<PAGE>
- ---------------------
ANNUAL
- ---------------------
REPORT
- ---------------------
ALLOCATION
- ---------------------
FUNDS
- ---------------------
Asset Allocation Fund
U.S. Government
Allocation Fund
MARCH 31, 1997
<PAGE>
TABLE OF CONTENTS
LETTER TO SHAREHOLDERS 1
INVESTMENT ADVISER Q & A
Asset Allocation Fund 2
U.S. Government Allocation Fund 6
STAGECOACH FUNDS
Statement of Assets and Liabilities 10
Statements of Operations 11
Statements of Changes in Net Assets 12
Financial Highlights 14
Notes to Financial Statements 18
Independent Auditors' Report 25
MASTER INVESTMENT TRUST PORTFOLIOS OF INVESTMENTS
Master Investment Trust Asset Allocation
Master Portfolio 26
Master Investment Trust U.S. Government Allocation
Master Portfolio 42
MASTER INVESTMENT TRUST
Statement of Assets and Liabilities 45
Statements of Operations 46
Statements of Changes in Net Assets 48
Notes to Financial Statements 50
Independent Auditors' Report 53
LIST OF ABBREVIATIONS 54
STAGECOACH FUNDS:
-------------------------------------------------------------------------
- - ARE NOT FDIC INSURED
- - ARE NOT GUARANTEED BY WELLS FARGO BANK [NO FDIC]
- - ARE NOT DEPOSITS OR OBLIGATIONS OF WELLS FARGO
BANK
- - INVOLVE INVESTMENT RISK, INCLUDING POSSIBLE LOSS
OF PRINCIPAL
---------------------
i
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
- ---------------------
ii
<PAGE>
LETTER TO SHAREHOLDERS
- ------------------
TO OUR SHAREHOLDERS:
Welcome to the 1997 Stagecoach Funds Annual Report.
This Report, dated March 31, 1997, comes to you six months after the previous
Annual Report dated September 30, 1996. As we explained in the Shareholder
Letter at that time, for administrative reasons, the Stagecoach Funds have
shifted their financial year-end to March 31. This change does not otherwise
affect the operation, nor does it affect the investment objectives, of the
Funds.
The recently completed reporting period saw market volatility and the long-
expected increase in the federal funds target rate. After months of debate on
the rate of economic growth and the potential for increased rates of inflation,
the Federal Reserve Board acted in March to raise rates by 0.25%. The Fed's
action capped a six month period which showed only modest total return for the
fixed-income market.
The equity market, as measured by the Standard & Poor's 500 Index, fell 7.20% in
March from its January high. While this environment offered some challenges, we
feel that much of the "bad news" has been greatly exaggerated. For example, the
S&P 500 Index still enjoyed a 1997 year-to-date return through March 31 of
2.69%. The positive return for the six-month period ended March 31, 1997 was
11.24%. The news is similar concerning the further market correction that
occurred after the reporting period. As of early May, the market had recouped
much of its March and April losses.
Of course, equity issues do not rise and fall in unison. Large company stocks
have fared well recently as investor dollars sought their greater security and
reduced volatility. Various sectors such as technology and finance stocks have
fluctuated acutely in recent months. Value stocks have outperformed growth
stocks, in contrast to recent years.
It is all too easy to be confused by such a variety of returns and apparently
conflicting information. That's why it is so important to truly understand the
investment philosophies and long-range goals that govern your Fund. We have
always felt that the more you understand your investment, the less likely you
are to be unduly concerned with short-term developments.
The following pages discuss what factors have affected the returns for the
Stagecoach Funds during the reporting period. These commentaries were written
for you -- our shareholders -- as part of the Stagecoach Funds commitment to
education, information and service as we help you meet your financial goals.
STAGECOACH FUNDS
MAY 1997
---------------------
1
<PAGE>
ASSET ALLOCATION FUND
- --------------------
INVESTMENT ADVISER Q&A
WHAT WERE THE FUND'S TOTAL RETURNS?
The total return for Class A shares for the six-month period ended March 31,
1997 was 4.94%. The return for Class B shares for the same period was 4.62%. The
one-year total returns were 8.73% and 8.35%, respectively. These return figures
exclude sales charges.
WHAT WERE SOME OF THE KEY FACTORS DRIVING THE CONTINUED STRONG PERFORMANCE OF
THE STOCK MARKET DURING LATE 1996 AND THE EARLY PART OF 1997?
Strong returns for large company stocks were one of the key factors driving the
strong performance of the broader stock market during this period. Unlike 1995,
when strong corporate earnings drove the stock market, the recent gains have
been driven by an increased tolerance for higher price-to-earnings ratios. In
March 1997, reaction to a hike in the fed funds target rate sent the equity
market, as measured by the S&P 500 Index, down more than 4% during a two-day
trading period. March's declines put the S&P 500 Index at 757.12, its lowest
level since the first week of January 1997. The equity market has since
rebounded, in part due to the recent balanced budget accord.
WHAT EFFECT HAS THE RECENT INCREASE IN THE FEDERAL FUNDS TARGET RATE HAD ON THE
FIXED-INCOME MARKET?
By the date of the Fed's announcement of a 0.25% increase in the federal funds
target rate to 5.50%, the fixed-income market was anticipating the rate hike, so
much of the impact on yields had already been absorbed. However, two days later,
economic reports of strong job and housing markets caused increased concern over
further future rate hikes. Market reaction to these reports was swift, bond
yields rose over 10 basis points to 7.09% on March 27th -- moving above 7.00%
for the first time since September.
DESPITE VOLATILITY IN THE MARKETS AND SUDDEN CHANGES IN INVESTOR EXPECTATIONS,
THE FUND'S ALLOCATION HAS NOT CHANGED SINCE AUGUST 1996. WHY?
The Fund has not been re-adjusted because the allocation model used to manage
the Fund's investments indicates that the current allocation is the most
attractive. The Fund's focus is on the spread in expected returns between three
asset classes -- stocks, bonds and cash -- adjusted for risk. While the markets
might rise and fall, the risk-adjusted relationship between the asset classes
has remained steady. The underweighting of stocks in the Fund's portfolio
actually benefited the Fund's performance in March, although for most of the
period the S&P 500 outperformed the other asset classes. The model's current
allocation mix is 40% stocks, 60% bonds and 0% cash.
- ---------------------
2
<PAGE>
ASSET ALLOCATION FUND
FOR BONDS, THE INTERMEDIATE RANGE WAS GENERALLY CONSIDERED TO OFFER THE BEST
VALUE DURING THE REPORTING PERIOD, YET THE FUND IS PERMITTED ONLY TO INVEST IN
LONGER-TERM BONDS. WHY WASN'T CASH USED TO REDUCE THE OVERALL MATURITY OF THE
FUND'S PORTFOLIO AND SOFTEN THE RISKS OF LONG-BONDS?
The Fund looks at relative values of S&P 500 stocks, long-term bonds, and short-
term cash rather than at the different performances levels of different bond
maturity ranges. Therefore, the Fund will only reallocate into cash when the
model indicates that there is no expected value to be gained in relation to the
risk exposure being taken when invested in stocks or longer-term bonds. Because
the expected returns and risk did not warrant this type of allocation the Fund
remained in a defensive position of 40% stocks, 60% bonds.
WHEN BOTH STOCKS AND BONDS ARE DOWN FROM RECENT HIGHS, AS THEY WERE AT THE END
OF THE FISCAL YEAR, WHAT CAN THE FUND DO TO CAPTURE VALUE? DOES THE FUND BECOME
MORE DEFENSIVE IN SUCH CONDITIONS?
When stock and bond markets are performing poorly the tendency for many
investors is to move a greater portion of a portfolio into money market
investments. However, the Fund's strategy is not to try to time short-term
market declines, but to invest in a mix of stocks, bonds and cash that is
expected over the long term to offer the best possible return.
ASSET ALLOCATION MODEL:
MARCH 31, 1997
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Bonds 60%
Stocks 40%
INDUSTRY SECTOR BREAKDOWN FOR
S&P 500 AS OF MARCH 31, 1997
Basic Industries 7%
Capital Goods - Tech 15%
Capital Goods 3%
Consumer Goods 19%
Consumer Cyclical 8%
Consumer Staples 9%
Credit Cyclical 4%
Utilities 10%
Transportation 1%
Finance 14%
Energy 10%
</TABLE>
---------------------
3
<PAGE>
ASSET ALLOCATION FUND
- ---------------------
PERFORMANCE AT A GLANCE
CLASS A SHARE PERFORMANCE AS OF 3/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 11/13/86
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEAR 5 YEAR INCEPTION
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------
With Maximum 4.5% Sales Charge 3.86% 11.36% 11.05% 10.70%
- ---------------------------------------------------------------------------------------
Without Sales Charge 8.73% 13.08% 12.07% 11.19%
- ---------------------------------------------------------------------------------------
</TABLE>
CLASS B SHARE PERFORMANCE AS OF 3/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 1/1/95
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR INCEPTION
<S> <C> <C>
- --------------------------------------------------------------------------------------
With Maximum Contingent Deferred Sales Charge(1) 3.50% 15.11%
- --------------------------------------------------------------------------------------
Without Sales Charge 8.35% 16.22%
- --------------------------------------------------------------------------------------
(1)Assumes redemption on 3/31/97.
</TABLE>
Past performance is not predictive of future results. The investment return and
net asset value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may have a greater or lesser net asset
value than when originally purchased.
Average annual total returns for the indicated periods represent the average
annual increase in the value of an investment over the periods assuming
reinvestment of dividends and capital gain distributions at net asset value.
The Stagecoach Asset Allocation Fund commenced operations on January 2, 1992, as
successor to the Asset Allocation Fund of the Wells Fargo Investment Trust for
Retirement Programs. The Predecessor Fund's date of inception was November 13,
1986. The performance figures shown include the performance of the Predecessor
Fund which had the same investment objectives and strategies. Certain of the
investment restrictions of the Stagecoach Asset Allocation Fund differ somewhat
from those of the Predecessor Fund.
The Fund seeks to achieve its investment objective by investing all of its
assets in the Master Investment Trust Asset Allocation Master Portfolio, which
has an identical investment objective as the Fund. Prior to April 28, 1996 the
Fund invested directly in a portfolio of securities and not in the Master
Investment Trust Asset Allocation Master Portfolio. References to the investment
policies of the Fund are understood to be references to the investment policies
of the Master Portfolio.
Wells Fargo Bank has voluntarily waived portions of its fees for some or all
classes of the Fund, which has reduced operating expenses for shareholders of
such classes. Without this reduction, the Fund's returns would have been lower.
- ---------------------
4
<PAGE>
ASSET ALLOCATION FUND
- --------------------------
GROWTH OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STAGECOACH ASSET
LEHMAN BROS U.S. ALLOCATION IBC/DONOGHUE
TREASURY BOND INDEX FUND CLASS A SHARES MONEY FUND AVERAGE S&P 500 INDEX
<S> <C> <C> <C> <C>
Nov-86 10000 9550 10000 10000
Dec-86 9990 9616.85 10045.41667 9744.803788
Jan-87 10165.824 10037.05 10091.45816 11057.01443
Feb-87 10301.02946 10285.35 10136.19696 11493.92142
Mar-87 10108.40021 10285.35 10181.72538 11825.55462
Apr-87 9622.186158 9951.1 10228.30677 11720.55569
May-87 9508.644362 9893.8 10277.65835 11822.16961
Jun-87 9616.092043 10113.45 10329.13229 12419.18714
Jul-87 9446.848823 10094.35 10380.9501 13048.31701
Aug-87 9291.920502 10056.15 10432.85485 13535.18229
Sep-87 8884.934384 9693.25 10486.93182 13238.45892
Oct-87 9529.092127 10361.75 10544.34777 10387.39597
Nov-87 9531.950855 10094.35 10601.02364 9531.371243
Dec-87 9722.589872 10438.15 10659.24093 10256.46731
Jan-88 10312.75108 11001.6 10716.97848 10687.85433
Feb-88 10424.12879 11230.8 10772.08161 11186.01522
Mar-88 10108.27769 10896.55 10826.39086 10840.47921
Apr-88 9931.382827 10772.4 10881.42501 10960.37491
May-88 9781.418946 10734.2 10938.18978 11055.18215
Jun-88 10193.21668 11183.05 10997.80291 11562.50446
Jul-88 9992.410315 11020.7 11060.21544 11518.68256
Aug-88 10034.37844 10867.9 11126.02372 11127.62329
Sep-88 10405.65044 11221.25 11194.81964 11601.77132
Oct-88 10721.98221 11421.8 11264.88055 11924.76463
Nov-88 10481.80981 11354.95 11336.78804 11754.83674
Dec-88 10617.02516 11460 11413.12241 11959.95864
Jan-89 10841.04439 11622.35 11492.63383 12835.78641
Feb-89 10615.55067 11631.9 11573.94422 12515.91861
Mar-89 10729.13706 11727.4 11659.9772 12807.91499
Apr-89 11001.65714 11870.65 11748.98169 13472.90194
May-89 11406.51812 12004.35 11838.46977 14018.01555
Jun-89 12057.83031 12061.65 11926.56772 13938.5334
Jul-89 12343.60089 12338.6 12012.53839 15197.04359
Aug-89 12014.02674 12453.2 12095.82532 15494.14579
Sep-89 12048.86742 12500.95 12179.08492 15431.23956
Oct-89 12534.43678 12577.35 12262.20718 15072.92617
Nov-89 12648.50015 12691.95 12343.95523 15380.26314
Dec-89 12625.73285 12816.1 12425.5282 15749.54326
Jan-90 12171.20647 12701.5 12505.7764 14692.11892
Feb-90 12135.90997 12777.9 12585.50072 14881.35341
Mar-90 12086.15274 12854.3 12665.83817 15275.70928
Apr-90 11797.29369 12854.3 12746.89953 14894.58033
May-90 12344.68812 13188.55 12828.47969 16346.95086
Jun-90 12628.61594 13264.95 12910.47506 16236.60894
Jul-90 12748.58779 13341.35 12992.45657 16184.48943
Aug-90 12210.59739 13121.7 13073.65943 14721.57343
Sep-90 12352.24032 13083.5 13155.04296 14005.07445
Oct-90 12635.10662 13226.75 13236.71385 13945.41283
Nov-90 13161.99057 13608.75 13317.56811 14846.84432
Dec-90 13422.59798 13799.75 13397.80646 15260.4774
Jan-91 13580.98464 14162.65 13474.7322 15925.07119
Feb-91 13640.74097 14458.7 13546.70972 17064.03228
Mar-91 13695.30393 14582.85 13615.45928 17477.32315
Apr-91 13869.23429 14716.55 13681.72118 17518.7444
May-91 13856.75198 14888.45 13745.34118 18274.50303
Jun-91 13754.21202 14563.75 13808.22612 17437.34805
Jul-91 13959.14978 14926.65 13871.16861 18250.10284
Aug-91 14440.74044 15404.15 13933.1265 18682.44778
Sep-91 14895.62377 15709.75 13993.61949 18369.89043
Oct-91 14928.39414 15757.5 14052.27608 18616.78176
Nov-91 15011.99315 15642.9 14108.25098 17866.71162
Dec-91 15906.70794 16855.75 14162.09747 19910.12743
Jan-92 15407.23731 16359.15 14210.83869 19539.20175
Feb-92 15498.14001 16454.65 14255.9581 19792.23442
Mar-92 15327.66047 16238.056 14300.27037 19407.27546
Apr-92 15312.33281 16363.78246 14343.76703 19977.07306
May-92 15738.01566 16682.93425 14385.72255 20074.96072
Jun-92 15966.21689 16755.66217 14426.96162 19776.24531
Jul-92 16630.41151 17470.96237 14465.91441 20584.10493
Aug-92 16745.16135 17412.17057 14502.8025 20162.7483
Sep-92 17009.7349 17650.08137 14538.09265 20399.66059
Oct-92 16652.53047 17402.04763 14571.89371 20470.03942
Nov-92 16715.81008 17630.23868 14605.28764 21167.04426
Dec-92 17173.82328 18026.49739 14639.85348 21426.7639
Jan-93 17663.27724 18409.39672 14674.13514 21605.89164
Feb-93 18253.2307 18923.28792 14707.39651 21900.37994
Mar-93 18298.86378 19054.48133 14740.24303 22362.47796
Apr-93 18439.76503 18962.77527 14772.7944 21821.97687
May-93 18500.61626 19207.32476 14804.80212 22405.71475
Jun-93 19283.19232 19705.59435 14837.24932 22471.36349
Jul-93 19593.65172 19880.61792 14869.89126 22381.02861
Aug-93 20381.31652 20663.07621 14902.72894 23230.16484
Sep-93 20452.65113 20579.57967 14935.76332 23051.98947
Oct-93 20599.91021 20880.99776 14968.74647 23528.93514
Nov-93 20072.55251 20558.79222 15002.05193 23304.70438
Dec-93 20136.78468 20731.01628 15036.05658 23586.45826
Jan-94 20620.06751 21359.56305 15069.88771 24388.39784
Feb-94 19774.64475 20664.85346 15104.42287 23726.49672
Mar-94 18906.53784 19855.90274 15140.54761 22692.02147
Apr-94 18683.44069 19800.3151 15179.15601 22982.93318
May-94 18560.12999 19878.13779 15221.65764 23360.08312
Jun-94 18383.80875 19532.66843 15267.57631 22787.52748
Jul-94 19007.01987 20162.39176 15315.54195 23535.86988
Aug-94 18866.36792 20488.49849 15366.08323 24500.84055
Sep-94 18272.07733 19894.15886 15419.48037 23901.795
Oct-94 18208.12506 20053.40313 15475.119 24438.86833
Nov-94 18315.553 19837.28591 15534.82717 23548.80474
Dec-94 18597.61251 20145.87741 15600.07344 23898.03352
Jan-95 19074.71567 20663.5 15667.54376 24517.35106
Feb-95 19615.46478 21313.75 15738.70052 25471.9096
Mar-95 19784.92278 21693.92 15811.09854 26222.33753
Apr-95 20137.58903 22169.23 15883.96135 26993.98226
May-95 21682.70596 23314.87 15956.89521 28070.71822
Jun-95 21935.02761 23675.09 16029.76503 28722.23959
Jul-95 21584.94457 23982.72 16101.36465 29674.2095
Aug-95 22063.76339 24142.68 16172.07648 29748.51372
Sep-95 22469.47188 24770.65 16242.82931 31003.27628
Oct-95 23098.23511 24894.75 16313.48562 30892.56358
Nov-95 23675.96816 25602.13 16384.58523 32247.35696
Dec-95 24305.32275 26025.21 16455.58509 32868.50555
Jan-96 24305.32275 26489.28 16524.69855 33986.03474
Feb-96 23131.37566 26351.31 16592.44982 34302.10486
Mar-96 22671.06128 26407.15 16658.81962 34631.40507
Apr-96 22292.45456 26432.42 16725.45489 35140.48672
May-96 22176.5338 26659.85 16792.35671 36043.59723
Jun-96 22648.89397 26958.82 16859.52614 36180.5629
Jul-96 22657.95353 26359.73 16926.96425 34581.38202
Aug-96 22374.72911 26334.24 16994.6721 35311.04918
Sep-96 22992.27163 27361.98 17062.65079 37295.53014
Oct-96 23895.8679 28302.39 17130.90139 38324.88678
Nov-96 24693.98989 29809.62 17199.425 41218.41573
Dec-96 24088.98714 29057.98 17268.2227 40402.2911
Jan-97 23917.95533 29646.14 17337.29559 42923.39406
Feb-97 23927.52251 29716.16 17406.64477 43262.48887
Mar-97 23314.97794 28712.92 17476.27135 41488.72683
</TABLE>
THE RETURN FOR CLASS B SHARES OF THE ASSET ALLOCATION FUND WILL VARY FROM THE
RESULTS SHOWN DUE TO DIFFERENT EXPENSES AND LOAD STRUCTURES.
The accompanying chart compares the performance of the Stagecoach Asset
Allocation Fund Class A shares since the inception of the Predecessor Fund with
the S&P 500 Index, the Lehman Brothers U.S. Treasury Bond Index, and the
IBC/Donoghue Money Fund Average. The chart assumes a hypothetical $10,000
initial investment in Class A shares and reflects all operating expenses and
assumes the maximum initial sales charge of 4.5%. The S&P 500 Index is an
unmanaged index of 500 widely held common stocks representing, among others,
industrial, financial, utility and transportation companies listed or traded on
national exchanges or over-the-counter markets. The Lehman Brothers U.S.
Treasury Bond Index is an unmanaged index composed of U.S. Treasury bonds with
10-year or longer maturities. The IBC/Donoghue Money Fund Average is an average
of 700 taxable money market funds. The Fund is a professionally managed mutual
fund. The indexes presented here do not incur expenses and are not available
directly for investment. Had these indexes incurred operating expenses, their
performances would have been lower.
---------------------
5
<PAGE>
U.S. GOVERNMENT ALLOCATION FUND
- --------------------
INVESTMENT ADVISER Q&A
WHAT WERE THE FUND'S TOTAL RETURNS?
The total return for Class A shares for the six-month period ended March 31,
1997 was 1.75%. The return for Class B shares for the same period was 1.42%. The
one-year returns were 3.47% and 2.68%, respectively. These return figures
exclude sales charges.
WHAT INFLUENCES THE FUND'S ALLOCATION BETWEEN ASSET CLASSES?
The Fund examines the expected returns, risks, and correlations of three asset
classes to determine the mix that provides the highest expected return after
adjusting for risk. These three asset classes are long-term Treasury bonds
(maturities greater than 20 years), intermediate-term Treasury notes (maturities
between 5 and 7 years), and cash. Since risk and correlation change more slowly
over time than expected return, changes in the Fund's allocation are based, to a
large extent, on changes in expected returns. Each day, we compare the yield
differences among the asset classes to their respective historical levels. The
greater the incremental yield relative to the historical average, the higher the
expected return. For a given level of risk, the Fund's allocation to an asset
class increases as the expected return of that asset class increases.
NOW THAT THE FED HAS INCREASED THE TARGET RATE, WHAT EFFECT HAS THAT HAD ON THE
MARKET?
The Federal Reserve Board raised the federal funds target rate by 0.25% on March
25, from 5.25% to 5.50%. As a result of this increase and also because of
concerns about recent job and housing reports, between the 25th and 31st of
March, yields on 30-year bonds and 5-year notes increased by 0.15%, whereas the
yield on 3-month T-bills decreased by 0.05%. The Fund's investment strategy,
however, does not focus on absolute yield levels, but on relative yields. In
other words, it is not the return for the asset classes, but the difference in
returns among classes that matter most. Since the spread, or difference, between
5-year notes and T-bills increased by 0.20%, 5-year notes became more
attractive. The spread between 5-year notes and 30-year bonds did not change,
leaving their relative valuation unaltered.
WILL THE FED'S RECENT ACTION MAKE AN ALLOCATION CHANGE MORE OR LESS LIKELY?
The likelihood of an allocation change to the Fund's portfolio depends on how
much interest rates fluctuate for each asset class on a relative basis. As
mentioned above, the key determinant is not the change in yields for different
maturities, but how the changes are spread among the maturities. Therefore, if
all interest rates change by an equal amount, the Fund's allocation will not
change.
DOES FUND MANAGEMENT ATTEMPT TO PREDICT FUTURE ACTION BY THE FEDERAL RESERVE
BOARD?
The management of the Fund does not reallocate the portfolio based on our
subjective view on the likelihood of
- ---------------------
6
<PAGE>
U.S. GOVERNMENT ALLOCATION FUND
another rate increase by the Federal Reserve Board. We apply a disciplined,
systematic approach that seeks to provide the highest potential return after
adjusting for risk by examining expected returns, risks, and correlations. Since
interest rates reflect the consensus view of all market participants, the
market's aggregate view on all subjects, including future Fed actions, is
reflected in our expected return estimates, and therefore the Fund's allocation.
DID THE PRESIDENTIAL ELECTION HAVE ANY IMPACT ON THE FIXED-INCOME MARKETS?
The fixed-income markets reacted favorably to the federal elections, based, we
believe, on the view that the reelection of President Clinton would lead to a
continuation of economic policies which have resulted in moderate growth and low
inflation. President Clinton's reelection, along with a closer balance in
Congress, led to the view that any new legislation would be moderate, and that
there would be no significant changes in either monetary or fiscal policy.
THERE IS TALK OF TAX REFORM -- AGAIN. WILL TAX REFORM AFFECT THE MARKET FOR
TREASURY SECURITIES?
Tax reform negotiations are part of broader discussions to balance the federal
budget. If Congress and the Administration succeed in reducing the budget
deficit, the U.S. Treasury will be able to reduce its borrowing needs. This
would affect the market for Treasury securities by reducing supply and driving
prices higher in the short-term. A reduction in the U.S. Treasury's borrowing
needs should lead to lower interest rates. If, however, tax cuts are implemented
before the spending cuts take place, this could lead to higher deficits, higher
interest rates and increased borrowing, which could cause a glut in supply. In
either case, the market would have to adjust by either absorbing the increased
supply or by finding alternative investments.
WILL THE NEW INFLATION-INDEXED TREASURY SECURITIES HAVE A ROLE IN THE FUND?
To date, the U.S. Treasury has issued only inflation-indexed bonds with a
10-year maturity. Since the Fund currently invests only in cash, 5 to 7-year
notes, and bonds with maturities greater than 20 years, inflation-indexed bonds
do not yet have a place in the Fund. However, the U.S. Treasury has announced
plans to broaden the inflation-indexed program by issuing bonds with maturities
other than 10 years. In addition, we continually seek to enhance and refine our
products. Therefore, it is likely that inflation-indexed bonds will have a role
in the Fund in the future.
---------------------
7
<PAGE>
U.S. GOVERNMENT ALLOCATION FUND
- ---------------------
PERFORMANCE AT A GLANCE
CLASS A SHARE PERFORMANCE AS OF 3/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 3/31/87
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEAR 5 YEAR INCEPTION
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------
With Maximum 4.5% Sales Charge (1.18)% 3.21% 6.36% 7.24%
- ---------------------------------------------------------------------------------------
Without Sales Charge 3.47% 4.80% 7.35% 7.73%
- ---------------------------------------------------------------------------------------
</TABLE>
CLASS B SHARE PERFORMANCE AS OF 3/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 1/1/95
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR INCEPTION
<S> <C> <C>
- --------------------------------------------------------------------------------------
With Maximum Contingent Deferred Sales Charge(1) (2.19)% 5.52%
- --------------------------------------------------------------------------------------
Without Sales Charge 2.68% 6.76%
- --------------------------------------------------------------------------------------
(1)Assumes redemption on 3/31/97.
</TABLE>
Past performance is not predictive of future results. The investment return and
net asset value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may have a greater or lesser net asset
value than when originally purchased.
Average annual total returns for the indicated periods represent the average
annual increase in the value of an investment over the periods assuming
reinvestment of dividends and capital gain distributions at net asset value.
The Stagecoach U.S. Government Allocation Fund commenced operations on January
2, 1992 as successor to the Fixed-Income Strategy Fund of the Wells Fargo
Investment Trust for Retirement Programs. The Predecessor Fund's date of
inception was March 31, 1987. The performance figures shown include the
performance of the Predecessor Fund whose investment objective was substantially
the same except that it was required to invest at least 65% of its assets in
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
The Fund seeks to achieve its investment objective by investing all of its
assets in the Master Investment Trust U.S. Government Allocation Master
Portfolio, which has an identical investment objective as the Fund. Prior to
April 28, 1996 the Fund invested directly in a portfolio of securities and not
in the Master Investment Trust U.S. Government Allocation Master Portfolio.
References to the investment policies of the Fund are understood to be
references to the investment policies of the Master Portfolio.
Wells Fargo Bank has voluntarily waived portions of its fees for some or all
classes of the Fund, which has reduced operating expenses for shareholders of
such classes. Without this reduction, the Fund's returns would have been lower.
- ---------------------
8
<PAGE>
U.S. GOVERNMENT ALLOCATION FUND
- --------------------------
GROWTH OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STAGECOACH U.S. LEHMAN BROS U.S. LEHMAN BROS U.S.
GOV'T TREASURY TREASURY
ALLOCATION FUND BOND INDEX NOTE INDEX
CLASS A SHARES IBC/DONOGHUE MONEY FUND AVERAGE
<S> <C> <C> <C> <C>
Mar-87 $9,550 $10,000 $10,000 $10,000
Apr-87 $9,588 $9,519 $10,046 $9,829
May-87 $9,636 $9,407 $10,094 $9,809
Jun-87 $9,674 $9,513 $10,145 $9,923
Jul-87 $9,607 $9,346 $10,196 $9,944
Aug-87 $9,540 $9,192 $10,247 $9,918
Sep-87 $9,330 $8,790 $10,300 $9,795
Oct-87 $9,731 $9,427 $10,356 $10,087
Nov-87 $9,789 $9,430 $10,412 $10,146
Dec-87 $9,884 $9,618 $10,469 $10,241
Jan-88 $10,285 $10,202 $10,526 $10,493
Feb-88 $10,324 $10,312 $10,580 $10,601
Mar-88 $10,209 $10,000 $10,633 $10,554
Apr-88 $10,113 $9,825 $10,687 $10,537
May-88 $10,075 $9,677 $10,743 $10,486
Jun-88 $10,285 $10,084 $10,802 $10,657
Jul-88 $10,209 $9,885 $10,863 $10,625
Aug-88 $10,228 $9,927 $10,927 $10,635
Sep-88 $10,467 $10,294 $10,995 $10,819
Oct-88 $10,610 $10,607 $11,064 $10,968
Nov-88 $10,515 $10,369 $11,134 $10,873
Dec-88 $10,553 $10,503 $11,209 $10,883
Jan-89 $10,686 $10,725 $11,288 $10,991
Feb-89 $10,591 $10,502 $11,367 $10,942
Mar-89 $10,620 $10,614 $11,452 $10,998
Apr-89 $10,839 $10,884 $11,539 $11,220
May-89 $11,107 $11,284 $11,627 $11,434
Jun-89 $11,470 $11,929 $11,714 $11,727
Jul-89 $11,670 $12,211 $11,798 $11,970
Aug-89 $11,498 $11,885 $11,880 $11,805
Sep-89 $11,536 $11,920 $11,962 $11,859
Oct-89 $11,813 $12,400 $12,043 $12,111
Nov-89 $11,899 $12,513 $12,124 $12,228
Dec-89 $11,928 $12,490 $12,204 $12,264
Jan-90 $11,747 $12,041 $12,283 $12,184
Feb-90 $11,785 $12,006 $12,361 $12,227
Mar-90 $11,766 $11,957 $12,440 $12,240
Apr-90 $11,651 $11,671 $12,519 $12,197
May-90 $11,842 $12,212 $12,600 $12,458
Jun-90 $11,928 $12,493 $12,680 $12,621
Jul-90 $12,014 $12,612 $12,761 $12,797
Aug-90 $12,014 $12,080 $12,840 $12,749
Sep-90 $12,138 $12,220 $12,920 $12,863
Oct-90 $12,262 $12,500 $13,000 $13,044
Nov-90 $12,425 $13,021 $13,080 $13,239
Dec-90 $12,549 $13,279 $13,159 $13,423
Jan-91 $12,673 $13,435 $13,234 $13,561
Feb-91 $12,721 $13,494 $13,305 $13,638
Mar-91 $12,759 $13,548 $13,372 $13,712
Apr-91 $12,883 $13,721 $13,438 $13,853
May-91 $12,940 $13,708 $13,500 $13,929
Jun-91 $12,912 $13,607 $13,562 $13,940
Jul-91 $13,064 $13,809 $13,624 $14,092
Aug-91 $13,399 $14,286 $13,684 $14,359
Sep-91 $13,704 $14,736 $13,744 $14,604
Oct-91 $13,828 $14,768 $13,801 $14,771
Nov-91 $13,895 $14,851 $13,856 $14,944
Dec-91 $14,717 $15,736 $13,909 $15,316
Jan-92 $14,229 $15,242 $13,957 $15,162
Feb-92 $14,259 $15,332 $14,002 $15,209
Mar-92 $14,105 $15,163 $14,045 $15,147
Apr-92 $14,091 $15,148 $14,088 $15,283
May-92 $14,444 $15,569 $14,129 $15,511
Jun-92 $14,602 $15,795 $14,169 $15,736
Jul-92 $15,222 $16,452 $14,208 $16,043
Aug-92 $15,275 $16,566 $14,244 $16,210
Sep-92 $15,486 $16,827 $14,279 $16,438
Oct-92 $15,160 $16,474 $14,312 $16,236
Nov-92 $15,233 $16,537 $14,345 $16,166
Dec-92 $15,634 $16,990 $14,379 $16,378
Jan-93 $16,035 $17,474 $14,412 $16,686
Feb-93 $16,594 $18,057 $14,445 $16,935
Mar-93 $16,578 $18,103 $14,477 $16,996
Apr-93 $16,692 $18,242 $14,509 $17,130
May-93 $16,749 $18,302 $14,541 $17,080
Jun-93 $17,457 $19,076 $14,572 $17,331
Jul-93 $17,769 $19,384 $14,604 $17,364
Aug-93 $18,507 $20,163 $14,637 $17,626
Sep-93 $18,551 $20,233 $14,669 $17,699
Oct-93 $18,745 $20,379 $14,702 $17,741
Nov-93 $18,282 $19,857 $14,734 $17,652
Dec-93 $18,364 $19,921 $14,768 $17,725
Jan-94 $18,736 $20,399 $14,801 $17,900
Feb-94 $18,019 $19,563 $14,835 $17,650
Mar-94 $17,471 $18,704 $14,870 $17,394
Apr-94 $17,225 $18,483 $14,908 $17,282
May-94 $17,183 $18,361 $14,950 $17,295
Jun-94 $17,123 $18,187 $14,995 $17,298
Jul-94 $17,400 $18,803 $15,042 $17,523
Aug-94 $17,437 $18,664 $15,092 $17,574
Sep-94 $17,168 $18,076 $15,144 $17,430
Oct-94 $17,132 $18,013 $15,199 $17,435
Nov-94 $17,025 $18,119 $15,258 $17,355
Dec-94 $17,081 $18,398 $15,322 $17,410
Jan-95 $17,373 $18,870 $15,388 $17,692
Feb-95 $17,811 $19,405 $15,458 $18,030
Mar-95 $17,938 $19,573 $15,529 $18,130
Apr-95 $18,150 $19,922 $15,600 $18,339
May-95 $18,718 $21,450 $15,672 $18,856
Jun-95 $18,840 $21,700 $15,744 $18,981
Jul-95 $18,789 $21,353 $15,814 $18,990
Aug-95 $18,948 $21,827 $15,883 $19,142
Sep-95 $19,105 $22,229 $15,953 $19,270
Oct-95 $19,296 $22,851 $16,022 $19,485
Nov-95 $19,460 $23,422 $16,092 $19,723
Dec-95 $19,628 $24,045 $16,162 $19,921
Jan-96 $19,677 $24,045 $16,230 $20,092
Feb-96 $19,484 $22,883 $16,296 $19,877
Mar-96 $19,434 $22,428 $16,361 $19,779
Apr-96 $19,327 $22,053 $16,427 $19,722
May-96 $19,243 $21,939 $16,493 $19,712
Jun-96 $19,452 $22,406 $16,559 $19,907
Jul-96 $19,482 $22,415 $16,625 $19,967
Aug-96 $19,472 $22,135 $16,691 $19,993
Sep-96 $19,762 $22,746 $16,758 $20,249
Oct-96 $20,202 $23,640 $16,825 $20,579
Nov-96 $20,468 $24,429 $16,892 $20,826
Dec-96 $20,311 $23,831 $16,960 $20,714
Jan-97 $20,336 $23,661 $17,028 $20,790
Feb-97 $20,359 $23,671 $17,096 $20,821
Mar-97 $20,108 $23,065 $17,164 $20,698
</TABLE>
THE RETURN FOR CLASS B SHARES OF THE U.S. GOVERNMENT ALLOCATION FUND WILL VARY
FROM THE RESULTS SHOWN DUE TO DIFFERENT EXPENSES AND LOAD STRUCTURES.
The accompanying chart compares the performance of the Stagecoach U.S.
Government Allocation Fund Class A shares since the Predecessor Fund's inception
with the Lehman Brothers U.S. Treasury Bond Index, the Lehman Brothers U.S.
Treasury Note Index and the IBC/Donoghue Money Fund Average. The chart assumes a
hypothetical $10,000 initial investment in Class A shares and reflects all
operating expenses and assumes the maximum initial sales charge of 4.5% for the
Class A shares. The Lehman Brothers U.S. Treasury Bond Index is an unmanaged
index composed of U.S. Treasury bonds with 10 year or longer maturities. The
Lehman Brothers U.S. Treasury Note Index is an unmanaged index of U.S. Treasury
notes with 2 to 10 year maturities. The IBC/Donoghue Money Fund Average is an
average of 700 taxable money market funds. The Fund is a professionally managed
mutual fund. The indexes presented here do not incur expenses and are not
available directly for investment. Had these indexes incurred operating
expenses, their comparative performances would have been lower.
---------------------
9
<PAGE>
STATEMENT OF ASSETS & LIABILITIES - MARCH 31, 1997
<TABLE>
<CAPTION>
U.S.
ASSET GOVERNMENT
ALLOCATION ALLOCATION
FUND FUND
- ----------------------------------------------------------------------------
<S> <C> <C>
ASSETS
INVESTMENTS:
In corresponding Master Portfolio $1,131,187,573 $ 94,304,646
Receivables:
Dividends and interest 12,941,458 502,923
Fund shares sold 516,080 54,878
Organization expenses, net of
amortization 3,893 7,965
Prepaid expenses 57,868 4,521
TOTAL ASSETS 1,144,706,872 94,874,933
LIABILITIES
Payables:
Distribution to shareholders 11,129,985 460,897
Fund shares redeemed 1,250 0
Due to sponsor and distributor (Note
2) 886,042 96,766
Due to WFB (Note 2) 1,691,903 52,865
Other 123,868 113,654
TOTAL LIABILITIES 13,833,048 724,182
TOTAL NET ASSETS
$1,130,873,824 $ 94,150,751
NET ASSETS CONSIST OF:
Paid-in capital $ 987,047,851 $120,442,302
Undistributed net realized gain (loss)
on investments 10,370,769 (24,119,268)
Net unrealized appreciation
(depreciation) of investments 133,455,204 (2,172,283)
TOTAL NET ASSETS $1,130,873,824 $ 94,150,751
COMPUTATION OF NET ASSET VALUE AND
OFFERING PRICE PER SHARE
Net assets - Class A $1,041,622,159 $ 86,929,700
Shares outstanding - Class A 51,319,371 6,072,444
Net asset value per share - Class A $ 20.30 $ 14.32
Maximum offering price per share - Class
A (1) $ 21.26 $ 14.99
Net Assets - Class B $ 89,251,665 $ 7,221,051
Shares outstanding - Class B 7,264,106 693,075
Net asset value and offering price per
share - Class B $ 12.29 $ 10.42
- ----------------------------------------------------------------------------
</TABLE>
(1) MAXIMUM OFFERING PRICE IS COMPUTED AS 100/95.5 OF NET ASSET VALUE. ON
INVESTMENTS OF $50,000 OR MORE THE OFFERING PRICE IS REDUCED.
The accompanying notes are an integral part of these financial statements.
- ------------------------
10
<PAGE>
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
U.S. GOVERNMENT ALLOCATION
FUND
ASSET ALLOCATION FUND ---------------------------
----------------------------- FOR THE
FOR THE SIX NINE
FOR THE SIX FOR THE NINE MONTHS MONTHS
MONTHS ENDED MONTHS ENDED ENDED ENDED
MARCH 31, SEPT. 30, MARCH 31, SEPT. 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 4)
Dividends $ 4,863,455 $ 10,015,725 $ 0 $ 0
Interest 23,571,263 28,075,732 3,402,767 7,092,686
Expenses allocated from Master
Portfolio (2,142,875) (1,791,430) (264,752) (335,905)
TOTAL INVESTMENT INCOME 26,291,843 36,300,027 3,138,015 6,756,781
EXPENSES (NOTE 2)
Advisory fees 0 1,353,641 0 231,278
Administration fees 232,506 257,419 18,865 32,354
Shareholder servicing fees 1,766,608 2,574,188 152,175 323,540
Transfer agency fees 638,723 814,531 99,945 173,925
Distribution fees 550,349 666,051 47,904 79,482
Amortization of organization expenses 750 2,454 1,636 2,005
Legal and audit fees 67,867 104,157 19,839 22,989
Registration fees 109,536 164,703 27,386 36,638
Directors' fees 2,490 3,743 2,490 3,743
Shareholder reports 119,764 180,331 49,793 74,589
Other 21,391 34,134 13,041 20,750
TOTAL EXPENSES 3,509,984 6,155,352 433,074 1,001,293
Less:
Waived fees and reimbursed expenses (18,026) (152,137) (169,933) (96,633)
Net Expenses 3,491,958 6,003,215 263,141 904,660
NET INVESTMENT INCOME 22,799,885 30,296,812 2,874,874 5,852,121
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS ALLOCATED FROM MASTER
PORTFOLIO
Net realized gain (loss) on sale of
investments 16,581,561 75,454,709 1,030,525 (1,945,578)
Net change in unrealized appreciation
(depreciation) of investments 16,935,058 (48,004,058) (2,042,135) (2,769,255)
NET GAIN (LOSS) ON INVESTMENTS 33,516,619 27,450,651 (1,011,610) (4,714,833)
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 56,316,504 $ 57,747,463 $ 1,863,264 $ 1,137,288
- ----------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------------------
11
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND
----------------------------------------------------
FOR THE SIX FOR THE NINE FOR THE
MONTHS ENDED MONTHS ENDED YEAR ENDED
MARCH 31, 1997 SEPT. 30, 1996 DEC. 31, 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income $ 22,799,885 $ 30,296,812 $ 39,014,905
Net realized gain (loss) on sale of
investments 16,581,561 75,454,709 4,576,913
Net change in unrealized appreciation
(depreciation) of investments 16,935,058 (48,004,058) 215,304,208
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 56,316,504 57,747,463 258,896,026
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
CLASS A (21,499,154) (29,059,204) (38,781,909)
CLASS B (1,300,731) (1,237,608) (232,996)
From net realized gain on sale of
investments
CLASS A (77,923,468) 0 (2,902,594)
CLASS B (5,356,143) 0 (60,209)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A 43,986,740 125,947,664 112,740,980
Reinvestment of dividends - Class A 99,267,295 25,929,821 84,335,697
Cost of shares redeemed - Class A (113,370,104) (198,735,389) (231,482,165)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A 29,883,931 (46,857,904) (34,405,488)
Proceeds from shares sold - Class B 28,861,527 41,385,524 25,023,646
Reinvestment of dividends - Class B 6,539,212 691,311 159,719
Cost of shares redeemed - Class B (5,436,423) (6,086,896) (433,346)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS B 29,964,316 35,989,939 24,750,019
INCREASE (DECREASE) IN NET ASSETS 10,085,255 16,582,686 207,262,849
NET ASSETS:
Beginning net assets 1,120,788,569 1,104,205,883 896,943,034
ENDING NET ASSETS $1,130,873,824 $1,120,788,569 $1,104,205,883
- -------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- ---------------------
12
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
U.S. GOVERNMENT ALLOCATION FUND
-----------------------------------------------
FOR THE SIX FOR THE NINE
MONTHS ENDED MONTHS ENDED FOR THE
MARCH 31, SEPT. 30, YEAR ENDED
1997 1996 DEC. 31, 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income $ 2,874,874 $ 5,852,121 $ 7,389,104
Net realized gain (loss) on sale of
investments 1,030,525 (1,945,578) 380,148
Net change in unrealized appreciation
(depreciation) of investments (2,042,135) (2,769,255) 11,177,439
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 1,863,264 1,137,288 18,946,691
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
CLASS A (2,697,855) (5,670,237) (7,305,279)
CLASS B (177,019) (181,884) (83,825)
From net realized gain on sale of
investments
CLASS A 0 0 0
CLASS B 0 0 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A 3,383,948 36,933,631 24,249,760
Reinvestment of dividends - Class A 2,218,226 4,748,739 6,172,643
Cost of shares redeemed - Class A (16,500,755) (73,965,970) (46,347,301)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A (10,898,581) (32,283,600) (15,924,898)
Proceeds from shares sold - Class B 1,811,816 3,581,868 4,453,188
Reinvestment of dividends - Class B 128,252 132,888 43,367
Cost of shares redeemed - Class B (1,026,305) (1,222,836) (541,430)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS B 913,763 2,491,920 3,955,125
INCREASE (DECREASE) IN NET ASSETS (10,996,428) (34,506,513) (412,186)
NET ASSETS:
Beginning net assets 105,147,179 139,653,692 140,065,878
ENDING NET ASSETS $ 94,150,751 $105,147,179 $ 139,653,692
- --------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------------------
13
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND
------------------------------------------
CLASS A
------------------------------------------
SIX NINE
MONTHS MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED
MARCH 31, SEPT. 30, DEC. 31, DEC. 31,
1997 1996 (1) 1995 1994
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $21.24 $20.74 $16.73 $18.80
--------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.41 0.57 0.74 0.77
Net realized and unrealized gain (loss) on
investments 0.65 0.50 4.07 (1.31)
--------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 1.06 1.07 4.81 (0.54)
LESS DISTRIBUTIONS:
Dividends from net investment income (0.41) (0.57) (0.74) (0.77)
Distributions from net realized gain (1.59) 0.00 (0.06) (0.76)
--------- --------- --------- ---------
TOTAL FROM DISTRIBUTIONS (2.00) (0.57) (0.80) (1.53)
--------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $20.30 $21.24 $20.74 $16.73
--------- --------- --------- ---------
--------- --------- --------- ---------
TOTAL RETURN (NOT ANNUALIZED) 4.94% 5.14% 29.18% (2.82)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $1,041,622 $1,057,346 $1,077,935 $896,943
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 0.92%(4) 0.90%(4) 0.84% 0.84%
Ratio of net investment income to average
net assets 3.91%(4) 3.53%(4) 3.81% 4.30%
Portfolio turnover N/A 1%(5) 15% 49%
Average commission rate paid(3) N/A $0.0320(5) N/A N/A
- ------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior
to waived fees and reimbursed expenses N/A N/A N/A N/A
Ratio of net investment income to average net
assets prior to waived fees and reimbursed
expenses N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------
</TABLE>
(1) THE FUND CHANGED ITS FISCAL YEAR-END FROM DECEMBER 31 TO SEPTEMBER 30.
(2) THE CLASS B SHARES COMMENCED OPERATIONS ON JANUARY 1, 1995.
(3) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED.THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(4) THIS RATIO INCLUDES INCOME AND EXPENSES CHARGED TO THE MASTER
PORTFOLIO.
(5) PORTFOLIO ACTIVITY REPRESENTS STAND-ALONE PERIOD ONLY. SEE NOTE 5.
The accompanying notes are an integral part of these financial statements.
- ---------------------
14
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND (CONT.)
-----------------------------------------------------
CLASS B
CLASS A (CONT.) -------------------------------
-------------------- SIX NINE
YEAR YEAR MONTHS MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, MARCH 31, SEPT. 30, DEC. 31,
1993 1992 1997 1996 (1) 1995 (2)
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $17.89 $17.65 $12.84 $12.50 $10.00
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.77 0.87 0.19 0.28 0.22
Net realized and
unrealized gain (loss)
on investments 1.88 0.31 0.41 0.34 2.53
--------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS 2.65 1.18 0.60 0.62 2.75
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.77) (0.87) (0.19) (0.28) (0.22)
Distributions from net
realized gain (0.97) (0.07) (0.96) 0.00 (0.03)
--------- --------- --------- --------- ---------
TOTAL FROM DISTRIBUTIONS (1.74) (0.94) (1.15) (0.28) (0.25)
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF
PERIOD $18.80 $17.89 $12.29 $12.84 $12.50
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
TOTAL RETURN (NOT
ANNUALIZED) 15.00% 7.00% 4.62% 4.96% 27.72%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s) $1,048,667 $542,226 $89,252 $63,443 $26,271
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 0.86% 0.95% 1.53%(4) 1.14%(4) 1.53%
Ratio of net investment
income to average net
assets 4.20% 5.22% 3.30%(4) 3.37%(4) 2.71%
Portfolio turnover 40% 5% N/A 1%(5) 15%
Average commission rate
paid(3) N/A N/A N/A $0.0320(5) N/A
- -----------------------------------------------------------------------------------
Ratio of expenses to average
net assets prior to waived
fees and reimbursed
expenses N/A 0.97% 1.58%(4) 1.56%(4) 1.76%
Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses N/A 5.20% 3.25%(4) 2.95%(4) 2.48%
- -----------------------------------------------------------------------------------
</TABLE>
(1) THE FUND CHANGED ITS FISCAL YEAR-END FROM DECEMBER 31 TO SEPTEMBER 30.
(2) THE CLASS B SHARES COMMENCED OPERATIONS ON JANUARY 1, 1995.
(3) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED.THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(4) THIS RATIO INCLUDES INCOME AND EXPENSES CHARGED TO THE MASTER
PORTFOLIO.
(5) PORTFOLIO ACTIVITY REPRESENTS STAND-ALONE PERIOD ONLY. SEE NOTE 5.
The accompanying notes are an integral part of these financial statements.
---------------------
15
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
U.S. GOVERNMENT ALLOCATION FUND
------------------------------------------
CLASS A
------------------------------------------
SIX NINE
MONTHS MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED
MARCH 31, SEPT. 30, DEC. 31, DEC. 31,
1997 1996 (1) 1995 1994
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $14.48 $14.98 $13.76 $15.71
--------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.42 0.59 0.79 0.87
Net realized and unrealized gain (loss) on
investments (0.16) (0.50) 1.22 (1.95)
--------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 0.26 0.09 2.01 (1.08)
LESS DISTRIBUTIONS:
Dividends from net investment income (0.42) (0.59) (0.79) (0.87)
Distributions from net realized gain 0.00 0.00 0.00 0.00
--------- --------- --------- ---------
TOTAL FROM DISTRIBUTIONS (0.42) (0.59) (0.79) (0.87)
--------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $14.32 $14.48 $14.98 $13.76
--------- --------- --------- ---------
--------- --------- --------- ---------
TOTAL RETURN (NOT ANNUALIZED) 1.75% 0.69% 14.91% (6.99)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $86,930 $98,741 $135,577 $140,066
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 1.00%(4) 1.12%(4) 1.04% 1.01%
Ratio of net investment income to average
net assets 5.70%(4) 5.45%(4) 5.41% 5.94%
Portfolio turnover N/A 31%(5) 292% 112%
Average commission rate paid(3) N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior
to waived fees and reimbursed expenses 1.31%(4) 1.20%(4) 1.07% 1.08%
Ratio of net investment income to average net
assets prior to waived fees and reimbursed
expenses 5.39%(4) 5.37%(4) 5.38% 5.87%
- ------------------------------------------------------------------------------------------
</TABLE>
(1) THE FUND CHANGED ITS FISCAL YEAR-END FROM DECEMBER 31 TO SEPTEMBER 30.
(2) THE CLASS B SHARES COMMENCED OPERATIONS ON JANUARY 1, 1995.
(3) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED.THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(4) THIS RATIO INCLUDES INCOME AND EXPENSES CHARGED TO THE MASTER
PORTFOLIO.
(5) PORTFOLIO ACTIVITY REPRESENTS STAND-ALONE PERIOD ONLY. SEE NOTE 5.
The accompanying notes are an integral part of these financial statements.
- ---------------------
16
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
U.S. GOVERNMENT ALLOCATION FUND (CONT.)
-----------------------------------------------------
CLASS B
CLASS A (CONT.) -------------------------------
-------------------- SIX NINE
YEAR YEAR MONTHS MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, MARCH 31, SEPT. 30, DEC. 31,
1993 1992 1997 1996 (1) 1995 (2)
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $15.41 $15.41 $10.54 $10.91 $10.00
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.96 0.87 0.27 0.36 0.49
Net realized and
unrealized gain (loss)
on investments 1.69 0.04 (0.12) (0.37) 0.91
--------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS 2.65 0.91 0.15 (0.01) 1.40
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.96) (0.87) (0.27) (0.36) (0.49)
Distributions from net
realized gain (1.39) (0.04) 0.00 0.00 0.00
--------- --------- --------- --------- ---------
TOTAL FROM DISTRIBUTIONS (2.35) (0.91) (0.27) (0.36) (0.49)
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF
PERIOD $15.71 $15.41 $10.42 $10.54 $10.91
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
TOTAL RETURN (NOT
ANNUALIZED) 17.46% 6.30% 1.42% 0.11% 14.11%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s) $283,206 $127,504 $7,221 $6,406 $4,077
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 0.99% 1.00% 1.61%(4) 1.92%(4) 1.65%
Ratio of net investment
income to average net
assets 5.92% 6.06% 5.12%(4) 4.60%(4) 4.31%
Portfolio turnover 150% 33% N/A 31%(5) 292%
Average commission rate
paid(3) N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------
Ratio of expenses to average
net assets prior to waived
fees and reimbursed
expenses 1.02% 1.08% 2.28%(4) 2.21%(4) 2.36%
Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses 5.89% 5.98% 4.45%(4) 4.31%(4) 3.60%
- -----------------------------------------------------------------------------------
</TABLE>
(1) THE FUND CHANGED ITS FISCAL YEAR-END FROM DECEMBER 31 TO SEPTEMBER 30.
(2) THE CLASS B SHARES COMMENCED OPERATIONS ON JANUARY 1, 1995.
(3) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED.THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(4) THIS RATIO INCLUDES INCOME AND EXPENSES CHARGED TO THE MASTER
PORTFOLIO.
(5) PORTFOLIO ACTIVITY REPRESENTS STAND-ALONE PERIOD ONLY. SEE NOTE 5.
The accompanying notes are an integral part of these financial statements.
---------------------
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Stagecoach Funds, Inc. (the "Company") is registered under the Investment
Company Act of 1940, (the "1940 Act"), as an open-end series management
investment company. The Company commenced operations on January 1, 1992, and
currently offers the following nineteen separate diversified funds: the
Aggressive Growth, Asset Allocation, Balanced, Corporate Stock, Diversified
Income, Equity Value, Ginnie Mae, Growth and Income, Government Money Market
Mutual, Intermediate Bond, Money Market Mutual, Money Market Trust, National
Tax-Free, National Tax-Free Money Market Mutual, Prime Money Market Mutual,
Short-Intermediate U.S. Government Income, Small Cap, Treasury Money Market
Mutual, and U.S. Government Allocation Funds; and five non-diversified funds:
the Arizona Tax-Free, California Tax-Free Bond, California Tax-Free Income,
California Tax-Free Money Market Mutual, and Oregon Tax-Free Funds. These
financial statements represent the Asset Allocation and U.S. Government
Allocation Funds (the "Funds").
The Company changed its fiscal year-end from September 30 to March 31.
Each of the Funds presented in this book offers Class A and Class B shares. The
two classes of shares differ principally in the applicable sales charges,
shareholder servicing fees and distribution fees. Shareholders of each class
also bear certain expenses that pertain to that particular class. All
shareholders bear the common expenses of the Fund and earn income from the
portfolio pro rata based on the average daily net assets of each class, without
distinction between share classes. Dividends are determined separately for each
class based on income and expenses allocable to each class. Gains are allocated
to each class pro rata based upon net assets of each class on the date of
distribution. No class has preferential dividend rights. Differences in per
share dividend rates generally result from the relative weightings of pro rata
income and gain allocations and from differences in separate class expenses,
including distribution and shareholder servicing fees.
The following significant accounting policies are consistently followed by the
Company in the preparation of its financial statements, and such policies are in
conformity with generally accepted accounting principles for investment
companies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
- ---------------------
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS
INVESTMENT POLICY AND SECURITY VALUATION
Beginning on April 28, 1996, the Funds invest only in interests of the Asset
Allocation and U.S. Government Allocation Master Portfolios (the "Master
Portfolios"), respectively, of Master Investment Trust ("MIT"). Each Master
Portfolio has the same investment objective as the Fund bearing the
corresponding name. The value of each Fund's investment in its corresponding
Master Portfolio reflects that Fund's interest in the net assets of that Master
Portfolio (99.99% and 99.99%) for the Asset Allocation Fund and U.S. Government
Allocation Fund, respectively, at March 31, 1997. Each Master Portfolio's
investments may include fixed-, variable-and floating-rate instruments.
Additionally, the Asset Allocation Master Portfolio may invest in equity
securities. Investments in securities for which the primary market is a national
securities exchange or the NASDAQ National Market System are valued at the last
reported sales price on the day of valuation. U.S. government obligations are
valued at the reported bid prices. Securities not listed on an exchange or
national securities market, or securities in which there were no transactions,
excluding debt securities maturing in 60 days or less, are valued at the most
recent bid prices, or if such prices are not readily available, at fair value as
determined in accordance with procedures approved by the Board of Trustees. Debt
securities maturing in 60 days or less are valued at amortized cost, which
approximates market value.
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Securities transactions are recorded no later than one business day after trade
date. Dividend income is recognized on the ex-dividend date, and interest income
is accrued daily. Realized gains or losses are reported on the basis of
identified cost of securities delivered. Bond discounts are accreted and
premiums are amortized as required by the Internal Revenue Code.
REPURCHASE AGREEMENTS
Transactions involving purchases of securities under agreements to resell such
securities ("repurchase agreements") are treated as collateralized financing
transactions and are recorded at their contracted resale amounts. These
repurchase agreements, if any, are detailed in each Master Portfolio's Portfolio
of Investments. The Master Portfolios may participate in pooled repurchase
agreement transactions with other funds advised by Wells Fargo Bank, N.A.
("WFB"). The repurchase agreements must be fully collateralized based on values
that are marked to market daily. The collateral may be held by an agent bank
under a tri-party agreement. It is the custodian's responsibility to value
collateral daily and to take action to obtain additional collateral as necessary
to maintain market value equal to or greater than the resale price.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income of the Asset Allocation Fund are declared
and distributed quarterly. Dividends from net investment income of the U.S.
Government Allocation Fund are
---------------------
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS
declared daily and distributed monthly. Any distributions to shareholders from
net realized capital gains are declared and distributed annually.
FEDERAL INCOME TAXES
Each Fund of the Company is treated as a separate entity for federal income tax
purposes. It is the policy of each Fund of the Company to continue to qualify as
a regulated investment company by complying with the provisions applicable to
regulated investment companies, as defined in the Internal Revenue Code, and to
make distributions of substantially all of its investment company taxable income
and any net realized capital gains (after reduction for capital loss
carryforwards) sufficient to relieve it from all, or substantially all, federal
income taxes. Accordingly, no provision for federal income taxes was required at
December 31, 1996. The U.S. Government Allocation Fund had capital loss
carryforwards at December 31, 1996 of $23,241,796 and $674,514 which expire in
the years 2002 and 2004, respectively.
The Board of Directors intends to offset net capital gains with each capital
loss carryforward until each carryforward has been fully utilized or expires.
Thus, no capital gain distributions shall be made until the capital loss
carryforward has been fully utilized or expires.
Due to the timing of dividend distributions and the differences in accounting
for income and realized gains (losses) for financial statement and federal
income tax purposes, the fiscal year in which amounts are distributed may differ
from the year in which the income and realized gains (losses) were recorded by
the Fund. The differences between the income and gains distributed on a book
versus tax basis, if any, are shown as excess distributions of net investment
income and net realized gain on the sale of investments in the accompanying
Statements of Changes in Net Assets. The amount of distributions from net
investment income and net realized capital gains are determined in accordance
with federal income tax regulations, which may differ from generally accepted
accounting principles. These "book/tax" differences are either considered
temporary or permanent in nature. To the extent that these differences are
permanent in nature, such amounts are reclassified within the capital accounts
based on their federal tax-basis treatment; temporary differences do not require
reclassifications.
ORGANIZATION EXPENSES
The Funds have been charged for expenses incurred in connection with the
organization and initial registration of the Funds and/or classes of shares.
These expenses are being amortized by the Funds on a straight-line basis over 60
months from the date each Fund and/or class commenced operations.
2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Funds do not directly retain an investment adviser because each Fund invests
all of its assets in a Master Portfolio of MIT which, in turn, retains WFB as
investment adviser. Prior to April 28, 1996, and their conversion to "feeder"
funds in a master/feeder structure, the Funds retained WFB as
invest-
- ---------------------
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS
ment adviser. For these services, WFB was entitled to be paid by each Fund a
monthly advisory fee at the annual rate of 0.50% of such Fund's average daily
net assets up to $250 million, 0.40% of the next $250 million and 0.30% of the
average daily net assets in excess of $500 million.
For the period from January 1, 1996 to April 28, 1996, the Funds retained
Barclays Global Fund Advisors ("BGFA") as sub-adviser.
Pursuant to a sub-advisory contract with the Funds and subject to the overall
supervision of WFB, the investment adviser, BGFA was responsible for day-to-day
portfolio management of the Fund. BGFA was entitled to receive from WFB as
compensation for its sub-advisory services monthly fees at the annual rate of
0.20% of the average daily net assets of the Asset Allocation Fund and 0.15% of
the average daily net assets of the U.S. Government Allocation Fund. BGFA was
also entitled to receive from WFB annual fees of $40,000 for its services for
the Funds.
BGFA currently acts as sub-adviser to the Master Portfolios in which the Funds
invest. BGFA is an indirect subsidiary of Barclays Bank PLC. BGFA was formed by
the reorganization of Wells Fargo Nikko Investment Advisors ("WFNIA"), a former
affiliate of Wells Fargo & Company.
Barclays Global Investors, N.A. ("BGI") currently acts as custodian to the
Funds. BGI is an affiliate of BGFA. BGI will not be entitled to compensation for
its custodial services to the Master Portfolios so long as BGFA is entitled to
receive compensation for providing sub-advisory services to the Master Portfolio
in which each Fund invests.
The Company has entered into a contract on behalf of the Funds with WFB, whereby
WFB has agreed to act as transfer agent for the Funds. Under the transfer agency
contract, WFB is entitled to receive transfer agency fees at an annual rate of
0.14% of the average daily net assets of each class of the Funds. Prior to
February 1, 1997, WFB was entitled to be paid a per account fee plus other
related costs with a minimum monthly fee of $3,000 per Fund, unless net assets
of the respective Fund were under $20 million. For as long as the assets
remained under $20 million, a Fund would not be charged any transfer agency fees
by WFB.
The Company has entered into contracts on behalf of the Funds with WFB, whereby
WFB has agreed to provide shareholder services to the Funds. Pursuant to the
contracts, WFB is entitled to an annual fee for providing shareholder servicing
of 0.30% of the average daily net assets of the Class A and Class B shares of
the Funds.
Subject to the overall supervision of the Company's Board of Directors, WFB as
administrator and Stephens Inc. ("Stephens") as co-administrator provide each
Fund with supervisory, administrative and distribution services. For these
administrative services, WFB and Stephens are entitled to receive monthly fees
at the annual rates of 0.04% and
---------------------
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS
0.02%, respectively, of each Fund's average daily net assets. Prior to February
1, 1997, Stephens provided substantially the same services as sole administrator
to the Funds. Under the previous agreements, Stephens was entitled to receive a
monthly fee at the annual rate of 0.03% of each Fund's average daily net assets.
The Company has adopted separate Distribution Plans, pursuant to Rule 12b-1, for
Class A and Class B shares of the Funds.
The Distribution Plan for the Class A shares of the Funds provides that each
Fund may defray all or part of the cost of preparing, printing and distributing
prospectuses and other promotional materials by paying for costs incurred on an
annual basis of up to 0.05% of the Class A shares' average daily net assets.
Each Fund may participate in joint distribution activities with other funds, in
which event, expenses reimbursed out of the assets of one of the Funds may be
attributable, in part, to the distribution-related activities of another Fund.
Generally, the expenses attributable to joint distribution activities will be
allocated among the Funds in proportion to their relative net asset sizes.
The Class B Distribution Plan for the Funds provides that the Funds may pay for
distribution-related services, a monthly fee at an annual rate of up to 0.70% of
each Fund's average daily net assets attributable to Class B shares. The
Distribution Plan expenses for Class A and Class B shares of the Funds were as
follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED MARCH FOR THE NINE MONTHS ENDED
31, 1997 SEPTEMBER 30, 1996
------------------------------ ------------------------------
DISTRIBUTION DISTRIBUTION DISTRIBUTION DISTRIBUTION
FEES FEES FEES FEES
FUND CLASS A CLASS B CLASS A CLASS B
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Asset Allocation Fund $ 274,749 $ 275,600 $ 410,799 $ 255,252
U.S. Government Allocation Fund 23,629 24,275 51,957 27,525
</TABLE>
FEES WAIVED
All amounts shown as waived fees and reimbursed expenses on the Statements of
Operations were waived and/or reimbursed by WFB. Fees waived and expenses
reimbursed continue at the discretion of WFB.
Certain officers and directors of the Company are also officers of Stephens. As
of March 31, 1997, Stephens owned 114 shares of the Asset Allocation Fund and
111 shares of the U.S. Government Allocation Fund.
Stephens has retained $1,960,806 as sales charges from the proceeds of Class A
shares sold and $355,437 from the proceeds of Class B shares redeemed by the
Company for the six months ended March 31, 1997. Wells Fargo Securities Inc., a
subsidiary of WFB, received $1,938,506 as sales charges from the proceeds of
Class A shares sold and $335,437 from the proceeds of Class B shares redeemed by
the Company for the six months ended March 31, 1997.
- ---------------------
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS
3. CAPITAL SHARE TRANSACTIONS
As of March 31, 1997, there were 91 billion shares of $0.001 par value capital
stock authorized by the Company. At March 31, 1997, the Asset Allocation and
U.S. Government Allocation Funds were authorized to issue 100 million shares and
300 million shares, respectively, of $0.001 par value capital stock for each
class of shares. Capital share transactions for the Funds were as follow:
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND
------------------------------------------
FOR THE SIX FOR THE NINE
MONTHS ENDED MONTHS ENDED FOR THE YEAR
MARCH 31, SEPT. 30, ENDED DEC.
1997 1996 31, 1995
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------
SHARES ISSUED AND REDEEMED:
Shares sold -- Class A 2,045,161 6,007,551 5,898,807
Shares issued in reinvestment of
dividends -- Class A 4,753,733 1,238,174 4,807,125
Shares redeemed -- Class A (5,260,733) (9,426,837) (12,361,894)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING -- CLASS A 1,538,161 (2,181,112) (1,655,962)
Shares sold -- Class B 2,222,248 3,267,959 2,123,672
Shares issued in reinvestment of
dividends -- Class B 518,569 54,554 13,259
Shares redeemed -- Class B (419,149) (481,023) (35,983)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING -- CLASS B 2,321,668 2,841,490 2,100,948
- ------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT ALLOCATION FUND
------------------------------------------
FOR THE SIX FOR THE NINE
MONTHS ENDED MONTHS ENDED FOR THE YEAR
MARCH 31, SEPT. 30, ENDED DEC.
1997 1996 31, 1995
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------
SHARES ISSUED AND REDEEMED:
Shares sold -- Class A 231,132 2,528,521 1,653,710
Shares issued in reinvestment of
dividends -- Class A 151,317 325,965 428,154
Shares redeemed -- Class A (1,126,961) (5,085,090) (3,211,044)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING -- CLASS A (744,512) (2,230,604) (1,129,180)
Shares sold -- Class B 169,717 336,746 420,344
Shares issued in reinvestment of
dividends -- Class B 12,022 12,543 4,057
Shares redeemed -- Class B (96,322) (115,493) (50,540)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING -- CLASS B 85,417 233,796 373,861
- ------------------------------------------------------------------------------------
</TABLE>
---------------------
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS
4. INCOME AND EXPENSE ALLOCATIONS
For the period from April 28, 1996 (commencement of operations as feeder funds)
to September 30, 1996, the Funds received allocations of income and expenses
from their corresponding Master Portfolios. The detail of income and expenses
for the stand-alone period of the Funds (January 1, 1996 to April 27, 1996) and
the detail of interest, dividends and expenses allocated from the master
portfolios for the feeder period of the Funds (April 28, 1996 to September 30,
1996) is as follows:
<TABLE>
<CAPTION>
STAND-ALONE PERIOD FEEDER PERIOD TOTAL
------------------------ -------------------------------------- INVESTMENT
FUND INTEREST DIVIDENDS INTEREST DIVIDENDS EXPENSES INCOME
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
Asset Allocation $ 9,691,981 $ 4,402,117 $ 18,383,751 $ 5,613,608 $ 1,791,430 $ 36,300,027
U.S. Government
Allocation 2,775,174 0 4,317,512 0 335,905 6,756,781
</TABLE>
The detail of allocated income and expenses for the six month period ended March
31, 1997 is presented in the Statements of Operations.
5. REORGANIZATION OF THE ASSET ALLOCATION AND U.S. GOVERNMENT ALLOCATION FUNDS
INTO MASTER/FEEDER STRUCTURES
At special meetings of shareholders held between December 5, 1995 and December
19, 1995, shareholders of the Asset Allocation and U.S. Government Allocation
Funds approved a reorganization of the Funds into a "master-feeder" structure,
pursuant to which the Funds invest all of their assets in a corresponding Master
Portfolio of MIT. On the conversion date the Funds transferred their investments
to the corresponding Master Portfolio in exchange for interests in the
corresponding Master Portfolio. The Funds then became "feeder" funds. This
reorganization was effected on April 28, 1996.
- ---------------------
24
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
STAGECOACH FUNDS, INC.:
We have audited the accompanying statement of assets and liabilities of the
Asset Allocation Fund and U.S. Government Allocation Fund (two of the funds
comprising Stagecoach Funds, Inc.) as of March 31, 1997, and the related
statements of operations for the six months ended March 31, 1997, and the nine
months ended September 30, 1996, the statements of changes in net assets for the
six months ended March 31, 1997, the nine months ended September 30, 1996, and
the year ended December 31, 1995, and financial highlights for the periods
indicated herein. These financial statements and financial highlights are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1997, by correspondence with the custodian and other appropriate audit
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the aforementioned funds of Stagecoach Funds, Inc. as of March 31, 1997, the
results of their operations, the changes in their net assets and their financial
highlights for the periods indicated herein in conformity with generally
accepted accounting principles.
[SIG]
[KPMG Peat Marwick LLP]
SAN FRANCISCO, CALIFORNIA
MAY 9, 1997
---------------------
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- -------------------------------------------------
PORTFOLIO OF INVESTMENTS - MARCH 31, 1997
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - 43.56%
14,849 3Com Corp+ $ 701,814 $ 486,305
66,059 Abbott Laboratories 2,311,894 3,707,561
11,597 Advanced Micro Devices+ 294,868 481,276
12,781 Aetna Inc 1,155,735 1,097,568
9,014 Ahmanson (H F) & Co 178,851 329,011
9,537 Air Products & Chemicals Inc 463,282 647,324
42,631 Airtouch Communications+ 1,074,577 980,513
4,758 Alberto-Culver Co Class B 67,303 124,303
21,319 Albertson's Inc 631,266 724,846
19,251 Alcan Aluminium Ltd 487,341 652,128
14,827 Allegheny Teledyne Inc 239,786 417,009
5,563 Allergan Inc 150,733 162,022
24,022 Allied Signal Inc 982,942 1,711,568
37,779 Allstate Corp 1,218,933 2,243,128
15,874 Alltel Corp 480,020 515,905
14,754 Aluminum Co of America 606,470 1,003,272
7,217 ALZA Corp+ 185,494 198,468
10,384 Amdahl Corp+ 77,251 97,350
7,954 Amerada Hess Corp 395,429 421,562
14,416 American Brands Inc 552,752 729,810
15,931 American Electric Power Inc 592,798 657,154
40,317 American Express Corp 1,363,884 2,413,980
17,277 American General Corp 548,060 704,038
6,399 American Greetings Corp Class A 192,765 204,368
54,281 American Home Products Corp 2,114,875 3,256,860
39,888 American International Group Inc 2,862,665 4,681,854
12,439 American Stores Co 294,900 553,536
46,721 Ameritech Corp 2,116,264 2,873,342
22,470 Amgen Inc+ 775,171 1,255,511
42,293 Amoco Corp 2,542,459 3,663,631
18,628 AMP Inc 653,395 640,338
7,734 AMR Corp+ 578,735 638,055
7,744 Andrew Corp+ 105,853 279,752
42,476 Anheuser-Busch Inc 1,179,854 1,789,302
</TABLE>
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<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
9,243 Aon Corp $ 506,166 $ 566,134
10,617 Apple Computer Inc+ 339,400 193,760
15,372 Applied Materials Inc+ 474,619 712,877
46,127 Archer-Daniels-Midland Co 729,300 824,520
9,152 Armco Inc+ 57,235 36,608
3,538 Armstrong World Industries Inc 188,418 229,086
3,594 ASARCO Inc 88,059 101,081
5,471 Ashland Inc 191,725 220,208
137,780 AT & T Corp 5,375,350 4,787,855
13,708 Atlantic Richfield Corp 1,525,127 1,850,580
3,772 Autodesk Inc 114,672 116,932
24,846 Automatic Data Processing 784,574 1,040,426
12,785 AutoZone Inc+ 349,715 287,663
8,816 Avery Dennison Corp 167,861 339,416
11,313 Avon Products Inc 339,658 593,933
12,354 Baker Hughes Inc 270,271 474,085
2,626 Ball Corp 76,589 69,589
12,523 Baltimore Gas & Electric Co 317,426 334,990
36,356 Banc One Corp 1,113,166 1,445,151
13,004 Bank of Boston Corp 532,670 871,268
33,360 Bank of New York Inc 658,425 1,225,980
30,459 BankAmerica Corp 1,560,960 3,068,744
6,956 Bankers Trust N Y Corp 485,964 570,392
4,858 Bard (C R) Inc 135,449 138,453
16,626 Barnett Banks Inc 389,207 773,109
30,396 Barrick Gold Corp 823,295 721,905
19,112 Battle Mountain Gold Co 162,803 126,617
4,668 Bausch & Lomb Inc 205,412 184,386
23,175 Baxter International Inc 681,365 999,422
16,575 Bay Networks Inc+ 788,087 296,278
10,494 Becton Dickinson & Co 285,135 472,230
37,210 Bell Atlantic Corp 2,234,275 2,265,159
84,260 BellSouth Corp 2,751,391 3,559,985
4,452 Bemis Co Inc 116,184 178,080
4,614 Beneficial Corp 189,206 298,180
9,617 Bethlehem Steel Corp+ 175,888 79,340
8,495 Beverly Enterprises+ 108,078 121,054
</TABLE>
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<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
9,738 Biomet Inc+ $ 138,994 $ 164,329
8,047 Black & Decker Corp 214,875 258,510
8,887 Block (H & R) Inc 367,729 261,056
30,506 Boeing Co 1,624,788 3,008,627
4,113 Boise Cascade Corp 133,103 125,447
15,094 Boston Scientific Corp+ 502,070 932,055
2,480 Briggs & Stratton Corp 97,851 111,290
85,106 Bristol-Myers Squibb Co 2,884,673 5,021,254
5,865 Brown-Forman Corp Class B 177,635 280,054
18,151 Browning-Ferris Industries Inc 567,854 524,110
8,395 Brunswick Corp 164,145 225,616
12,956 Burlington Northern Santa Fe 796,888 958,744
10,627 Burlington Resources Inc 441,722 454,304
13,190 Cabletron Systems Inc+ 388,373 385,808
3,296 Caliber System Inc 161,550 87,344
39,704 Campbell Soup Co 986,554 1,841,273
12,862 Carolina Power & Light Co 395,286 466,248
6,251 Case Corp 280,387 317,238
16,315 Caterpillar Inc 856,735 1,309,279
2,444 Centex Corp 83,956 86,151
17,982 Central & South West Corp 501,654 384,365
5,899 Ceridian Corp+ 219,608 211,627
8,087 Champion International Corp 308,984 367,959
8,954 Charming Shoppes Inc+ 77,688 48,128
37,329 Chase Manhattan Bank 1,675,772 3,494,928
55,436 Chevron Corp 2,655,948 3,859,732
59,714 Chrysler Corp 1,527,932 1,791,420
14,764 Chubb Corp 631,569 795,411
6,402 CIGNA Corp 543,728 935,492
3,430 Cincinnati Milacron Inc 77,136 64,313
13,351 Cinergy Corp 340,903 455,603
8,334 Circuit City Stores Inc 205,621 278,147
55,912 Cisco Systems Inc+ 1,786,817 2,690,765
39,402 Citicorp 2,340,243 4,265,267
4,400 Clorox Co 273,406 493,350
8,948 Coastal Corp 272,814 429,504
211,493 Coca-Cola Co 5,898,333 11,817,171
</TABLE>
- ------------------------
28
<PAGE>
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<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
14,449 Cognizant Corp $ 480,388 $ 420,827
12,467 Colgate-Palmolive Co 814,071 1,242,025
4,738 Columbia Gas System Inc 140,644 274,212
57,070 Columbia HCA Healthcare Corp 1,742,605 1,918,979
27,732 Comcast Corp Class A 524,479 467,978
9,131 Comerica Inc 347,974 514,760
23,044 Compaq Computer Corp+ 800,651 1,765,747
30,892 Computer Associates International Inc 831,509 1,200,927
6,473 Computer Sciences Corp+ 370,022 399,708
20,413 ConAgra Inc 696,792 1,107,405
6,760 Conrail Inc 508,594 762,190
14,479 Conseco Inc 523,206 515,814
19,935 Consolidated Edison Co 626,565 598,050
8,079 Consolidated Natural Gas Co 353,679 406,980
9,155 Cooper Industries Inc 394,524 397,098
7,061 Cooper Tire & Rubber Co 177,113 130,629
3,226 Coors (Adolph) Co Class B 58,858 68,553
18,961 CoreStates Financial Corp 727,655 900,648
19,456 Corning Inc 492,584 863,360
17,817 Costco Companies Inc+ 308,142 492,195
12,190 CPC International Inc 684,863 999,580
3,923 Crane Co 81,840 123,068
10,948 Crown Cork & Seal Co 487,907 565,191
18,430 CSX Corp 774,466 856,995
33,728 CUC International Inc+ 718,451 758,880
3,362 Cummins Engine Co Inc 152,369 172,303
9,016 CVS Corp 285,371 415,863
7,888 Cyprus Amax Minerals 208,284 187,340
8,654 Dana Corp 243,286 284,500
13,539 Darden Restaurants Inc 149,451 106,620
3,365 Data General Corp+ 33,689 57,205
18,394 Dayton-Hudson Corp 436,554 767,950
27,304 Dean Witter Discover & Co 593,139 952,227
21,742 Deere & Co 615,696 945,777
14,842 Dell Computer Corp+ 508,294 1,003,690
6,228 Delta Air Lines Inc 447,418 523,931
7,043 Deluxe Corp 227,564 228,017
</TABLE>
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29
<PAGE>
MASTER INVESTMENT TRUST ASSET ALLOCATION MASTER PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
13,391 Digital Equipment Corp+ $ 579,798 $ 366,579
9,644 Dillard Department Stores Inc Class A 312,211 303,786
57,394 Disney (Walt) Co 3,616,743 4,189,762
15,327 Dominion Resources Inc 653,606 557,520
12,811 Donnelley (R R) & Sons Co 425,171 446,784
9,603 Dover Corp 322,836 504,158
20,615 Dow Chemical Co 1,373,831 1,649,200
8,177 Dow Jones & Co Inc 309,268 332,191
14,972 Dresser Industries Inc 339,642 452,903
10,000 DSC Communications Corp+ 321,197 209,375
12,384 DTE Energy Co 385,191 332,820
17,180 Duke Power Co 737,301 758,068
14,449 Dun & Bradstreet Corp 329,763 366,643
47,883 DuPont (E I) de Nemours 2,983,555 5,075,598
1,681 Eastern Enterprises 47,833 51,901
6,584 Eastman Chemical Co 358,640 353,890
28,347 Eastman Kodak Co 1,561,753 2,150,829
6,540 Eaton Corp 358,096 463,523
5,323 Echlin Inc 182,444 180,982
11,965 Echo Bay Mines Ltd 145,327 79,268
5,463 Ecolab Inc 136,057 207,594
36,828 Edison International 689,187 828,630
4,039 EG & G Inc 72,676 84,314
19,788 EMC Corp+ 439,457 702,474
38,004 Emerson Electric Co 1,283,563 1,710,180
12,209 Engelhard Corp 232,486 256,389
21,655 Enron Corp 720,702 822,890
5,972 Enserch Corp 98,928 122,426
19,626 Entergy Corp 598,940 480,837
105,581 Exxon Corp 7,235,102 11,376,353
9,732 Federal Express Corp+ 344,163 507,281
60,768 Federal Home Loan Mortgage Corp 940,954 1,655,928
92,872 Federal National Mortgage Assoc 2,149,363 3,355,001
17,706 Federated Department Stores Inc+ 484,653 582,085
9,037 Fifth Third Bancorp 529,269 700,368
11,450 First Bank System Inc 602,043 835,850
27,142 First Chicago NBD Corp 848,559 1,469,061
</TABLE>
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<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
38,040 First Data Corp $ 1,230,805 $ 1,288,605
24,108 First Union Corp 1,072,875 1,955,762
22,336 Fleet Financial Group Inc 763,760 1,278,736
3,055 Fleetwood Enterprises Inc 71,603 76,375
3,260 Fleming Co Inc 79,918 57,050
7,109 Fluor Corp 349,804 373,223
3,154 FMC Corp+ 177,609 193,183
100,742 Ford Motor Co 3,064,581 3,160,780
3,455 Foster Wheeler Corp 135,425 122,221
15,515 FPL Group Inc 609,994 684,599
16,440 Freeport McMoRan Copper & Gold Inc Class B 457,837 499,365
13,966 Frontier Corp 316,171 249,642
6,567 Fruit of the Loom Inc Class A+ 174,465 272,531
11,971 Gannett Co Inc 680,958 1,028,010
23,736 Gap Inc 465,750 795,156
5,359 General Dynamics Corp 263,324 361,063
139,969 General Electric Co 8,144,736 13,891,971
11,620 General Instrument Corp+ 310,354 265,808
13,706 General Mills Inc 722,185 851,485
64,314 General Motors Corp 3,271,334 3,561,388
7,021 General Re Corp 908,330 1,109,318
4,225 General Signal Corp 149,233 165,303
10,276 Genuine Parts Co 407,281 479,119
7,781 Georgia-Pacific Corp 564,868 564,123
5,060 Giant Food Inc Class A 130,116 161,920
2,884 Giddings & Lewis Inc 59,350 42,900
47,196 Gillette Co 2,230,110 3,427,610
4,886 Golden West Financial 209,154 306,597
4,529 Goodrich (B F) Co 113,960 165,875
13,253 Goodyear Tire & Rubber Co 568,120 692,469
10,255 GPU Inc 311,643 329,442
7,070 Grace W.R. & Co 373,960 334,941
4,541 Grainger (W W) Inc 281,750 336,034
3,260 Great Atlantic & Pacific Tea Co 79,951 82,723
5,424 Great Lakes Chemical Corp 386,128 249,504
11,743 Great Western Financial Corp 234,713 474,124
11,699 Green Tree Financial Inc 397,129 394,841
</TABLE>
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<PAGE>
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<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
81,805 GTE Corp $ 3,123,675 $ 3,814,158
6,298 Guidant Corp 356,276 387,327
10,671 Halliburton Co 414,690 722,960
6,003 Harcourt General Inc 228,035 279,140
2,628 Harland (John H) Co 60,824 62,415
4,188 Harnischfeger Industries Inc 121,886 194,742
8,769 Harrah's Entertainment Inc+ 268,295 150,169
3,289 Harris Corp 165,216 252,842
10,971 Hasbro Inc 262,955 300,331
26,844 Healthsouth Corp+ 544,592 513,392
31,323 Heinz (H J) Co 860,041 1,237,259
2,135 Helmerich & Payne Inc 61,044 98,744
8,735 Hercules Inc 393,461 369,054
13,022 Hershey Foods Corp 362,648 651,100
86,249 Hewlett Packard Co 2,473,496 4,592,759
10,948 HFS Inc+ 721,673 644,564
20,985 Hilton Hotels Corp 311,351 508,886
40,842 Home Depot Inc 1,749,206 2,185,047
12,510 Homestake Mining Co 242,604 189,214
10,792 Honeywell Inc 417,264 732,507
8,200 Household International Inc 370,075 704,175
19,921 Houston Industries Inc 439,583 415,851
13,872 Humana Inc+ 386,640 305,184
11,423 IKON Office Solutions 341,036 382,671
10,556 Illinois Tool Works Inc 496,418 861,634
14,294 Inco Ltd 426,773 466,342
9,273 Ingersoll-Rand Co 338,801 404,535
4,143 Inland Steel Industries Inc 126,548 80,789
69,796 Intel Corp 2,896,567 9,710,369
4,165 Intergraph Corp+ 53,391 32,279
44,037 International Business Machines Corp 3,477,323 6,049,583
9,353 International Flavors & Fragrances 413,763 409,194
25,561 International Paper Co 903,346 993,684
6,890 Interpublic Group Cos Inc 243,433 363,448
9,889 ITT Corp+ 448,920 582,215
9,973 ITT Hartford Group Inc 430,160 719,303
10,072 ITT Industries Inc 195,809 225,361
</TABLE>
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<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
7,281 James River Corp $ 156,911 $ 212,059
6,056 Jefferson-Pilot Corp 230,861 329,295
113,206 Johnson & Johnson 3,583,735 5,985,767
3,531 Johnson Controls Inc 201,354 284,246
3,332 Jostens Inc 67,261 75,387
41,211 K Mart Corp 671,802 499,683
3,378 Kaufman & Broad Home Corp 57,511 44,759
17,945 Kellogg Co 1,119,666 1,206,801
4,151 Kerr-McGee Corp 211,116 256,843
19,162 KeyCorp 621,663 934,148
24,029 Kimberly-Clark Corp 1,234,181 2,387,882
3,166 King World Productions+ 127,017 115,559
8,003 Knight-Ridder Inc 236,196 319,120
10,691 Kroger Co+ 296,745 542,568
26,724 Laidlaw Inc Class B 247,879 367,455
46,932 Lilly (Eli) & Co 1,771,473 3,860,157
23,093 Limited Inc 417,834 424,334
8,891 Lincoln National Corp 399,331 475,669
6,049 Liz Claiborne Inc 127,522 263,888
16,419 Lockheed Martin Corp 927,526 1,379,196
9,754 Loews Corp 595,731 866,887
3,326 Longs Drug Stores Corp 60,051 78,161
2,942 Louisiana Land & Exploration Co 121,118 139,377
9,307 Louisiana-Pacific Corp 302,605 193,120
14,706 Lowe's Co Inc 477,373 549,637
10,915 LSI Logic Corp+ 377,505 379,296
54,281 Lucent Technologies Inc 2,668,340 2,863,323
6,325 Mallinckrodt Inc 224,981 260,116
5,334 Manor Care Inc 103,937 130,016
10,885 Marriott International 365,135 541,529
6,133 Marsh & McLennan Companies Inc 513,854 694,562
13,620 Masco Corp 419,911 486,915
24,480 Mattel Inc 471,499 587,520
20,787 May Department Stores Co 770,219 945,809
8,481 Maytag Corp 149,320 174,921
3,664 MBIA Inc 378,899 351,286
28,440 MBNA Corp 368,723 792,765
</TABLE>
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<PAGE>
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<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
4,704 McDermott International Inc $ 120,487 $ 100,548
59,315 McDonald's Corp 2,115,832 2,802,634
18,044 McDonnell Douglas Corp 501,371 1,100,684
8,424 McGraw-Hill Inc 313,720 430,677
58,267 MCI Communications 1,443,976 2,075,762
4,487 Mead Corp 220,844 237,811
20,377 Medtronic Inc 702,297 1,268,468
11,039 Mellon Bank Corp 468,917 803,087
3,099 Mercantile Stores Co Inc 126,633 143,716
102,428 Merck & Co Inc 4,748,215 8,629,559
4,598 Meredith Corp 63,048 106,329
14,002 Merrill Lynch & Co Inc 666,099 1,202,422
5,032 MGIC Investment Corp 315,758 356,014
17,827 Micron Technology Inc 508,471 721,994
102,300 Microsoft Corp+ 3,677,337 9,379,631
3,687 Millipore Corp 100,592 156,237
35,557 Minnesota Mining & Manufacturing Co 1,928,108 3,004,567
33,534 Mobil Corp 3,007,036 4,380,379
49,970 Monsanto Co 879,849 1,911,353
8,471 Moore Corp Ltd 167,392 169,420
15,694 Morgan (J P) & Co Inc 1,106,283 1,541,936
12,952 Morgan Stanley Group 642,635 760,930
12,113 Morton International Inc 388,447 511,774
50,417 Motorola Inc 2,630,606 3,043,926
647 NACCO Industries Inc Class A 32,865 31,865
5,722 Nalco Chemical Co 194,806 213,860
18,919 National City Corp 632,261 882,098
11,829 National Semiconductor+ 198,966 325,298
3,842 National Service Industries Inc 108,281 150,318
65,532 NationsBank 1,867,217 3,628,835
6,340 Navistar International+ 118,294 59,438
8,256 New York Times Co Class A 211,471 364,296
13,537 Newell Co 311,951 453,490
8,436 Newmont Mining Corp 382,477 326,895
12,419 Niagara Mohawk Power Corp+ 203,644 105,562
4,245 NICOR Inc 114,132 135,840
24,480 Nike Inc Class B 475,828 1,517,760
</TABLE>
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<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
11,669 NorAm Energy Corp $ 90,415 $ 170,659
6,777 Nordstrom Inc 249,342 256,679
10,601 Norfolk Southern Corp 750,906 903,735
5,885 Northern States Power Co 264,897 278,802
21,946 Northern Telecom Ltd 783,385 1,434,720
4,870 Northrop Grumman Corp 238,660 368,294
31,432 Norwest Corp 909,885 1,453,730
29,307 Novell Inc+ 506,677 278,417
7,427 Nucor Corp 403,850 339,785
37,402 NYNEX Corp 1,643,012 1,706,466
27,967 Occidental Petroleum Corp 551,067 688,687
12,972 Ohio Edison Co 287,917 274,034
2,319 ONEOK Inc 45,814 60,294
57,446 Oracle Systems Corp+ 1,255,428 2,215,261
8,931 Oryx Energy Co+ 144,283 171,922
4,441 Owens Corning Fiberglass Corp 185,219 178,750
3,293 PACCAR Inc 167,062 219,808
7,241 Pacific Enterprises 184,861 219,040
36,525 Pacific Telesis Group 1,147,748 1,378,819
25,025 PacifiCorp 491,439 534,909
10,697 Pall Corp 234,096 247,368
12,848 Panenergy Corp 304,170 554,070
6,281 Parker Hannifin Corp 171,900 268,513
18,956 PECO Energy Co 540,338 386,229
21,024 Penney (J C) Co Inc 1,034,605 1,001,268
3,971 Pennzoil Co 199,592 205,499
3,008 Peoples Energy Corp 88,680 99,640
5,175 Pep Boys-Manny Moe & Jack 149,893 155,250
132,054 Pepsico Inc 2,967,720 4,308,262
3,712 Perkin-Elmer Corp 134,511 238,960
54,797 Pfizer Inc 2,504,600 4,609,798
35,047 PG&E Corp 1,063,368 823,605
43,226 Pharmacia and Upjohn Inc 1,572,050 1,583,152
5,489 Phelps Dodge Corp 298,837 401,383
69,229 Philip Morris Co Inc 4,766,411 7,900,760
22,383 Phillips Petroleum Co 720,332 914,905
6,999 Pioneer Hi Bred International Inc 280,083 440,062
</TABLE>
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<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
12,656 Pitney Bowes Inc $ 522,075 $ 743,540
20,380 Placer Dome Inc 503,902 369,388
28,487 PNC Bank Corp 855,595 1,139,480
3,860 Polaroid Corp 142,691 153,435
2,431 Potlatch Corp 105,136 99,975
13,838 PP & L Resources Inc 357,383 280,220
15,589 PPG Industries Inc 614,511 841,806
13,297 Praxair Inc 339,810 596,703
57,807 Procter & Gamble Co 3,909,533 6,647,805
7,932 Providian Corp 303,610 424,362
20,297 Public Services Enterprise Group 621,563 532,796
1,946 Pulte Corp 59,312 56,921
11,574 Quaker Oats Co 396,217 422,451
8,999 Ralston-Purina Group 432,931 703,047
3,777 Raychem Corp 172,517 311,130
20,088 Raytheon Co 745,244 906,471
4,690 Reebok International Ltd 148,231 210,464
4,718 Republic New York Corp 276,897 415,774
5,411 Reynolds Metals Co 259,601 335,482
10,384 Rite Aid Corp 302,256 436,128
18,584 Rockwell International Corp (New) 749,154 1,205,637
5,462 Rohm & Haas Co 314,754 408,967
7,248 Rowan Co Inc+ 60,472 163,986
45,535 Royal Dutch Petroleum Co 5,332,787 7,968,625
12,728 Rubbermaid Inc 418,784 316,609
3,257 Russell Corp 90,398 116,438
6,934 Ryder System Inc 167,280 202,820
10,749 SAFECO Corp 320,548 429,960
4,985 Safety-Kleen Corp 77,859 73,529
9,251 Salomon Inc 383,675 461,394
7,810 Santa Fe Energy Resources Inc+ 75,164 108,364
11,250 Santa Fe Pacific Gold Corp 173,961 185,625
40,938 Sara Lee Corp 1,158,358 1,657,989
51,352 SBC Communication Inc 2,327,171 2,702,399
31,376 Schering-Plough Corp 1,254,085 2,282,604
20,955 Schlumberger Ltd 1,302,951 2,247,424
6,626 Scientific-Atlanta Inc 121,051 101,047
</TABLE>
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<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
20,994 Seagate Technology Inc+ $ 607,126 $ 942,106
31,522 Seagram Co Ltd 982,389 1,205,717
33,295 Sears Roebuck & Co 1,043,299 1,673,074
20,046 Service Corp International 355,210 596,369
1,966 Shared Medical System Corp 70,839 91,419
14,612 Sherwin Williams Co 266,852 394,524
8,460 Sigma-Aldrich Corp 173,524 261,203
14,888 Silicon Graphics Inc+ 492,734 290,316
5,125 Snap-On Inc 133,683 198,594
7,352 Sonat Inc 227,173 400,684
57,266 Southern Co 1,275,686 1,209,744
12,293 Southwest Airlines Co 306,192 271,983
1,718 Springs Industries Inc Class A 66,345 76,881
36,542 Sprint Corp 1,226,556 1,662,661
6,926 St Jude Medical Inc+ 191,715 231,155
7,057 St Paul Co Inc 347,316 457,823
7,572 Stanley Works 166,666 286,790
8,451 Stone Container Corp 142,999 94,017
4,266 Stride Rite Corp 59,766 63,990
6,213 Sun Co Inc 179,275 162,315
31,338 Sun Microsystems Inc+ 349,581 904,885
18,971 SunTrust Banks Inc 509,029 879,780
5,698 Supervalu Inc 180,569 169,516
14,982 Sysco Corp 428,498 511,261
10,143 Tandem Computers Inc+ 128,489 120,448
4,932 Tandy Corp 221,372 247,217
2,798 Tektronix Inc 99,142 141,299
56,404 Tele-Communication Inc Class A+ 917,533 676,848
15,258 Tellabs Inc+ 360,784 551,195
4,724 Temple-Inland Inc 216,122 248,010
25,611 Tenet Healthcare Corp+ 500,400 630,671
14,474 Tenneco 633,667 564,486
22,500 Texaco Inc 1,566,077 2,463,750
16,209 Texas Instruments Inc 655,795 1,213,649
19,057 Texas Utilities Co 765,781 652,702
7,029 Textron Inc 440,909 738,045
12,710 Thermo Electron Corp+ 520,952 392,421
</TABLE>
---------------------
37
<PAGE>
MASTER INVESTMENT TRUST ASSET ALLOCATION MASTER PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
4,546 Thomas & Betts Corp $ 163,142 $ 194,342
48,325 Time Warner Inc 2,006,032 2,090,056
8,387 Times Mirror Co Class A 213,772 458,140
2,665 Timken Co 93,936 142,578
6,582 TJX Companies Inc 162,630 281,381
5,985 Torchmark Corp 268,425 331,419
24,665 Toys R Us Inc+ 862,026 690,620
5,656 Transamerica Corp 338,651 506,212
54,301 Travelers Group Inc 1,257,755 2,599,660
10,508 Tribune Co 309,582 425,574
2,402 Trinova Corp 73,969 80,467
10,762 TRW Inc 388,823 556,934
5,317 Tupperware Corp+ 172,473 178,120
14,160 Tyco International Ltd 432,206 778,800
12,793 U.S. Bancorp 432,359 684,426
2,935 U.S. Life Corp 79,801 137,211
40,741 U.S. West Inc 1,142,153 1,385,194
53,109 U.S. West Media Group+ 984,953 989,155
18,354 Unicom Corp 526,617 357,903
13,644 Unilever NV 1,718,280 2,541,195
5,876 Union Camp Corp 285,738 276,907
10,810 Union Carbide Corp 333,643 478,343
8,707 Union Electric Co 341,288 321,071
20,787 Union Pacific Corp 884,193 1,179,662
21,287 Union Pacific Resources Group Inc 529,448 569,436
15,026 Unisys Corp+ 158,075 95,791
15,626 United Healthcare Corp 782,341 744,188
5,310 United States Surgical 130,481 161,955
20,146 United Technologies Corp 744,453 1,515,987
21,302 Unocal Corp 611,469 812,139
6,181 UNUM Corp 338,493 451,213
5,414 USAir Group Inc+ 63,273 132,643
9,895 USF & G Corp 152,555 212,743
15,777 UST Inc 479,421 439,784
24,396 USX - Marathon Group 437,679 680,039
7,219 USX - US Steel Group 261,834 192,206
5,439 VF Corp 260,584 363,733
</TABLE>
- ------------------------
38
<PAGE>
MASTER INVESTMENT TRUST ASSET ALLOCATION MASTER PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
30,065 Viacom Inc Class B+ $ 1,254,262 $ 995,903
14,049 Wachovia Corp 535,527 765,671
195,046 Wal Mart Stores Inc 4,828,817 5,436,907
20,943 Walgreen Co 522,824 876,988
23,074 Warner Lambert Co 901,002 1,995,901
7,882 Wells Fargo & Co 1,230,597 2,239,473
11,035 Wendy's International Inc 195,933 227,597
4,543 Western Atlas Inc+ 197,609 275,419
51,330 Westinghouse Electric Corp 897,427 911,108
8,679 Westvaco Corp 220,056 218,060
16,822 Weyerhaeuser Co 718,982 750,682
6,324 Whirlpool Corp 372,051 301,181
8,806 Whitman Corp 160,516 215,747
4,694 Willamette Industries Inc 308,713 293,375
13,383 Williams Co Inc 295,005 595,544
12,717 Winn-Dixie Stores Inc 372,365 419,661
41,095 WMX Technologies Inc 1,127,734 1,258,534
11,410 Woolworth Corp+ 222,184 266,709
73,622 WorldCom Inc+ 1,812,488 1,619,684
8,161 Worthington Industries Inc 163,204 156,079
9,896 Wrigley (Wm) Jr Co 474,820 577,679
27,541 Xerox Corp 985,578 1,566,335
------------ --------------
TOTAL COMMON STOCKS $347,824,718 $ 492,764,542
</TABLE>
---------------------
39
<PAGE>
MASTER INVESTMENT TRUST ASSET ALLOCATION MASTER PORTFOLIO
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. TREASURY SECURITIES - 56.60%
U.S. TREASURY BILLS - .32%
$ 64,000 U.S. Treasury Bills 4.91 %(F) 04/10/97 $ 63,914
95,000 U.S. Treasury Bills 4.93 (F) 04/24/97 94,675
83,000 U.S. Treasury Bills 4.94 (F) 04/17/97 82,816
298,000 U.S. Treasury Bills 5.14 (F) 05/01/97 296,754
1,067,000 U.S. Treasury Bills 5.16 (F) 06/05/97 1,057,120
148,000 U.S. Treasury Bills 5.17 (F) 06/12/97 146,461
270,000 U.S. Treasury Bills 5.17 (F) 06/19/97 266,890
1,374,000 U.S. Treasury Bills 5.18 (F) 05/15/97 1,365,182
310,000 U.S. Treasury Bills 5.20 (F) 05/29/97 307,254
--------------
$ 3,681,066
U.S. TREASURY BONDS - 56.28%
$24,750,000 U.S. Treasury Bonds 6.00 % 02/15/26 $ 21,161,250
39,900,000 U.S. Treasury Bonds 6.25 08/15/23 35,323,987
20,300,000 U.S. Treasury Bonds 6.50 11/15/26 18,676,000
8,400,000 U.S. Treasury Bonds 6.63 02/15/27 7,911,456
3,900,000 U.S. Treasury Bonds 6.75 08/15/26 3,691,596
21,900,000 U.S. Treasury Bonds 6.88 08/15/25 21,024,000
42,100,000 U.S. Treasury Bonds 7.13 02/15/23 41,547,438
24,300,000 U.S. Treasury Bonds 7.25 08/15/22 24,315,188
39,400,000 U.S. Treasury Bonds 7.50 11/15/24 40,692,831
21,800,000 U.S. Treasury Bonds 7.63 11/15/22 22,767,375
19,500,000 U.S. Treasury Bonds 7.88 02/15/21 20,877,188
55,300,000 U.S. Treasury Bonds 8.00 11/15/21 60,035,063
33,149,000 U.S. Treasury Bonds 8.13 08/15/19 36,349,965
20,500,000 U.S. Treasury Bonds 8.13 05/15/21 22,530,791
45,850,000 U.S. Treasury Bonds 8.13 08/15/21 50,406,344
27,600,000 U.S. Treasury Bonds 8.50 02/15/20 31,429,500
33,032,000 U.S. Treasury Bonds 8.75 05/15/17 38,296,475
32,925,000 U.S. Treasury Bonds 8.75 08/15/20 38,460,516
19,800,000 U.S. Treasury Bonds 8.88 08/15/17 23,227,875
38,115,000 U.S. Treasury Bonds 8.88 02/15/19 44,892,341
</TABLE>
- ------------------------
40
<PAGE>
MASTER INVESTMENT TRUST ASSET ALLOCATION MASTER PORTFOLIO
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. TREASURY SECURITIES (CONTINUED)
$16,849,000 U.S. Treasury Bonds 9.00 % 11/15/18 $ 20,060,841
10,750,000 U.S. Treasury Bonds 9.13 05/15/18 12,930,239
--------------
$ 636,608,259
TOTAL U.S. TREASURY SECURITIES $ 640,289,325
(Cost $651,770,273)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $999,594,991)* (Notes 1 and 3) 100.16% $1,133,053,867
Other Assets and Liabilities, Net (0.16) (1,862,602)
------ --------------
TOTAL NET ASSETS 100.00% $1,131,191,265
------ --------------
------ --------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
+ NON-INCOME EARNING SECURITIES.
(F) YIELD TO MATURITY.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $161,662,776
Gross Unrealized Depreciation (28,203,900)
------------
NET UNREALIZED APPRECIATION $133,458,876
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------------------
41
<PAGE>
MASTER INVESTMENT TRUST U.S. GOVERNMENT ALLOCATION MASTER PORTFOLIO
- -------------------------------------------------
PORTFOLIO OF INVESTMENTS - MARCH 31, 1997
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. TREASURY SECURITIES - 99.33%
U.S. TREASURY BILLS - 1.67%
$ 47,000 U.S. Treasury Bills 4.91 %(F) 04/10/97 $ 46,936
947,000 U.S. Treasury Bills 5.14 (F) 05/01/97 943,041
24,000 U.S. Treasury Bills 5.16 (F) 06/05/97 23,775
64,000 U.S. Treasury Bills 5.17 (F) 06/12/97 63,334
17,000 U.S. Treasury Bills 5.17 (F) 06/19/97 16,806
443,000 U.S. Treasury Bills 5.18 (F) 05/15/97 440,295
45,000 U.S. Treasury Bills 5.20 (F) 05/29/97 44,625
--------------
$ 1,578,812
U.S. TREASURY BONDS - 24.28%
$ 1,900,000 U.S. Treasury Bonds 10.75 % 02/15/03 $ 2,253,282
4,200,000 U.S. Treasury Bonds 10.75 05/15/03 5,008,500
4,000,000 U.S. Treasury Bonds 11.13 08/15/03 4,865,000
2,000,000 U.S. Treasury Bonds 11.63 11/15/02 2,446,876
6,600,000 U.S. Treasury Bonds 11.88 11/15/03 8,324,250
--------------
$ 22,897,908
U.S. TREASURY NOTES - 73.38%
$18,800,000 U.S. Treasury Notes 5.75 % 08/15/03 $ 17,736,634
10,300,000 U.S. Treasury Notes 5.88 02/15/04 9,739,938
18,500,000 U.S. Treasury Notes 6.25 02/15/03 17,991,250
16,350,000 U.S. Treasury Notes 6.38 08/15/02 16,048,554
7,450,000 U.S. Treasury Notes 7.50 05/15/02 7,680,488
--------------
$ 69,196,864
TOTAL U.S. TREASURY SECURITIES $ 93,673,584
(Cost $95,845,736)
</TABLE>
- ------------------------
42
<PAGE>
MASTER INVESTMENT TRUST U.S. GOVERNMENT ALLOCATION MASTER PORTFOLIO
<TABLE>
<C> <S> <C> <C> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $95,845,736)* (Notes 1 and 3) 99.33% $ 93,673,584
Other Assets and Liabilities, Net 0.67 631,150
------ --------------
TOTAL NET ASSETS 100.00% $ 94,304,734
------ --------------
------ --------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(F) YIELD TO MATURITY.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED DEPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 26
Gross Unrealized Depreciation (2,172,178)
------------
NET UNREALIZED DEPRECIATION $ (2,172,152)
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------------------
43
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
- ------------------------
44
<PAGE>
STATEMENT OF ASSETS & LIABILITIES - MARCH 31, 1997
<TABLE>
<CAPTION>
U.S.
ASSET GOVERNMENT
ALLOCATION ALLOCATION
MASTER MASTER
PORTFOLIO PORTFOLIO
<S> <C> <C>
- ---------------------------------------------------------------------------
ASSETS
INVESTMENTS:
In securities, at market value (see
cost below) $1,133,053,867 $93,673,584
Cash 210 408
Receivables:
Dividends and Interest 11,036,299 1,330,546
Investment securities sold 1,526,767 0
TOTAL ASSETS 1,145,617,143 95,004,538
LIABILITIES
Payables:
Investment securities purchased 34,101 0
Distribution to beneficial interest
holders 12,941,458 502,923
Due to adviser (Note 2) 1,423,657 166,225
Other 26,662 30,656
TOTAL LIABILITIES 14,425,878 699,804
TOTAL NET ASSETS $1,131,191,265 $94,304,734
INVESTMENT AT COST (NOTE 3) $ 999,594,991 $95,845,736
- ---------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------------------
45
<PAGE>
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
ASSET ALLOCATION MASTER PORTFOLIO
-----------------------------------
FROM APRIL 28, 1996
FOR THE SIX (COMMENCEMENT
MONTHS ENDED OF OPERATIONS) TO
MARCH 31, 1997 SEPT. 30, 1996
<S> <C> <C>
- -----------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 4,863,455 $ 5,613,608
Interest 23,571,277 18,383,751
TOTAL INVESTMENT INCOME 28,434,732 23,997,359
EXPENSES (NOTE 2)
Advisory fees 2,132,577 1,764,081
Legal and audit fees 10,298 27,349
TOTAL EXPENSES 2,142,875 1,791,430
NET INVESTMENT INCOME 26,291,857 22,205,929
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on sale of
investments 16,581,561 72,820,164
Net change in unrealized appreciation
(depreciation) of investments 16,897,909 (55,284,698)
NET GAIN (LOSS) ON INVESTMENTS 33,479,470 17,535,466
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 59,771,327 $ 39,741,395
- -----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- ---------------------
46
<PAGE>
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
U.S. GOVERNMENT MASTER PORTFOLIO
-----------------------------------
FROM APRIL 28, 1996
FOR THE SIX (COMMENCEMENT
MONTHS ENDED OF OPERATIONS) TO
MARCH 31, 1997 SEPT. 30, 1996
<S> <C> <C>
- -----------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 0 $ 0
Interest 3,402,767 4,317,513
TOTAL INVESTMENT INCOME 3,402,767 4,317,513
EXPENSES (NOTE 2)
Advisory fees 254,002 308,379
Legal and audit fees 10,750 27,527
TOTAL EXPENSES 264,752 335,906
NET INVESTMENT INCOME 3,138,015 3,981,607
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on sale of
investments 1,030,525 (1,454,942)
Net change in unrealized appreciation
(depreciation) of investments (2,123,856) 651,125
NET GAIN (LOSS) ON INVESTMENTS (1,093,331) (803,817)
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 2,044,684 $ 3,177,790
- -----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------------------
47
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
ASSET ALLOCATION MASTER PORTFOLIO
---------------------------------
FROM APRIL 28,
1996
(COMMENCEMENT
OF OPERATIONS)
FOR THE SIX TO
MONTHS ENDED SEPT. 30,
MARCH 31, 1997 1996 (1)
<S> <C> <C>
- ------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income $ 26,291,857 $ 22,205,929
Net realized gain (loss) on sale of
investments 16,581,561 72,820,164
Net change in unrealized appreciation
(depreciation) of investments 16,897,909 (55,284,698)
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 59,771,327 39,741,395
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM BENEFICIAL INTERESTS
TRANSACTIONS (48,645,394) 1,080,323,937
INCREASE (DECREASE) IN NET ASSETS 11,125,933 1,120,065,332
NET ASSETS:
Beginning net assets 1,120,065,332 0
ENDING NET ASSETS $1,131,191,265 $1,120,065,332
- ------------------------------------------------------------------------------
</TABLE>
(1) "NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM BENEFICIAL INTERESTS
TRANSACTIONS" INCLUDES $980,510,972, AS A RESULT OF THE CONVERSION FROM
STAND-ALONE TO MASTER-FEEDER STRUCTURE.
(2) "NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM BENEFICIAL INTERESTS
TRANSACTIONS" INCLUDES $169,909,388, AS A RESULT OF THE CONVERSION FROM
STAND-ALONE TO MASTER-FEEDER STRUCTURE.
The accompanying notes are an integral part of these financial statements.
- ---------------------
48
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
U.S. GOVERNMENT ALLOCATION
MASTER PORTFOLIO
-----------------------------
FROM APRIL
28, 1996
(COMMENCEMENT
OF
FOR THE SIX OPERATIONS)
MONTHS ENDED TO
MARCH 31, SEPT. 30,
1997 1996 (2)
<S> <C> <C>
- --------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income $ 3,138,015 $ 3,981,607
Net realized gain (loss) on sale of
investments 1,030,525 (1,454,942)
Net change in unrealized appreciation
(depreciation) of investments (2,123,856) 651,125
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 2,044,684 3,177,790
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM BENEFICIAL INTERESTS
TRANSACTIONS (13,060,349) 102,142,609
INCREASE (DECREASE) IN NET ASSETS (11,015,665) 105,320,399
NET ASSETS:
Beginning net assets 105,320,399 0
ENDING NET ASSETS $ 94,304,734 $105,320,399
- --------------------------------------------------------------------------
</TABLE>
(1) "NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM BENEFICIAL INTERESTS
TRANSACTIONS" INCLUDES $980,510,972, AS A RESULT OF THE CONVERSION FROM
STAND-ALONE TO MASTER-FEEDER STRUCTURE.
(2) "NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM BENEFICIAL INTERESTS
TRANSACTIONS" INCLUDES $169,909,388, AS A RESULT OF THE CONVERSION FROM
STAND-ALONE TO MASTER-FEEDER STRUCTURE.
The accompanying notes are an integral part of these financial statements.
---------------------
49
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Asset Allocation Master Portfolio and U.S. Government Allocation Master
Portfolio (the "Master Portfolios") are two series of Master Investment Trust
(the "Trust"), a business trust organized under the laws of Delaware on August
14, 1991. The Trust is registered as an investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"). The Declaration of Trust
permits the issuance of beneficial interests ("interests"). The Trust currently
issues nine series of investment portfolios: the Asset Allocation, Capital
Appreciation, Cash Investment Trust, Corporate Stock, Short-Term
Government-Corporate Income, Short-Term Municipal Income, Small Cap, Tax-Free
Money Market and U.S. Government Allocation Master Portfolios. These financial
statements represent only the Asset Allocation and U.S. Government Allocation
Master Portfolios.
The following significant accounting policies are consistently followed by the
Trust in the preparation of its financial statements, and such policies are in
conformity with generally accepted accounting principles for investment
companies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INVESTMENT POLICY AND SECURITY VALUATION
Each Master Portfolio's investments may include fixed-, variable- and
floating-rate instruments. Additionally, the Asset Allocation Master Portfolio
may invest in equity securities. Investments in securities for which the primary
market is a national securities exchange or the NASDAQ National Market System
are valued at the last reported sales price on the day of valuation. U.S.
government obligations are valued at the reported bid prices. Securities not
listed on an exchange or national securities market, or securities in which
there were no transactions, excluding debt securities maturing in 60 days or
less, are valued at the most recent bid prices, or if such prices are not
readily available, at fair value as determined in accordance with procedures
approved by the Board of Trustees. Debt securities maturing in 60 days or less
are valued at amortized cost, which approximates market value.
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Security transactions are recorded no later than one business day after trade
date. Dividend income is recognized on the ex-dividend date, interest income is
accrued daily. Realized gains and losses
- ---------------------
50
<PAGE>
NOTES TO FINANCIAL STATEMENTS
are reported on the basis of identified cost of securities delivered. Bond
discounts are accreted and premiums are amortized as required by the Internal
Revenue Code.
FEDERAL INCOME TAXES
Each Master Portfolio intends to qualify for federal income tax purposes as a
partnership. Management of each Master Portfolio therefore believes that it will
not be subject to any federal or state income tax on its income and net capital
gains (if any). However, each investor in a Master Portfolio will be taxed on
its distributive share of the partnership's income for purposes of determining
its federal and state income tax liabilities. The determination of such share
will be made in accordance with the Internal Revenue Code of 1986, as amended
("Code"), and the regulations promulgated thereunder.
It is intended that the Master Portfolios' assets, income, gain/loss and
allocations will be managed in such a way that a regulated investment company
investing in the Master Portfolio will be able to satisfy the requirements of
Subchapter M of the Code, assuming that the investment company invests all of
its assets in the Master Portfolio.
2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into separate advisory contracts with Wells Fargo Bank,
N.A. ("WFB") on behalf of each Master Portfolio. Pursuant to the contracts, WFB
furnishes investment guidance and policy direction in connection with daily
portfolio management of each Master Portfolio. Under the contracts, WFB is
entitled to receive a monthly advisory fee at an annual rate of 0.50% of the
first $250 million, 0.40% of the next $250 million and 0.30% of the average
daily net assets in excess of $500 million.
The Master Portfolios currently retain Barclays Global Fund Advisors ("BGFA") as
sub-adviser. BGFA is an indirect subsidiary of Barclays Bank PLC. BGFA was
formed by the reorganization of Wells Fargo Nikko Investment Advisors ("WFNIA"),
a former affiliate of Wells Fargo & Company. Pursuant to a sub-advisory contract
with the Master Portfolios and subject to the overall supervision of WFB, the
investment adviser, BGFA is responsible for day-to-day portfolio management.
BGFA is entitled to receive from WFB as compensation for its sub-advisory
services monthly fees at the annual rate of 0.20% of the average daily net
assets of the Asset Allocation Master Portfolio and 0.15% of the average daily
net assets of the U.S. Government Allocation Master Portfolio. BGFA is also
entitled to receive from WFB annual fees of $40,000 for its services for each of
the Master Portfolios.
Barclays Global Investors, N.A. ("BGI") currently acts as custodian to the
Master Portfolios. BGI is an affiliate of BGFA. BGI will not be entitled to
compensation for its custodial services to the Master Portfolios so long as BGFA
is entitled to receive compensation for providing sub-advisory services to the
Master Portfolios.
---------------------
51
<PAGE>
NOTES TO FINANCIAL STATEMENTS
3. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments exclusive of short-term securities for the
Asset Allocation and U.S. Government Allocation Master Portfolios, for the six
months ended March 31, 1997, were as follows:
<TABLE>
<CAPTION>
U.S. GOVERNMENT
ALLOCATION
AGGREGATE PURCHASES ASSET ALLOCATION MASTER
AND SALES: MASTER PORTFOLIO PORTFOLIO
<S> <C> <C>
- ----------------------------------------------------------------------------
Total purchases at cost $ 51,633,351 $ 185,349,555
Total sales proceeds 71,308,168 92,194,305
</TABLE>
4. FINANCIAL HIGHLIGHTS
The portfolio turnover rates, exclusive of short-term securities, and average
commission rate paid for each Master Portfolio for the stated periods are as
follows:
<TABLE>
<CAPTION>
FOR THE PERIOD FROM APRIL 28,
1996 (COMMENCEMENT OF
FOR THE SIX MONTHS ENDED OPERATIONS)
MARCH 31, 1997 TO SEPTEMBER 30, 1996
------------------------------ ------------------------------
U.S. U.S.
ASSET GOVERNMENT ASSET GOVERNMENT
ALLOCATION ALLOCATION ALLOCATION ALLOCATION
MASTER MASTER MASTER MASTER
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
Portfolio Turnover 5% 113% 28% 87%
Average Commission Rate Paid $0.0277 N/A $0.0261 N/A
</TABLE>
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52
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE UNITHOLDERS AND BOARD OF TRUSTEES
MASTER INVESTMENT TRUST:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Asset Allocation Master Portfolio and U.S.
Government Allocation Master Portfolio (two of the master portfolios comprising
Master Investment Trust) as of March 31, 1997, and the related statements of
operations and changes in net assets, and financial highlights for the six
months ended March 31, 1997, and for the period from April 28, 1996
(commencement of operations) to September 30, 1996. These financial statements
and financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1997, by correspondence with the custodian and other appropriate audit
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the aforementioned master portfolios of Master Investment Trust as of March
31, 1997, the results of their operations, the changes in their net assets and
their financial highlights for the periods indicated herein in conformity with
generally accepted accounting principles.
[SIG]
[KPMG Peat Marwick LLP]
SAN FRANCISCO, CALIFORNIA
MAY 9, 1997
---------------------
53
<PAGE>
LIST OF ABBREVIATIONS
The following is a list of common abbreviations for terms and entities which may
have appeared in this report.
<TABLE>
<S> <C> <C>
ABAG -- Association of Bay Area Governments
ADR -- American Depository Receipts
AMBAC -- American Municipal Bond Assurance Corporation
AMT -- Alternative Minimum Tax
ARM -- Adjustable Rate Mortgages
BART -- Bay Area Rapid Transit
CDA -- Community Development Authority
CDSC -- Contingent Deferred Sales Charge
CGIC -- Capital Guaranty Insurance Company
CGY -- Capital Guaranty Corporation
CMT -- Constant Maturity Treasury
COFI -- Cost of Funds Index
CONNIE LEE -- Connie Lee Insurance Company
COP -- Certificate of Participation
CP -- Commercial Paper
DW&P -- Department of Water & Power
DWR -- Department of Water Resources
EDFA -- Education Finance Authority
FGIC -- Financial Guaranty Insurance Corporation
FHA -- Federal Housing Authority
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance, Inc
GNMA -- Government National Mortgage Association
GO -- General Obligation
HFA -- Housing Finance Authority
HFFA -- Health Facilities Financing Authority
IDA -- Industrial Development Authority
LIBOR -- London Interbank Offered Rate
LOC -- Letter of Credit
MBIA -- Municipal Bond Insurance Association
MFHR -- Multi-Family Housing Revenue
MUD -- Municipal Utility District
PCFA -- Pollution Control Finance Authority
PCR -- Pollution Control Revenue
PFA -- Public Finance Authority
PSFG -- Public School Fund Guaranty
RAW -- Revenue Anticipation Warrants
RDA -- Redevelopment Authority
RDFA -- Redevelopment Finance Authority
R&D -- Research & Development
SFMR -- Single Family Mortgage Revenue
TBA -- To Be Announced
TRAN -- Tax Revenue Anticipation Notes
USD -- Unified School District
V/R -- Variable Rate
</TABLE>
- ---------------------
54
<PAGE>
Wells Fargo provides investment advisory services, shareholder services, and
certain other services for the Stagecoach Funds. The Funds are sponsored and
distributed by STEPHENS INC., Member NYSE/SIPC. Wells Fargo is not affiliated
with Stephens Inc.
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Stagecoach Funds. If this report
is used for promotional purposes, distribution of the report must be accompanied
or preceded by a current prospectus. For a prospectus containing more complete
information, including charges and expenses, call 1-800-260-5969. Read the
prospectus carefully before you invest or send money.
SCF 080 (5/97)
<TABLE>
<S> <C>
STAGECOACH
FUNDS-REGISTERED TRADEMARK-
P.O. Box 7066
San Francisco, CA 94120-7066
DATED MATERIAL
PLEASE EXPEDITE
</TABLE>
[LOGO]
-C- 1997 Stagecoach Funds
