the Trust
arising in connection with the affairs of the Trust. Each Holder shall be
jointly and severally liable (with rights of contribution inter se in
proportion to their respective Interest in the Trust) for the liabilities and
obligations of the Trust in the event that the Trust fails to satisfy such
liabilities and obligations; provided, however, that, to the extent assets are
available in the Trust, the Trust shall indemnify and hold each Holder harmless
from and against any claim or liability to which such Holder may become subject
by reason of his or her being or having been a Holder to the extent that such
claim or liability imposes on the Holder an obligation or liability which, when
compared to the obligations and liabilities imposed on other Holders, is
greater than his or her Interest (proportionate share), and shall reimburse
such Holder for all legal and other expenses reasonably incurred by him or her
in connection with any such claim or liability. The rights accruing to a
Holder under this Section 5.1 shall not exclude any other right to which such
Holder may be lawfully entitled, nor shall anything herein contained restrict
the right of the Trust to indemnify or reimburse a Holder in any appropriate
situation even though not specifically provided herein. Notwithstanding the
indemnification procedure described above, it is intended that each Holder
shall remain jointly and severally liable to the Trust's creditors as a legal
matter.
6 Non-liability of Trustees, etc. No Trustee, officer,
employee or agent of the Trust shall be liable to the Trust, Holders of
Interests therein, or to any Trustee, officer, employee, or agent thereof for
any action or failure to act (including, without limitation, the failure to
compel in any way any former or
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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.
7 Mandatory Indemnification. The Trust shall indemnify each
of its Trustees, officers, employees, and agents (including Persons who serve
at its request as directors, officers or trustees of another organization in
which it has any interest, as a shareholder, creditor or otherwise) against all
liabilities and expenses (including amounts paid in satisfaction of judgments,
in compromise, as fines and penalties, and as counsel fees) reasonably incurred
by him or her in connection with the defense or disposition of any action, suit
or other proceeding, whether civil or criminal, in which he or she may be
involved or with which he or she may be threatened, while in office or
thereafter, by reason of his or her being or having been such a Trustee,
officer, employee or agent, except with respect to any matter as to which he or
she shall have been adjudicated to have acted in bad faith, willful
misfeasance, gross negligence or reckless disregard of his or her duties;
provided, however, that as to any matter disposed of by a compromise payment by
such Person, pursuant to a consent decree or otherwise, no indemnification
either for said payment or for any other expenses shall be provided unless
there has been a determination that such Person did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office by the court or other body
approving the settlement or other disposition or by a reasonable determination,
based upon a review of readily available facts (as opposed to a full trial-type
inquiry), that he or she did not engage in such conduct by written opinion from
independent legal counsel approved by the Trustees. The rights accruing to any
Person under these provisions shall not exclude any other right to which he or
she may be lawfully entitled; provided that no Person may satisfy any right of
indemnity or reimbursement granted herein or in Section 5.1 or to which he or
she may be otherwise entitled except out of the Trust Property. The Trustees
may make advance payments in connection with indemnification under this Section
5.3, provided that the indemnified Person shall have given a written
undertaking to reimburse the Trust in the event it is subsequently determined
that he or she is not entitled to such indemnification.
8 No Bond Required of Trustees. No Trustee shall, as such,
be obligated to give any bond or surety or other security for the performance
of any of his or her duties hereunder.
9 No Duty of Investigation; Notice in Trust Instruments, etc.
No purchaser, lender, or other Person dealing with the Trustees or any officer,
employee or agent of the Trust shall be bound to make any inquiry concerning
the validity of any transaction purporting to be made by the Trustees or by
said officer, employee or agent or be liable for the application of money or
property paid, loaned, or delivered to or on the order of the Trustees or of
said officer, employee or agent. Every obligation, contract, instrument,
certificate or other interest or undertaking of the Trust, and every other act
or thing whatsoever executed in connection with the Trust shall be conclusively
taken to have been executed or done by the executors thereof only in their
capacity as Trustees, officers, employees or agents of the Trust. Every
written obligation, contract, instrument, certificate or other interest or
undertaking of the Trust made or sold by the Trustees or by any officer,
employee or agent of the Trust, in his or her capacity as such, shall contain
an appropriate recital to the effect that the Trustee, officer, employee and
agent of the Trust shall not personally be bound by or liable thereunder, nor
shall resort be had to their private property for the satisfaction of any
obligation or claim thereunder, and appropriate references shall be made
therein to the Declaration, and may contain any further recital which they may
deem appropriate, but the omission of such recital shall not operate to impose
personal liability on any of the Trustees, officers, employees or agents of the
Trust. The Trustees may maintain insurance for the protection of the Trust
Property, Holders, Trustees, officers, employees and agents in such amount as
the Trustees shall deem adequate to cover possible tort liability, and such
other insurance as the Trustees in their sole judgment shall deem advisable.
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10 Reliance on Experts, etc. Each Trustee and officer or
employee of the Trust shall, in the performance of his or her duties, be fully
and completely justified and protected with regard to any act or any failure to
act resulting from reliance in good faith upon the books of account or other
records of the Trust, upon an opinion of counsel, or upon reports made to the
Trust by any of its officers or employees or by any Investment Adviser,
Administrator, accountant, appraiser or other experts or consultants selected
with reasonable care by the Trustees, officers or employees of the Trust,
regardless of whether such counsel or expert may also be a Trustee.
ARTICLE VI
Interests in the Trust
6 Interests. The beneficial interest in the property of the
Trust shall consist of non-transferable Interests which may only be increased
or decreased in accordance with this Article VI and Article VII. The Trustees
may permit the purchase of Interests from the Trust, but only if the purchaser
is an Institutional Investor and the number of Holders does not exceed 500.
Individuals, S corporations, partnerships and grantor trusts that are
beneficially owned by any individual, S corporation or partnership may not
purchase Interests. Subject to applicable law and to such restrictions as may
be adopted by the Trustees, a Holder may increase or decrease its Interest
without limitation by investing additional moneys in or withdrawing moneys from
the Trust.
7 Rights of Holders. The ownership of the Trust Property of
every description and the right to conduct any business hereinbefore described
are vested exclusively in the Trustees, and the Holders shall have no right or
title therein other than the beneficial interest conferred by their Interests
and they shall have no right to call for any partition or division of any
property, profits or rights of the Trust. The Interests shall be personal
property giving only the rights in this Declaration specifically set forth.
8 Purchase of or Increase in Interests. The Trustees, in
their discretion, may, from time to time, without a vote of the Holders, permit
the purchase of Interests by such party or parties (or increase in the Interest
of a Holder) and for such type of consideration, including cash or property, at
such time or times (including, without limitation, each business day), and on
such terms as the Trustees may deem best, and may in such manner acquire other
assets (including the acquisition of assets subject to, and in connection with
the assumption of, liabilities) and businesses.
9 Register of Interests. A register shall be kept at the
Trust under the direction of the Trustees which shall contain the names and
addresses of the Holders and the Book Capital Account balances of each Holder.
Each such register shall be conclusive as to who are the Holders of the Trust
and who shall be entitled to payments of distributions or otherwise to exercise
or enjoy the rights of Holders. No holder shall be entitled to receive payment
of any distribution, nor to have notice given to it as herein provided, until
it has given its address to such officer or agent of the Trustees as shall keep
the said register for entry thereon.
10 Non-Transferability. Interests shall not be transferable
and may only be increased or decreased as provided in Section 6.1 of this
Article VI.
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11 Notices. Any and all notices to which any Holder hereunder
may be entitled and any and all communications shall be deemed duly served or
given if mailed, postage prepaid, addressed to any Holder of record at its last
known address as recorded on the register of the Trust.
ARTICLE VII
Decreases And Withdrawals
7 Decreases and Withdrawals. A Holder shall have the
authority to decrease or withdraw its Interest in the Trust, at such Holder's
option, subject to the terms and conditions provided in this Article VII. The
Trust shall, upon application of any Holder or pursuant to authorization from
any Holder, and subject to this Section 7.1, decrease or withdraw such Holder's
Interest; provided that (a) the amount of such decrease or withdrawal shall not
exceed the reduction in the Holder's Book Capital Account effected by such
decrease or withdrawal of its Interest and (b) if so authorized by the
Trustees, the Trust may, at any time and from time to time, charge fees for
effecting such decrease or withdrawal, at such rates as the Trustees may
establish, and may, at any time and from time to time, suspend such right of
decrease or withdrawal subject to the applicable terms and conditions of the
1940 Act. The procedures for effecting decreases or withdrawals shall be as
determined by the Trustees from time to time.
ARTICLE VIII
Determination of Book Capital Account
Balances, Net Income and Distributions
8 Book Capital Account Balances. An individual Book Capital
Account shall be maintained for each Holder. The balance of each Holder's Book
Capital Account shall consist of its original contribution of capital,
increased by additional contributions and by allocations of income or gain and
decreased by allocations of loss and expenses and by distributions, including
distributions pursuant to redemptions of a Holder's beneficial interest in the
Trust. The Book Capital Accounts of the Holders shall be adjusted daily to
reflect the revaluation of Trust assets on the Trust's books as if such assets
has been sold for fair market value using the authorized cost method. Gain or
loss in such case, and in the case of an actual sale of Trust assets, shall be
computed by reference to the book value of the assets and not their tax basis.
Such Book Capital Accounts shall be further adjusted as necessary to meet the
requirements of Treasury Regulation Section 1.704-1(b)(2)(iv) under the Code.
The Trustees may adopt resolutions setting forth the specific method of
determining the Book Capital Account balances of each Holder. The power and
duty to make calculations pursuant to such resolutions may be delegated by the
Trustees to the Investment Adviser, Administrator, custodian, or other such
person as the Trustees may determine.
9 Distributions and Allocations to Holders. The Trust shall,
in compliance with the regulations promulgated under applicable provisions of
the Code (i) allocate daily the income or loss of the Trust to each Holder of
Interest in the Trust in proportion to such Holder's Book Capital Account, (ii)
pay distributions to each Holder in proportion to such Holder's Book Capital
Account and (iii) upon liquidation, make a final distribution to each Holder in
accordance with such Holder's Book Capital Account. The Trustees may also
retain from the net profits such amount as they may deem necessary to pay the
debts or expenses of the Trust or to meet obligations of the Trust, or as they
may deem desirable to use in the conduct of its affairs or to retain for future
requirements or extensions of the business. The Trustees may,
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from time to time modify the Trust's obligation or methodology under this
Section 8.2 to the extent necessary to comply with the Code or any regulations
promulgated thereunder.
10 Allocation of Certain Tax Items. If any property of the
Trust is reflected in the Book Capital Accounts of the Holders and on the books
of the Trust at a book value that differs from the adjusted tax basis of such
property, then the tax items with respect to such property shall, in accordance
with the requirements of Treasury Regulations Section 1.704-1(b)(4)(i) under
the Code, be shared among the Holders in a manner that takes account of the
variation between the adjusted tax basis of the applicable property and its
book value in the same manner as variations between the adjusted tax basis and
fair market value of property contributed to the Trust are taken into account
in determining the Holders' share of tax items under Code Section 704(c).
11 Power to Modify Foregoing Procedures. Notwithstanding any
of the foregoing provisions of this Article VIII, the Trustees may prescribe,
in their absolute discretion, such other bases and times for determining the
net income and net assets of the Trust, the allocation of income or the payment
of distributions to the Holders of Interest in the Trust as they may deem
necessary or desirable to enable the Trust to comply with any applicable
provisions of the 1940 Act, or any order of exemption issued by the Commission,
as in effect now or hereafter amended or modified.
ARTICLE IX
Holders
9 Meetings of Holders. Meetings of the Holders may be called
at any time by a majority in the Trustees and shall be called by any Trustee
upon written request of Holders holding, in the aggregate, not less than 10% of
the Interests in the Trust, such request specifying the purpose or purposes for
which such meeting is to be called. Any such meeting shall be held within or
without the State of Delaware on such day and at such time as the Trustees
shall designate. Holders of one-third of the Interests in the Trust, present
in person or by proxy, shall constitute a quorum for the transaction of any
business, except as may otherwise be required by the 1940 Act or other
applicable law or by this Declaration or the By-Laws of the Trust. If a quorum
is present at a meeting, an affirmative vote by the Holders present, in person
or by proxy, holding more than 50% of the total Interests of the Holders
present, either in person or by proxy, at such meeting constitutes the action
of the Holders, unless the 1940 Act, other applicable law, this Declaration or
by the By-laws of the Trust requires a greater number of affirmative votes.
10 Notice of Meetings. Written or printed notice of all
meetings of the Holders, stating the time, place and purposes of the meeting,
shall be given by the Trustees either by presenting it personally to a Holder,
leaving it at his or her residence or usual place of business, or by mailing it
to a Holder, at his or her registered address, at least 20 business days and
not more than 90 business days before the meeting. If mailed, such notice
shall be deemed to be given when deposited in the United States mail addressed
to the Holder at his or her address as it is registered with the Trust, with
postage thereon prepaid. At any such meeting, any business properly before the
meeting may be considered whether or not stated in the notice of the meeting.
Any adjourned meeting may be held as adjourned without further notice.
11 Record Date for Meetings For the purpose of determining
the Holders who are entitled to notice of any to vote at any meeting, or to
participate in any distribution, or for the purpose of any other action, the
Trustees may from time to time fix a date, not more than 90 calendar days prior
to the date of
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any meeting of the Holders or payment of distributions or other action, as the
case may be, as a record date for the determination of the persons to be
treated as Holders of record for such purposes.
12 Proxies, etc. At any meeting of Holders, any Holder
entitled to vote thereat may vote by proxy, provided that no proxy shall be
voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other officer or agent of the Trust as the Secretary
may direct, for verification prior to the time at which such vote shall be
taken. Pursuant to a resolution of a majority of the Trustees, proxies may be
solicited in the name of one or more Trustees or one or more of the officers of
the Trust. Only Holders of record shall be entitled to vote. Each Holder
shall be entitled to a vote proportionate to its Interest in the Trust. When
Interests are held jointly by several persons, any one of them may vote at any
meeting in person or by proxy in respect of such Interest, but if more than one
of them shall be present at such meeting in person or by proxy, and such joint
owners or their proxies so present disagree as to any vote to be cast, such
vote shall not be received in respect of such Interest. A proxy purporting to
be executed by or on behalf of a Holder shall be deemed valid unless challenged
at or prior to its exercise, and the burden of proving invalidity shall rest on
the challenger. If the Holder is a minor or a person of unsound mind, and
subject to guardianship or to the legal control of any other person regarding
the charge or management of its Interest, he or she may vote by his or her
guardian or such other person appointed or having such control, and such vote
may be given in person or by proxy.
13 Reports. The Trustees shall cause to be prepared, at least
annually, a report of operations containing a balance sheet and statement of
income and undistributed income of the Trust prepared in conformity with
generally accepted accounting principles and an opinion of an independent
public accountant on such financial statements. The Trustees shall, in
addition, furnish to the Holders at least semi-annually interim reports
containing an unaudited balance sheet as of the end of such period and an
unaudited statement of income and surplus for the period from the beginning of
the current Fiscal Year to the end of such period.
14 Inspection of Records. The records of the Trust shall be
open to inspection by Holders during normal business hours and for any purpose
not harmful to the Trust.
15 Voting Powers. The Holders shall have power to vote only
(i) for the election of Trustees as contemplated by Section 2.2 hereof, (ii)
with respect to any investment advisory contract as contemplated by Section 4.1
hereof, (iii) with respect to termination of the Trust as provided in Section
10.2 hereof, (iv) with respect to any amendment of the Declaration to the
extent and as provided in Section 10.4 hereof, (v) with respect to any merger,
consolidation or sale of assets as provided in Section 10.5 hereof, (vi) with
respect to incorporation of the Trust to the extent and as provided in Section
10.6 hereof, (vii) to the same extent as the stockholders of a Delaware
business corporation as to whether or not a court action, proceeding or claim
should or should not be brought or maintained derivatively or as a class action
on behalf of the Trust or the Holders, and (viii) with respect to such
additional matters relating to the Trust as may be required by the 1940 Act,
DBTA, or any other law, the Declaration, the By-Laws or any registration of the
Trust with the Commission (or any successor agency) or any state, or as and
when the Trustees may consider necessary or desirable. Each Holder shall be
entitled to vote based on the ratio its Interest bears to the Interests of all
Holders entitled to vote. Until Interests are issued, the Trustees may
exercise all rights of Holders and may take any action required by law, the
Declaration or the By-Laws to be taken by Holders. The By-Laws may include
further provisions for Holders' votes and meetings and related matters.
16 Series of Interests. If the Trustees shall divide the
Trust Property into two or more series the following provisions shall be
applicable:
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(a) All consideration received by the Trust for the
issue or sale of Interests of a particular series together with all Trust
Property in which such consideration is invested or reinvested, all income,
earnings, profits, and proceeds thereof, including any proceeds derived from
the sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same may
be, shall irrevocably belong to that series for all purposes, subject only to
the rights of creditors of such series and except as may otherwise be required
by applicable tax laws, and shall be so recorded upon the books of account of
the Trust. In the event that there is any Trust Property, or any income,
earnings, profits, and proceeds thereof, funds, or payments which are not
readily identifiable as belonging to any particular series, the Trustees shall
allocate them among any one or more of the series established and designated
from time to time in such manner and on such basis as they, in their sole
discretion, deem fair and equitable. Each such allocation by the Trustees
shall be conclusive and binding upon the Holders of all Interests for all
purposes.
(b) The Trust Property belonging to each particular
series shall be charged with the liabilities of the Trust in respect of that
series and all expenses, costs, charges and reserves attributable to that
series, and any general liabilities, expenses, costs, charges or reserves of
the Trust which are not readily identifiable as belonging to any particular
series shall be allocated and charged by the Trustees to and among any one or
more of the series established and designated from time to time in such manner
and on such basis as the Trustees in their sole discretion deem fair and
equitable. Each allocation of liabilities, expenses, costs, charges and
reserves by the Trustees shall be conclusive and binding upon the Holders of
all Interests for all purposes. The Trustees shall have full discretion, to
the extent not inconsistent with the 1940 Act, to determine which items shall
be treated as income and which items as capital; and each such determination
and allocation shall be conclusive and binding upon the Holders. The assets of
a particular series of the Trust shall, under no circumstances, be charged with
liabilities attributable to any other series of the Trust. All persons
extending credit to, or contracting with or having any claim against a
particular series of the Trust shall look only to the assets of that particular
series for payment of such credit, contract or claim.
(c) The power of the Trustees to pay dividends and make
distributions shall be governed by Section 8.2 of this Declaration with respect
to the Interests in the Trust immediately prior to the establishment of two or
more series. With respect to any other series, dividends and distributions on
Interests of a particular series may be paid with such frequency as the
Trustees may determine, which may be daily or otherwise, pursuant to a standing
resolution or resolution adopted only once or with such frequency as the
Trustees may determine, to the Holders of Interests in that series, from such
of the income and capital gains, accrued or realized, from the Trust Property
belonging to that series as the Trustees may determine, after providing for
actual and accrued liabilities belonging to that series. All dividends and
distributions on Interests in a particular series shall be distributed pro rata
to the Holders of Interests in that series in proportion to the total
outstanding Interests in that series held by such Holders at the date and time
of record establishment for the payment of such dividends or distribution.
(d) The Interests in a series of the Trust shall
represent beneficial interests in the Trust Property belonging to such series.
Each Holder of Interests in a series shall be entitled to receive its pro rata
share of distributions of income and capital gains made with respect to such
series. Upon reduction or withdrawal of its Interests or indemnification for
liabilities incurred by reason of being or having been a Holder of Interests in
a series, such Holder shall be paid solely out of the funds and property of
such series of the Trust. Upon liquidation or termination of a series of the
Trust, Holders of Interests in such series shall be entitled to receive a pro
rata share of the Trust Property belonging to such series. A
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Holder of Interests in a particular series of the Trust shall not be entitled
to participate in a derivative or class action lawsuit on behalf of any other
series or the Holders of Interests in any other series of the Trust.
(e) Notwithstanding any other provision hereof, if the
Trust Property has been divided into two or more series, then on any matter
submitted to a vote of Holders of Interests in the Trust, all Interests then
entitled to vote shall be voted by individual series, except that (1) when
required by the 1940 Act, Interests shall be voted in the aggregate and not by
individual series, and (2) when the Trustees have determined that the matter
affects only the interests of Holders of Interests in a limited number of
series, then only the Holders of Interests in such series shall be entitled to
vote thereon. Except as otherwise provided in this Article IX, the Trustees
shall have the power to determine the designations, preferences, privileges,
limitations and rights, including voting and dividend rights, of each series of
Interests.
(f) The establishment and designation of any series of
Interests shall be effective upon the execution by a majority of the then
Trustees of an instrument setting forth such establishment and designation and
the relative rights and preferences of such series, or as otherwise provided in
such instrument. At any time that there are no Interests outstanding of any
particular series previously established and designated, the Trustees may by an
instrument executed by a majority of their number abolish that series and the
establishment and designation thereof. Each instrument referred to in this
paragraph shall have the status of an amendment to this Declaration.
17 Holder Action by Written Consent. Any action which may be
taken by Holders may be taken without a meeting if Holders holding more than
50% of the total Interest entitled to vote (or such larger proportion thereof as
shall be required by any express provision of this Declaration) shall consent
to the action in writing and the written consents are filed with the records of
the meetings of Holders. Such consents shall be treated for all purposes as a
vote taken at a meeting of Holders.
ARTICLE X
Duration; Termination of Trust;
Amendment; Mergers; Etc.
10 Duration. Subject to possible termination or dissolution
in accordance with the provisions of Sections 10.2 and 10.3 respectively, the
Trust created hereby shall continue perpetually pursuant to Section 3808 of
DBTA.
11 Termination of Trust.
(a) The Trust may be terminated (i) by the affirmative
vote of the Holders of not less than two-thirds of the Interests in the Trust
at any meeting of the Holders or by an instrument in writing, without a
meeting, signed by a majority of the Trustees and consented to by the Holders
of not less than two-thirds of such Interests, or (ii) by the Trustees by
written notice to the Holders. Upon any such termination,
(i) The Trust shall carry on no business except
for the purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the
affairs of the Trust and all of the powers of the Trustees under this
Declaration shall continue until the affairs of the Trust shall have been
wound up, including the power to fulfill or discharge the contracts of
the Trust, collect its assets,
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sell, convey, assign, exchange, or otherwise dispose of all or any part
of the remaining Trust Property to one or more Persons at public or
private sale for consideration which may consist in whole or in part of
cash, securities or other property of any kind, discharge or pay its
liabilities, and do all other acts appropriate to liquidate its business;
provided that any sale, conveyance, assignment, exchange, or other
disposition of all or substantially all of the Trust Property shall
require approval of the principal terms of the transaction and the nature
and amount of the consideration by the vote of Holders holding more than
50% of the total Interests entitled to vote.
(iii) After paying or adequately providing for the
payment of all liabilities, and upon receipt of such releases,
indemnities and refunding agreements, as they deem necessary for their
protection, the Trustees may distribute the remaining Trust Property, in
cash or in kind or partly each, among the Holders according to their
respective rights.
(b) Upon termination of the Trust and distribution to
the Holders as herein provided, a majority of the Trustees shall execute and
lodge among the records of the Trust an instrument in writing setting forth the
fact of such termination. Upon termination of the Trust, the Trustees shall
thereon be discharged from all further liabilities and duties hereunder, and
the rights and interests of all Holders shall thereupon cease.
12 Dissolution. Upon the withdrawal, resignation, retirement,
bankruptcy or expulsion of any Holder, the Trust shall be dissolved effective
120 days after the event. However, the Holders may, by a unanimous affirmative
vote at any meeting of the Holders or by an instrument in writing without a
meeting signed by a majority of the Trustees and consented to in writing by all
of the Holders, agree to continue the business of the Trust even if there has
been a prior dissolution and termination.
13 Amendment Procedure.
(a) This Declaration may be amended by the vote of
Holders holding more than 50% of the total Interests entitled to vote or by any
instrument in writing, without a meeting, signed by a majority of the Trustees
and consented to by the vote of Holders holding more than 50% of the total
Interests entitled to vote. The Trustees may also amend this Declaration
without the vote or consent of Holders to change the name of the Trust, to
supply any omission, to cure, correct or supplement any ambiguous, defective or
inconsistent provision hereof, or to conform this Declaration to the
requirements of the 1940 Act, the Code, DBTA, or any other applicable federal
laws or regulations, but the Trustees shall not be liable for failing so to do.
(b) No amendment may be made, under Section 10.4(a)
above, which would change any rights with respect to any Interest in the Trust
by reducing the amount payable thereon upon liquidation of the Trust or by
diminishing or eliminating any voting rights pertaining thereto, except with a
Majority Interests Vote.
(c) A certification in recordable form signed by a
majority of the Trustees setting forth an amendment and reciting that it was
duly adopted by the Holders or by the Trustees as aforesaid or a copy of the
Declaration, as amended, in recordable form, and executed by a majority of the
Trustees, shall be conclusive evidence of such amendment when lodged among the
records of the Trust.
Notwithstanding any other provision hereof, until such time as
Interests are first sold, this Declaration may be terminated or amended in any
respect by the affirmative vote of a majority of the Trustees or by an
instrument signed by a majority of the Trustees.
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14 Merger, Consolidation and Sale of Assets. The Trust, or
any series thereof, may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange all or
substantially all of its property, including its good will, upon such terms and
conditions and for such consideration when and as authorized by no less than a
majority of the Trustees and, at any meeting of Holders called for the purpose,
by the affirmative vote of the Holders of not less than two-thirds of the
Interests in the Trust, or by an instrument or instruments in writing without a
meeting, consented to by the Holders of not less than two-thirds of such
Interests, and any such merger, consolidation, sale, lease or exchange shall be
deemed for all purposes to have been accomplished under and pursuant to the
statutes of the State of Delaware. In accordance with Section 3815(f) of DBTA,
an agreement of merger or consolidation may effect any amendment to the
Declaration or By-Laws or effect the adoption of a new declaration of trust or
by-laws of the Trust if the Trust is the surviving or resulting business trust.
15 Incorporation. Upon a Majority Interests Vote, the
Trustees may cause to be organized or assist in organizing a corporation or
corporations under the laws of any jurisdiction or any other trust,
partnership, association or other organization to take over all of the Trust
Property or to carry on any business in which the Trust shall directly or
indirectly have any interest, and to sell, convey and transfer the Trust
Property to any such corporation, trust, association or organization in
exchange for the equity interests thereof or otherwise, and to lend money to,
subscribe for the equity interests of, and enter into any contracts with any
such corporation, trust, partnership, association or organization, or any
corporation, partnership, trust, association or organization in which the Trust
holds or is about to acquire equity interests. The Trustees may also cause a
merger or consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or other organization if and to
the extent permitted by law, as provided under the law then in effect. Nothing
contained herein shall be construed as requiring approval of the Holders for
the Trustees to organize or assist in organizing one or more corporations,
trusts, partnerships, associations or other organizations and selling,
conveying or transferring a portion of the Trust Property to such organizations
or entities.
ARTICLE XI
Miscellaneous
11 Certificate of Designation; Agent for Service of Process.
The Trust shall file, in accordance with Section 3812 of DBTA, in the office of
the Secretary of State of Delaware, a certificate of trust, in the form and
with such information required by Section 3810 by DBTA and executed in the
manner specified in Section 3811 of DBTA. In the event the Trust does not have
at least one Trustee qualified under Section 3807(a) of DBTA, then the Trust
shall comply with Section 3807(b) of DBTA by having and maintaining a
registered office in Delaware and by designating a registered agent for service
of process on the Trust, which agent shall have the same business office as the
Trust's registered office. The failure to file any such certificate, to
maintain a registered office, to designate a registered agent for service of
process, or to include such other information shall not affect the validity of
the establishment of the Trust, the Declaration, the By-Laws or any action
taken by the Trustees, the Trust officers or any other Person with respect to
the Trust except insofar as a provision of the DBTA would have governed, in
which case the Delaware common law governs.
12 Governing Law. This Declaration is executed by all of the
Trustees and delivered with reference to DBTA and the laws of the State of
Delaware, and the rights of all parties and the validity and construction of
every provision hereof shall be subject to and construed according to DBTA and
the laws of
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the State of Delaware (unless and to the extent otherwise provided for and/or
preempted by the 1940 Act or other applicable federal securities laws).
Reference shall be specifically made to DBTA as to the construction of matters
not specifically covered herein or as to which an ambiguity exists (unless and
to the extent otherwise provided for and/or preempted by the 1940 Act or other
applicable federal securities laws).
13 Counterparts. This Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
14 Reliance by Third Parties. Any certificate executed by an
individual who, according to the records of the Trust or of any recording
office in which this Declaration may be recorded, appears to be a Trustee
hereunder, certifying to: (a) the number or identity of Trustees or Holders,
(b) the due authorization of the execution of any instrument or writing, (c)
the form of any vote passed at a meeting of Trustees or Holders, (d) the fact
that the number of Trustees or Holders present at any meeting or executing any
written instrument satisfies the requirements of this Declaration, (e) the form
of any By-Laws adopted by or the identity of any officers elected by the
Trustees, or (f) the existence of any fact or facts which in any manner relate
to the affairs of the Trust, shall be conclusive evidence as to the matters so
certified in favor of any person dealing with the Trustees and their
successors.
15 Provisions in Conflict With Law or Regulations.
(a) The provisions of this Declaration are severable,
and if the Trustees shall determine, with the advice of counsel, that any of
such provisions is in conflict with the 1940 Act, the DBTA, or with other
applicable laws and regulations, the conflicting provisions shall be deemed
never to have constituted a part of this Declaration; provided, however, that
such determination shall not affect any of the remaining provisions of this
Declaration or render invalid or improper any action taken or omitted prior to
such determination.
(b) If any provision of this Declaration shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction and
shall not in any manner affect such provision in any other jurisdiction or any
other provision of this Declaration in any jurisdiction.
16 Trust Only. It is the intention of the Trustees to create
only a business trust under DBTA with the relationship of Trustee and
beneficiary between the Trustees and each Holder from time to time. It is not
the intention of the Trustees to create a general partnership, limited
partnership, joint stock association, corporation, bailment, or any form of
legal relationship other than a Delaware business trust except to the extent
such trust is deemed to constitute a partnership under the Code and applicable
state tax laws. Nothing in this Declaration of Trust shall be construed to
make the Holders, either by themselves or with the Trustees, partners or
members of a joint stock association except to the extent such Holders are
deemed to be partners under the Code and applicable state tax laws. However,
it is the intention of the Trustees to create a partnership among the Holders
for purposes of taxation under the Code and applicable state tax laws.
17 Tax Matters Partner. The Trustees shall appoint one of the
Holders as Tax Matters Partner ("TMP") in accordance with Section 6231(a)(7) of
the Code for federal income tax purposes. The TMP shall be charged with all
authority and duties accorded Tax Matters Partners under the Code and
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applicable regulations. The TMP, at Trust expense, shall cause to be prepared
income tax returns for the Trust and shall further cause such returns to be
timely filed with the appropriate authorities. In the event the Trust is
subject to administrative or judicial proceedings for the assessment and
collection of deficiencies for federal taxes or for the refund of overpayments
of federal taxes arising out of a Holder's distributive share of income,
losses, gain, credits and deductions, the TMP shall have all the powers and
duties assigned to the TMP under Sections 6221-6233 of the Code and regulations
thereunder. In addition, the TMP shall have similar authority and duties with
respect to all state and local tax matters. Nothing in this Section 11.7 shall
be construed to prohibit the TMP from delegating its authority and duties as
TMP to the Trustees or an agent or adviser selected with the approval of the
Trustees.
The TMP, Trustees, agent or adviser, as the case may be,
shall send to each Holder within 100 days after the end of each taxable year,
the information necessary for the Holder to complete its federal and state
income tax or information returns and a copy of the Trust's federal, state and
local income tax or information returns for the year.
18 Withholding. Should any Holder be subject to withholding
pursuant to the Code, or any other provision of law, the Trust shall withhold
all amounts otherwise distributable to such Holder as shall be required by law
and any amounts so withheld shall be deemed to have been distributed to such
Holder under this Declaration of Trust. If any sums are withheld pursuant to
this provision, the Trust shall remit the sums so withheld to and file the
required forms with the Internal Revenue Service, or other applicable
government agency.
19 Headings and Construction. Headings are placed herein for
convenience of reference only and shall not be taken as a part hereof or
control or affect the meaning, construction or effect of this instrument.
Whenever the singular number is used herein, the same shall include the plural;
and the neuter, masculine and feminine genders shall include each other, as
applicable.
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IN WITNESS WHEREOF, the undersigned have caused these presents to
be executed as of the day and year first above written.
/s/Jack S. Euphrat
-------------------------
Jack S. Euphrat, Trustee Date August, 1991
/s/ Greg Feltus
-------------------------
R. Greg Feltus, Trustee Date August, 1991
/s/Thomas S. Goho
-------------------------
Thomas S. Goho, Trustee Date August, 1991
/s/Zoe Ann Hines
-------------------------
Zoe Ann Hines, Trustee Date August, 1991
/s/W. Rodney Hughes
-------------------------
W. Rodney Hughes, Trustee Date August, 1991
/s/Robert M. Joses
-------------------------
Robert M. Joses, Trustee Date August, 1991
/s/J. Tucker Morse
-------------------------
J. Tucker Morse, Trustee Date August, 1991
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Certificate No. 00001
CASH INVESTMENT TRUST
a Delaware Business Trust
Non-Transferable Certificate of Beneficial Interest
THIS CERTIFIES that the Overland Sweep Fund, a series of the
Overland Express Funds, Inc., is the holder of a non-transferable beneficial
interest ("the Interest") in Cash Investment Trust, a Delaware business trust
(the "Trust"), acquired for the initial purchase price of One Hundred Thousand
Dollars ($100,000.00).
The registered holder of this Certificate is entitled to all the
rights, interest and privileges of a holder of a beneficial interest as
provided by the Declaration of Trust and By-Laws of the Trust as from time to
time amended, which are incorporated by reference herein. Subject to
applicable law and to the Declaration of Trust and By- Laws of the Trust, a
holder may increase or decrease its Interest represented by this Certificate
without limitation.
IN WITNESS WHEREOF, the said Trust has caused this Certificate to
be signed by its duly authorized officers.
Dated: September 24, 1991 /s/ R. Greg Feltus
--------------------------------
R. Greg Feltus, President
/s/ Richard H. Blank, Jr.
--------------------------------
Richard H. Blank, Jr., Treasurer
<PAGE> 1
EXHIBIT-99.(B)(1)(b)
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;
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 master portfolio for corresponding feeder funds of Overland Express
Funds, Inc. and Stagecoach Funds, Inc.:
RESOLVED, that pursuant to the powers vested in the Trustees, a new
series of Interests be, and hereby is, established and designated as the
"Capital Appreciation Master Portfolio" "New Series"); and
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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), 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
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
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FURTHER RESOLVED, that this instrument is to be filed with the minutes
of the Trust's Board of Trustees.
Dated: November 15, 1995 /s/Jack S. Euphrat
------------------
Jack S. Euphrat
Dated: November 15, 1995 /s/R. Greg Feltus
------------------
R. Greg Feltus
Dated: November 15, 1995 /s/Thomas S. Goho
------------------
Thomas S. Goho
Dated: November 15, 1995 /s/Zoe Ann Hines
------------------
Zoe Ann Hines
Dated: November 15, 1995 /s/W. Rodney Hughes
-------------------
W. Rodney Hughes
Dated: November 15, 1995 /s/Robert M. Joses
-------------------
Robert M. Joses
Dated: November 15, 1995 /s/J. Tucker Morse
-------------------
J. Tucker Morse
3
<PAGE> 1
EXHIBIT 99.B2
BY-LAWS
OF
CASH INVESTMENT TRUST
a Delaware Business Trust
August 14, 1991
Principal Place of Business:
111 Center Street
Little Rock, Arkansas 72201
<PAGE> 2
CASH INVESTMENT TRUST
BY-LAWS
These By-Laws are made as of the 14th day of August, 1991 and
adopted pursuant to Section 2.7 of the Declaration of Trust establishing the
CASH INVESTMENT TRUST, dated August 14, 1991, as from time to time amended
(hereinafter called the "Declaration"). All words and terms capitalized in
these By-Laws shall have the meaning or meanings set forth for such words or
terms in the Declaration.
ARTICLE I
Meetings of Holders
Section 1.1 Annual Meeting. An annual meeting of the Holders of
Interests in the Trust, which may be held on such date and at such hour as may
from time to time be designated by the Board of Trustees and stated in the
notice of such meeting, is not required to be held unless certain actions must
be taken by the Holders as set forth in Section 9.7 of the Declaration, or
except when the Trustees consider it necessary or desirable.
Section 1.2 Chairman. The President or, in his absence, the
Chief Operating Officer shall act as chairman at all meetings of the Holders
and, in the absence of both of them, the Trustee or Trustees present at the
meeting may elect a temporary chairman for the meeting, who may be one of
themselves or an officer of the Trust.
Section 1.3 Proxies; Voting. Holders may vote either in person
or by duly executed proxy and each Holder shall be entitled to a vote
proportionate to his Interest in the Trust, all as provided in Article IX of
the Declaration. No proxy shall be valid after eleven (11) months from the
date of its execution, unless a longer period is expressly stated in such
proxy.
Section 1.4 Fixing Record Dates. For the purpose of determining
the Holders who are entitled to notice of or to vote or act at a meeting,
including any adjournment thereof, or who are entitled to participate in any
distributions, or for any other proper purpose, the Trustees may from time to
time fix a
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record date in the manner provided in Section 9.3 of the Declaration. If the
Trustees do not, prior to any meeting of the Holders, so fix a record date,
then the date of mailing notice of the meeting shall be the record date.
Section 1.5 Inspectors of Election. In advance of any meeting
of the Holders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the chairman, if any, of any meeting of the Holders may, and on the
request of any Holder or his proxy shall, appoint Inspectors of Election of the
meeting. The number of Inspectors shall be either one or three. If appointed
at the meeting on the request of one or more Holders or proxies, a Majority
Interests Vote shall determine whether one or three Inspectors are to be
appointed, but failure to allow such determination by the Holders shall not
affect the validity of the appointment of Inspectors of Election. In case any
person appointed as Inspector fails to appear or fails or refuses to act, the
vacancy may be filled by appointment made by the Trustees in advance of the
convening of the meeting or at the meeting by the person acting as chairman.
The Inspectors of Election shall determine the Interests owned by Holders, the
Interests represented at the meeting, the existence of a quorum, the
authenticity, validity and effect of proxies, shall receive votes, ballots or
consents, shall hear and determine all challenges and questions in any way
arising in connection with the right to vote, shall count and tabulate all
votes or consents, determine the results, and do such other acts as may be
proper to conduct the election or vote with fairness to all Holders. If there
are three Inspectors of Election, the decision, act or certificate of a
majority is effective in all respects as the decision, act or certificate of
all. On request of the chairman, if any, of the meeting, or of any Holder or
his proxy, the Inspectors of Election shall make a report in writing of any
challenge or question or matter determined by them and shall execute a
certificate of any facts found by them.
Section 1.6 Records at Meetings of Holders. At each meeting of
the Holders there shall be open for inspection the minutes of the last previous
meeting of Holders of the Trust and a list of the Holders of the Trust,
certified to be true and correct by the Secretary or other proper agent of the
Trust, as of the record date of the meeting. Such list of Holders shall
contain the name of each Holder in
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alphabetical order, the Holder's address and Interests owned by such Holder.
Holders shall have the right to inspect books and records of the Trust during
normal business hours and for any purpose not harmful to the Trust.
ARTICLE II
Trustees
Section 2.1 Annual and Regular Meetings. The Trustees shall
hold an Annual Meeting of the Trustees for the election of officers and the
transaction of other business which may come before such meeting. Regular
meetings of the Trustees may be held without call or notice at such place or
places and times as the Trustees may by resolution provide from time to time.
Section 2.2 Special Meetings. Special Meetings of the Trustees
shall be held upon the call of the chairman, if any, the President, the Chief
Operating Officer, the Secretary, an Assistant Secretary or any two Trustees,
at such time, on such day and at such place, as shall be designated in the
notice of the meeting.
Section 2.3 Notice. Notice of a meeting shall be given by mail
(which term shall include overnight mail) or by telegram (which term shall
include a cablegram or telefacsimile) or delivered personally (which term shall
include notice by telephone). If notice is given by mail, it shall be mailed
not later than 72 hours preceding the meeting and if given by telegram or
personally, such notice shall be delivered not later than 24 hours preceding
the meeting. Notice of a meeting of Trustees may be waived before or after any
meeting by signed written waiver. Neither the business to be transacted at,
nor the purpose of, any meeting of the Board of Trustees need be stated in the
notice or waiver of notice of such meeting, and no notice need be given of
action proposed to be taken by written consent. The attendance of a Trustee at
a meeting shall constitute a waiver of notice of such meeting except where a
Trustee attends a meeting for the express purpose of objecting, at the
commencement of such meeting, to the transaction of any business on the ground
that the meeting has not been lawfully called or convened.
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Section 2.4 Chairman; Records. The Trustees shall appoint a
Chairman of the Board from among their number. Such Chairman of the Board
shall act as chairman at all meetings of the Trustees; in his absence the
President shall act as chairman; and, in the absence of the Chairman of the
Board and the President, the Chief Operating Officer shall act as Chairman. In
the absence of all of them, the Trustees present shall elect one of their
number to act as temporary chairman. The results of all actions taken at a
meeting of the Trustees, or by written consent of the Trustees, shall be
recorded by the Secretary.
Section 2.5 Audit Committee. The Board of Trustees may, by the
affirmative vote of a majority of the entire Board, appoint from its members an
Audit Committee composed of two or more Trustees who are not "interested
persons" (as defined in the 1940 Act) of the Trust, as the Board may from time
to time determine. The Audit Committee shall (a) recommend independent public
accountants for selection by the Board, (b) review the scope of audit,
accounting and financial internal controls and the quality and adequacy of the
Trust's accounting staff with the independent public accountants and such other
persons as may be deemed appropriate, (c) review with the accounting staff and
the independent public accounts the compliance of transactions of the Trust
with its investment adviser, administrator or any other service provider with
the financial terms of applicable contracts or agreements, (d) review reports
of the independent public accountants and comment to the Board when warranted,
(e) report to the Board at least once each year and at such other times as the
committee deems desirable, and (f) be directly available at all times to
independent public accountants and responsible officers of the Trust for
consultation on audit, accounting and related financial matters.
Section 2.6 Nominating Committee of Trustees. The Board of
Trustees may, by the affirmative vote of a majority of the entire Board,
appoint from its members a Trustee Nominating Committee composed of two or more
Trustees. The Trustee Nominating Committee shall recommend to the Board a
slate of persons to be nominated for election as Trustees by the Holders at a
meeting of the Holders and a person to be elected to fill any vacancy occurring
for any reason in the Board. Notwithstanding anything in this Section to the
contrary, if the Trust has in effect a plan pursuant to
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Rule 12b-1 under the 1940 Act, the selection and nomination of those Trustees
who are not "interested persons" (as defined in the Act) shall be committed to
the discretion of such Disinterested Trustees.
Section 2.7 Executive Committee. The Board of Trustees may
appoint from its members an Executive Committee composed of those Trustees as
the Board may from time to time determine, of which committee the Chairman of
the Board shall be a member. In the intervals between meetings of the Board,
the Executive Committee shall have the power of the Board to (a) determine the
value of securities and assets owned by the Trust, (b) elect or appoint
officers of the Trust to serve until the next meeting of the Board and (c) take
such action as may be necessary to manage the portfolio security loan business
of the Trust. All action by the Executive Committee shall be recorded and
reported to the Board at its meeting next succeeding such action.
Section 2.8 Other Committees. The Board of Trustees may appoint
from among its members other committees composed of two or more of its Trustees
which shall have such powers as may be delegated or authorized by the
resolution appointing them.
Section 2.9 Committee Procedures. The Board of Trustees may at
any time change the members of any committee, fill vacancies or discharge any
committee. In the absence of any member of any committee, the member or
members thereof present at any meeting, whether or not they constitute a
quorum, may unanimously appoint to act in the place of such absent member a
member of the Board who, except in the case of the Executive Committee, is not
an "interested person" of the Trust as the Board may from time to time
determine. Each committee may fix its own rules of procedure and may meet as
and when provided by those rules. Copies of the minutes of all meetings of
committees other than the Nominating Committee and the Executive Committee
shall be distributed to the Board unless the Board shall otherwise provide.
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ARTICLE III
Officers
Section 3.1 Officers of the Trust; Compensation. The officers
of the Trust shall consist of the Chairman of the Board of Trustees, a
President, a Chief Operating Officer, a Secretary, a Treasurer and such other
officers or assistant officers, including Vice Presidents, as may be elected by
the Trustees. Any two or more of the offices may be held by the same person,
except that the same person may not be both President and Secretary. The
Trustees may designate a Vice President as an Executive Vice President and may
designate the order in which the other Vice Presidents may act. The Chairman
shall be a Trustee, but no other officer of the Trust need be a Trustee. The
Board of Trustees may determine what, if any, compensation shall be paid to
officers of the Trust.
Section 3.2 Election and Tenure. At the initial organization
meeting and thereafter at each annual meeting of the Trustees, the Trustees
shall elect the Chairman, President, Chief Operating Officer, Secretary,
Treasurer and such other officers as the Trustees shall deem necessary or
appropriate in order to carry out the business of the Trust. Such officers
shall hold office until the next annual meeting of the Trustees and until their
successors have been duly elected and qualified. The Trustees may fill any
vacancy in office or add any additional officers at any time.
Section 3.3 Removal of Officers. Any officer may be removed at
any time, with or without cause, by action of a majority of the Trustees. This
provision shall not prevent the making of a contract of employment for a
definite term with any officer and shall have no effect upon any cause of
action which any officer may have as a result of removal in breach of a
contract of employment. Any officer may resign at any time by notice in
writing signed by such officer and delivered or mailed to the President, Chief
Operating Officer or Secretary, and such resignation shall take effect
immediately, or at a later date according to the terms of such notice in
writing.
Section 3.4 Bonds and Surety. Any officer may be required by
the Trustees to be bonded for the faithful performance of his duties in such
amount and with such sureties as the Trustees may determine.
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Section 3.5 President and Vice-Presidents. The President shall
be the chief executive officer of the Trust and, subject to the control of the
Trustees, shall have general supervision, direction and control of the business
of the Trust and of its employees and shall exercise such general powers of
management as are usually vested in the office of president of a corporation.
The President shall preside at all meetings of the Holders and, in the absence
of the Chairman of the Board, the President shall preside at all meetings of
the Trustees. The President shall be, ex officio, a member of all standing
committees. Subject to direction of the Trustees, the President shall have the
power, in the name and on behalf of the Trust, to execute any and all loan
documents, contracts, agreements, deeds, mortgages, and other instruments in
writing, and to employ and discharge employees and agents of the Trust. Unless
otherwise directed by the Trustees, the President shall have full authority and
power, on behalf of all of the Trustees, to attend and to act and to vote, on
behalf of the Trust at any meetings of business organizations in which the
Trust holds an interest, or to confer such powers upon any other persons, by
executing any proxies duly authorizing such persons. The President shall have
such further authorities and duties as the Trustees shall from time to time
determine. In the absence or disability of the President, the Chief Operating
Officer, or, in the absence or disability of both of them, the Vice Presidents
in order of their rank or the Vice President designated by the Trustees, shall
perform all of the duties of President, and when so acting shall have all the
powers of and be subject to all of the restrictions upon the President.
Subject to the direction of the President, the Chief Operating Officer, the
Treasurer and each Vice President shall have the power in the name and on
behalf of the Trust to execute any and all loan documents, contracts,
agreements, deeds, mortgages and other instruments in writing, and, in
addition, shall have such other duties and powers as shall be designated from
time to time by the Trustees, the Chairman, or the President.
Section 3.6 Chief Operating Officer. The Chief Operating
Officer shall have the authority and duties that generally pertain to such
office, including, but not limited to, those delegated by the Chairman or the
President.
Section 3.7 Secretary. The Secretary shall keep the minutes of
all meetings of, and record all votes of, Holders, Trustees and any committees
of Trustees, provided that, in the absence or disability of
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the Secretary, the Holders or Trustees or committee may appoint any other
person to keep the minutes of a meeting and record votes. The Secretary shall
be custodian of the seal of the Trust, if any, and he (and any other person so
authorized by the Trustees) shall affix the seal or, if permitted, a facsimile
thereof, to any instrument executed by the Trust which would be sealed by a
Delaware corporation executing the name or a similar instrument and shall
attest the seal and the signature or signatures of the officer or officers
executing such instrument on behalf of the Trust. The Secretary shall also
perform any other duties commonly incident to such office in a Delaware
corporation, and shall have such other authorities and duties as the Trustees
shall from time to time determine.
Section 3.8 Treasurer. Except as otherwise directed by the
Trustees, the Treasurer shall have the general supervision of the monies,
funds, securities, notes receivable and other valuable papers and documents of
the Trust, and shall have and exercise under the supervision of the Trustees
and of the Chairman, the President and the Chief Operating Officer all powers
and duties normally incident to his office. He may endorse for deposit or
collection all notes, checks and other instruments payable to the Trust or to
its order. He shall deposit all funds of the Trust as may be ordered by the
Trustees, the Chairman, the President or the Chief Operating Officer. He shall
keep accurate account of the books of the Trust's transactions which shall be
the property of the Trust and which, together with all other property of the
Trust in his possession, shall be subject at all times to the inspection and
control of the Trustees. Unless the Trustees shall otherwise determine, the
Treasurer shall be the principal accounting officer of the Trust and shall also
be the principal financial officer of the Trust. He shall have such other
duties and authorities as the Trustees shall from time to time determine.
Notwithstanding anything to the contrary herein contained, the Trustees may
authorize any adviser or administrator to maintain bank accounts and deposit
and disburse funds on behalf of the Trust.
Section 3.9 Other Officers and Duties. The Trustees may elect
such other officers and assistant officers as they shall from time to time
determine to be necessary or desirable in order to conduct the business of the
Trust. Assistant officers shall act generally in the absence of the officer
whom they assist and shall assist that officer in the duties of his office.
Each officer, employee and agent of the Trust
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shall have such other duties and authority as may be conferred upon him by the
Trustees or delegated to him by the President.
ARTICLE IV
Custodian
Section 4.1 Appointment and Duties. The Trustees shall at all
times employ a custodian or custodians with authority as its agent, but subject
to such restrictions, limitations and other requirements, if any, as may be
contained in these By-Laws:
(1) to hold the securities owned by the Trust and deliver the
same upon written order;
(2) to receive and receipt for any moneys due to the Trust and
deposit the same in its own banking department or elsewhere as the Trustees
may direct;
(3) to disburse such funds upon orders or vouchers;
(4) if authorized by the Trustees, to keep the books and
accounts of the Trust and furnish clerical and accounting services; and
(5) if authorized to do so by the Trustees, to compute the
net income and net assets of the Trust;
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. The Trustees may also authorize the custodian to employ one
or more sub-custodians, from time to time, to perform such of the acts and
services of the custodian and upon such terms and conditions as may be agreed
upon between the custodian and such sub-custodian and approved by the Trustee.
Section 4.2 Central Certificate System. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct the
custodian to deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, any such other person or
entity with which the Trustees may authorize deposit in accordance
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with the 1940 Act, pursuant to which system all securities of any particular
class or series of any issuer deposited within the system are treated as
fungible and may be transferred or pledged by bookkeeping entry without
physical delivery of such securities. All such deposits shall be subject to
withdrawal only upon the order of the Trust.
ARTICLE V
Miscellaneous
Section 5.1 Depositories. In accordance with Article IV of
these By-Laws, the funds of the Trust shall be deposited in such depositories
as the Trustees shall designate and shall be drawn out on checks, drafts or
other orders signed by such officer, officers, agent or agents (including any
adviser or administrator), as the Trustees may from time to time authorize.
Section 5.2 Signatures. All contracts and other instruments
shall be executed on behalf of the Trust by such officer, officers, agent or
agents, as provided in these By-Laws or as the Trustees may from time to time
by resolution or authorization provide.
Section 5.3 Seal. The seal of the Trust, if any, may be affixed
to any document, and the seal and its attestation may be lithographed, engraved
or otherwise printed on any document with the same force and effect as if it
had been imprinted and attested manually in the same manner and with the same
effect as if done by a Delaware corporation.
Section 5.4 Fiscal Year. The fiscal year of the Trust shall end
on December 31 of each year, subject, however, to change from time to time by
the Board of Trustees.
ARTICLE VI
Interests
Section 6.1 Non-Transferability of Interests. Interests shall
not be transferable. Except as otherwise provided by law, the Trust shall be
entitled to recognize the exclusive right of a person in whose name Interests
stand on the record of Holders as the owners of such Interests for all
purposes, including,
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without limitation, the rights to receive distributions, and to vote as such
owner, and the Trust shall not be bound to recognize any equitable or legal
claim to or interest in any such Interests on the part of any other person.
Section 6.2 Regulations. The Trustees may make such additional
rules and regulations, not inconsistent with these By-Laws, as they may deem
expedient concerning the sale and purchase of Interests of the Trust.
Section 6.3 Distribution Disbursing Agents and the Like. The
Trustees shall have the power to employ and compensate such distribution
disbursing agents, warrant agents and agents for the reinvestment of
distributions as they shall deem necessary or desirable. Any of such agents
shall have such power and authority as is delegated to any of them by the
Trustees.
ARTICLE VII
Amendment of By-Laws
Section 7.1 Amendment and Repeal of By-Laws. In accordance with
Section 2.7 of the Declaration, the Trustees shall have the power to alter,
amend or repeal the By-Laws or adopt new By-Laws at any time. Action by the
Trustees with respect to the By-Laws shall be taken by an affirmative vote of a
majority of the Trustees. The Trustees shall in no event adopt By-Laws which
are in conflict with the Declaration, DBTA, or inconsistent with the 1940 Act
or applicable federal securities laws.
The Declaration establishing the Cash Investment Trust provides
that the name Cash Investment Trust does not refer to the Trustees as
individuals or personally; and no Trustee, officer, employee or agent of, or
Holder of Interest in, the Cash Investment Trust shall be held to any personal
liability, nor shall resort be had to their private property for the
satisfaction of any obligation or claim or otherwise in connection with the
affairs of said Cash Investment Trust (except to the extent of a Holder's
Interest in the Trust).
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EXHIBIT-99.B(5)(a)
AMENDED ADVISORY CONTRACT
CASH INVESTMENT TRUST
111 Center Street
Little Rock, Arkansas 72201
March 1, 1994
Wells Fargo Bank, N.A.
420 Montgomery Street
San Francisco, California 94163
Dear Sirs:
This will confirm the agreement between the undersigned (the
"Trust") on behalf of the Cash Investment Trust Master Portfolio (the
"Portfolio") and Wells Fargo Bank, N.A. (the "Adviser") as follows:
1. The Trust is a registered open-end management investment
company currently consisting of four investment portfolios, but which may from
time to time consist of a greater or lesser number of investment portfolios
(the "Portfolios"). The Cash Investment Trust Master Portfolio is one of the
four Portfolios. The Trust proposes to engage in the business of investing and
reinvesting the assets of the 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 documents referred to in the preceding sentence have been furnished to the
Adviser. Any amendments to those documents shall be furnished to the Adviser
promptly.
2. The Trust is engaging the Adviser to manage the investing and
reinvesting of the Portfolio's assets and to provide the advisory services
specified elsewhere in this contract to the Portfolio, subject to the overall
supervision of the Board of Trustees of the Trust. Pursuant to an
administration agreement between the Trust and Stephens Inc. (the
"Administrator"), the Trust has engaged the Administrator to provide the
administrative services specified therein.
3. (a) The Adviser shall make investments for the account of the
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 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 Portfolio and shall, when requested by the Trust's
officers or Board of Trustees, supply the reasons for making particular
investments.
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(b) The Adviser shall provide to the Trust investment
guidance and policy direction in connection with its daily management of the
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 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 Portfolio prepared by it, or
prepared at its request, other than such costs relating to proxy statements,
prospectuses, reports for holders of beneficial interests ("Interests") of the
Portfolio ("Holders") and other materials distributed to existing or
prospective Holders on behalf of the Portfolio.
(d) The Adviser shall, at its expense, employ or associate
with itself such persons as the Adviser believes appropriate to assist it in
performing its obligations under this contract.
4. Except as provided in the Trust's Advisory 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 shares; expenses of preparing
and printing stock certificates, prospectuses, 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 Portfolio; expenses of Holders' meetings; expenses relating to the
issuance, and any registration and qualification of, shares of the Portfolio;
pricing services, if any; organizational expenses; and any extraordinary
expenses. Expenses attributable to one or more, but not all, of the Portfolios
are to be charged against the assets of the relevant Portfolios. General
expenses of the Trust are allocated among the Portfolios in a manner
proportionate to the net assets of each Portfolio, on a transactional basis or
on such other basis as the Board of Trustees deems equitable.
5. The Adviser shall give the Trust and the Portfolio the
benefit of the Adviser's best judgment and efforts in rendering services under
this contract. As an inducement to the Adviser's undertaking to render these
services, the Trust agrees that the Adviser shall not be liable under this
contract for any mistake in judgment or in any other event whatsoever except
for lack of good faith, provided that nothing in this contract shall be deemed
to protect or purport to protect the Adviser against any liability to the Trust
or its Holders to which the Adviser would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of the
Adviser's duties under this contract or by reason of reckless disregard of its
obligations and duties hereunder.
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6. In consideration of the services to be rendered by the
Adviser under this contract, the Portfolio shall pay the Adviser a monthly fee
on the first business day of each month, at the annual rate of 0.25% of the
average daily value (as determined on each day that such value is determined
for the Portfolio at the time set forth in the Registration Statement for
determining net asset value per share) of the Portfolio's net assets during the
preceding month. If the fee payable to the Adviser pursuant to this paragraph
6 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 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 Portfolio's net assets in connection with the
determination of the net asset value of Portfolio shares.
7. If in any fiscal year the total expenses of the Portfolio or
any registered investment company investing in the Portfolio ("Investing
Company") incurred by, or allocated to, the Portfolio or any Investing Company,
excluding taxes, interest, brokerage commissions and other portfolio
transaction expenses, other expenditures that are capitalized in accordance
with generally accepted accounting principles, extraordinary expenses and
amounts accrued or paid under any Rule 12b-1 Plan, but including the fees
provided for in paragraph 6 and those provided for pursuant to the Trust's
Administration Agreement ("includable expenses"), exceed the most restrictive
expense limitation applicable to the Portfolio and/or Investing Company imposed
by state securities laws or regulations thereunder, as these limitations may be
raised or lowered from time to time, the Adviser shall waive or reimburse that
portion of the excess derived by multiplying the excess by a fraction, the
numerator of which shall be the percentage at which the excess portion
attributable to the fee payable pursuant to this agreement is calculated under
paragraph 6 hereof, and the denominator of which shall be the sum of such
percentage plus the percentage at which the excess portion attributable to the
fee payable pursuant to the Trust's Administration Agreement is calculated (the
"Applicable Ratio"), but only to the extent of the fee hereunder for the fiscal
year. If the fees payable under this agreement and/or the Trust'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 Portfolio's
fiscal year, the Portfolio shall review the includable expenses accrued during
that fiscal year to the end of the period and shall estimate the contemplated
includable expenses for the balance of that fiscal year. If as a result of
that review and estimation it appears likely that the includable expenses will
exceed the limitations referred to in this paragraph 7 for a fiscal year with
respect to the Portfolio, the monthly fee set forth in paragraph 6 payable to
the Adviser for such month shall be reduced, subject to a later adjustment, by
an amount equal to the Applicable Ratio times the pro rata portion (prorated on
the basis of the remaining months of the fiscal year, including the month just
ended) of the amount by which the includable expenses for the fiscal year are
expected to exceed the limitations provided for in this paragraph 7. For
purposes of computing the excess, if any, over the most restrictive applicable
expense limitation, the value of the Portfolio's net assets shall be computed
in the manner specified in the last sentence of
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paragraph 6, and any reimbursements required to be made by the Adviser shall be
made once a year promptly after the end of the Portfolio's fiscal year.
8. This contract shall continue in effect only so long as the
continuance is specifically approved at least annually (a) by the vote of a
majority of the 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 Portfolio, without the payment of any penalty, by a vote of a majority of
the Portfolio's outstanding voting securities (as defined in the Act) or by a
vote of a majority of the Trust's entire Board of Trustees on 60 days' written
notice to the Adviser or by the Adviser, at any time on 60 days' written notice
to the Trust and the Portfolio. This contract shall terminate automatically in
the event of its assignment (as defined in the Act).
9. Except to the extent necessary to perform the Adviser's
obligations under this contract, nothing herein shall be deemed to limit or
restrict the right of the Adviser, or any affiliate of the Adviser, or any
employee of the Adviser, to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether of
a similar or dissimilar nature, or to render services of any kind to any other
corporation, firm, individual or association.
10. Pursuant to Article V of the Trust's Declaration of Trust, no
Trustee, officer, employee or agent of the Trust shall be subject to any
personal liability whatsoever, in his or her official or individual capacity to
any person, other than 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 Interest in the Trust) for the liabilities and
obligations of the Trust in the event that the Trust fails to satisfy such
liabilities and obligations; provided, however, that, to the extent assets are
available in the Trust, the Trust shall indemnify and hold each Holder harmless
from and against any claim or liability to which such Holder may become subject
by reason of his or her being or having been a Holder to the extent that such
claim or liability imposes on the Holder an obligation or liability which, when
compared to the obligations and liabilities imposed on other Holders, is
greater than his or her interest (proportionate share), and shall reimburse
such Holder for all legal and other expenses reasonably incurred by him or her
in connection with any such claim or liability. The rights accruing to a
Holder under Section 5.1 of the Trust's Declaration of Trust shall not exclude
any other right to which such Holder may be lawfully entitled, nor shall
anything herein contained restrict the right of the Trust to indemnify or
reimburse a Holder in any appropriate situation even though not specifically
provided herein. Notwithstanding the indemnification procedure described
above, it is intended that each Holder shall remain jointly and severally
liable to the creditors as a legal matter.
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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.
11. This contract shall be governed by and construed in
accordance with the laws of the State of California.
If the foregoing correctly sets forth the agreement between the
Trust and the Adviser, please so indicate by signing and returning to the Trust
the enclosed copy hereof.
Very truly yours,
MASTER INVESTMENT TRUST,
on behalf of the Cash Investment Trust
Master Portfolio
By: /s/ Richard H. Blank, Jr.
---------------------------
Name: Richard H. Blank, Jr.
------------------------
Title: Chief Operating Officer
-----------------------
ACCEPTED as of the date
set forth above:
WELLS FARGO BANK, N.A.
By: /s/ Elizabeth A. Gottfried
--------------------------
Name: Elizabeth A. Gottfried
------------------------
Title: Vice President
--------------
By: /s/ M.J. Niedermeyer
--------------------
Name: Michael J. Niedermeyer
----------------------
Title: Executive Vice President
------------------------
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