<PAGE> 1
As filed with the Securities and Exchange Commission
on November 15, 1996
Registration No. 33-64352; 811-7780
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Post-Effective Amendment No. 6 [ X ]
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 8 [ X ]
(Check appropriate box or boxes)
STAGECOACH TRUST
(Exact Name of Registrant as specified in Charter)
111 Center Street
Little Rock, Arkansas 72201
(Address of Principal Executive Offices, including Zip Code)
Registrant's Telephone Number, including Area code: (800) 643-9691
Richard H. Blank, Jr.
c/o Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
(Name and Address of Agent for Service)
With a copy to:
Robert M. Kurucza, Esq.
Marco E. Adelfio, Esq.
Morrison & Foerster LLP
2000 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
It is proposed that this filling will become effective (check appropriate box):
[ ] Immediately upon filing pursuant to Rule 485(b), or [ ] on _________,
pursuant to Rule 485(b)
[X] 60 days after filing pursuant to Rule 485(a)(1), or [ ] on _________,
pursuant to Rule 485(a)(1)
[ ] 75 days after filing pursuant to Rule 485(a)(2), or [ ] on _________,
pursuant to Rule 485(a)(2)
<PAGE> 2
If appropriate, check the following box:
[ ] this post effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant has registered an indefinite number of shares of its Common
Stock, $.001 par value, under the Securities Act of 1933, pursuant to Rule
24f-2 under the Investment Company Act 1940, as amended. The Registrant filed
the notice required by Rule 24f-2 for its most recent fiscal year ended
February 29, 1996, with the Securities and Exchange Commission on April 29,
1996.
This Post-Effective Amendment to the Registrant's Registration Statement has
been executed by Master Investment Portfolio (a registered investment company
with separate series in which certain of the Registrant's series invest
substantially all of their assets) and its trustees and principal officer.
<PAGE> 3
EXPLANATORY NOTE
This Post-Effective Amendment is being filed to register a new
class of shares -- Class B shares -- to Stagecoach Trust's LifePath 2010,
LifePath 2020, LifePath 2030 and LifePath 2040 Funds, and to make certain other
non- material changes to the Registration Statement. The former Retail Class
shares of the LifePath Funds have been redesignated as Class A shares.
<PAGE> 4
LIFEPATH FUNDS
Cross Reference Sheet
Form N-1A Item Number
<TABLE>
<CAPTION>
Part A Prospectus Captions
- ------ -------------------
<S> <C>
1 Cover Page
2 Summary of Fund Expenses
3 Financial Highlights
4 Description of the Funds; General Information
5 Management of the Funds; General Information
6 Management of the Funds; Dividends and Distributions; Federal Tax Information
7 How to Buy Shares; How to Redeem Shares; Exchange Privilege; Dividends and Distributions
Performance Information
8 How to Redeem Shares; Exchange Privilege
9 Not Applicable
Part B Statement of Additional Information Captions
------ --------------------------------------------
10 Cover Page
11 Table of Contents
12 Management of the Trust
13 Investment Objectives and Management Policies; Appendix
14 Management of the Trust; Management Arrangements
15 Information About the Funds; Capital Stock; Management of the Trust
16 Management of the Trust; Independent Auditors; Counsel
17 Portfolio Transactions
18 Capital Stock
19 Purchase and Redemption of Shares; Determination of Net Asset Value
20 Dividends, Distributions and Taxes
21 Management Arrangements
22 Performance Information
23 Financial Information; Financial Statements
Part C General Information
------
24-32 Information required to be included in Part C is set forth under the appropriate Item, so
numbered, in Part C of this Document.
</TABLE>
<PAGE> 5
[STAGECOACH LOGO]
------------------------------
PROSPECTUS
------------------------------
[LOGO]
CLASS A AND CLASS B
January 15, 1997
<PAGE> 6
STAGECOACH FUNDS(R)
STAGECOACH LIFEPATH(TM) FUNDS
CLASS A AND CLASS B SHARES
The LIFEPATH FUNDS consist of five asset allocation funds (the "LifePath
Funds") offered by Stagecoach Trust (the "Trust"), an open-end, management
investment company. By this Prospectus, the Trust is offering Class A (formerly,
Retail Class) and Class B shares of the LifePath Funds. The LifePath Funds seek
to provide investors with an asset allocation strategy designed to maximize
assets for retirement or for other purposes consistent with the quantitatively
measured risk investors, on average, may be willing to accept given their
investment time horizons.
EACH FUND INVESTS ALL OF ITS ASSETS IN A SEPARATE SERIES (EACH, A "MASTER
PORTFOLIO") OF MASTER INVESTMENT PORTFOLIO ("MIP"), AN OPEN-END, SERIES
INVESTMENT COMPANY, RATHER THAN IN A PORTFOLIO OF SECURITIES AND, AS SUCH, MAY
BE CONSIDERED A FEEDER FUND IN A MASTER/FEEDER STRUCTURE. EACH MASTER PORTFOLIO
HAS THE SAME INVESTMENT OBJECTIVE AS THE FUND BEARING THE CORRESPONDING NAME.
THEREFORE, EACH FUND'S INVESTMENT EXPERIENCE CORRESPONDS DIRECTLY WITH THE
RELEVANT MASTER PORTFOLIO'S INVESTMENT EXPERIENCE.
Please read this Prospectus before investing and retain it for future
reference. It sets forth concisely information about the Trust and Funds that a
prospective investor should know before investing. A Statement of Additional
Information ("SAI") dated January 15, 1997 has been filed with the Securities
and Exchange Commission ("SEC") and is incorporated by reference into this
Prospectus. For a free copy, write to the Trust c/o Wells Fargo Bank,
N.A. - Stagecoach Shareholder Services, P.O. Box 7066, San Francisco, California
94120-7066, or call 1-800-222-8222. If you hold shares in an IRA, please call
1-800-BEST-IRA (1-800-237-8472) for information or assistance.
FUND SHARES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR ISSUED, ENDORSED OR
GUARANTEED BY WELLS FARGO BANK, N.A. ("WELLS FARGO BANK"), BARCLAYS GLOBAL FUND
ADVISORS ("BGFA") OR ANY OF THEIR AFFILIATES. SUCH SHARES ARE NOT INSURED BY THE
U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"), THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN A FUND INVOLVES
CERTAIN INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, ANY STATE
SECURITIES COMMISSION OR ANY OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THESE
AUTHORITIES PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS DATED JANUARY 15, 1997
PROSPECTUS
<PAGE> 7
Each LifePath Fund invests in the corresponding LifePath Master Portfolio. The
LifePath Master Portfolios invest in a wide range of U.S. and foreign equity and
debt securities and money market instruments. Investors are encouraged to select
a particular LifePath Fund based on the decade of their anticipated retirement
or when they anticipate beginning to withdraw substantial portions of their
investment.
- LIFEPATH 2000 FUND is managed for investors planning to retire (or begin to
withdraw substantial portions of their investment) approximately in the year
2000.
- LIFEPATH 2010 FUND is managed for investors planning to retire (or begin to
withdraw substantial portions of their investment) approximately in the year
2010.
- LIFEPATH 2020 FUND is managed for investors planning to retire (or begin to
withdraw substantial portions of their investment) approximately in the year
2020.
- LIFEPATH 2030 FUND is managed for investors planning to retire (or begin to
withdraw substantial portions of their investment) approximately in the year
2030.
- LIFEPATH 2040 FUND is managed for investors planning to retire (or begin to
withdraw substantial portions of their investment) approximately in the year
2040.
BGFA SERVES AS EACH MASTER PORTFOLIO'S INVESTMENT ADVISER AND, TOGETHER WITH ITS
AFFILIATES, PROVIDES OTHER SERVICES FOR WHICH IT IS COMPENSATED. STEPHENS INC.
("STEPHENS"), WHICH IS NOT AFFILIATED WITH BGFA, SERVES AS THE TRUST'S
CO-ADMINISTRATOR AND AS DISTRIBUTOR OF EACH FUND'S SHARES.
PROSPECTUS
<PAGE> 8
TABLE OF CONTENTS
-------
SUMMARY OF FUND EXPENSES 1
FINANCIAL HIGHLIGHTS 4
DESCRIPTION OF THE FUNDS 6
RISK CONSIDERATIONS 14
MANAGEMENT OF THE FUNDS 18
HOW TO BUY SHARES 23
HOW TO REDEEM SHARES 34
EXCHANGE PRIVILEGE 38
DIVIDENDS AND DISTRIBUTIONS 41
FEDERAL TAX INFORMATION 42
PERFORMANCE INFORMATION 43
GENERAL INFORMATION 44
APPENDIX A-1
PROSPECTUS
<PAGE> 9
SUMMARY OF FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
CLASS A SHARES
<TABLE>
<CAPTION>
LIFEPATH LIFEPATH LIFEPATH LIFEPATH LIFEPATH
2000 FUND 2010 FUND 2020 FUND 2030 FUND 2040 FUND
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge Imposed
on Purchase (as a percentage
of offering price).......... None 4.50% 4.50% 4.50% 4.50%
Sales Charge Imposed on
Reinvested
Dividends................... None None None None None
Maximum Sales Charge Imposed
on
Redemptions................. None None None None None
Exchange Fees................. None None None None None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
<TABLE>
<CAPTION>
LIFEPATH LIFEPATH LIFEPATH LIFEPATH LIFEPATH
2000 FUND 2010 FUND 2020 FUND 2030 FUND 2040 FUND
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Master Portfolio
Management Fees(1)....... .55% .55% .55% .55% .55%
12b-1 Fees................. .25% .25% .25% .25% .25%
Other Expenses............. .40% .40% .40% .40% .40%
Total Fund Operating
Expenses................. 1.20% 1.20% 1.20% 1.20% 1.20%
</TABLE>
- ---------------
(1) A portion of these fees is covered by a "defensive" Rule 12b-1
Distribution Plan that does not result in additional expenses to the Funds
or Master Portfolios. (See "Management of the Funds -- MIP 12b-1 Plan"
for further information.)
EXAMPLE OF EXPENSES
An investor would pay the following expenses on a $1,000 investment in Class A
shares of a Fund, assuming (1) 5% annual return and (2) redemption at the end
of each time period:
<TABLE>
<CAPTION>
LIFEPATH LIFEPATH LIFEPATH LIFEPATH LIFEPATH
2000 FUND 2010 FUND 2020 FUND 2030 FUND 2040 FUND
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1 YEAR............. $ 12 $ 57 $ 57 $ 57 $ 57
3 YEARS............ $ 38 $ 81 $ 81 $ 81 $ 81
5 YEARS............ $ 66 $ 108 $ 108 $ 108 $ 108
10 YEARS............ $ 145 $ 184 $ 184 $ 184 $ 184
</TABLE>
1 PROSPECTUS
<PAGE> 10
SHAREHOLDER TRANSACTION EXPENSES
CLASS B SHARES
<TABLE>
<CAPTION>
LIFEPATH LIFEPATH LIFEPATH LIFEPATH
2010 FUND 2020 FUND 2030 FUND 2040 FUND
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchase
(as a percentage of offering price).... None None None None
Sales Charge Imposed on Reinvested
Dividends.............................. None None None None
Maximum Sales Charge Imposed on
Redemptions............................ 5.00% 5.00% 5.00% 5.00%
Exchange Fees............................ None None None None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
<TABLE>
<CAPTION>
LIFEPATH LIFEPATH LIFEPATH LIFEPATH
2010 FUND 2020 FUND 2030 FUND 2040 FUND
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Master Portfolio Management Fees(1)...... .55% .55% .55% .55%
12b-1Fees................................ .75% .75% .75% .75%
Other Expenses........................... .40% .40% .40% .40%
--------- --------- --------- ---------
Total Fund Operating Expenses............ 1.70% 1.70% 1.70% 1.70%
</TABLE>
- ---------------
(1) A portion of these fees is covered by a "defensive" Rule 12b-1
Distribution Plan that does not result in additional expenses to the
Funds or Master Portfolios. (See "Management of the Funds -- MIP 12b-1
Plan" for further information.)
- --------------------------------------------------------------------------------
EXAMPLE OF EXPENSES
An investor would pay the following expenses on a $1,000 investment in Class B
shares of a Fund, assuming (1) 5% annual return and (2) redemption at the
end of each time period:
<TABLE>
<CAPTION>
LIFEPATH LIFEPATH LIFEPATH LIFEPATH
2010 FUND 2020 FUND 2030 FUND 2040 FUND
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
1 YEAR........................ $ 67 $ 67 $ 67 $ 67
3 YEARS....................... $ 84 $ 84 $ 84 $ 84
</TABLE>
An investor would pay the following expenses on a $1,000 investment in Class B
shares of a Fund, assuming (1) 5% annual return and (2) no redemption:
<TABLE>
<CAPTION>
LIFEPATH LIFEPATH LIFEPATH LIFEPATH
2010 FUND 2020 FUND 2030 FUND 2040 FUND
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
1 YEAR........................ $ 17 $ 17 $ 17 $ 17
3 YEARS....................... $ 54 $ 54 $ 54 $ 54
------------------------------------------------------------------------------------
</TABLE>
EXPLANATION OF TABLES
The purpose of the foregoing tables is to help a shareholder understand the
various costs and expenses that an investor in a Fund will bear directly or
indirectly. The foregoing tables reflect expenses at both the Fund and Master
Portfolio levels. The tables do not reflect any charges that may be imposed by
Wells Fargo Bank or other shareholder servicing agents directly on customer
accounts in connection with an investment in a Fund.
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or sell Fund
shares. You are subject to a front-end sales charge on purchases of a Fund's
Class A shares and may be subject to a contingent-deferred sales charge on a
Fund's Class B shares if you redeem such shares within a specified period. The
Trust reserves the right to impose a charge for wiring redemption proceeds. In
certain instances you may qualify for a reduction
PROSPECTUS 2
<PAGE> 11
or waiver of the front-end sales charge. There are no other sales charges,
exchange fees or redemption fees. See "How to Buy Shares".
ANNUAL FUND OPERATING EXPENSES for Class A shares are based on each Fund's
actual expenses for the fiscal year ended February 29, 1996. Annual Fund
Operating Expenses for Class B shares are based on contract amounts and certain
anticipated voluntary fee waivers and expense reimbursements expected to be in
effect for the remainder of the current fiscal year. BGFA, Wells Fargo Bank and
Stephens at their sole discretion may waive or reimburse all or a portion of
their respective fees charged to, or expenses paid by, a Fund or Master
Portfolio. Any waivers or reimbursements would reduce a Fund's or Master
Portfolio's total expenses. For more complete descriptions of the various costs
and expenses you can expect to incur as an investor in the Funds, please see
"Management of the Funds."
Long-term Class B shareholders of the Funds could pay more in sales charges
than the economic equivalent of the maximum front-end sales charges applicable
to mutual funds sold by members of the National Association of Securities
Dealers, Inc. ("NASD"). For more complete descriptions of the various costs and
expenses you can expect to incur as a shareholder in a Fund, please see "How to
Buy Shares" and "Management of the Funds."
EXAMPLE OF EXPENSES is a hypothetical illustration of the expenses associated
with a $1,000 investment over stated periods, based on the expenses in the above
tables and an assumed annual rate of return of 5%. This annual rate of return
should not be considered an indication of actual or expected performance of a
Fund nor a representation of past or future expenses; actual expenses and
returns may be greater or lesser than those shown.
With regard to the combined fees and expenses of the Funds and Master
Portfolios, the Trust's Board of Trustees has considered whether the various
costs and benefits of investing each Fund's assets in the corresponding Master
Portfolio rather than directly in a portfolio of securities would be more or
less than if the Fund invested in portfolio securities directly. The Trust's
Board of Trustees believes that the aggregate per share expenses of a Fund and
its corresponding Master Portfolio will be less than or approximately equal to
the expenses such Fund would incur if it directly acquired and managed the type
of securities held by its corresponding Master Portfolio. The information in the
foregoing tables does not reflect any fee waivers or expense reimbursement
arrangements that may be in effect. For a description of the various costs and
expenses incurred in the operation of the Trust and MIP, as well as any fee
waivers or expense reimbursements, see "Management of the Funds."
The Trust is currently authorized to issue a third class of LifePath
shares -- the Institutional Class shares -- which are no longer offered for sale
or in connection with the Trust's dividend reinvestment plan. In addition, other
mutual funds may invest in each LifePath Master Portfolio. The expenses and,
accordingly, the investment returns of such other mutual funds and a class of
shares may differ from those of another class of shares. Information about each
class of shares and other investment options in the Master Portfolios may be
obtained by calling Stephens at 1-800-643-9691. For additional information, see
"Description of the Funds -- Master/Feeder Structure."
3 PROSPECTUS
<PAGE> 12
FINANCIAL HIGHLIGHTS
The following information has been derived from the Financial Highlights of
the Class A shares in the Funds' financial statements for the fiscal year ended
February 29, 1996. The financial statements are incorporated by reference into
the SAI for the Funds. The financial statements have been audited by KPMG Peat
Marwick LLP, independent auditors, whose report dated April 12, 1996 also is
incorporated by reference into the SAI. This information should be read in
conjunction with the Funds' 1996 annual financial statements and notes thereto.
The unaudited information has been derived from the Financial Highlights of the
Class A shares in the Funds' Semi-Annual Report for the six months ended August
31, 1996. Financial information is not provided for the Class B shares because
the Class B shares were not offered during the periods presented.
FOR A CLASS A SHARE OUTSTANDING
<TABLE>
<CAPTION>
LIFEPATH 2000 FUND LIFEPATH 2010 FUND LIFEPATH 2020 FUND
-------------------------------------- ------------------------------------- ------------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR ENDED ENDED YEAR ENDED YEAR ENDED ENDED YEAR ENDED
AUGUST 31, FEBRUARY 29, FEBRUARY 28, AUGUST 31, FEBRUARY FEBRUARY 28, AUGUST 31, FEBRUARY 29,
1996 1996 1995 1996 29, 1996 1995 1996 1996
---------- ------------ ------------ ---------- ----------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
beginning of period..... $ 10.64 $ 9.92 $ 10.00 $ 11.42 $ 9.99 $ 10.00 $ 11.98 $ 10.17
-------- -------- -------- -------- ------- -------- -------- --------
Income from investment
operations:
Net investment income... 0.21 0.40 0.34 0.17 0.32 0.34 0.15 0.27
Net realized and
unrealized gain/(loss)
on investments........ (0.18) 0.86 (0.14) (0.07) 1.58 (0.02) (0.03) 2.03
-------- -------- -------- -------- ------- -------- -------- --------
Total from investment
operations.............. 0.03 1.26 0.20 0.10 1.90 0.32 0.12 2.30
Less distributions:
Dividends from net
investment income..... (0.20) (0.41) (0.27) (0.16) (0.33) (0.28) (0.14) (0.28)
Distributions from net
realized capital
gains................. (0.03) (0.13) (0.01) (0.02) (0.14) (0.05) (0.04) (0.21)
-------- -------- -------- -------- ------- -------- -------- --------
Total Distributions...... (0.23) (0.54) (0.28) (0.18) (0.47) (0.33) (0.18) (0.49)
-------- -------- -------- -------- ------- -------- -------- --------
Net Asset Value, end of
Period.................. $ 10.44 $ 10.64 $ 9.92 $ 11.34 $ 11.42 $ 9.99 $ 11.92 $ 11.98
======== ======== ======== ======== ======= ======== ======== ========
Total Return (not
annualized)............. 0.34% 12.98% 2.10% 0.88% 19.40% 3.31% 0.96% 22.94%
Ratios/Supplemental Data:
Net assets, end of
period (000).......... $ 87,537 $100,070 $ 54,617 $ 71,246 $67,178 $ 36,764 $127,975 $122,488
Number of shares
outstanding, end of
period (000).......... 8,388 9,406 5,503 6,281 5,883 3,679 10,733 10,224
Ratios to average net
assets (annualized)(1):
Ratio of expenses to
average net assets.... 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20%
Ratio of net investment
income to average net
assets................ 3.91% 4.00% 4.62% 3.06% 3.06% 4.40% 2.42% 2.45%
Portfolio Turnover(2).... 56% 84% 17% 53% 39% 24% 40% 49%
</TABLE>
(1) These ratios include expenses charged to the Master Portfolio.
(2) The portfolio turnover rate reflects activity by the Master Portfolio. For
the year ended February 28, 1995, the Master Portfolio was audited by other
auditors.
(Continued)
PROSPECTUS 4
<PAGE> 13
<TABLE>
<CAPTION>
LIFEPATH
2020 FUND LIFEPATH 2030 FUND LIFEPATH 2040 FUND
------------ -------------------------------------- --------------------------------------
SIX MONTHS SIX MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED ENDED YEAR ENDED YEAR ENDED
FEBRUARY 28, AUGUST 31, FEBRUARY 29, FEBRUARY 28, AUGUST 31, FEBRUARY 29, FEBRUARY 28,
1995 1996 1996 1995 1996 1996 1995
------------ ---------- ------------ ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
Net Asset Value,
beginning of period.... $ 10.00 $ 12.34 $ 10.17 $ 10.00 $ 12.84 $ 10.37 $ 10.00
-------- -------- -------- -------- -------- -------- --------
Income from investment
operations:
Net investment
income............... 0.28 0.12 0.21 0.26 0.09 0.15 0.18
Net realized and
unrealized
gain/(loss) on
investments.......... 0.12 0.01 2.45 0.13 0.17 2.82 0.34
-------- -------- -------- -------- -------- -------- --------
Total from investment
operations............. 0.40 0.13 2.66 0.39 0.26 2.97 0.52
Less distributions:
Dividends from net
investment income.... (0.23) (0.11) (0.22) (0.22) (0.08) (0.16) (0.15)
Distributions from net
realized capital
gains................ 0.00 (0.03) (0.27) 0.00 (0.06) 0.34 0.00
-------- -------- -------- -------- -------- -------- --------
Total Distributions..... (0.23) (0.14) (0.49) (0.22) (0.14) (0.50) (0.15)
-------- -------- -------- -------- -------- -------- --------
Net Asset Value, end of
Period................. $ 10.17 $ 12.33 $ 12.34 $ 10.17 $ 12.96 $ 12.84 $ 10.37
======== ======== ======== ======== ======== ======== ========
Total Return (not
annualized)............ 4.12% 1.11% 26.53% 4.03% 2.01% 28.91% 5.26%
Ratios/Supplemental
Data:
Net assets, end of
period (000)......... $ 66,036 $ 84,400 $ 83,012 $ 41,153 $155,478 $142,738 $ 56,737
Number of shares
outstanding, end of
period (000)......... 6,494 6,846 6,728 4,045 11,994 11,114 5,472
Ratios of average net
assets (annualized)(1):
Ratio of expenses to
average net assets... 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20%
Ratio of net investment
income to average net
assets............... 3.64% 1.93% 1.92% 3.35% 1.35% 1.29% 2.35%
Portfolio Turnover(2)... 28% 31% 39% 40% 33% 29% 5%
</TABLE>
(1) These ratios include expenses charged to the Master Portfolio.
(2) The portfolio turnover rate reflects activity by the Master Portfolio. For
the year ended February 28, 1995, the Master Portfolio was audited by other
auditors.
5 PROSPECTUS
<PAGE> 14
DESCRIPTION OF THE FUNDS
GENERAL
The Trust is a "series fund," which is a mutual fund divided into separate
portfolios. Each portfolio is treated as a separate entity for certain matters
under the Investment Company Act of 1940, as amended (the "1940 Act"), and for
other purposes, and a shareholder of one portfolio is not deemed to be a
shareholder of any other portfolio. Each LifePath Fund offers Class A shares and
the LifePath 2010, 2020, 2030 and 2040 Funds also offer Class B shares. The
LifePath Funds no longer offer the Institutional Class shares either for
investment or in connection with the dividend reinvestment plan. As described
below, for certain matters Trust shareholders vote together as a group, as to
others they vote separately by portfolio, and, in certain instances, they vote
by class of shares within a portfolio. In addition, because of differences
between the fees and expenses borne by a Class of shares, the net asset value of
a class of shares will typically differ from the net asset value of another
class of shares in a Fund. Each LifePath Fund is diversified. From time to time,
the Trust may establish other portfolios. See "General Information."
MASTER/FEEDER STRUCTURE
Each Fund is a feeder fund in a master/feeder structure, which means it
invests all of its assets in a separate Master Portfolio of MIP with the same
investment objective as such Fund. See "Investment Objectives" and "Management
Policies" below. MIP is organized as a trust under the laws of the State of
Delaware. See "Management of the Funds."
The Board of Trustees believes that, if other investors invest their assets in
a Master Portfolio, certain economic efficiencies may be realized with respect
to such Master Portfolio. For example, fixed expenses that otherwise would have
been borne solely by a Fund would be spread across a larger asset base provided
by more than one fund investing in the Master Portfolio. There can be no
assurance that these economic efficiencies will be achieved. Each Fund and other
entities investing in a Master Portfolio will be liable for all obligations of
the Master Portfolio. However, the risk of a Fund incurring financial loss on
account of such liability is limited to circumstances in which both inadequate
insurance exists and MIP itself is unable to meet its obligations. Accordingly,
the Trust's Board of Trustees believes that the Funds and their shareholders
will not be adversely affected by reason of investing their assets in a Master
Portfolio. However, if a mutual fund or other investor withdraws its investment
from such Master Portfolio, the economic efficiencies (e.g., spreading fixed
expenses across a larger asset base) that the Trust's Board believes should be
available through investment in the Master Portfolio may not be fully achieved
or maintained. In addition, given the relatively novel nature of the
master/feeder structure, accounting and operational difficulties could result.
See "Management of the Funds" for additional description of the Funds' and
Master Portfolios' management and expenses.
PROSPECTUS 6
<PAGE> 15
Each Master Portfolio's investment objective and other fundamental policies,
which are the same as those of the corresponding Fund, cannot be changed without
approval by the holders of a majority (as defined in the 1940 Act) of such
Master Portfolio's outstanding voting interests. Whenever a Fund, as a Master
Portfolio interestholder, is requested to vote on matters pertaining to any
fundamental policy of such Master Portfolio, the Fund will hold a meeting of its
shareholders to consider such matters and such Fund will cast its votes in
proportion to the votes received from Fund shareholders. A Fund will vote Master
Portfolio interests for which it receives no voting instructions in the same
proportion as the votes received from Fund shareholders. In addition, certain
policies of a Master Portfolio which are non-fundamental could be changed by
vote of a majority of MIP's Trustees without shareholder vote. If a Master
Portfolio's investment objective or fundamental or non-fundamental policies are
changed, the Fund investing in that Master Portfolio could subsequently change
its objective or policies to correspond to those of the Master Portfolio or the
Fund could redeem its Master Portfolio interests and either seek a new
investment company in which to invest with a matching objective or retain its
own investment adviser to manage such Fund's portfolio in accordance with its
objective. In the latter case, the Fund's inability to find a substitute
investment company in which to invest or equivalent management services could
adversely affect shareholders' investments in that Fund. A Fund will provide
shareholders with 30 days' written notice prior to the implementation of any
change in a non-fundamental policy of such Fund or Master Portfolio, to the
extent possible. Information on the Funds' and Master Portfolios' investment
objectives, policies and restrictions is included under "Description of the
Funds -- Investment Objectives" and "Appendix" in this Prospectus and
"Investment Objectives and Management Policies" in the SAI. Additional
Information regarding officers and directors/trustees is included in the SAI
under "Management of the Trust."
The LifePath Funds generally offer two classes of shares - Class A and Class B
(except LifePath 2000 Fund). Institutional Class shares are no longer offered to
investors, although a limited number of such shares remained outstanding as of
the date of this Prospectus. The classes have identical rights with respect to
the series of which they are a part, except that there are certain matters which
affect one class but not another. Currently, there is a separate Distribution
Plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Class A and
the Class B shares. On any matter applicable to one class and not another, the
shareholders of the affected class vote as a class.
In addition to selling its shares to a Fund, each Master Portfolio may sell
its shares to certain other mutual funds or other qualified investors.
Information regarding additional options for investment in shares of the Master
Portfolios is available from Stephens and may be obtained by calling
1-800-643-9691. The expenses and, correspondingly, the returns of other
investment options in the Master Portfolios are expected to differ from those of
the Funds.
7 PROSPECTUS
<PAGE> 16
INVESTMENT OBJECTIVES
Each LifePath Fund seeks to provide investors with an asset allocation
strategy designed to maximize assets for retirement or for other purposes
consistent with the quantitatively measured risk investors, on average, may be
willing to accept given their investment time horizons. Specifically:
- LifePath 2000 Fund is managed for investors planning to retire (or begin to
withdraw substantial portions of their investment) approximately in the year
2000.
- LifePath 2010 Fund is managed for investors planning to retire (or begin to
withdraw substantial portions of their investment) approximately in the year
2010.
- LifePath 2020 Fund is managed for investors planning to retire (or begin to
withdraw substantial portions of their investment) approximately in the year
2020.
- LifePath 2030 Fund is managed for investors planning to retire (or begin to
withdraw substantial portions of their investment) approximately in the year
2030.
- LifePath 2040 Fund is managed for investors planning to retire (or begin to
withdraw substantial portions of their investment) approximately in the year
2040.
Each Fund's investment objective cannot be changed without approval by the
holders of a majority (as defined in the 1940 Act) of such Fund's outstanding
voting securities. Each Master Portfolio's investment objective, which is the
same as the corresponding Fund's, cannot be changed without approval by the
holders of a majority (as defined in the 1940 Act) of such Master Portfolio's
outstanding voting interests. Shareholders of a Fund that invests in a Master
Portfolio are provided the opportunity to vote on any proposed change to such
Master Portfolio's investment objective, and that Fund will vote on any such
proposal in proportion to the votes received from Fund shareholders. See
"General" above. The differences in objectives and policies among the Master
Portfolios determine the types of portfolio securities in which each Master
Portfolio invests and can be expected to affect the degree of risk to which each
Master Portfolio, and, therefore, the corresponding Fund, is subject and the
performance of each Master Portfolio and Fund.
MANAGEMENT POLICIES
Each Fund invests all of its assets in the Master Portfolio bearing the
corresponding name, which has the same investment objective as the Fund. A Fund
may withdraw its investment in the relevant Master Portfolio at any time,
provided that the Trust's Board of Trustees determines that it is in the best
interests of the Fund to do so. Upon any such withdrawal, the Trust's Board of
Trustees would consider what action should be taken, including investing all of
such Fund's assets in another pooled investment entity having the same
investment objective as the Fund, or retaining an investment adviser to manage
such Fund's assets in accordance with the policies described below.
Since the investment characteristics of each Fund correspond directly with
those of the Master Portfolio bearing the corresponding name, the following is a
discussion of the management policies used by each Master Portfolio.
PROSPECTUS 8
<PAGE> 17
The LifePath Master Portfolios follow an asset allocation strategy among three
broad investment classes: equity and debt securities of issuers located
throughout the world and cash in the form of money market instruments. Each
LifePath Master Portfolio differs in the weighting assigned to each such
investment class, with the later-dated Master Portfolios generally bearing more
risk than the earlier-dated Master Portfolios, with the expectation of greater
total return. Thus, the investment class weightings of the LifePath 2040 Master
Portfolio initially might be 100%, 0% and 0% among equity securities, debt
securities and cash, respectively, while the weightings of the LifePath 2000
Master Portfolio initially might be 25%, 50% and 25%, respectively. Over the
years, each LifePath Master Portfolio is managed more conservatively, on the
premise that individuals investing for retirement desire to reduce investment
risk in their retirement accounts as they age. The difference in such investment
class weightings is based on the statistically determined risk that such
investors, on average, may be willing to accept given their investment time
horizons in an effort to maximize assets in anticipation of retirement or for
other purposes.
You are encouraged to invest in a particular LifePath Fund based on the decade
of your anticipated retirement or when you anticipate beginning to withdraw
substantial portions of your account. For example, the LifePath 2000 Fund is
designed for investors in their 50s and 60s who plan to retire (or begin to
withdraw substantial portions of their investment) in approximately 2000; the
LifePath 2010 Fund is designed for investors in their 40s and 50s who plan to
retire (or begin to withdraw as described above) in approximately 2010; and so
on. In addition, when making your investment decision, you should evaluate your
own risk profile, recognizing, for example, that the LifePath 2040 Fund is
designed for investors with a high tolerance for risk while the LifePath 2000
Fund is designed for investors with a low tolerance for risk. The LifePath Funds
were the first mutual funds of their kind to offer a flexible investment
strategy designed to change over specific time horizons.
To manage the LifePath Master Portfolios, BGFA employs a proprietary
investment model (the "Model") that analyzes extensive financial and economic
data, including risk correlation and expected return statistics, to recommend
the portfolio allocation among the investment classes described below. At its
simplest, for each point in time, the Model recommends a portfolio allocation
designed to maximize total return for each LifePath Master Portfolio based on
each such LifePath Master Portfolio's evolving risk profile. As a result, while
each LifePath Master Portfolio invests in substantially the same securities
within an investment class, the amount of each LifePath Master Portfolio's
aggregate assets invested in a particular investment class, and thus in
particular securities, differs, but the relative percentage that a particular
security comprises within
9 PROSPECTUS
<PAGE> 18
an investment class ordinarily remains substantially the same. As of September
30, 1996, asset allocations in the LifePath Master Portfolios were approximately
as follows:
<TABLE>
<CAPTION>
LIFEPATH LIFEPATH LIFEPATH LIFEPATH LIFEPATH
2000 2010 2020 2030 2040
MASTER MASTER MASTER MASTER MASTER
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Equity Securities
Domestic ........ 15% 36% 50% 60% 71%
International ... 6% 10% 14% 17% 18%
Debt Securities ... 78% 53% 35% 22% 10%
Cash .............. 1% 1% 1% 1% 1%
</TABLE>
The relative weightings for each LifePath Master Portfolio of the various
investment classes are expected to change over time, with the LifePath 2040
Master Portfolio adopting in the 2030s characteristics similar to the LifePath
2000 Master Portfolio today. BGFA may in the future refine the Model, or the
financial and economic data analyzed by the Model, in ways that could result in
changes to recommended allocations.
The LifePath Model contains both "strategic" and "tactical" components, with
the strategic component weighted more heavily than the tactical component. The
strategic component of the Model evaluates the risk that investors, on average,
may be willing to accept given their investment time horizons. The strategic
component thus determines the changing investment risk level of each LifePath
Fund as time passes. The tactical component of the Model, on the other hand,
addresses short-term market conditions. The tactical component thus adjusts the
amount of investment risk taken by each LifePath Fund without regard to time
horizon, but rather in consideration of the relative risk-adjusted short-term
attractiveness of various asset classes.
Through the strategic and tactical components the asset allocation strategy
contemplates shifts, which may be frequent, among a wide range of U.S. and
foreign investments and market sectors. Each LifePath Master Portfolio may
invest up to approximately 20% of the value of its total assets in foreign
securities that are not publicly traded in the United States. Rather than
choosing specific securities, the Model selects indices representing segments of
the global equity and debt markets and invests to create market exposure to
these market segments by purchasing representative samples of securities
comprising the indices in an attempt to replicate their performance. From time
to time, other indices may be selected in addition to, or as a substitute for,
any of the indices listed herein and market exposure may be broadened. You will
be notified of any such change.
The Model has broad latitude to select the class of investments and the
particular securities within a class in which each LifePath Master Portfolio
invests. The LifePath Master Portfolios are not managed as balanced portfolios
and are not required to maintain
PROSPECTUS 10
<PAGE> 19
a portion of their investments in each of the permitted investment categories at
all times. Until a LifePath Master Portfolio attains an asset level of
approximately $100 to $150 million, the Model allocates assets across fewer of
the investment categories identified below than it otherwise would. As a
LifePath Master Portfolio approaches this minimum asset level, the Model adds
investment categories from among those identified below, thereby approaching the
desired investment mix over time.
Each LifePath Master Portfolio's investments are compared from time to time to
the Model's recommended allocation. Recommended reallocations are implemented
subject to BGFA's assessment of current economic conditions and investment
opportunities. BGFA may change from time to time the criteria and methods it
uses to implement the recommendations of the Model. Recommended reallocations
are implemented in accordance with trading policies designed to take advantage
of market opportunities and reduce transaction costs. The asset allocation mix
selected by the Model is a primary determinant in the respective LifePath Master
Portfolio's investment performance.
BGFA manages other portfolios which also invest in accordance with the Model.
The performance of each of those other portfolios is likely to vary from the
performance of each LifePath Master Portfolio and corresponding LifePath Fund.
Such variation in performance is primarily due to different equilibrium asset
mix assumptions used for the various portfolios, timing differences in the
implementation of the Model's recommendations and differences in expenses and
liquidity requirements. The overall management of each LifePath Master Portfolio
is based on the recommendation of the Model, and no person is primarily
responsible for recommending the mix of asset classes in each Master Portfolio
or the mix of securities within the asset classes. Decisions relating to the
Model are made by BGFA's investment committee.
Each LifePath Master Portfolio may invest in up to 17 asset classes, including
10 stock classes, 6 bond classes and a money market class. Each LifePath Master
Portfolio invests in the classes of investments described below.
EQUITY SECURITIES -- The LifePath Master Portfolios seek U.S. equity market
exposure through the following indices of common stock:
- The S&P/BARRA Value Stock Index (consisting of primarily
large-capitalization U.S. stocks with lower-than-average price/book ratios).
- The S&P/BARRA Growth Stock Index (consisting of primarily
large-capitalization U.S. stocks with higher-than-average price/book
ratios).
- The Intermediate Capitalization Value Stock Index (consisting of primarily
medium-capitalization U.S. stocks with lower-than-average price/book
ratios).
- The Intermediate Capitalization Growth Stock Index (consisting of primarily
medium-capitalization U.S. stocks with higher-than-average price/book
ratios).
11 PROSPECTUS
<PAGE> 20
- The Intermediate Capitalization Utility Stock Index (consisting of primarily
medium-capitalization U.S. utility stocks).
- The Micro Capitalization Market Index (consisting of primarily
small-capitalization U.S. stocks).
- The Small Capitalization Value Stock Index (consisting of primarily small-
capitalization U.S. stocks with lower-than-average price/book ratios).
- The Small Capitalization Growth Stock Index (consisting of primarily small-
capitalization U.S. stocks with higher-than-average price/book ratios).
The LifePath Master Portfolios seek foreign equity market exposure through the
following indices of foreign equity securities:
- The Morgan Stanley Capital International (MSCI) Japan Index (consisting of
primarily large-capitalization Japanese stocks).
- The Morgan Stanley Capital International Europe, Australia, Far East Index
(MSCI EAFE) Ex-Japan Index (consisting of primarily large-capitalization
foreign stocks, excluding Japanese stocks).
In addition, each LifePath Master Portfolio may invest in other common stocks,
preferred stocks and convertible securities, including those in the form of
American, European and Continental Depositary Receipts, as well as warrants to
purchase such securities, and investment company securities. See
"Appendix -- Portfolio Securities."
DEBT SECURITIES -- The LifePath Master Portfolios seek U.S. debt market
exposure through the following indices of U.S. debt securities:
- The Lehman Brothers Long-Term Government Bond Index (consisting of all U.S.
Government bonds with maturities of at least ten years).
- The Lehman Brothers Intermediate-Term Government Bond Index (consisting of
all U.S. Government bonds with maturities of less than ten years and greater
than one year).
- The Lehman Brothers Long-Term Corporate Bond Index (consisting of all U.S.
investment-grade corporate bonds with maturities of at least ten years).
- The Lehman Brothers Intermediate-Term Corporate Bond Index (consisting of
all U.S. investment-grade corporate bonds with maturities of less than ten
years and greater than one year).
- The Lehman Brothers Mortgage-Backed Securities Index (consisting of all
fixed-coupon mortgage pass-throughs issued by the Federal National Mortgage
PROSPECTUS 12
<PAGE> 21
Association, Government National Mortgage Association and Federal Home Loan
Mortgage Corporation with maturities greater than one year).
The LifePath Master Portfolios seek foreign debt market exposure through the
following index of foreign debt securities:
- The Salomon Brothers Non-U.S. World Government Bond Index (consisting of
foreign government bonds with maturities of greater than one year).
Each U.S. and foreign debt security is expected to be part of an issuance with
a minimum outstanding amount at the time of purchase of approximately $50
million and $100 million, respectively. Each security in which a LifePath
Master Portfolio invests must be rated at least Baa by Moody's Investors
Service, Inc. ("Moody's"), or BBB by Standard & Poor's Corporation ("S&P"),
Fitch Investors Service, Inc. ("Fitch") or Duff & Phelps, Inc. ("Duff") or, if
unrated, deemed to be of comparable quality by WFNIA. See "Risk
Considerations -- Fixed-Income Securities."
MONEY MARKET INSTRUMENTS -- The money market instruments held by each Master
Portfolio generally consist of high-quality money market instruments,
including U.S. Government obligations, obligations of domestic and foreign
banks, short-term corporate debt instruments and repurchase agreements. See
"Appendix" below for a more complete description of the money market
instruments in which each Master Portfolio may invest.
INVESTMENT TECHNIQUES -- Each LifePath Master Portfolio also may lend its
portfolio securities and enter into transactions in certain derivatives, each
of which involves risk. Derivatives are financial instruments whose values are
derived, at least in part, from the prices of other securities or specified
assets, indices or rates. The futures contracts and options on futures
contracts that each Master Portfolio may purchase are considered derivatives.
Each Master Portfolio may use some derivatives as part of its short-term
liquidity holdings and/or as substitutes for comparable market positions in
the underlying securities. Also, asset-backed securities issued or guaranteed
by U.S. Government agencies or instrumentalities and certain floating- and
variable-rate instruments can be considered derivatives. Some derivatives may
be more sensitive than direct securities to changes in interest rates or
sudden market moves. Some derivatives also may be susceptible to fluctuations
in yield or value due to their structure or contract terms.
BGFA (as investment adviser to each Master Portfolio) uses a variety of
internal risk management procedures to ensure that derivatives use is
consistent with each Master Portfolio's and each Fund's investment objective,
does not expose either the Master Portfolio or a Fund to undue risks and is
closely monitored, including providing periodic reports to the Boards of
Trustees concerning the use of derivatives. Derivatives use also is subject to
broadly applicable investment policies. For example, in no case may a Master
Portfolio invest more than 15% of the current value of its
13 PROSPECTUS
<PAGE> 22
assets in "illiquid securities," including derivatives without active
secondary markets. Nor may a Master Portfolio use derivatives to create
leverage without establishing adequate "cover" in compliance with Securities
and Exchange Commission leverage rules. For more information, see "Risk
Considerations" below, and "Appendix -- Investment Techniques."
CERTAIN FUNDAMENTAL POLICIES
Each Fund and Master Portfolio may (i) borrow money to the extent permitted
under the 1940 Act; (ii) invest up to 5% of its total assets in the obligations
of any single issuer, except that up to 25% of the value of the total assets of
such Fund or Master Portfolio may be invested and obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities may be
purchased, without regard to any such limitation; and (iii) invest up to 25% of
the value of its total assets in the securities of issuers in a particular
industry or group of closely related industries, provided there is no limitation
on the purchase of obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities. This paragraph describes fundamental policies
that cannot be changed as to a Fund or Master Portfolio without approval by the
holders of a majority (as defined in the 1940 Act) of the outstanding voting
securities of such Fund or Master Portfolio, as the case may be. See "Investment
Objectives and Management Policies -- Investment Restrictions" in the Statement
of Additional Information.
CERTAIN ADDITIONAL NON-FUNDAMENTAL POLICIES
Each Fund and Master Portfolio may (i) purchase securities of any company
having less than three years' continuous operation (including operations of any
predecessors) if such purchase does not cause the value of its investments in
all such companies to exceed 5% of the value of its total assets; (ii) pledge,
hypothecate, mortgage or otherwise encumber its assets, but only to secure
permitted borrowings; and (iii) invest up to 15% of the value of its net assets
in repurchase agreements providing for settlement in more than seven days after
notice and in other illiquid securities. Although each LifePath Fund and
LifePath Master Portfolio reserves the right to invest up to 15% of the value of
its net assets in illiquid securities, including repurchase agreements providing
for settlement in more than seven days after notice, as long as such Fund's
shares are registered for sale in a state that imposes a lower limit on the
percentage of a fund's assets that may be so invested, such LifePath Fund and
LifePath Master Portfolio will comply with the lower limit. Each LifePath Fund
currently is limited to investing up to 10% of the value of its net assets in
such securities due to limits applicable in several states. See "Investment
Objectives and Management Policies -- Investment Restrictions" in the Statement
of Additional Information.
RISK CONSIDERATIONS
General
Since the investment characteristics and, therefore, investment risks directly
associated with such characteristics of each LifePath Fund correspond to those
of the Master
PROSPECTUS 14
<PAGE> 23
Portfolio in which such Fund invests, the following is a discussion of the risks
associated with an investment in the Master Portfolio.
The net asset value per share of each class of a LifePath Fund and Master
Portfolio is neither insured nor guaranteed, is not fixed and should be expected
to fluctuate.
Investment Techniques
Each LifePath Master Portfolio may engage in various investment techniques,
the use of which involve greater risk than that incurred by other funds with
similar investment objectives. See "Appendix -- Investment Techniques." Using
these techniques may affect the degree to which a LifePath Master Portfolio's
net asset value fluctuates.
Equity Securities
You should be aware that equity securities fluctuate in value, often based on
factors unrelated to the value of the issuer of the securities, and that
fluctuations can be pronounced. Changes in the value of securities held by a
LifePath Master Portfolio result in changes in the value of such LifePath Master
Portfolio's shares and thus the LifePath Master Portfolio's performance.
The securities of the smaller companies in which each LifePath Master
Portfolio may invest may be subject to more abrupt or erratic market movements
than larger, more-established companies, both because the securities typically
are traded in lower volume and because the issuers typically are subject to a
greater degree to changes in earnings and prospects.
Fixed-Income Securities
You should be aware that even though interest-bearing securities are
investments that promise a stable stream of income, the prices of such
securities are inversely affected by changes in interest rates and, therefore,
are subject to the risk of market price fluctuations. Long-term securities are
affected to a greater extent by interest rates than shorter-term securities. The
values of fixed-income securities also may be affected by changes in the credit
rating or financial condition of the issuing entities. Once the rating of a
portfolio security has been changed to a rating below investment grade, the
LifePath Master Portfolio's adviser considers all circumstances deemed relevant
in determining whether to continue to hold the security. Certain securities that
may be purchased by a LifePath Master Portfolio, such as those rated "Baa" by
Moody's and "BBB" by S&P, Fitch and Duff, may be subject to such risk with
respect to the issuing entity and to greater market fluctuations than certain
lower yielding, higher rated fixed-income securities. Securities rated "Baa" by
Moody's are considered medium-grade obligations; they are neither highly
protected nor poorly secured, and are considered by Moody's to have speculative
characteristics. Securities rated "BBB" by S&P are regarded as having adequate
capacity to pay interest and repay principal, and while such debt securities
ordinarily exhibit adequate protection parameters, adverse economic conditions
or changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for securities in this category than in higher
rated categories.
15 PROSPECTUS
<PAGE> 24
Securities rated "BBB" by Fitch are considered investment grade and of
satisfactory credit quality; however, adverse changes in economic conditions and
circumstances are more likely to have an adverse impact on these securities and,
therefore, impair timely payment. Securities rated "BBB" by Duff have below
average protection factors but nonetheless are considered sufficient for prudent
investment. If a security held by a LifePath Master Portfolio is downgraded to a
rating below investment grade, such Master Portfolio may continue to hold the
security until such time as BGFA determines it advantageous for the LifePath
Master Portfolio to sell the security. If such a policy would cause a LifePath
Master Portfolio to have 5% or more of its net assets invested in securities
that have been downgraded below investment grade, the Master Portfolio promptly
would seek to dispose of such securities in an orderly manner. See
"Appendix -- Portfolio Securities" in this Prospectus and "Appendix" in the SAI.
Foreign Securities
Foreign securities markets generally are not as developed or efficient as
those in the United States. Securities of some foreign issuers are less liquid
and more volatile than securities of comparable U.S. issuers. Similarly, volume
and liquidity in most foreign securities markets are less than in the United
States and, at times, volatility of price can be greater than in the United
States. In addition, there may be less publicly available information about a
non-U.S. issuer, and non-U.S. issuers generally are not subject to uniform
accounting and financial reporting standards, practices and requirements
comparable to those applicable to U.S. issuers. See "Appendix -- Portfolio
Securities -- Bank Obligations."
Because evidences of ownership of such securities usually are held outside the
United States, each Master Portfolio is subject to additional risks which
include possible adverse political and economic developments, possible seizure
or nationalization of foreign deposits and possible adoption of governmental
restrictions that might adversely affect the payment of principal and interest
on the foreign securities or might restrict the payment of principal and
interest to investors located outside the country of the issuers, whether from
currency blockage or otherwise. Custodial expenses for a portfolio of non-U.S.
securities generally are higher than for a portfolio of U.S. securities.
Since the LifePath Master Portfolios may purchase foreign securities in
currencies of foreign countries, the value of these assets as measured in U.S.
dollars may be affected favorably or unfavorably by changes in currency rates
and exchange control regulations. Some currency exchange costs generally are
incurred when a LifePath Master Portfolio changes investments from one country
to another.
Furthermore, some of these securities may be subject to brokerage or stamp
taxes levied by foreign governments, which have the effect of increasing the
cost of such investment and reducing the realized gain or increasing the
realized loss on such securities at the time of sale. Income received by a
Master Portfolio from sources within foreign countries may be reduced by
withholding and other taxes imposed by such countries. Tax conventions between
certain countries and the United States, however,
PROSPECTUS 16
<PAGE> 25
may reduce or eliminate such taxes. All such taxes paid by a Master Portfolio
reduce its net income available for distribution to its interestholders.
Foreign Currency Exchange
Currency exchange rates may fluctuate significantly over short periods of
time. They generally are determined by the forces of supply and demand in the
foreign exchange markets and the relative merits of investments in different
countries, actual or perceived changes in interest rates and other complex
factors, as seen from an international perspective. Currency exchange rates also
can be affected unpredictably by the intervention of U.S. or foreign governments
or central banks, or by the failure to intervene, or by currency controls or
political developments in the United States or abroad. The LifePath Master
Portfolios intend to engage in foreign currency transactions to maintain the
same foreign currency exposure as the relevant foreign securities index through
which the Master Portfolios seek foreign equity market exposure, but not as part
of a defensive strategy to protect against fluctuations in exchange rates.
Foreign currency transactions may occur on a spot (i.e., cash) basis at the
rate prevailing in the currency exchange market or on a forward basis. A forward
currency exchange contract involves an obligation to purchase or sell a specific
currency at a set price on a future date which must be more than two days from
the date of the contract. The forward foreign currency market offers less
protection against default than is available when trading currencies on an
exchange, since a forward currency contract is not guaranteed by an exchange or
clearinghouse. Therefore, a default on a forward currency contract would deprive
a LifePath Master Portfolio of unrealized profits or force such Master Portfolio
to cover its commitments for purchase or resale, if any, at the current market
price.
Foreign Futures Transactions
Unlike trading on domestic futures exchanges, trading on foreign futures
exchanges is not regulated by the Commodity Futures Trading Commission (the
"CFTC") and generally is subject to greater risks than trading on domestic
exchanges. For example, some foreign exchanges are principal markets so that no
common clearing facility exists and an investor may look only to the broker for
performance of the contract. BGFA, however, considers on an ongoing basis the
creditworthiness of such counterparties. In addition, any profits that a
LifePath Master Portfolio might realize in trading could be eliminated by
adverse changes in the exchange rate; adverse exchange rate changes also could
cause a Master Portfolio to incur losses. Transactions on foreign exchanges may
include both futures contracts which are traded on domestic exchanges and those
which are not. Such transactions may also be subject to withholding and other
taxes imposed by foreign governments.
Other Investment Considerations
Asset allocation and modeling strategies are employed by BGFA for other
investment companies and accounts advised or sub-advised by BGFA. If these
strategies indicate particular securities should be purchased or sold, at the
same time, by a LifePath Master
17 PROSPECTUS
<PAGE> 26
Portfolio and one or more of these investment companies or accounts, available
investments or opportunities for sales will be allocated equitably to each by
BGFA. In some cases, this procedure may adversely affect the size of the
position obtained for or disposed of by a LifePath Master Portfolio or the price
paid or received by such LifePath Master Portfolio.
Under normal market conditions, the portfolio turnover rate for each LifePath
Master Portfolio is not expected to exceed 100%. A portfolio turnover rate of
100% would occur, for example, if all of a LifePath Master Portfolio's
securities were replaced within one year. Higher portfolio turnover rates are
likely to result in comparatively greater brokerage commissions. In addition,
short-term gains realized from portfolio transactions are taxable to
shareholders as ordinary income. Portfolio turnover is not a limiting factor in
making investment decisions.
MANAGEMENT OF THE FUNDS
GENERAL
The Trust has not retained the services of an investment adviser because each
Fund's assets are invested in a Master Portfolio that has retained investment
advisory services (see "Master Portfolio Investment Adviser"). Each LifePath
Fund bears a pro rata portion of the fees paid to the corresponding Master
Portfolio.
BOARD OF TRUSTEES
The business and affairs of the Trust are managed under the direction of its
Board of Trustees. The Trust's Trustees are also MIP's Trustees and also serve
as Directors of MasterWorks Funds Inc., another open-end investment company
whose LifePath Fund series are wholly invested in the Master Portfolios. The
Trust's Board, including a majority of the Trustees who are not "interested
persons" (as defined in the 1940 Act) of the Trust, has adopted procedures to
address potential conflicts of interest that may arise as a result of the
structure of the Boards. See "Management of the Trust" in the SAI. The SAI also
contains the name and general business experience of each Trustee.
MASTER PORTFOLIO INVESTMENT ADVISER
BGFA serves as investment adviser to each LifePath Master Portfolio. Pursuant
to an Investment Advisory Contract with each Master Portfolio, BGFA provides
investment guidance and policy direction in connection with the management of
each Master Portfolio's assets, subject to the overall authority of MIP's Board
of Trustees and in conformity with Delaware Law and the stated policies of such
Master Portfolio. BGFA was created by the reorganization of Wells Fargo Nikko
Investment Advisors ("WFNIA"), the former sub-adviser to each Master Portfolio,
with and into an affiliate of Wells Fargo Institutional Trust Company, N.A.
("WFITC"). BGFA is an indirect subsidiary of Barclays Bank PLC and is located at
45 Fremont Street, San Francisco, California 94105. As of September 30, 1996,
BGFA and its affiliates provided investment advisory services for over $327
billion of assets. MIP has agreed to pay to BGFA a monthly fee at the
PROSPECTUS 18
<PAGE> 27
annual rate of 0.55% of each LifePath Master Portfolio's average daily net
assets as compensation for its advisory services. For the period beginning
January 1, 1996 and ended February 29, 1996, MIP, on behalf of each Master
Portfolio, actually paid BGFA an amount equal to 0.55% of each Master
Portfolio's average daily net assets as compensation for its advisory services.
Prior to January 1, 1996, Wells Fargo Bank, a wholly owned subsidiary of Wells
Fargo & Company, located at 420 Montgomery Street, San Francisco, California
94105, served as each Master Portfolio's investment adviser. Pursuant to an
Investment Advisory Agreement with MIP, Wells Fargo Bank provided investment
guidance and policy direction in connection with the management of each Master
Portfolio's assets, subject to the supervision of MIP's Board of Trustees and in
conformity with Delaware law and the stated policies of such Master Portfolio.
Wells Fargo Bank was entitled to receive a monthly fee at the annual rate of
0.55% of each LifePath Master Portfolio's average daily net assets as
compensation for its advisory services. For the period beginning March 1, 1995
and ended December 31, 1995, MIP, on behalf of each Master Portfolio, actually
paid an amount equal to 0.55% of each such Master Portfolio's average daily net
assets to Wells Fargo Bank for advisory services.
Prior to January 1, 1996, Wells Fargo Bank engaged WFNIA, located at 45
Fremont Street, San Francisco, California 94104, to provide investment
sub-advisory services to each Master Portfolio. WFNIA was a general partnership
owned 50% by a wholly owned subsidiary of Wells Fargo Bank and 50% by a
subsidiary of The Nikko Securities Co., Ltd. Pursuant to a Sub-Investment
Advisory Agreement, WFNIA, subject to the supervision and approval of Wells
Fargo Bank, provided investment advisory assistance and the day-to-day
management of each Master Portfolio's assets. WFNIA was entitled to receive from
Wells Fargo Bank a monthly fee at the annual rate of 0.40% of each LifePath
Master Portfolio's average daily net assets for its sub-advisory services. For
the fiscal year ended February 29, 1996, Wells Fargo Bank actually paid WFNIA an
amount equal to 0.40% of the average daily net assets of each LifePath Master
Portfolio. The LifePath Master Portfolios no longer retain a sub-investment
adviser.
BGFA, Barclays and their affiliates may deal, trade and invest for their own
account in the types of securities in which a Master Portfolio may invest and
may have deposit, loan and commercial banking relationships with the issuers of
securities purchased by a Master Portfolio. BGFA has informed MIP that in making
investment decisions the Adviser does not obtain or use material inside
information in its possession.
Morrison & Foerster LLP, counsel to the Trust and MIP and special counsel to
BGFA, has advised the Trust, MIP and BGFA that BGFA and its affiliates may
perform the services contemplated by the Investment Advisory Contracts and this
Prospectus without violation of the Glass-Steagall Act. Such counsel has pointed
out, however, that there are no controlling judicial or administrative
interpretations or decisions and that future judicial or administrative
interpretations of, or decisions relating to, present federal or state statutes,
including the Glass-Steagall Act, and relating to the permissible activities
19 PROSPECTUS
<PAGE> 28
of banks and their subsidiaries or affiliates, as well as future changes in such
statutes, regulations and judicial or administrative decisions or
interpretations, could prevent such entities from continuing to perform, in
whole or in part, such services. If any such entity were prohibited from
performing any such services, it is expected that new agreements would be
proposed or entered into with another entity or entities qualified to perform
such services.
ADMINISTRATOR, CO-ADMINISTRATOR AND DISTRIBUTOR
Wells Fargo Bank and Stephens serve as administrator and co-administrator to
the Trust. Wells Fargo Bank and Stephens generally supervise all aspects of the
operation of the Trust other than providing investment advice, subject to the
overall authority of the Board of Trustees in accordance with Massachusetts law.
The administrative services provided to the LifePath Funds also include
coordination of the other services provided to the LifePath Funds, compilation
of information for reports to the SEC and state securities commissions,
preparation of proxy statements and shareholder reports, and general supervision
of data compilation in connection with preparing periodic reports to the Trust's
Board of Trustees and officers. Stephens also furnishes office space and certain
facilities to conduct the Trust's business and compensates the Trust's Trustees,
officers and employees who are affiliated with Stephens. In addition, except as
noted below, Wells Fargo Bank and Stephens have assumed all ordinary expenses
incurred by a LifePath Fund other than the fees payable by such Fund pursuant to
the Trust's various service contracts. For providing administrative and
co-administrative services to the Trust, the Trust has agreed to pay Wells Fargo
Bank and Stephens a monthly fee at the annual rate of % and %,
respectively, of each LifePath Fund's average daily net assets. For the fiscal
year ended February 29, 1996, the Trust paid Stephens, the Trust's prior
administrator, a monthly fee of 0.10% with respect to each LifePath Fund's
average daily net assets.
Stephens also serves as the Trust's principal underwriter within the meaning
of the 1940 Act and as distributor of each Fund's shares pursuant to a
Distribution Agreement with the Trust. The Distribution Agreement provides that
Stephens acts as agent for the Trust for the sale of Fund shares and may enter
into selling agreements with selling agents that wish to make available shares
of the Funds to their respective customers. Each Fund may participate in joint
distribution activities with any of the other Funds of the Trust, in which event
expenses reimbursed out of the assets of a Fund may be attributable, in part, to
the distribution-related activities of another Fund of the Trust. Generally, the
expenses attributable to joint distribution activities are allocated among each
Fund of the Trust in proportion to their relative net asset sizes, although the
Trust's Board of Trustees may allocate such expenses in any other manner that it
deems fair and equitable.
Under the Distribution Agreement, Stephens is entitled to receive from Class A
shares of each Fund a monthly fee at an annual rate of up to 0.25%, and from
Class B shares of each Fund a monthly fee at an annual rate of up to 0.75%, of
the average daily net assets
PROSPECTUS 20
<PAGE> 29
of such shares. Through selling agreements Stephens may compensate selling
agents for sales support services relating to a class, including, but not
limited to, commissions or other payments to such agents based on the average
daily net assets of a Fund's Class A or Class B shares, as the case may be,
attributable to them. Services provided by selling agents in exchange for
payments to selling agents are the principal sales support services provided to
the Fund. Stephens may retain any portion of the total distribution fee payable
under the Distribution Agreement to compensate it for distribution-related
services provided by it or to reimburse it for other distribution-related
expenses. Since the Distribution Agreement provides for fees that are used by
Stephens to pay for distribution expenses, plans of distribution for the Class A
and Class B shares of each Fund (a "Distribution Plan") and the Distribution
Agreement are approved and reviewed in accordance with Rule 12b-1 under the 1940
Act, which regulates the manner in which an investment company may, directly or
indirectly, bear the expense of distributing its shares.
Financial institutions acting as selling agents, shareholder servicing agents,
or in certain other capacities may be required to register as dealers pursuant
to applicable state securities laws which may differ from federal law and any
interpretations expressed herein.
Stephens is a full service broker/dealer and investment advisory firm.
Stephens and its predecessor have been providing securities and investment
services for more than 60 years, including discretionary portfolio management
services since 1983. Stephens currently manages investment portfolios for
pension and profit sharing plans, individual investors, foundations, insurance
companies and university endowments.
CUSTODIAN AND TRANSFER AGENT
Investors Bank & Trust Company ("IBT") acts as custodian to each Fund and
Master Portfolio. The principal business address of IBT is 89 South Street, P.O.
Box 1537, Boston, MA 02205-1537. IBT is not entitled to receive compensation for
its custodial services so long as IBT is entitled to receive compensation for
providing sub-administration services to Stephens.
Wells Fargo Bank serves as the Company's and MIP's transfer and dividend
disbursing agent (the "Transfer Agent"). The Company has agreed to pay Wells
Fargo Bank, which provides transfer agency services at 525 Market Street, San
Francisco, California 94105, a monthly fee at the annual rate of 0.10% of each
Fund's average daily net assets for transfer agency services. MIP pays no
additional fee for transfer and dividend disbursing agency services. Wells Fargo
Bank previously served as custodian to the Funds.
SHAREHOLDER SERVICING PLAN
The Trust has adopted Shareholder Servicing Plans for Class A and Class B
shares pursuant to which it may enter into shareholder servicing agreements with
certain financial institutions, securities dealers and other industry
professionals (collectively, "Shareholder Servicing Agents") for the provision
of certain services to Fund shareholders. The services provided may include
aggregating and transmitting purchase,
21 PROSPECTUS
<PAGE> 30
exchange and redemption orders, providing personal services relating to
shareholder accounts, such as answering shareholder inquiries regarding the
Funds, providing reports and other information, and providing services related
to the maintenance of shareholder accounts. For the services provided pursuant
to a Shareholder Servicing Agreement, the Trust may pay each Shareholder
Servicing Agent a monthly fee at the annual rate of up to 0.20% of the average
daily value of each LifePath Fund's Class A or Class B shares beneficially owned
by customers of the Shareholder Servicing Agent. The fee payable for such
services is intended to be a "service fee" as defined in Article III, Section 26
of the NASD Rules of Fair Practice.
A Shareholder Servicing Agent also may impose certain conditions on its
customers, subject to the terms of this Prospectus, in addition to or different
from those imposed by the Trust, such as requiring a minimum initial investment
or payment of a separate fee for additional services. Each Shareholder Servicing
Agent is required to agree to disclose any fees it may directly charge its
customers who are Fund shareholders and to notify them in writing at least 30
days before it imposes any transaction fees.
MIP 12B-1 PLAN
MIP's Board of Trustees has adopted, on behalf of each Master Portfolio, a
"defensive" distribution plan under Section 12(b) of the 1940 Act and Rule 12b-1
thereunder (the "Plan"). The Plan does not result in any additional expenses
being borne by a Master Portfolio or a Fund. The Plan was adopted by a majority
of MIP's Board of Trustees (including a majority of those Trustees who are not
"interested persons" of MIP as defined in the 1940 Act) on October 10, 1995. The
Plan was intended as a precaution designed to address the possibility that
certain ongoing payments by Barclays to Wells Fargo Bank in connection with the
sale of WFNIA may be characterized as indirect payments by each Master Portfolio
to finance activities primarily intended to result in the sale of interests in
such Master Portfolio. The Plan provides that if any portion of a Master
Portfolio's advisory fees (up to 0.25% of the average daily net assets of each
Master Portfolio on an annual basis) were deemed to constitute an indirect
payment for activities that are primarily intended to result in the sale of
interests in a Master Portfolio, such payment would be authorized pursuant to
the Plan.
EXPENSES
Under the Administration and Co-Administration Agreements, Wells Fargo Bank
and Stephens have agreed to assume the operating expenses of each LifePath Fund
and a pro rata share of the operating expenses of each LifePath Master
Portfolio, except for extraordinary expenses and those fees and expenses payable
pursuant to the various service contracts described above that are borne by the
Trust.
Stephens has not assumed the following operating expenses of the LifePath
Master Portfolios: advisory fees, interest, brokerage fees and commissions, if
any, costs of independent pricing services and any extraordinary expenses.
PROSPECTUS 22
<PAGE> 31
Stephens has not assumed the following operating expenses of the LifePath
Funds: administration fees, Shareholder Servicing Agent fees, Transfer Agent
fees and expenses and any extraordinary expenses.
HOW TO BUY SHARES
GENERAL
You may purchase shares in one of the several ways described below. You must
complete and sign an Account Application to open an account. Additional
documentation may be required from corporations, associations and certain
fiduciaries. Do not mail cash. For more information or additional forms call
1-800-222-8222. For more information about buying shares in an IRA, call
1-800-BEST-IRA, (1-800-237-8472). The Trust or Stephens may make the Prospectus
available in an electronic format. Upon receipt of a request from you or your
representative, the Trust or Stephens will transmit or cause to be transmitted
promptly, without charge, a paper copy of the electronic Prospectus.
To invest in a Fund's shares through a tax-deferred retirement plan through
which the Fund's shares are available, please contact a Shareholder Servicing
Agent to receive information and an application. See "Tax-Deferred Retirement
Plans" below.
The minimum initial investment amount is generally $1,000. The minimum initial
investment amount is $100 by the AutoSaver Plan purchase method (described
below), $250 for any tax-deferred retirement account for which a Shareholder
Servicing Agent serves as trustee or custodian under a prototype trust approved
by the Internal Revenue Service ("IRS") (a "Plan Account"), and $1,000 by all
other methods or for all other investors. Generally, subsequent investments must
be made in amounts of $100 or more. Where Fund shares are acquired in exchange
for shares of another fund in the Stagecoach Family of Funds, the minimum
initial investment amount applicable to the shares being exchanged generally
carries over. However, if the value of your investment in the shares you are
exchanging has been reduced below the minimum initial investment amount by
changes in market conditions or sales charges (and not by redemptions), you may
carry over the lesser amount into one of the Funds. Plan Accounts that invest in
the Fund through Wells Fargo ExpressInvest(TM)(available to certain Wells Fargo
tax-deferred retirement plans) are not subject to the minimum initial investment
amount or the subsequent investment amount requirements. In addition, the
minimum initial or subsequent purchase amount requirements may be waived or
lowered for investments effected on a group basis by certain entities and their
employees, such as pursuant to a payroll deduction or other accumulation plan.
If you have any questions regarding purchases of shares call 1-800-222-8222. If
you have questions regarding ExpressInvest please contact the Company at
1-800-237-8472. For additional information on tax-deferred accounts, please
refer to the section "How to Buy Shares -- Tax-Deferred Retirement Plans" or
contact a Shareholder Servicing Agent or Selling Agent.
23 PROSPECTUS
<PAGE> 32
All investments in a Fund's shares are subject to a determination by the Trust
that the investment instructions are complete. Payment for shares purchased
through a selling agent is not due from the selling agent until the settlement
date, which is normally three Business Days after the order is placed. If shares
are purchased by a check which does not clear, the Trust reserves the right to
cancel the purchase and hold the investor responsible for any losses or fees
incurred. The Trust reserves the right in its sole discretion to suspend the
availability of any Fund's shares and to reject any purchase requests.
Certificates for Fund shares are not issued.
Shares of each Fund are sold on a continuous basis at the applicable offering
price (net asset value per share plus any applicable sales charges) next
determined after an order in proper form is received by the Transfer Agent. Net
asset value ("NAV") per share is determined as of the close of regular trading
on the New York Stock Exchange ("NYSE") (currently 4:00 p.m., Eastern Time), on
each day the NYSE is open for business (a "Business Day"). Currently, the
weekdays on which the NYSE is closed are: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
The NAV of a share of each class of the LifePath Funds is the value of total
net assets attributable to such class divided by the number of outstanding
shares of that class. The value of the net assets per class is determined daily
by adjusting the net assets per class at the beginning of the day by the value
of each class's shareholder activity, net investment income and net realized and
unrealized gains or losses for that day. Net investment income is calculated
each day for each class by attributing to each class a pro rata share of daily
income and common expenses, and by assigning class-specific expenses to each
class as appropriate. The NAV of each class of shares is expected to fluctuate
daily and is expected to differ. The Master Portfolio's investments are valued
each Business Day generally by using available market quotations or at fair
value determined in good faith by BGFA pursuant to guidelines approved by MIP's
Board of Trustees. For further information regarding the methods employed in
valuing each Master Portfolio's investments, see "Determination of Net Asset
Value" in the SAI.
Purchase orders that are received by the Transfer Agent before the close of
regular trading on the NYSE generally are executed on the same day. Orders
received by the Transfer Agent after the close of regular trading on the NYSE
are executed on the next Business Day.
Federal regulations require that an investor provide a valid taxpayer
identification number ("TIN"), which is usually the investor's social security
number or employee identification number, upon opening or reopening an account.
See "Dividends, Distributions and Taxes" for further information concerning this
requirement. Failure to furnish a valid TIN to the Trust could subject the
investor to penalties imposed by the IRS.
PROSPECTUS 24
<PAGE> 33
SALES CHARGES
Set forth below is a Front-end Sales Charge Schedule listing the front-end
sales charges applicable to purchases of Class A shares of the LifePath Funds
(other than LifePath 2000). As shown below, reductions in the rate of front-end
sales charges ("Volume Discounts") are available as you purchase additional
shares (contingent-deferred sales charges applicable to Class B shares are
described below). You should consider the front-end sales charge information set
forth below and the other information contained in this Prospectus when making
your investment decisions.
FRONT-END SALES CHARGE SCHEDULE
<TABLE>
<CAPTION>
DEALER
FRONT-END FRONT-END ALLOWANCE
SALES CHARGE SALES CHARGE AS % OF
AS % OF AS % OF NET OFFERING
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED PRICE
- ------------------------------------- -------------- --------------- ---------
<S> <C> <C> <C>
Less than $50,000.................... 4.50% 4.71% 4.00%
$50,000 up to $99,999................ 4.00 4.17 3.55
$100,000 up to $249,999.............. 3.50 3.63 3.125
$250,000 up to $499,999.............. 3.00 3.09 2.65
$500,000 up to $999,999.............. 2.00 2.04 1.75
$1,000,000 and over.................. 1.00 1.01 0.85
</TABLE>
Class B shares are not subject to front-end sales charges. Class B shares that
are redeemed within one, two three, four, five or six years from the receipt of
an order to purchase such shares are subject to a contingent-deferred sales
charge equal to 5.00%, 4.00%, 3.00%, 3.00%, 2.00% and 1.00%, respectively, of
the dollar amount equal to the lesser of the NAV at the time of purchase or the
NAV of such shares at the time of redemption (the "NAV Amount"). See "How To Buy
Shares -- Contingent Deferred Sales Charges -- Class B shares."
If Class A shares are purchased through a selling agent, Stephens reallows the
portion of the front-end sales charge shown above as the Dealer Allowance.
Stephens also compensates selling agents up to a maximum of 4.00% for sales of
Class B shares and is then reimbursed out of Rule 12b-1 Fees and
contingent-deferred sales charges applicable to such shares. When shares are
purchased directly through the Transfer Agent and no selling agent is involved
with the purchase, the entire sales charge is paid to Stephens.
A selling agent or Shareholder Servicing Agent and any other person entitled
to receive compensation for selling or servicing shares may receive different
compensation for selling or servicing Class A shares as compared with Class B
shares of the same fund.
25 PROSPECTUS
<PAGE> 34
REDUCED SALES CHARGES -- CLASS A SHARES
Discounts described below pertaining to reduced sales charge for Class A
shares are based on your holdings or purchases of shares on which you have paid
or will pay a front-end sales charge. Because Class B shares do not assess a
front-end sales charge, the amount of Class B shares you hold is not considered
in determining any Volume Discount.
Volume Discounts
The Volume Discounts described in the Front-end Sales Charge Schedule are
available to you based on the combined dollar amount you invest in shares
(including the Funds Class A shares) of one or more of the Trust's Funds which
assess a front-end sales charge (the "Load Funds").
Right of Accumulation
The Right of Accumulation allows you to combine the amount you invest in a
Fund's Class A shares with the total NAV of shares in other Load Funds to
determine reduced front-end sales charges in accordance with the above Front-end
Sales Charge Schedule. In addition, you also may combine the total NAV of shares
that you currently have invested in any other mutual fund in the Stagecoach
Family of Funds that is sponsored by Stephens. For example, if you own Class A
shares of the Load Funds with an aggregate NAV of $90,000 and you invest an
additional $20,000 in Class A shares of another Load Fund, the front-end sales
charge on the additional $20,000 investment would be 3.50% of the offering
price. To obtain the discount, you must provide sufficient information at the
time of your purchase to verify that your purchase qualifies for the reduced
front-end sales charge. Confirmation of the order is subject to such
verification. The Right of Accumulation may be modified or discontinued at any
time without prior notice with respect to all subsequent shares purchase.
Letter of Intent
A Letter of Intent allows you to purchase shares of a Load Fund over a
13-month period at a reduced front-end sales charge based on the total amount of
Class A shares you intend to purchase plus the total NAV of shares in the Load
Funds that you already own. Each investment in shares of a Load Fund that you
make during the period may be made at the reduced front-end sales charge that is
applicable to the total amount you intend to invest. If you do not invest the
total amount within the period, you must pay the difference between the higher
front-end sales charge rate that would have been applied to the purchases you
made and the reduced front-end sales charge rate you have paid. The minimum
initial investment for a Letter of Intent is 5% of the total amount you intend
to purchase, as specified in the Letter. Shares of the Load Fund you purchased
equal to 5% of the total amount you intend to invest will be held in escrow and,
if you do not pay the difference within 20 days following the mailing of a
request, a sufficient
PROSPECTUS 26
<PAGE> 35
amount of escrowed shares will be redeemed for payment of the additional
front-end sales charge. Dividends and capital gains paid on such shares held in
escrow are reinvested in additional Fund shares.
Reinvestment
You may reinvest proceeds from a redemption of Class A shares in Class A
shares of another of the Trust's Funds or another of the Stagecoach Family of
Funds that is registered in your state of residence at NAV, without a front-end
sales charge, within 120 days after your redemption. However, if the other fund
charges a front-end sales charge that is higher than the front-end sales charge
that you paid in connection with the Class A shares you redeemed, you must pay
the difference between the dollar amount of the two front-end sales charges. You
may reinvest at this NAV price up to the total amount of your redemption
proceeds. A written purchase order for the shares must be delivered to the
Trust, a selling agent, a Shareholder Servicing Agent, or the Transfer Agent at
the time of reinvestment.
If you realized a gain on a redemption, a reinvestment would not alter the
amount of any federal capital gains tax you must pay on the gain. If you
realized a loss on your redemption, your reinvestment may cause some or all of
the loss to be disallowed as a tax deduction, depending on the number of shares
you purchase by reinvestment and the period of time that has elapsed after the
redemption and which Fund's shares are purchased; although for tax purposes, the
amount disallowed would be added to the cost of the shares you acquire upon the
reinvestment.
Reductions for Families or Fiduciaries
Reductions in front-end sales charges apply to purchases by an individual,
members of a family unit, including a husband, wife and children under the age
of 21 purchasing securities for their own account, or a trustee or other
fiduciary purchasing for a single fiduciary account or single trust estate.
Waivers for Investments of Proceeds From Other Investments
Purchases may be made at NAV, without payment of a front-end sales charge, to
the extent that: (i) you are investing proceeds from a redemption of shares of
another open-end investment company on which you paid a front-end sales charge,
and (ii) such redemption occurred within thirty (30) days prior to the date of
the purchase order. You must notify the Fund and/or the Transfer Agent at the
time you place such purchase order of your eligibility for the waiver of
front-end sales charges and provide satisfactory evidence thereof (e.g., a
confirmation of the redemption and the sales charges paid).
27 PROSPECTUS
<PAGE> 36
Reductions for Qualified Groups
Reductions in front-end sales charges also apply to purchases by individual
members of a "qualified group." The reductions are based on the aggregate dollar
amount of Class A shares purchased by all members of the qualified group. For
purposes of this paragraph, a qualified group consists of a "company," as
defined in the 1940 Act, which has been in existence for more than six months
and which has a primary purpose other than acquiring Fund shares at a reduced
sales charge, and "related parties" of such company. For purposes of this
paragraph, a "related party" of a company is: (i) any individual or other
company who directly or indirectly owns, controls or has the power to vote 5%
percent or more of the outstanding voting securities of such company; (ii) any
other company of which such company directly or indirectly owns, controls or has
the power to vote 5% or more of its outstanding voting securities; (iii) any
other company under common control with such company; (iv) any executive
officer, director or partner of such company or of a related party; and (v) any
partnership of which such company is a partner. Investors seeking to rely on
their membership in a qualified group to purchase shares at a reduced sales load
must provide evidence satisfactory to the transfer agent of the existence of a
bona fide qualified group and their membership therein.
Waivers for Certain Parties
The Funds' Class A shares may be purchased at NAV, without a front-end sales
charge, by (i) trustees, officers and employees (and their spouses, parents,
children and siblings) of the Trust, Stephens, its affiliates and selling
agents; (ii) present and retired directors, officers and employees (and their
spouses, parents, children and siblings) of Wells Fargo Bank and its affiliates
if Wells Fargo Bank and/or the respective affiliates agree; (iii) employee
benefit and thrift plans for such persons and investment advisory, trust or
other fiduciary accounts, including certain Plan Accounts that are maintained,
managed or advised by Wells Fargo Bank or its affiliates ("Fiduciary Accounts");
and (iv) investors using proceeds from a required minimum distribution from any
Individual Retirement Account ("IRA"), Simplified Employee Pension Plan or other
self-directed retirement plan for which Wells Fargo Bank serves as trustee,
provided that the proceeds are invested in the Funds within 30 days of such
distribution and such distribution is required as a result of reaching age
70 1/2.
CONTINGENT-DEFERRED SALES CHARGE -- CLASS B SHARES
The Funds' Class B shares may be subject to contingent-deferred sales charges
but are not subject to front-end sales charges. Class B shares that are redeemed
within one, two, three, four, five or six years from the receipt of a purchase
order for such shares are subject to a contingent-deferred sales charge equal to
5.00%, 4.00%, 3.00%, 3.00%, 2.00% and 1.00%, respectively, of the NAV Amount.
Contingent-deferred sales charges are not imposed on amounts representing
increases in NAV above the NAV at the time of purchase and are not assessed on
Class B shares purchased through reinvestment of
PROSPECTUS 28
<PAGE> 37
dividends or capital-gain distributions. Class B shares automatically convert
into Class A shares of the same Fund seven years after the end of the month in
which such Class B shares were acquired.
The amount of any contingent-deferred sales charge paid upon redemption of
Class B shares is determined in a manner designed to result in the lowest
sales-charge rate being assessed. When a redemption request is made, Class B
shares acquired pursuant to the reinvestment of dividends and capital-gain
distributions are considered to be redeemed first. After this, Class B shares
are considered redeemed on a first-in, first-out basis so that Class B shares
held for a longer period of time are considered redeemed prior to more recently
acquired Class B shares. For a discussion of the interaction between the
optional Exchange Privilege and contingent-deferred sales charges on Class B
shares, see "Exchange Privilege."
Contingent-deferred sales charges are waived on redemptions of Class B shares
of a Fund (i) following the death or disability (as defined in the Internal
Revenue Code of 1986, as amended (the "Code")) of a shareholder, (ii) to the
extent that the redemption represents a scheduled distribution from an
individual retirement account or other retirement plan to a shareholder who has
reached age 59 1/2, (iii) effected pursuant to the Trust's right to liquidate a
shareholder's account if the aggregate NAV of the shareholder's account is less
than the minimum account size, or (iv) in connection with the combination of the
Trust with any other registered investment company by a merger, acquisition of
assets or any other transaction.
In deciding whether to purchase Class A or Class B shares, you should compare
the fees assessed on Class A shares (including front-end sales charges) against
those assessed on Class B shares (including potential contingent-deferred sales
charges and higher Rule 12b-1 fees) in light of the amount to be invested and
the time that you anticipate owning the shares. If your purchase amount would
qualify you for a reduced sales charge on Class A shares, you should consider
carefully whether you would pay lower fees ultimately on Class A shares or on
Class B shares. (See "How To Buy Shares -- Sales Charges" for information on
reduced sales charges for Class A shares.)
You may buy shares on any Business Day by any of the methods described below.
The Company reserves the right to reject any purchase order or suspend sales at
any time. Payment for orders that are not received is returned after prompt
inquiry. The issuance of shares is recorded on the Company's books, and share
certificates are not issued.
29 PROSPECTUS
<PAGE> 38
INITIAL PURCHASES BY WIRE
1. Telephone toll free 1-800-222-8222. Give the name of the Fund in which an
investment is being made, and the name(s) in which the shares are to be
registered, address, TIN, amount to be wired, name of the wiring bank and
name and telephone number of the person to be contacted in connection with
the order. Some banks may impose wiring fees.
2. Instruct the wiring bank to transmit the specified amount in federal funds
($1,000 or more) to:
Wells Fargo Bank, N.A.
San Francisco, California
Bank Routing Number: 121000248
Wire Purchase Account Number: 4068-000587
Attention: Stagecoach Trust (Name of Fund -- designate Class
A or Class B)
Account Name(s): (name(s) in which to be registered)
Account Number: (if investing into an existing account)
3. A completed Account Application should be mailed, or sent by telefacsimile
with the original subsequently mailed, to the following address immediately
after the funds are wired and must be received and accepted by the Transfer
Agent before an account can be opened:
Wells Fargo Bank, N.A.
Stagecoach Shareholder Services
P.O. Box 7066
San Francisco, California 94120-7066
Telefacsimile: 1-415-543-9538
4. Share purchases are effected at the public offering price, or in the case of
Class B shares at the NAV, next determined after the Account Application is
received and accepted.
INITIAL PURCHASES BY MAIL
1. Complete an Account Application. Indicate the services to be used.
2. Mail the Account Application and a check for $1,000 or more, payable to
"Stagecoach Trust/(Name of Fund -- designate Class A or Class B)," to the
address above.
3. Share purchases are effected at the public offering price, or in the case of
Class B shares at the NAV, next determined after the Account Application is
received and accepted.
AUTOSAVER PLAN
The Trust's AutoSaver Plan provides you with a convenient way to establish and
automatically add to a Fund account on a monthly basis. To participate in the
AutoSaver
PROSPECTUS 30
<PAGE> 39
Plan, you must specify an amount ($100 or more) to be withdrawn automatically by
the Transfer Agent on a monthly basis from an account with a bank designated in
your Account Application and approved by the Transfer Agent ("Approved Bank
Account"). You may open an Approved Bank Account with Wells Fargo Bank. The
Transfer Agent withdraws and uses the amount you designate to purchase specified
shares of the designated Fund on your behalf each month on or about the day that
you have selected, or, if you have not selected a day, on or about the 20th day
of each month. The Transfer Agent requires a minimum of ten (10) Business Days
to implement your AutoSaver Plan purchases. If you hold shares through a
brokerage account, your AutoSaver Plan will comply with the terms of your
brokerage agreement. There are no separate fees charged to you by the Trust for
participating in the AutoSaver Plan.
You may change your investment amount, or the date on which your AutoSaver
purchase is effected, suspend purchases or terminate participation in the
AutoSaver Plan at any time by providing written notice to the Transfer Agent at
least five (5) Business Days prior to any scheduled transaction. Participation
in the AutoSaver Plan will be terminated automatically if an Approved Bank
Account balance is insufficient to make a scheduled withdrawal, or if either the
Approved Bank Account or Fund account is closed.
TAX-DEFERRED RETIREMENT PLANS
You may be entitled to invest in shares of a Fund through a tax-deferred
retirement plan. Contact a Shareholder Servicing Agent for materials describing
plans available through it, and their benefits, provisions and fees related to
such plans. The minimum initial investment amount for Fund Shares acquired
through a plan is $250 (the minimum initial investment amount is not applicable
if you participate in ExpressInvest through a Plan Account).
Pursuant to the Code, an individual who is not an active participant (and who
does not have a spouse who is an active participant) in certain types of
retirement plans ("qualified retirement plans") may deduct contributions to an
individual retirement account ("IRA"), up to specified limits. Investment
earnings in the IRA will be tax-deferred until withdrawn, at which time the
individual may be in a lower tax bracket.
The maximum annual deductible contribution to an IRA for individuals under age
70 1/2 is 100% of includible compensation up to a maximum of (i) $2,000 for
single individuals and (ii) $4,000 for a married couple.
The IRA deduction is also available for single individual taxpayers and
married couples who are active participants in qualified retirement plans but
who have adjusted gross incomes which do not exceed certain specified limits. If
their adjusted gross income exceeds these limits, the amount of the deductible
contribution is phased down and eventually eliminated.
Any individual who works may make nondeductible contributions to an IRA in
addition to any deductible contributions. Total aggregate deductible and
nondeductible
31 PROSPECTUS
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contributions are limited to the IRA contribution limits discussed above.
Aggregate contributions in excess of the applicable IRA contribution limits are
"excess contributions." In addition, contributions made to an IRA for the year
in which an individual attains the age of 70 1/2, or any year thereafter, are
also excess contributions. Excess contributions are subject to a 6% excise tax
penalty which is charged each year that the excess contribution remains in the
IRA.
An employer also may contribute to an individual's IRA by establishing a
Simplified Employee Pension Plan, known as a SEP-IRA, established prior to
January 1, 1996, or a Savings Incentive Match Plan for Employees, or "SIMPLE
plan", established after December 31, 1996, both through a Shareholder Servicing
Agent or a selling agent. Participating employers may make an annual
contribution to each employee through a SEP-IRA in an amount up to the lesser of
15% of such employee's earned income or $30,000, subject to certain provisions
of the Code. Under the SIMPLE plan, an employee may contribute up to $6,000
annually to his or her own IRA, and the employer must generally match such
contributions up to 3% of the employee's annual salary. Alternatively, the
employer may elect under the SIMPLE formula to contribute to the employee's IRA
2% of the lesser of his or her earned income or $150,000. In any case, all
contributions and investment earnings will be tax-deferred until withdrawn.
The foregoing discussion regarding IRAs is based on the Code and federal
regulations in effect as of the date of this Prospectus and summarizes only some
of the important federal income tax considerations generally affecting IRA
contributions made by individuals or their employers. It is not intended as a
substitute for careful tax planning. You should consult your tax advisor with
respect to your specific tax situation as well as with respect to state and
local taxes. Further tax-related information is available in the "Dividends,
Distributions and Taxes" section of this Prospectus and in the SAI.
A Shareholder Servicing Agent or selling agent also may offer other types of
tax-deferred or tax-advantaged plans, including a Keogh retirement plan for
self-employed professional persons, sole proprietors and partnerships.
Shares of each Fund also are offered to employee benefits plans, including,
but not limited to, retirement plans ("Benefit Plans"), that have appointed one
of the Trust's Shareholder Servicing Agents as such plan's trustee or investment
manager ("Plan Trustee"). Benefit Plans include plans qualified under Section
401(a) of the Code ("Qualified Plans"). Other Benefit Plans that are eligible to
invest in Fund shares include health and welfare plans and certain executive
deferred compensation plans. For additional information about Benefit Plans that
may be eligible to invest in Fund shares, prospective investors should contact a
Shareholder Servicing Agent.
Application materials for opening a tax-deferred retirement plan can be
obtained from a Shareholder Servicing Agent or selling agent. Completed
tax-deferred retirement plan applications should be returned to the investor's
Shareholder Servicing Agent or selling agent for approval and processing. If an
investor's tax-deferred retirement plan application is incomplete or improperly
filled out, there may be a delay before the Fund
PROSPECTUS 32
<PAGE> 41
account is opened. Certain features described herein, such as the AutoSaver
Plan, may not be available to individuals or entities who invest through a
tax-deferred retirement plan. Investors should consult their Shareholder
Servicing Agent or selling agent.
ADDITIONAL PURCHASES
You may make additional purchases of $100 or more by instructing the Fund's
Transfer Agent to debit your Approved Bank Account by wire by using the
procedures described under initial purchases by wire, above, or by mail with a
check payable to "Stagecoach Funds/(Name of Fund -- designate Class A or Class
B)" to the above address. Write your Fund account number on the check and
include the detachable stub from your Statement of Account or a letter providing
your Fund account number.
PURCHASES THROUGH SELLING AGENTS
You may place a purchase order for shares of the Funds through a broker/dealer
or financial institution that has entered into a Selling Agreement with
Stephens, as the Funds' Distributor ("Selling Agent"). If your purchase order is
placed by the close of trading on the NYSE, the purchase order generally is
executed on the same day if the order is received by the Transfer Agent before
the close of business. If your purchase order is received by a selling agent
after the close of trading on the NYSE or by the Transfer Agent after the close
of business, then your purchase order is executed on the next Business Day.
Because payment for shares is not due until settlement date, normally three
Business Days after your order is placed, the Selling Agent might benefit from
temporary use of your payment.
The Selling Agent is responsible for the prompt transmission of your purchase
order to the Trust. A financial institution acting as a selling agent,
Shareholder Servicing Agent or in certain other capacities may be required to
register as a dealer pursuant to applicable state securities laws, which may
differ from federal law and any interpretations expressed herein.
PURCHASES THROUGH SHAREHOLDER SERVICING AGENTS
Purchase orders for Fund shares may be transmitted to the Transfer Agent
through a Shareholder Servicing Agent, such as Wells Fargo Bank. The Shareholder
Servicing Agent may transmit a purchase order to the Transfer Agent, on your
behalf, including a purchase order for which payment is to be transferred from
an Approved Bank Account or wired from a financial institution. If your order is
transmitted by the Shareholder Servicing Agent, on your behalf, to the Transfer
Agent before the close of trading on the NYSE, the purchase order will be
executed on the same day. If your Shareholder Servicing Agent transmits your
purchase order to the Transfer Agent after the close of trading on the NYSE,
then the order generally is executed on the next Business Day following the day
your order is received. The Shareholder Servicing Agent is responsible for the
prompt transmission of your purchase order to the Transfer Agent.
33 PROSPECTUS
<PAGE> 42
STATEMENTS AND REPORTS
The Trust, or a Shareholder Servicing Agent on its behalf, will typically send
you a confirmation or statement of your account after every transaction that
affects your share balance or your Fund account registration. A statement with
tax information for the previous year will be mailed to you each year, and also
will be filed with the IRS. At least twice a year, you will receive financial
statements.
HOW TO REDEEM SHARES
GENERAL
You may redeem Fund shares on any Business Day. The redemption price of the
shares is the next determined NAV of the relevant Class calculated after the
Trust has received a redemption request in proper form. Redemption proceeds may
be more or less than the amount invested and, therefore, a redemption of shares
may result in a gain or loss for federal and state income tax purposes.
The Trust ordinarily remits redemption proceeds, net of any
contingent-deferred sales charge applicable with respect to Class B shares (the
"redemption proceeds"), from a Fund within seven days after a redemption order
is received in proper form, absent extraordinary circumstances. Such
extraordinary circumstances could include a period during which an emergency
exists as a result of which (a) disposal by the Master Portfolio in which such
Fund invests of securities owned by the Master Portfolio is not reasonably
practicable or (b) it is not reasonably practicable for the Fund fairly to
determine the value of its net assets, or a period during which the Securities
and Exchange Commission by order permits deferral of redemptions for the
protection of Fund shareholders. In addition, the Trust may defer payment of a
shareholder's redemption until reasonably satisfied that such shareholder's
investments made by check have been collected (which can take up to ten (10)
days from the purchase date). Payment of redemption proceeds may be made in
portfolio securities, subject to regulation by some state securities
commissions. Such redemptions ordinarily will be taxable.
All redemptions of shares generally are made in cash, except that the
commitment to redeem shares in cash extends only to redemption requests made by
each Fund shareholder during any 90-day period of up to the lesser of $250,000
or 1% of the net asset value of the Fund at the beginning of such period. This
commitment is irrevocable without the prior approval of the SEC and is a
fundamental policy of the Funds that may not be changed without shareholder
approval. In the case of redemption requests by shareholders in excess of such
amounts, the Board of Trustees reserves the right to have a Fund make payment,
in whole or in part, in securities or other assets, in case of an emergency or
any time a cash distribution would impair the liquidity of the Fund to the
detriment of the existing shareholders. In this event, the securities would be
valued in the same manner as the securities of the Fund are valued. If the
recipient were
PROSPECTUS 34
<PAGE> 43
to sell such securities, he or she would incur brokerage costs in converting
such securities in cash.
Due to the high cost of maintaining Fund accounts with small balances, the
Trust reserves the right to close an investor's account and send the proceeds to
such investor if the balance falls below $1,000 because of a redemption
(including a redemption of Fund shares after an investor has made only the
$1,000 minimum initial investment). However, investors will be given 30 days'
notice to make an additional investment to increase their account balance to
$1,000 or more. Plan Accounts are not subject to minimum Fund account balance
requirements.
Redemption orders that are received by the Transfer Agent before the close of
regular trading on the NYSE generally are executed at the net asset value
determined as of the close of regular trading on the NYSE on that day.
Redemption orders that are received by the Transfer Agent after the close of
trading on the NYSE are executed on the next Business Day.
REDEMPTIONS BY TELEPHONE
Telephone redemption or exchange privileges are made available to shareholders
automatically upon opening an account, unless the shareholder specifically
declines the privileges. These privileges authorize the Transfer Agent to act on
telephone instructions from any person representing himself or herself to be the
investor and reasonably believed by the Transfer Agent to be genuine. The Trust
requires the Transfer Agent to employ reasonable procedures, such as requiring a
form of personal identification, to confirm that instructions are genuine and,
if it does not follow such procedures, the Trust or the Transfer Agent may be
liable for any losses due to unauthorized or fraudulent instructions. Neither
the Trust nor the Transfer Agent will be liable for following telephone
instructions reasonably believed to be genuine.
During times of drastic economic or market conditions you may experience
difficulty in contacting the Transfer Agent by telephone to request a redemption
or exchange of Fund shares. In such cases, you should consider using the other
redemption procedures made available to you. Use of these other redemption
procedures may result in your redemption request being processed at a later time
than it would have been if telephone redemption had been used. During the delay,
the NAV of a Class of shares of a LifePath Fund may fluctuate.
REDEMPTIONS BY MAIL
1. Write a letter of instruction. Indicate the Class and the dollar amount or
number of Fund shares to be redeemed, the Fund account number and TIN.
2. Sign the letter in exactly the same way the account is registered. If there
is more than one owner of the shares, all owners must sign.
35 PROSPECTUS
<PAGE> 44
3. If shares to be redeemed have a value of $5,000 or more, or redemption
proceeds are to be paid to someone other than you at your address of record
or your Approved Bank Account, the signature(s) must be guaranteed by an
"eligible guarantor institution," which generally includes a commercial
bank whose deposits are insured by the Federal Deposit Insurance
Corporation ("FDIC"), a trust company, a member firm of a domestic stock
exchange, a savings association, or a credit union that is authorized by
its charter to provide a signature guarantee. Signature guarantees by
notaries public are not acceptable. Further documentation may be requested
from corporations, administrators, executors, personal representatives,
trustees or custodians.
4. Mail the redemption letter to the Transfer Agent at the mailing address set
forth under "How to Buy Shares - Initial Purchases By Wire."
Unless other instructions are given in proper form, a check for the redemption
proceeds is sent to your address of record.
SYSTEMATIC WITHDRAWAL PLAN
The Systematic Withdrawal Plan provides you with a convenient way to have Fund
shares redeemed from your account and the proceeds distributed to you on a
monthly basis. You may participate in the Systematic Withdrawal Plan only if you
have a Fund account valued at $10,000 or more as of the date of your election to
participate, you have an account at an Approved Bank, your dividends and capital
gain distributions are being reinvested automatically, and you are not
participating in the AutoSaver Plan at any time while participating in the
Systematic Withdrawal Plan. You may specify an amount ($100 or more) to be
distributed by check to your address of record or deposited in your Approved
Bank Account. The Transfer Agent redeems sufficient shares and mails or deposits
net redemption proceeds as instructed on or about the fifth Business Day prior
to the end of each month. There are no separate fees charged to you by the Fund
for participating in the Systematic Withdrawal Plan. However, you should not
participate in the Systematic Withdrawal Plan if you also are purchasing shares
of a Fund subject to a sales charge.
It may take up to ten (10) days after receipt of your request to establish
your participation in the Systematic Withdrawal Plan. You may change your
withdrawal amount, suspend withdrawals or terminate your participation in the
Systematic Withdrawal Plan at any time by providing written notice to the
Transfer Agent at least five (5) Business Days prior to any scheduled
transaction. Your participation in the Systematic Withdrawal Plan is terminated
automatically if your Fund account, or, in some cases, Approved Bank Account, is
closed.
EXPEDITED REDEMPTIONS BY MAIL OR TELEPHONE
You may request an expedited redemption of Fund shares by letter, in which
case your receipt of redemption proceeds, but not the Fund's receipt of your
redemption request, would be expedited. Telephone redemption or exchange
privileges are made available
PROSPECTUS 36
<PAGE> 45
to you automatically upon the opening of an account unless you decline the
privilege. You also may request an expedited redemption of Fund shares by
telephone on any Business Day, in which case both your receipt of redemption
proceeds and the Fund's receipt of your redemption request would be expedited.
You may call 1-800-222-8222 to request expedited redemption by telephone. You
may mail an expedited redemption request to the Transfer Agent at the mailing
address set forth under "How to Buy Shares -- Initial Purchases by Wire."
Upon request, net redemption proceeds of expedited redemptions of $5,000 or
more are wired or credited to your Approved Bank Account or wired to the Selling
Agent designated in the Account Application. The Trust reserves the right to
impose a charge for wiring redemption proceeds. When proceeds of your expedited
redemption are to be paid to someone else, to an address other than that of
record, or to an Approved Bank Account or Selling Agent that you have not
predesignated in your Account Application, the expedited redemption request must
be made by letter and the signature(s) on the letter must be guaranteed,
regardless of the amount of the redemption. If your expedited redemption request
is received by the Transfer Agent by the close of the NYSE on a Business Day,
your redemption proceeds are transmitted to your Approved Bank Account or
Selling Agent on the next Business Day (assuming your investment check has
cleared as described above), absent extraordinary circumstances. Such
extraordinary circumstances could include those described above as potentially
delaying redemptions, and also could include situations involving an unusually
heavy volume of wire transfer orders on a national or regional basis or
communication or transmittal delays that could cause a brief delay in the wiring
or crediting of funds. A check for proceeds of less than $5,000 is mailed to
your address of record or, at your election, credited to your Approved Bank
Account.
During periods of drastic economic or market activity or changes, you may
experience problems implementing an expedited redemption by telephone. In the
event you are unable to reach the Transfer Agent by telephone, you should
consider using overnight mail to implement an expedited redemption. The Trust
reserves the right to modify or terminate the expedited telephone redemption
privilege at any time.
REDEMPTIONS THROUGH SELLING AGENTS
If your redemption order is received by a Selling Agent before the close of
trading on the NYSE and received by the Transfer Agent before the close of
business on the same day, the order is executed at the NAV determined as of the
close of trading on the NYSE on that day. If your redemption order is received
by a Selling Agent after the close of trading on the NYSE, or not received by
the Transfer Agent prior to the close of business, your order is executed at the
NAV determined as of the close of trading on the NYSE on the next Business Day.
The Selling Agent is responsible for the prompt transmission of your redemption
order to the Trust.
Unless you have made other arrangements with a Selling Agent, and the Transfer
Agent has been informed of such arrangements, net proceeds of a redemption order
made by
37 PROSPECTUS
<PAGE> 46
you through a Selling Agent are credited to your Approved Bank Account. If no
such account is designated, a check for the net redemption proceeds is mailed to
your address of record or, if such address is no longer valid, the net
redemption proceeds are credited to your account with the Selling Agent. You may
request a check from the Selling Agent or elect to retain the net redemption
proceeds in such account. The Selling Agent may charge you a service fee. In
addition, it may benefit from the use of your redemption proceeds until the
check it issues to you has cleared or until such proceeds have been disbursed or
reinvested on your behalf.
REDEMPTIONS THROUGH SHAREHOLDER SERVICING AGENTS
You may request a redemption of Fund shares through your Shareholder Servicing
Agent. If your redemption order is transmitted by the Shareholder Servicing
Agent, on your behalf, to the Transfer Agent before the close of regular trading
on the NYSE, the redemption order is executed at the NAV determined as of the
close of regular trading on the NYSE on that day. If your Shareholder Servicing
Agent transmits your redemption order to the Transfer Agent after the close of
trading on the NYSE, then your order is executed on the next Business Day
following the date your order is received. The Shareholder Servicing Agent is
responsible for the prompt transmission of redemption orders to the Funds.
Unless you have made other arrangements with your Shareholder Servicing Agent,
and the Transfer Agent has been informed of such arrangements, net redemption
proceeds of a redemption order made by you through your Shareholder Servicing
Agent are credited to your Approved Bank Account. If no such account is
designated, a check for the proceeds is mailed to your address of record or, if
such address is no longer valid, the proceeds are credited to your account with
your Shareholder Servicing Agent or to another account designated in your
agreement with your Shareholder Servicing Agent. The Shareholder Servicing Agent
may charge you a fee. In addition, the Shareholder Servicing Agent may benefit
from the use of proceeds credited to your account until any check it issues to
you has cleared or until such proceeds have been disbursed or reinvested on your
behalf.
EXCHANGE PRIVILEGE
The exchange privilege is a convenient way to buy shares in other funds of the
Stagecoach Family of Funds that are registered in your state of residence, and
allows you to respond to changes in your investment and savings goals or in
market conditions. Class A and Class B shares of each Fund generally may be
exchanged for Class A and Class B shares, respectively, of another fund, or for
Class A shares of the Government Money Market Mutual, Money Market Mutual, Prime
Money Market Mutual or Treasury Money Market Mutual Funds or shares of the
California Tax-Free Money Market Mutual, Corporate Stock or National Tax-Free
Money Market Mutual Funds.
PROSPECTUS 38
<PAGE> 47
Before making an exchange from a Fund into another fund of the Stagecoach
Family of Funds, please observe the following:
- Obtain and carefully read the prospectus of the fund into which you want to
exchange.
- If you exchange into another fund with a front-end sales charge, you must
pay the difference between that fund's sales charge and any sales charge you
already have paid in connection with the shares you are exchanging.
- If you exchange Class B shares for Class B shares of another fund, Class A
shares of one of the Money Market Mutual Funds or shares of a single-class
fund, a contingent-deferred sales charge is not imposed upon the exchange.
- Each exchange, in effect, represents the redemption of shares of one fund
and the purchase of shares of another, which may produce a gain or loss for
federal income tax purposes. A confirmation of each exchange transaction is
sent to you.
- The dollar amount of shares you exchange generally must meet the minimum
initial and/or subsequent investment amounts of the fund from which you are
exchanging. If the value of your investment in the fund from which you are
exchanging has been reduced below the minimum initial investment amount by
changes in market conditions or sales charges (and not by redemptions), you
may carry over the lesser amount into the Fund you are acquiring.
- The Trust reserves the right to limit the number of times shares may be
exchanged between funds, to reject any telephone exchange order, or
otherwise to modify or discontinue exchange privileges at any time. Under
SEC rules, subject to limited exceptions, the Trust must notify you 60 days
before it modifies or discontinues the exchange privilege.
- If you exchange Class B shares for Class B shares of another fund, Class A
shares of Money Market Mutual Fund or shares of a single-class fund, any
remaining period of time that the contingent-deferred sales charge
applicable to such shares remains in effect is computed from the time of
initial purchase of the previously held shares. For example, if you exchange
Class B shares of a Fund for shares of the California Tax-Free Money Market
Mutual Fund and then redeem the shares of the California Tax-Free Money
Market Mutual Fund within four years of the purchase of the exchanged Class
B shares, you are required to pay a contingent-deferred sales charge equal
to the charge that would have been applicable if you were redeeming the
original Class B shares at that time.
- If you exchange Class B shares for shares of one of the Money Market Mutual
Funds as described above, you subsequently may re-exchange the acquired
shares only for Class B shares of one of the Company's funds or for shares
of another Money Market Mutual Fund.
39 PROSPECTUS
<PAGE> 48
The procedures applicable to Fund share redemptions also apply to Fund share
exchanges.
In particular, exchange orders received before 1:00 p.m. (Pacific time) on
each Business Day are processed at the offering price based on the NAV next
determined as of that Business Day's close of market (provided it is a Business
Day for each fund involved in the transaction). In addition, a signature
guarantee may be required for exchanges between shareholder accounts registered
in identical names if the amount being exchanged is more than $25,000. If you
have questions, please call 1-800-222-8222.
To exchange shares, write the transfer agent at the mailing address under "How
to Buy Shares -- Initial Purchases by Wire" or (unless you have specifically
declined telephone exchange privileges) call the transfer agent at the telephone
number listed on your transaction confirmation, or contact your Shareholder
Servicing Agent or Selling Agent. The procedures applicable to telephone
redemptions, including the discussion regarding the responsibility for the
authenticity of telephone instructions, are also applicable to telephone
exchange requests. See "How to Redeem Shares -- Expedited Redemptions by Letter
and Telephone."
CONVERSION
A Fund's Class B shares that have been outstanding for seven years after the
end of the month in which the shares were initially purchased automatically
convert to Class A shares of such Fund and, consequently, will no longer be
subject to the higher Rule 12b-1 Fees applicable to Class B shares. Such
conversion is on the basis of the relative NAV of the two Classes, without the
imposition of any sales charge or other charge except that the lower Rule 12b-1
Fees applicable to Class A shares shall thereafter be applied to such converted
shares. Because the per share NAV of the Class A shares may be higher than that
of the Class B shares at the time of conversion, a shareholder may receive fewer
Class A shares than the number of Class B shares converted, although the dollar
value will be the same. Reinvestments of dividends and distributions on Class B
shares are considered new purchases for purposes of the conversion feature. A
conversion should not produce a gain or loss for federal income tax purposes.
If a shareholder effects one or more exchanges among Class B shares of any
Fund or Class A shares of a Money Market Mutual Fund during the six-year period,
and exchanges back into Class B shares, the holding period for shares so
exchanged is counted toward the six-year period, and any Class B shares held at
the end of six years are converted into Class A shares.
PROSPECTUS 40
<PAGE> 49
DIVIDENDS AND DISTRIBUTIONS
Each Fund declares and pays quarterly dividends of substantially all of its
net investment income. Each Fund's net investment income available for
distribution to the holders of Class A or B shares is reduced by the amount of
the distribution-related expenses payable under the applicable Distribution
Plan. Each Fund makes distributions from any net realized gains at least once a
year, in all events in a manner consistent with the provisions of the 1940 Act
and the Code. No Fund will make distributions from net realized securities gains
unless capital loss carryovers, if any, have been utilized or have expired.
Dividends are automatically reinvested in additional Fund shares at net asset
value, unless payment in cash has been requested.
Dividends and capital gain distributions have the effect of reducing the NAV
per share by the amount distributed on the record date. Although such a dividend
or distribution paid to you on newly issued shares shortly after purchase would
represent, in substance, a return of capital, the dividend or distribution would
consist of net investment income or net realized capital gain and, accordingly,
would be taxable to you.
DIVIDEND AND DISTRIBUTION OPTIONS
When you fill out your Account Application, you can choose from the following
dividend and distribution options:
A. The Automatic Reinvestment Option provides for the reinvestment of your
dividends and capital-gain distributions in additional shares of the same class
of the Fund which paid such dividends or capital gain distributions. Dividends
and distributions declared in a month generally are reinvested at NAV on the
last Business Day of such month. You are assigned this option automatically if
you make no choice on your Account Application.
B. The Fund Purchase Option lets you use your dividends and/or capital-gain
distributions from the Funds to purchase, at NAV plus any applicable sales
charge, shares of another fund in the Stagecoach Family of Funds offered in your
state of residence with which you have an established account that has met the
applicable minimum initial investment requirement. Dividends and distributions
paid on Class A or Class B shares may be invested in Class A or Class B shares,
respectively, of another LifePath Fund or another fund of the Stagecoach Family
of Funds.
C. The Automatic Clearing House Option permits you to have dividends and
capital-gain distributions deposited in your Approved Bank Account. In the event
your Approved Bank Account is closed and such distribution is returned to the
Funds' dividend disbursing agent, the distribution will be reinvested in your
Fund account at the NAV next determined after the distribution has been resumed.
Your Automatic Clearing House Option will be converted to the Automatic
Reinvestment Option.
D. The Check Payment Option lets you receive a check for all dividends and/or
capital gain distributions, which is mailed either to your designated address or
your
41 PROSPECTUS
<PAGE> 50
designated Approved Bank shortly following declaration. If the U.S. Postal
Service cannot deliver such checks, or if such checks remain uncashed for six
months, those checks will be reinvested in your Fund account at the NAV next
determined after the earlier of the date the checks have been returned to the
dividend disbursing agent or the date six months after the payment of such
dividend or distribution. Your Check Payment Option will be converted to the
Automatic Reinvestment Option.
The Trust takes reasonable efforts to locate investors whose checks are
returned or uncashed after six months.
FEDERAL TAX INFORMATION
The Trust intends to qualify each Fund every year as a regulated investment
company pursuant to Subchapter M of the Code as long as such qualification is in
the best interest of each Fund's shareholders. In addition, net capital gains,
net investment income, and operating expenses will be determined separately for
each Fund. By complying with the applicable provisions of the Code, each Fund
will not be subject to federal income tax with respect to its net investment
income and net realized capital gains distributed to its shareholders.
Dividends paid by a Fund derived from net investment income and distributions
from any net realized short-term gains of such Fund generally are taxable to
U.S. investors as ordinary income, whether or not such dividends are reinvested
in additional Fund shares. Distributions from any net realized long-term gains
generally are taxable to U.S. investors as long-term capital gain for federal
income tax purposes, regardless of how long shareholders have held their shares
and whether such distributions are received in cash or reinvested in additional
Fund shares.
Dividends paid by a Fund to a foreign investor generally are subject to U.S.
nonresident withholding taxes at the rate of 30%, unless the foreign investor
claims the benefits of a lower rate specified in a tax treaty. Capital-gain
distributions paid by a Fund to a foreign investor, as well as the proceeds of
any redemptions from a foreign investor's Fund account, regardless of the extent
to which gain or loss may be recognized, will not be subject to U.S. nonresident
withholding tax. However, such distributions may be subject to backup
withholding, as described below, unless the foreign investor certifies a
non-U.S. residency status.
Notice as to the tax status of your dividends and capital-gain distributions
will be mailed to you annually. You also will receive periodic summaries of your
account which will include information as to dividends and capital gain
distributions, if any, paid during the year.
Each Fund may be required to withhold, subject to certain exemptions, at a
rate of 31% ("backup withholding") on dividends, capital-gain distributions, and
redemption proceeds (including proceeds from exchanges) paid or credited to an
individual
PROSPECTUS 42
<PAGE> 51
shareholder, unless a shareholder certifies that the TIN provided is correct and
that the shareholder is not subject to backup withholding, or the IRS notifies
the Fund that the shareholder's TIN is incorrect or the shareholder is subject
to backup withholding. Such tax withheld does not constitute an additional tax
imposed on the shareholder, and may be claimed as a tax payment on the
shareholder's federal income tax return.
The foregoing discussion regarding federal income taxes, is based on tax laws
and federal regulations which were in effect as of the date of this Prospectus
and summarizes only some of the important federal income tax considerations
generally affecting a Fund and its shareholders. It is not intended as a
substitute for careful tax planning; you should consult your tax advisor with
respect to your specific tax situation as well as with respect to state and
local taxes. Further tax information is contained in the SAI.
PERFORMANCE INFORMATION
For purposes of advertising, performance of the LifePath Funds may be
calculated on the basis of average annual total return and/or cumulative total
return of a class of shares. Average annual total return of a class of shares is
calculated pursuant to a standardized formula which assumes that an investment
in that class of shares of the Fund was purchased with an initial payment of
$1,000 and that the investment was redeemed at the end of a stated period of
time, after giving effect to the reinvestment of dividends and distributions
during the period. The return of a class of shares is expressed as a percentage
rate which, if applied on a compounded annual basis, would result in the
redeemable value of the investment in a class of shares at the end of the
period. Advertisements of the performance of a class of shares of a LifePath
Fund includes the Fund's average annual total return of a class of shares for
one, five and ten year periods, or for shorter time periods depending upon the
length of time during which such Fund has operated.
Cumulative total return of a class of shares is computed on a per share basis
and assumes the reinvestment of dividends and distributions. Cumulative total
return of a class of shares generally is expressed as a percentage rate which is
calculated by combining the income and principal changes for a specified period
and dividing by the net asset value per share at the beginning of the period.
Advertisements may include the percentage rate of total return of a class of
shares or may include the value of a hypothetical investment in a class of
shares at the end of the period which assumes the application of the percentage
rate of total return.
Performance of a class of shares varies from time to time, and past results
are not predictive of future performance. Investors should remember that
performance is a function of the type and quality of portfolio securities held
by the Master Portfolio in which the Fund invests and is affected by operating
expenses. Performance information, such as that described above, may not provide
a basis for comparison with other
43 PROSPECTUS
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investments or other investment companies using a different method of
calculating performance.
Comparative performance information may be used from time to time in
advertising or marketing a Fund's shares, including data from Lipper Analytical
Services, Inc., Bank Rate Monitor, Bond 20-Bond Index, Moody's Bond Survey Bond
Index, Lehman Brothers Aggregate Bond Index and components thereof,
IBC/Donoghue's Money Fund Report, Standard & Poor's 500 Stock Index, Wilshire
5000 Index, the Dow Jones Industrial Average, CDA Investment Technologies, Inc.,
Wiesenberger Investment Companies Service, Mutual Fund Values; Mutual Fund
Forecaster, Schabacker Investment Management, Inc., Morningstar, Inc. and other
industry publications.
Total return quotations are computed separately for each class of the Funds'
shares. Because of the difference in the fees and expenses borne by a class of
shares of the Funds, the return on such shares can be expected, at any given
time, to differ from the return on another class of shares.
Additional information about the performance of each Fund is contained in the
Funds' SAI and the Annual Report, which may be obtained free of charge by
calling the Trust at 1-800-222-8222.
GENERAL INFORMATION
The Trust was organized as an unincorporated business trust under the laws of
the Commonwealth of Massachusetts pursuant to an Agreement and Declaration of
Trust (the "Trust Agreement") dated May 14, 1993. The Trust is authorized to
issue an unlimited number of shares of beneficial interest. Each LifePath Fund
of the Trust offers Class A, Class B (except LifePath 2000 Fund) and
Institutional Class shares. Each share has one vote. Institutional Class shares
are no longer offered to the public, although a limited number of such shares
were outstanding as of the date of this Prospectus.
To date, the Board of Trustees has authorized the creation of ten separate
portfolios of shares, including the five Funds offered hereby. All consideration
received by the Trust for shares of one of the portfolios and all assets in
which such consideration is invested belong to that portfolio (subject only to
the rights of creditors of the Trust) and are subject to the liabilities related
thereto. The income attributable to, and the expenses of, one portfolio are
treated separately from those of the other portfolios. The Trust has the ability
to create, from time to time, new portfolios without shareholder approval.
Under the terms of a License Agreement between the Trust and Wells Fargo Bank,
Wells Fargo Bank has granted the Trust a non-exclusive license to use the name
"Stagecoach." If the License Agreement is terminated, the Trust, at the request
of Wells Fargo Bank, will cease using the name "Stagecoach."
PROSPECTUS 44
<PAGE> 53
Under Massachusetts law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Trust. However, the Trust
Agreement disclaims shareholder liability for acts or obligations of the Trust
and requires that notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Trust or a Trustee. The
Trust Agreement provides for indemnification from the Trust's property for all
losses and expenses of any shareholder held personally liable for the
obligations of the Trust. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which
the Trust itself is unable to meet its obligations, a possibility which
management believes is remote. Upon payment of any liability incurred by the
Trust, the shareholder paying such liability is entitled to reimbursement from
the general assets of the Trust. The Trustees intend to conduct the operations
of the Trust in such a way so as to avoid, as far as possible, ultimate
liability of the shareholders for liabilities of the Trust. As described under
"Management of the Trust" in the SAI, the Trust ordinarily does not hold
shareholder meetings; however, shareholders under certain circumstances have the
right to call a meeting of shareholders for the purpose of voting to remove
Trustees.
The Transfer Agent maintains a record of each investor's ownership and sends
confirmations and statements of account.
Investor inquiries may be made by writing to the Trust c/o Wells Fargo Bank,
N.A. -- Shareholder Services, P.O. Box 7066, San Francisco, California
94120-7066 or by calling 1-800-222-8222.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN THE FUNDS'
SAI, AND IN THE TRUST'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER
OF THE FUNDS' SHARES AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY
PERSON TO WHOM, SUCH OFFERING MAY NOT LAWFULLY BE MADE.
45 PROSPECTUS
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<PAGE> 55
APPENDIX
PORTFOLIO SECURITIES
To the extent set forth in this Prospectus, each Fund through its investment
in the corresponding Master Portfolio may invest in the securities described
below.
U.S. GOVERNMENT OBLIGATIONS -- U.S. Government obligations include securities
issued or guaranteed as to principal and interest by the U.S. Government and
supported by the full faith and credit of the U.S. Treasury. U.S. Treasury
obligations differ mainly in the length of their maturity. Treasury bills, the
most frequently issued marketable government securities, have a maturity of up
to one year and are issued on a discount basis. U.S. Government obligations also
include securities issued or guaranteed by federal agencies or
instrumentalities, including government-sponsored enterprises. Some obligations
of agencies or instrumentalities of the U.S. Government are supported by the
full faith and credit of the United States or U.S. Treasury guarantees; others,
by the right of the issuer or guarantor to borrow from the U.S. Treasury; still
others by the discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others, only by the credit of
the agency or instrumentality issuing the obligation. In the case of obligations
not backed by the full faith and credit of the United States, the investor must
look principally to the agency or instrumentality issuing or guaranteeing the
obligation for ultimate repayment, which agency or instrumentality may be
privately owned. There can be no assurance that the U.S. Government would
provide financial support to its agencies or instrumentalities (including
government-sponsored enterprises) where it is not obligated to do so. In
addition, U.S. Government obligations are subject to fluctuations in market
value due to fluctuations in market interest rates. As a general matter, the
value of debt instruments, including U.S. Government obligations, declines when
market interest rates increase and rises when market interest rates decrease.
Certain types of U.S. Government obligations are subject to fluctuations in
yield or value due to their structure or contract terms.
FOREIGN GOVERNMENT OBLIGATIONS; SECURITIES OF SUPRANATIONAL ENTITIES -- Each
Master Portfolio, through its investment in money market instruments, may invest
in obligations issued or guaranteed by one or more foreign governments or any of
their political subdivisions, agencies or instrumentalities that are determined
by BGFA to be of comparable quality to the other obligations in which such
Master Portfolio may invest. Such securities also include debt obligations of
supranational entities. Supranational entities include international
organizations designated or supported by governmental entities to promote
economic reconstruction or development and international banking institutions
and related government agencies. Examples include the International Bank for
Reconstruction and Development (the World Bank), the European Coal and Steel
Community, the Asian Development Bank and the InterAmerican Development Bank.
The percentage of a Master Portfolio's assets invested in securities issued by
foreign governments varies depending on the relative yields of such securities,
the economic
A-1 PROSPECTUS
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and financial markets of the countries in which the investments are made and the
interest rate climate of such countries. Investments in such securities may be
subject to withholding and other taxes imposed by foreign governments.
BANK OBLIGATIONS -- Each Master Portfolio may invest in bank obligations,
including certificates of deposit, time deposits, bankers' acceptances and other
short-term obligations of domestic banks, foreign subsidiaries of domestic
banks, foreign branches of domestic banks, and domestic and foreign branches of
foreign banks, domestic savings and loan associations and other banking
institutions. With respect to such securities issued by foreign branches of
domestic banks, foreign subsidiaries of domestic banks, and domestic and foreign
branches of foreign banks, a Master Portfolio may be subject to additional
investment risks that are different in some respects from those incurred by a
fund which invests only in debt obligations of U.S. domestic issuers. Such risks
include possible future political and economic developments, the possible
imposition of foreign withholding taxes on interest income payable on the
securities, the possible establishment of exchange controls or the adoption of
other foreign governmental restrictions which might adversely affect the payment
of principal and interest on these securities and the possible seizure or
nationalization of foreign deposits.
Certificates of deposit are negotiable certificates evidencing the obligation
of a bank to repay funds deposited with it for a specified period of time.
Time deposits are non-negotiable deposits maintained in a banking institution
for a specified period of time at a stated interest rate. Time deposits which
may be held by a Master Portfolio will not benefit from insurance from the Bank
Insurance Fund or the Savings Association Insurance Fund administered by the
FDIC.
Bankers' acceptances are credit instruments evidencing the obligation of a
bank to pay a draft drawn on it by a customer. These instruments reflect the
obligation both of the bank and of the drawer to pay the face amount of the
instrument upon maturity. The other short-term obligations may include
uninsured, direct obligations, bearing fixed, floating or variable interest
rates.
COMMERCIAL PAPER AND OTHER SHORT-TERM CORPORATE OBLIGATIONS -- Each Master
Portfolio may invest in commercial paper, which consists of short-term,
unsecured promissory notes issued to finance short-term credit needs. The
commercial paper purchased by the LifePath Master Portfolio consists only of
direct obligations which, at the time of their purchase, are (a) rated not lower
than Prime-1 by Moody's, A-1 by S&P, F-1 by Fitch or Duff-1 by Duff, (b) issued
by companies having an outstanding unsecured debt issue currently rated not
lower than Aa3 by Moody's or AA- by S&P, Fitch or Duff, or (c) if unrated,
determined by WFNIA to be of comparable quality to those rated obligations which
may be purchased by such Master Portfolio.
REPURCHASE AGREEMENTS -- Each Master Portfolio may enter into repurchase
agreements, wherein the seller of a security to a Master Portfolio agrees to
repurchase
PROSPECTUS A-2
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that security from the Master Portfolio at a mutually agreed upon time and
place. MIP's custodian will have custody of, and will hold in a segregated
account, securities acquired by a Master Portfolio under a repurchase agreement.
Repurchase agreements are considered by the staff of the Securities and Exchange
Commission to be loans by the Master Portfolio entering into them. In an attempt
to reduce the risk of incurring a loss on a repurchase agreement, each Master
Portfolio enters into repurchase agreements only with federally regulated or
insured banks or primary government securities dealers reporting to the Federal
Reserve Bank of New York or their affiliates, or, under certain circumstances,
banks with total assets in excess of $5 billion or domestic broker/dealers with
total equity capital in excess of $100 million, with respect to securities of
the type in which such Master Portfolio may invest or government securities
regardless of their remaining maturities, and requires that additional
securities be deposited with it if the value of the securities purchased should
decrease below repurchase price. BGFA monitors on an ongoing basis the value of
the collateral to assure that it always equals or exceeds the repurchase price.
Certain costs may be incurred by a Master Portfolio in connection with the sale
of the securities if the seller does not repurchase them in accordance with the
repurchase agreement. In addition, if bankruptcy proceedings are commenced with
respect to the seller of the securities, disposition of the securities by a
Master Series may be delayed or limited. Each Master Portfolio considers on an
ongoing basis the creditworthiness of the institutions with which it enters into
repurchase agreements.
UNREGISTERED NOTES -- Each Master Portfolio may purchase unsecured promissory
notes ("Notes") which are not readily marketable and have not been registered
under the Securities Act of 1933, as amended (the "1933 Act"), provided such
investments are consistent with such Master Portfolio's goal. No Master
Portfolio invests more than 15% of the value of its net assets in Notes and in
other illiquid securities.
FLOATING- AND VARIABLE-RATE OBLIGATIONS -- Each Master Portfolio may purchase
floating- and variable-rate demand notes and bonds, which are obligations
ordinarily having stated maturities in excess of 13 months, but which permit the
holder to demand payment of principal at any time or at specified intervals not
exceeding 13 months. Variable-rate demand notes include master demand notes
which are obligations that permit a Master Portfolio to invest fluctuating
amounts, which may change daily without penalty, pursuant to direct arrangements
between the Master Portfolio, as lender, and the borrower. The interest rates on
these notes fluctuate from time to time. The issuer of such obligations
ordinarily has a corresponding right, after a given period, to prepay in its
discretion the outstanding principal amount of the obligations plus accrued
interest upon a specified number of days' notice to the holders of such
obligations. The interest rate on a floating-rate demand obligation is based on
a known lending rate, such as a bank's prime rate, and is adjusted automatically
each time such rate is adjusted. The interest rate on a variable-rate demand
obligation is adjusted automatically at specified intervals. Frequently, such
obligations are secured by letters of credit or other credit support
arrangements provided by banks. Because these obligations are direct lending
A-3 PROSPECTUS
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arrangements between the lender and borrower, it is not contemplated that such
instruments generally will be traded. There generally is no established
secondary market for these obligations, although they are redeemable at face
value. Accordingly, where these obligations are not secured by letters of credit
or other credit support arrangements, the Master Portfolios' right to redeem is
dependent on the ability of the borrower to pay principal and interest on
demand. Such obligations frequently are not rated by credit rating agencies and
each Master Portfolio may invest in obligations which are not so rated only if
BGFA determines that at the time of investment the obligations are of comparable
quality to the other obligations in which such Master Portfolio may invest.
BGFA, on behalf of each Master Portfolio, considers on an ongoing basis the
creditworthiness of the issuers of the floating- and variable-rate demand
obligations in such Master Portfolio's portfolio. No Master Portfolio invests
more than 15% of the value of its net assets in illiquid securities including
floating- or variable-rate demand obligations not exercisable within seven days.
Such obligations may be treated as liquid, provided that an active secondary
market exists.
PARTICIPATION INTERESTS -- Each Master Portfolio may purchase from financial
institutions participation interests in securities in which such Master
Portfolio may invest. A participation interest gives a Master Portfolio an
undivided interest in the security in the proportion that the Master Portfolio's
participation interest bears to the total principal amount of the security.
These instruments may have fixed, floating or variable rates of interest. If the
participation interest is unrated, or has been given a rating below that which
is permissible for purchase by the Master Portfolios, the participation interest
must be backed by an irrevocable letter of credit or guarantee of a bank, or the
payment obligation otherwise must be collateralized by U.S. Government
obligations, or, in the case of unrated participation interests, BGFA must have
determined that the instrument is of comparable quality to those instruments in
which such Master Portfolio may invest. Prior to a Master Portfolio's purchase
of any such instrument backed by a letter of credit or guarantee of a bank, BGFA
evaluates the creditworthiness of the bank, considering all factors which it
deems relevant, which generally may include review of the bank's cash flow;
level of short-term debt; leverage; capitalization; the quality and depth of
management; profitability; return on assets; and economic factors relative to
the banking industry. For certain participation interests, a Master Portfolio
has the right to demand payment, on not more than seven days' notice, for all or
any part of the Master Portfolio's participation interest in the security, plus
accrued interest. As to these instruments, each Master Portfolio intends to
exercise its right to demand payment only upon a default under the terms of the
security, as needed to provide liquidity to meet redemptions, or to maintain or
improve the quality of its investment portfolio.
MORTGAGE-RELATED SECURITIES -- Each LifePath Master Portfolio may invest in
mortgage-related securities ("MBSs"), which are securities representing
interests in a pool of loans secured by mortgages. The resulting cash flow from
these mortgages is used to pay principal and interest on the securities. MBSs
are assembled for sale to investors by various government-sponsored enterprises
such as the Federal National Mortgage
PROSPECTUS A-4
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Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC") or
are guaranteed by such governmental agencies as the Government National Mortgage
Association ("GNMA"). Regardless of the type of guarantee, all MBSs are subject
to interest rate risk (i.e., exposure to loss due to changes in interest rates).
GNMA MBSs include GNMA Mortgage Pass-Through Certificates (also known as
"Ginnie Maes") which are guaranteed as to the full and timely payment of
principal and interest by GNMA and such guarantee is backed by the authority of
GNMA to borrow funds from the U.S. Treasury to make payments under its
guarantee. GNMA is a wholly-owned U.S. Government corporation within the
Department of Housing and Urban Development and, as such, Ginnie Maes are backed
by the full faith and credit of the federal government. In contrast, MBSs issued
by FNMA include FNMA Guaranteed Mortgage Pass-Through Certificates ("Fannie
Maes") which are solely the obligations of FNMA and are neither backed by nor
entitled to the full faith and credit of the federal government). FNMA is a
government-sponsored enterprise which is also a private corporation whose stock
trades on the NYSE. Fannie Maes are guaranteed as to timely payment of principal
and interest by FNMA. MBSs issued by FHLMC include FHLMC Mortgage Participation
Certificates ("Freddie Macs" or "PCs"). FHLMC is a government-sponsored
enterprise whose MBSs are solely obligations of FHLMC. Therefore, Freddie Macs
are not guaranteed by the United States or by any Federal Home Loan Bank and do
not constitute a debt or obligation of the United States or of any Federal Home
Loan Bank. FHLMC guarantees timely payment of interest, but only ultimate
payment of principal due under the obligations it issues. FHLMC may, under
certain circumstances, remit the guaranteed payment of principal at any time
after default on an underlying mortgage, but in no event later than one year
after the guarantee becomes payable.
AMERICAN, EUROPEAN AND CONTINENTAL DEPOSITARY RECEIPTS -- Each LifePath Master
Portfolio assets may be invested in the securities of foreign issuers in the
form of American Depositary Receipts ("ADRs") and European Depositary Receipts
("EDRs"). These securities may not necessarily be denominated in the same
currency as the securities into which they may be converted. ADRs are receipts
typically issued by a United States bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. EDRs, which
are sometimes referred to as Continental Depositary Receipts ("CDRs"), are
receipts issued in Europe typically by non-United States banks and trust
companies that evidence ownership of either foreign or domestic securities.
Generally, ADRs in registered form are designed for use in the United States
securities markets and EDRs and CDRs in bearer form are designed for use in
Europe. Each LifePath Master Portfolio may invest in ADRs, EDRs and CDRs through
"sponsored" or "unsponsored" facilities. A sponsored facility is established
jointly by the issuer of the underlying security and a depositary, whereas a
depositary may establish an unsponsored facility without participation by the
issuer of the deposited security. Holders of unsponsored depositary receipts
generally bear all the costs of such facilities and the depositary of an
unsponsored facility frequently is under no obligation to
A-5 PROSPECTUS
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distribute shareholder communications received from the issuer of the deposited
security or to pass through voting rights to the holders of such receipts in
respect of the deposited securities.
CONVERTIBLE SECURITIES -- Each LifePath Master Portfolio may purchase
fixed-income convertible securities, such as bonds or preferred stock, which may
be converted at a stated price within a specified period of time into a
specified number of shares of common stock of the same or a different issuer.
Convertible securities are senior to common stock in a corporation's capital
structure, but usually are subordinated to non-convertible debt securities.
While providing a fixed-income stream (generally higher in yield than the income
from a common stock but lower than that afforded by a non-convertible debt
security), a convertible security also affords an investor the opportunity,
through its conversion feature, to participate in the capital appreciation of
the common stock into which it is convertible.
In general, the market value of a convertible security is the higher of its
"investment value" (i.e., its value as a fixed-income security) or its
"conversion value" (i.e., the value of the underlying shares of common stock if
the security is converted). As a fixed-income security, the market value of a
convertible security generally increases when interest rates decline and
generally decreases when interest rates rise. However, the price of a
convertible security also is influenced by the market value of the security's
underlying common stock. Thus, the price of a convertible security generally
increases as the market value of the underlying stock increases, and generally
decreases as the market value of the underlying stock declines. Investments in
convertible securities generally entail less risk than investments in the common
stock of the same issuer.
WARRANTS -- Each LifePath Master Portfolio may invest generally up to 5% of
its net assets at the time of purchase in warrants, except that this limitation
does not apply to warrants acquired in units or attached to securities. A
warrant is an instrument issued by a corporation which gives the holder the
right to subscribe to a specified amount of the corporation's capital stock at a
set price for a specified period of time. The prices of warrants do not
necessarily correlate with the prices of the underlying securities.
ILLIQUID SECURITIES -- Each Master Portfolio may invest up to 15% of the value
of its net assets in securities as to which a liquid trading market does not
exist, provided such investments are consistent with its investment objective.
Such securities may include securities that are not readily marketable, such as
certain securities that are subject to legal or contractual restrictions on
resale, participation interests that are not subject to the demand feature
described above, floating- and variable-rate demand obligations as to which a
Master Portfolio cannot exercise the related demand feature described above on
not more than seven days' notice and as to which there is no secondary market
and repurchase agreements providing for settlement in more than seven days after
notice. Disposing of illiquid securities generally will involve additional costs
and require additional time. However, if a substantial market of qualified
institutional investors develops pursuant to Rule 144A under the 1933 Act for
certain of these securities held by
PROSPECTUS A-6
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a Master Portfolio, such Master Portfolio intends to treat such securities as
liquid securities in accordance with procedures approved by MIP's Board of
Trustees. Because it is not possible to predict with assurance how the market
for restricted securities pursuant to Rule 144A will develop, MIP's Board of
Trustees has directed BGFA to monitor carefully each Master Portfolio's
investments in such securities with particular regard to trading activity,
availability of reliable price information and other relevant information. To
the extent that for a period of time, qualified institutional investors cease
purchasing such restricted securities pursuant to Rule 144A, a Master
Portfolio's investing in such securities may have the effect of increasing the
level of illiquidity in such Master Portfolio's portfolio during such period.
INVESTMENT COMPANY SECURITIES -- Each Master Portfolio may invest in
securities issued by other investment companies which principally invest in
securities of the type in which such Master Portfolio invests. Under the 1940
Act, a Master Portfolio's investment in such securities currently is limited to,
subject to certain exceptions, (i) 3% of the total voting stock of any one
investment company, (ii) 5% of such Master Portfolio's net assets with respect
to any one investment company and (iii) 10% of such Master Portfolio's net
assets in the aggregate. Investments in the securities of other investment
companies involve duplication of advisory fees and certain other expenses.
RATINGS -- The ratings of Moody's, S&P, Fitch and Duff represent their
opinions as to the quality of the obligations which they undertake to rate. It
should be emphasized, however, that ratings are relative and subjective and,
although ratings may be useful in evaluating the safety of interest and
principal payments, they do not evaluate the market value risk of such
obligations. Therefore, although these ratings may be an initial criterion for
selection of portfolio investments, BGFA also evaluates such obligations and the
ability of their issuers to pay interest and principal. Each Master Portfolio
relies on BGFA's judgment, analysis and experience in evaluating the
creditworthiness of an issuer. In this evaluation, BGFA takes into
consideration, among other things, the issuer's financial resources, its
sensitivity to economic conditions and trends, the quality of the issuer's
management and regulatory matters. It also is possible that a rating agency
might not timely change the rating on a particular issue to reflect subsequent
events. See "Description of the Funds -- Risk Considerations -- Fixed-Income
Securities."
INVESTMENT TECHNIQUES
STOCK INDEX OPTIONS -- Each LifePath Master Portfolio may purchase and write
(i.e., sell) put and call options on stock indices as a substitute for
comparable market positions in the underlying securities. A stock index
fluctuates with changes in the market values of the stocks included in the
index. The aggregate premiums paid on all options purchased may not exceed 20%
of a LifePath Master Portfolio's total assets and the value of options written
or purchased may not exceed 10% of the value of a LifePath Master Portfolio's
total assets.
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The effectiveness of purchasing or writing stock index options depends upon
the extent to which price movements in the LifePath Master Portfolio's portfolio
correlate with price movements of the stock index selected. Because the value of
an index option depends upon movements in the level of the index rather than the
price of a particular stock, whether a LifePath Master Portfolio realizes a gain
or loss from purchasing or writing options on an index depends upon movements in
the level of stock prices in the stock market generally or, in the case of
certain indices, in an industry or market segment, rather than movements in the
price of a particular stock.
When a LifePath Master Portfolio writes an option on a stock index, such
LifePath Master Portfolio places in a segregated account with MIP's custodian
cash, U.S. Government obligations or other liquid securities in an amount at
least equal to the market value of the underlying stock index and maintains the
account while the option is open or otherwise covers the transaction.
FUTURES TRANSACTIONS -- IN GENERAL -- None of the LifePath Master Portfolios
will be a commodity pool. To the extent permitted by applicable regulations,
each LifePath Master Portfolio is permitted to use futures as a substitute for a
comparable market position in the underlying securities.
A futures transaction involves a firm agreement to buy or sell a commodity or
financial instrument at a particular price on a specified future date. Futures
contracts are traded on exchanges, where the exchange serves as the ultimate
counterparty for all contracts. Consequently, the only credit risk on futures
contracts is the creditworthiness of the exchange. Futures contracts are,
however, subject to market risk (i.e., exposure to adverse price changes).
Each LifePath Master Portfolio may trade futures contracts and may purchase
and write options on futures contracts in U.S. domestic markets, such as the
Chicago Board of Trade and the International Monetary Market of the Chicago
Mercantile Exchange, or, to the extent permitted under applicable law, on
exchanges located outside the United States, such as the London International
Financial Futures Exchange, the Deutscher Aktienindex and the Sydney Futures
Exchange Limited. See "Description of the Funds -- Risk
Considerations -- Foreign Futures Transactions."
Each LifePath Master Portfolio's futures transactions must constitute
permissible transactions pursuant to regulations promulgated by the CFTC. In
addition, a LifePath Master Portfolio may not engage in futures transactions if
the sum of the amount of initial margin deposits and premiums paid for unexpired
options on futures contracts, other than those contracts entered into for bona
fide hedging purposes, would exceed 5% of the liquidation value of the Master
Portfolio's assets, after taking into account unrealized profits and unrealized
losses on such contracts; provided, however, that in the case of an option that
is in-the-money at the time of purchase, the in-the-money amount may be excluded
in calculating this 5% liquidation limit. Pursuant to regulations and/or
published positions of the SEC, a LifePath Master Portfolio may be required to
segregate
PROSPECTUS A-8
<PAGE> 63
cash, U.S. Government obligations or other high quality money market instruments
in connection with its futures transactions in an amount generally equal to the
entire value of the underlying commitment.
Initially, when purchasing or selling futures contracts a LifePath Master
Portfolio is required to deposit with the Portfolio's custodian in the broker's
name an amount of cash or cash equivalents up to approximately 10% of the
contract amount. This amount is subject to change by the exchange or board of
trade on which the contract is traded. Members of such exchange or board of
trade may impose their own higher requirements. This amount is known as "initial
margin" and is in the nature of a performance bond or good faith deposit on the
contract which is returned to such LifePath Master Portfolio upon termination of
the futures position, assuming all contractual obligations have been satisfied.
Subsequent payments to and from the broker, known as "variation margin," are
made daily as the price of the index or securities underlying the futures
contract fluctuates, making the long and short positions in the futures contract
more or less valuable, a process known as "marking-to-market." At any time prior
to the expiration of a futures contract, a LifePath Master Portfolio may elect
to close the position by taking an opposite position, at the then-prevailing
price, thereby terminating its existing position in the contract.
Although each LifePath Master Portfolio may purchase or sell futures contracts
only if there is an active market for such contracts, no assurance can be given
that a liquid market will exist for any particular contract at any particular
time. Many futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single trading day. Once the daily
limit has been reached in a particular contract, no trades may be made that day
at a price beyond that limit or trading may be suspended for specified periods
during the trading day. Futures contract prices could move to the limit for
several consecutive trading days with little or no trading, thereby preventing
prompt liquidation of futures positions and potentially subjecting the relevant
LifePath Master Portfolio to substantial losses. If it is not possible, or the
LifePath Master Portfolio determines not to close a futures position in
anticipation of adverse price movements, it will be required to make daily cash
payments of variation margin.
An option on a futures contract gives the purchaser the right, in return for
the premium paid, to assume a position in a futures contract (a long position if
the option is a call and a short position if the option is a put) at a specified
exercise price at any time during the option exercise period. The writer (i.e.,
seller) of the option is required upon exercise to assume an offsetting futures
position (a short position if the option is a call and a long position if the
option is a put). Upon exercise of the option, the assumption of offsetting
futures positions by both the writer and the holder of the option will be
accompanied by delivery of the accumulated cash balance in the writer's futures
margin account in the amount by which the market price of the futures contract,
at exercise,
A-9 PROSPECTUS
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exceeds (in the case of a call) or is less than (in the case of a put) the
exercise price of the option on the futures contract.
STOCK INDEX FUTURES AND OPTIONS ON STOCK INDEX FUTURES -- Each LifePath Master
Portfolio may purchase and sell stock index futures contracts and options on
stock index futures contracts.
A stock index future obligates the seller to deliver (and the purchaser to
take), effectively, an amount of cash equal to a specific dollar amount times
the difference between the value of a specific stock index at the close of the
last trading day of the contract and the price at which the agreement is made.
No physical delivery of the underlying stocks in the index is made. With respect
to stock indices that are permitted investments, each LifePath Master Portfolio
intends to purchase and sell futures contracts on the stock index for which it
can obtain the best price with consideration also given to liquidity.
INTEREST RATE FUTURES CONTRACTS AND OPTIONS ON INTEREST RATE FUTURES
CONTRACTS -- Each LifePath Master Portfolio may invest in interest rate futures
contracts and options on interest rate futures contracts as a substitute for a
comparable market position in the underlying securities.
Each LifePath Master Portfolio also may write options on interest rate futures
contracts as part of closing purchase transactions to terminate its options
positions. No assurance can be given that such closing transactions can be
effected or concerning the degree of correlation between price movements in the
options on interest rate futures and price movements in the LifePath Master
Series' portfolio securities which are the subject of the transaction.
INTEREST RATE AND INDEX SWAPS -- Each LifePath Master Portfolio may enter into
interest rate and index swaps in pursuit of its investment objective. Interest
rate swaps involve the exchange by a LifePath Master Portfolio with another
party of their respective commitments to pay or receive interest (for example,
an exchange of floating-rate payments for fixed-rate payments). Index swaps
involve the exchange by a LifePath Master Portfolio with another party of cash
flows based upon the performance of an index or a portion of an index (usually
including dividends or income). In each case, the exchange commitments can
involve payments to be made in the same currency or in different currencies.
Each LifePath Master Portfolio usually enters into swaps on a net basis. In so
doing, only the net difference of the payment obligations is exchanged between
the counterparties. If a LifePath Master Portfolio enters into a swap, it
maintains a segregated account in an amount equivalent to the gross value of its
payment obligations unless the contract provides otherwise. If the other party
to such a transaction defaults on a swap, the Master Series has contractual
remedies pursuant to the agreements related to the transaction. In such a case,
the LifePath Master Portfolio's risk of loss consists of the net
PROSPECTUS A-10
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amount of payments that the LifePath Master Portfolio contractually is entitled
to receive.
The use of interest rate and index swaps is a highly specialized activity
which involves investment techniques different from those associated with
ordinary portfolio security transactions. There is no limit, except as provided
below, on the amount of swap transactions that may be entered into by a Master
Portfolio. These transactions generally do not involve the delivery of
securities or other underlying assets or principal. Accordingly, the risk of
loss with respect to swaps generally is limited to the net amount of payments
that the LifePath Master Portfolio is contractually entitled to receive. No
LifePath Master Portfolio invests more than 15% of the value of its net assets
in swaps that are illiquid, and in other illiquid securities.
FOREIGN CURRENCY TRANSACTIONS -- Each LifePath Master Portfolio may engage in
currency exchange transactions either on a spot (i.e., cash) basis at the rate
prevailing in the currency exchange market, or by entering into forward
contracts to purchase or sell currencies. A forward currency exchange contract
involves an obligation between two parties to exchange a specific currency at a
set price on a future date, which must be more than two days from the date of
the contract. These contracts are entered into in the interbank market conducted
directly between currency traders (typically commercial banks or other financial
institutions) and their customers.
Each LifePath Master Portfolio may combine forward currency exchange contracts
with investments in securities denominated in other currencies.
Each LifePath Master Portfolio also may maintain short positions in forward
currency exchange transactions, which would involve the Master Portfolio
agreeing to exchange an amount of a currency it did not currently own for
another currency at a future date in anticipation of a decline in the value of
the currency sold relative to the currency such Master Portfolio contracted to
receive in the exchange.
LENDING PORTFOLIO SECURITIES -- From time to time, each Master Portfolio may
lend securities from its portfolio to brokers, dealers and other financial
institutions needing to borrow securities to complete certain transactions. Such
loans may not exceed one-third of the value of the relevant Master Portfolio's
total net assets. In connection with such loans, each Master Portfolio receives
collateral consisting of cash, U.S. Government obligations or other high-quality
debt instruments which will be maintained at all times in an amount equal to at
least 100% of the current market value of the loaned securities. Each Master
Portfolio can increase its income through the investment of such collateral.
Each Master Portfolio continues to be entitled to receive payments in amounts
equal to the dividends, interest and other distributions payable on the loaned
security and receives interest on the amount of the loan. Such loans are
terminable at any time upon specified notice. A Master Portfolio might
experience risk of loss if the institution with which it has engaged in a
portfolio loan transaction breaches its agreement with such Master Portfolio.
A-11 PROSPECTUS
<PAGE> 66
FORWARD COMMITMENTS -- Each Master Portfolio may purchase securities on a
when-issued or forward commitment basis, which means that the price is fixed at
the time of commitment but delivery and payment ordinarily take place a number
of days after the date of the commitment to purchase. A Master Portfolio makes
commitments to purchase such securities only with the intention of actually
acquiring the securities, but the Master Portfolio may sell these securities
before the settlement date if it is deemed advisable. A Master Portfolio will
not accrue income in respect of a security purchased on a forward commitment
basis prior to its stated delivery date.
Securities purchased on a when-issued or forward commitment basis and certain
other securities held in a Master Portfolio's portfolio are subject to changes
in value (both generally changing in the same way, i.e., appreciating when
interest rates decline and depreciating when interest rates rise) based upon the
public's perception of the creditworthiness of the issuer and changes, real or
anticipated, in the level of interest rates. Securities purchased on a
when-issued or forward commitment basis may expose the relevant Master Portfolio
to risk because they may experience such fluctuations prior to their actual
delivery. Purchasing securities on a when-issued or forward commitment basis can
involve the additional risk that the yield available in the market when the
delivery takes place actually may be higher than that obtained in the
transaction itself. A segregated account of each Master Portfolio consisting of
cash, U.S. Government obligations or other high quality liquid debt securities
at least equal at all times to the amount of the when-issued or forward
commitments is established and maintained at MIP's custodian bank. Purchasing
securities on a forward commitment basis when a Master Portfolio is fully or
almost fully invested may result in greater potential fluctuation in the value
of such Master Portfolio's net assets and its net asset value per share.
BORROWING MONEY -- As a fundamental policy, each Master Portfolio is permitted
to borrow to the extent permitted under the 1940 Act. However, each Master
Portfolio currently intends to borrow money only for temporary or emergency (not
leveraging) purposes, in an amount up to one-third of the value of its total net
assets (including the amount borrowed) valued at the lesser of cost or market,
less liabilities (not including the amount borrowed) at the time the borrowing
is made. While borrowings exceed 5% of a Master Portfolio's total net assets,
such Master Portfolio will not make any investments.
PROSPECTUS A-12
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[STAGECOACH FUNDING LOGO]
P.O. Box 7066
San Francisco, CA 94120-7066
STAGECOACH FUNDS:
- --------------------------------------------------------------------------------
<TABLE>
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- are NOT INSURED BY THE FDIC or U.S. Government
- are NOT obligations or deposits of Wells Fargo Bank
nor guaranteed by the Bank LOGO
- involve investment risk, including possible loss of
principal.
</TABLE>
[LOGO]
Printed on Recycled Paper LP0220 (2/97)
<PAGE> 69
<TABLE>
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------------------
[STAGECOACH FUNDING LOGO] BULK RATE
P.O. Box 7066 U.S. POSTAGE
San Francisco, CA 94120-7066 PAID
DALLAS, TEXAS
Permit No. 1808
------------------
- -------------------------------------------------------------------------------
STAGECOACH FUNDS:
-------------------------------------------------------------------------
- are NOT INSURED BY THE FDIC or U.S. Government
- are NOT obligations or deposits of Wells Fargo Bank
nor guaranteed by the Bank
- involve investment risk, including possible loss of LOGO
principal.
- -------------------------------------------------------------------------------
</TABLE>
LP0220 2/97
<PAGE> 70
STAGECOACH LIFEPATH(TM) FUNDS
LIFEPATH 2000(TM) FUND
LIFEPATH 2010(TM) FUND
LIFEPATH 2020(TM) FUND
LIFEPATH 2030(TM) FUND
LIFEPATH 2040(TM) FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
JANUARY 15, 1997
This Statement of Additional Information ("SAI"), which is not a
prospectus, supplements and should be read in conjunction with the current
Prospectus describing the LifePath 2000 Fund, LifePath 2010 Fund, LifePath 2020
Fund, LifePath 2030 Fund and LifePath 2040 Fund (the "LifePath Funds" or the
"Funds") of Stagecoach Trust (the "Trust"), also dated January 15, 1997, as it
may be revised from time to time. A copy of the Funds' Prospectus may be
obtained without charge by writing Stephens Inc. ("Stephens"), sponsor,
administrator and distributor, at 111 Center Street, Little Rock, Arkansas
72201, or by calling at 1-800-643-9691.
As described in the Prospectus, each Fund invests all of its
assets in a separate master portfolio (each, a "Master Portfolio") of Master
Investment Portfolio ("MIP"), an open-end, series investment company. Each
Master Portfolio has the same investment objective as the corresponding Fund.
Barclays Global Fund Advisors ("BGFA") serves as investment adviser to each
Master Portfolio. Prior to January 1, 1996, Wells Fargo Bank, N.A. ("Wells
Fargo Bank") served as each Master Portfolio's investment adviser and Wells
Fargo Nikko Investment Advisors ("WFNIA") served as each Master Portfolio's
sub-investment adviser. BGFA was created by the reorganization of WFNIA with
and into an affiliate of Wells Fargo Institutional Trust Company ("WFITC"), the
former custodian to the Funds and Master Portfolio's BGFA is now a subsidiary
of WFITC which, effective January 1, 1996, changed its name to Barclays Global
Investors, N.A. ("BGI").
This SAI applies to Class A (formerly, the Retail Class), Class B
and Institutional Class shares of the LifePath Funds. Net asset value, total
return and yield quotations are computed separately for each class of Fund
shares. Because of the differences in the fees and expenses borne by Class A
and Class B shares of the Funds, the return/yield on such shares can be
expected, at any given time, to be lower than the return/yield on Institutional
Class shares. Distributions to holders of Class A and Class B shares are
reduced by the amount of distribution-related expenses payable under the
Distribution Plan for each such Class.
<PAGE> 71
TABLE OF CONTENTS
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Investment Objectives and Management Policies . . . . . . . . . . . . . . . . 3
Management of the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Management Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Purchase and Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . 17
Determination of Net Asset Value . . . . . . . . . . . . . . . . . . . . . . 17
Dividends, Distributions and Taxes . . . . . . . . . . . . . . . . . . . . . 18
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Performance Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Information About the Funds . . . . . . . . . . . . . . . . . . . . . . . . . 29
Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
</TABLE>
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<PAGE> 72
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES
General. Each LifePath Fund seeks to achieve its investment
objective by investing all of its assets in a corresponding Master Portfolio of
MIP. A Fund may withdraw its investment from such Master Portfolio at any time
if the Trust's Board of Trustees determines that it is in the best interest of
the Fund and its shareholders to do so. Since the investment characteristics
of a Fund correspond directly to those of the relevant Master Portfolio, the
following is a discussion of the various investment policies and techniques
employed by each corresponding LifePath Master Portfolio.
Portfolio Securities
Bank Obligations. Domestic commercial banks organized under
federal law are supervised and examined by the Comptroller of the Currency and
are required to be members of the Federal Reserve System and to have their
deposits insured by the Federal Deposit Insurance Corporation (the "FDIC").
Domestic banks organized under state law are supervised and examined by state
banking authorities, but are members of the Federal Reserve System only if they
elect to join. In addition, state banks whose certificates of deposit ("CDs")
may be purchased by each Master Portfolio are insured by the FDIC (although
such insurance may not be of material benefit to the Master Portfolio,
depending on the principal amount of the CDs of each bank held by the Master
Portfolio) and are subject to federal examination and to a substantial body of
federal law and regulation. As a result of federal or state laws and
regulations, domestic branches of domestic banks whose CDs may be purchased by
each Master Portfolio generally are required, among other things, to maintain
specified levels of reserves, are limited in the amounts which they can loan to
a single borrower and are subject to other regulations designed to promote
financial soundness. However, not all of such laws and regulations apply to
the foreign branches of domestic banks.
Obligations of foreign branches of domestic banks, foreign
subsidiaries of domestic banks and domestic and foreign branches of foreign
banks, such as CDs and time deposits ("TDs"), may be general obligations of the
parent banks in addition to the issuing branch, or may be limited by the terms
of a specific obligation and/or governmental regulation. Such obligations are
subject to different risks than are those of domestic banks. These risks
include foreign economic and political developments, foreign governmental
restrictions that may adversely affect payment of principal and interest on the
obligations, foreign exchange controls and foreign withholding and other taxes
on interest income. These foreign branches and subsidiaries are not
necessarily subject to the same or similar regulatory requirements that apply
to domestic banks, such as mandatory reserve requirements, loan limitations,
and accounting, auditing and financial record keeping requirements. In
addition, less information may be publicly available about a foreign branch of
a domestic bank or about a foreign bank than about a domestic bank.
Obligations of U.S. branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation or by federal or state regulation
as well as governmental action in the country in which the foreign bank has its
head office. A domestic branch of a foreign bank with assets in excess of $1
billion may be
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<PAGE> 73
subject to reserve requirements imposed by the Federal Reserve System or by the
state in which the branch is located if the branch is licensed in that state.
In addition, federal branches licensed by the Comptroller of the
Currency and branches licensed by certain states ("State Branches") may be
required to: (1) pledge to the appropriate regulatory authority, by depositing
assets with a designated bank within the relevant state, a certain percentage
of their assets as fixed from time to time by such regulatory authority; and
(2) maintain assets within the relevant state in an amount equal to a specified
percentage of the aggregate amount of liabilities of the foreign bank payable
at or through all of its agencies or branches within the state. The deposits
of federal and State Branches generally must be insured by the FDIC if such
branches take deposits of less than $100,000.
In view of the foregoing factors associated with the purchase of
CDs and TDs issued by foreign branches of domestic banks, by foreign
subsidiaries of domestic banks, by foreign branches of foreign banks or by
domestic branches of foreign banks, BGFA carefully evaluates such investments
on a case-by-case basis.
Each Master Portfolio may purchase CDs issued by banks, savings
and loan associations and similar thrift institutions with less than $1 billion
in assets, provided that such institutions are members of the FDIC, and further
provided that such Master Portfolio purchases any such CD in a principal amount
of not more than $100,000, which amount would be fully insured by the Bank
Insurance Fund or the Savings Association Insurance Fund administered by the
FDIC. Interest payments on such a CD are not insured by the FDIC. No Master
Portfolio will own more than one such CD per issuer.
Management Policies
Stock Index Options. Each LifePath Master Portfolio may purchase
and write (i.e., sell) put and call options on stock indices as a substitute
for comparable market positions in the underlying securities. Options on stock
indices are similar to options on stock except that (a) the expiration cycles
of stock index options are monthly, while those of stock options are currently
quarterly, and (b) the delivery requirements are different. Instead of giving
the right to take or make delivery of stock at a specified price, an option on
a stock index gives the holder the right to receive a cash "exercise settlement
amount" equal to (i) the amount, if any, by which the fixed exercise price of
the option exceeds, in the case of a put, or is less than, in the case of a
call, the closing value of the underlying index on the date of exercise,
multiplied by (ii) a fixed "index multiplier." Receipt of this cash amount
depends upon the closing level of the stock index upon which the option is
based being greater than, in the case of a call, or less than, in the case of a
put, the exercise price of the option. The amount of cash received is equal to
such difference between the closing price of the index and the exercise price
of the option expressed in dollars multiplied by a specified multiplier. The
writer of the option is obligated, in return for the premium received, to make
delivery of this amount. The writer may offset a position in stock index
options prior to expiration by entering into a closing transaction on an
exchange or the writer may let the option expire unexercised.
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<PAGE> 74
Futures Contracts and Options on Futures Contracts. The LifePath
Master Portfolios may enter into futures contracts and may purchase and write
options thereon. Upon the exercise of an option on a futures contract, the
writer of the option delivers to the holder of the option the futures position
and the accumulated balance in the writer's futures margin account, which
represents the amount by which the market price of the futures contract
exceeds, in the case of a call, or is less than, in the case of a put, the
exercise price of the option on the futures contract. The potential loss
related to the purchase of options on futures contracts is limited to the
premium paid for the option (plus transaction costs). Because the value of the
option is fixed at the time of sale, there are no daily cash payments to
reflect changes in the value of the underlying contract; however, the value of
the option may change daily and that change would be reflected in the net asset
value of the relevant LifePath Master Portfolio.
Foreign Currency Transactions. If a LifePath Master Portfolio
enters into a foreign currency transaction or forward contract, such Master
Portfolio deposits, if required by applicable regulations, with MIP's custodian
cash or high-grade debt securities in a segregated account of the LifePath
Master Portfolio in an amount at least equal to the value of the Master
Portfolio's total assets committed to the consummation of the forward contract.
If the value of the securities placed in the segregated account declines,
additional cash or securities is placed in the account so that the value of the
account equals the amount of the LifePath Master Portfolio's commitment with
respect to the contract.
At or before the maturity of a forward contract, a LifePath Master
Portfolio either may sell a portfolio security and make delivery of the
currency, or may retain the security and offset its contractual obligation to
deliver the currency by purchasing a second contract pursuant to which such
Master Portfolio obtains, on the same maturity date, the same amount of the
currency which it is obligated to deliver. If the Master Portfolio retains the
portfolio security and engages in an offsetting transaction, such Master
Portfolio, at the time of execution of the offsetting transaction, incurs a
gain or a loss to the extent that movement has occurred in forward contract
prices. Should forward prices decline during the period between the Master
Portfolio's entering into a forward contract for the sale of a currency and the
date it enters into an offsetting contract for the purchase of the currency,
the Master Portfolio realizes a gain to the extent the price of the currency it
has agreed to sell exceeds the price of the currency it has agreed to purchase.
Should forward prices increase, the Master Portfolio suffers a loss to the
extent the price of the currency it has agreed to purchase exceeds the price of
the currency it has agreed to sell.
The cost to a LifePath Master Portfolio of engaging in currency
transactions varies with factors such as the currency involved, the length of
the contract period and the market conditions then prevailing. Because
transactions in currency exchange usually are conducted on a principal basis,
no fees or commissions are involved. BGFA considers on an ongoing basis the
creditworthiness of the institutions with which a LifePath Master Portfolio
enters into foreign currency transactions. The use of forward currency
exchange contracts does not eliminate fluctuations in the underlying prices of
the securities, but it does establish a rate of exchange that can be achieved
in the future. If a devaluation generally is anticipated, the Master Portfolio
may not be able to contract to sell the currency at a price above the
devaluation level it anticipates.
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<PAGE> 75
The purchase of options on currency futures allows a LifePath
Master Portfolio, for the price of the premium it must pay for the option, to
decide whether or not to buy (in the case of a call option) or to sell (in the
case of a put option) a futures contract at a specified price at any time
during the period before the option expires.
Future Developments. Each LifePath Master Portfolio may take
advantage of opportunities in the areas of options and futures contracts and
options on futures contracts and any other derivative investments which are not
presently contemplated for use by such Master Portfolio or which are not
currently available but which may be developed, to the extent such
opportunities are both consistent with a LifePath Master Portfolio's investment
objective and legally permissible for the Master Portfolio. Before entering
into such transactions or making any such investment, a LifePath Master
Portfolio would provide appropriate disclosure in its Prospectus or this SAI.
Lending Portfolio Securities. To a limited extent, each Master
Portfolio may lend its portfolio securities to brokers, dealers and other
financial institutions, provided it receives cash collateral which is
maintained at all times in an amount equal to at least 100% of the current
market value of the securities loaned. By lending its portfolio securities, a
Master Portfolio can increase its income through the investment of the cash
collateral or by receipt of a loan premium from the borrower. For purposes of
this policy, each Master Portfolio considers collateral consisting of U.S.
Government obligations or irrevocable letters of credit issued by banks whose
securities meet the standards for investment by such Master Portfolio to be the
equivalent of cash. From time to time, a Master Portfolio may return to the
borrower, or to a third party which is unaffiliated with MIP, and which is
acting as a "placing broker," a part of the interest earned from the investment
of collateral received in exchange for securities loaned.
The Securities and Exchange Commission ("SEC') currently requires
that the following conditions must be met whenever portfolio securities are
loaned: (1) the Master Portfolio must receive at least 100% cash collateral
from the borrower; (2) the borrower must increase such collateral whenever the
market value of the securities loaned rises above the level of such collateral;
(3) the Master Portfolio must be able to terminate the loan at any time; (4)
the Master Portfolio must receive reasonable interest on the loan, as well as
any dividends, interest or other distributions payable on the loaned
securities, and any increase in market value; (5) the Master Portfolio may pay
only reasonable custodian fees in connection with the loan; and (6) while
voting rights on the loaned securities may pass to the borrower, MIP's Board of
Trustees must terminate the loan and regain the right to vote the securities if
a material event adversely affecting the investment occurs. These conditions
may be subject to future modification.
Investment Restrictions. Each Fund and Master Portfolio has
adopted investment restrictions numbered 1 through 10 as fundamental policies.
These restrictions cannot be changed, as to a Fund or Master Portfolio, without
approval by the holders of a majority (as defined in the Investment Company Act
of 1940, as amended (the "1940 Act")) of the outstanding voting securities of
such Fund or Master Portfolio, as the case may be. Whenever a Fund is
requested to vote on a fundamental policy of the Master Portfolio in which it
invests, such Fund
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<PAGE> 76
holds a meeting of Fund shareholders and casts its votes as instructed by such
Fund's shareholders. Investment restrictions numbered 11 through 20 are not
fundamental policies and may be changed by vote of a majority of the Trustees
of the Trust or MIP, as the case may be, at any time. No Fund or Master
Portfolio may:
1. Invest more than 5% of its assets in obligations of any
single issuer, except that up to 25% of the value of its total assets may be
invested, and securities issued or guaranteed by the U.S. Government, or its
agencies or instrumentalities may be purchased, without regard to any such
limitation.
2. Hold more than 10% of the outstanding voting securities of
any single issuer. This Investment Restriction applies only with respect to
75% of its total assets.
3. Invest in commodities, except that each Fund or Master
Portfolio may purchase and sell (i.e., write) options, forward contracts,
futures contracts, including those relating to indices and options on futures
contracts or indices.
4. Purchase, hold or deal in real estate, or oil, gas or other
mineral leases or exploration or development programs, but each Fund or Master
Portfolio may purchase and sell securities that are secured by real estate or
issued by companies that invest or deal in real estate.
5. Borrow money, except to the extent permitted under the 1940
Act. For purposes of this investment restriction, a Fund's or Master
Portfolio's entry into options, forward contracts, futures contracts, including
those relating to indices and options on futures contracts or indices shall not
constitute borrowing to the extent certain segregated accounts are established
and maintained by the Fund or Master Portfolio as described in the Prospectus.
6. Make loans to others, except through the purchase of debt
obligations and the entry into repurchase agreements. However, each Fund or
Master Portfolio may lend its portfolio securities in an amount not to exceed
one- third of the value of its total assets. Any loans of portfolio securities
will be made according to guidelines established by the SEC and the Board of
Trustees of the Trust or MIP, as the case may be.
7. Act as an underwriter of securities of other issuers,
except to the extent the Fund or Master Portfolio, as the case may be, may be
deemed an underwriter under the Securities Act of 1933, as amended, by virtue
of disposing of portfolio securities.
8. Invest 25% or more of its total assets in the securities of
issuers in any particular industry or group of closely related industries,
except that, in the case of each Fund or Master Portfolio, there shall be no
limitation on the purchase of obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
9. Issue any senior security (as such term is defined in
Section 18(g) of the 1940 Act), except to the extent the activities permitted
in Investment Restriction Nos. 3, 5, 12 and 13
7
<PAGE> 77
may be deemed to give rise to a senior security or as otherwise permitted under
the rules and regulations or an exemptive order of the SEC.
10. Purchase securities on margin, but each Fund or Master
Portfolio may make margin deposits in connection with transactions in options,
forward contracts, futures contracts, including those relating to indices, and
options on futures contracts or indices.
11. Invest in securities of a company for the purpose of
exercising management or control, but each Fund or Master Portfolio will vote
the securities it owns in its portfolio as a shareholder in accordance with its
views.
12. Pledge, mortgage or hypothecate its assets, except to the
extent necessary to secure permitted borrowings and to the extent related to
the purchase of securities on a when-issued or forward commitment basis and the
deposit of assets in escrow in connection with writing covered put and call
options and collateral and initial or variation margin arrangements with
respect to options, forward contracts, futures contracts, including those
relating to indices, and options on futures contracts or indices.
13. Purchase, sell or write puts, calls or combinations
thereof, except as may be described in the Funds' Prospectus and this SAI.
14. Purchase securities of any company having less than three
years' continuous operations (including operations of any predecessors) if such
purchase would cause the value of its investments in all such companies to
exceed 5% of the value of its total assets.
15. Enter into repurchase agreements providing for settlement
in more than seven days after notice or purchase securities which are illiquid,
if, in the aggregate, more than 15%, in the case of a LifePath Fund and
LifePath Master Portfolio, of the value of its net assets would be so invested.
Although each Fund and LifePath Master Portfolio reserves the right to invest
up to 15% of the value of its net assets in repurchase agreements providing for
settlement in more than seven days after notice and in other illiquid
securities, as long as such Fund's shares are registered for sale in a state
that imposes a lower limit on the percentage of a Fund's assets that may be so
invested, such Fund and LifePath Master Portfolio will comply with the lower
limit. Each Fund currently is limited to investing up to 10% of the value of
its net assets in such securities due to limits applicable in several states.
16. Purchase securities of other investment companies, except
to the extent permitted under the 1940 Act.
17. Purchase, hold or deal in real estate limited partnerships.
18. Purchase warrants that exceed 2% of the value of the Fund's
or Master Portfolio's net assets, if those warrants are not listed on the New
York or American Stock Exchanges.
8
<PAGE> 78
19. Purchase or retain securities of any issuer if the
officers, trustees of the Trust or MIP, its advisers or managers owning
beneficially more than one-half of one percent of the securities of an issuer
together own beneficially more than five percent of the securities of that
issuer.
20. Engage in any short sales other than short sales against
the box.
As a fundamental policy, each LifePath Fund may invest,
notwithstanding any other investment restriction (whether or not fundamental),
all of its assets in the securities of a single open-end management investment
company with substantially the same fundamental investment objectives, policies
and restrictions as such Fund.
If a percentage restriction is adhered to at the time of
investment, a later change in percentage resulting from a change in values or
assets, except with respect to compliance with Investment Restriction No. 5,
will not constitute a violation of such restriction.
The Trust may make commitments more restrictive than the restrictions
listed above so as to permit the sale of shares of a LifePath Fund in certain
states. Should the Trust determine that a commitment is no longer in the best
interest of the LifePath Fund and its shareholders, the Trust reserves the
right to revoke the commitment by terminating the sale of such LifePath Fund's
shares in the state involved.
MANAGEMENT OF THE TRUST
The following information supplements and should be read in
conjunction with the Prospectus section entitled "Management of the Funds."
Trustees and officers of the Trust, together with information as to their
principal business occupations during at least the last five years, are shown
below. The address of each, unless otherwise indicated, is 111 Center Street,
Little Rock, Arkansas 72201. Trustees who are deemed to be an "interested
person" of the Trust for purposes of the 1940 Act are indicated by an asterisk.
<TABLE>
<CAPTION>
Principal Occupations
Name, Address and Age Position During Past 5 Years
- --------------------- -------- ---------------------
<S> <C> <C>
Jack S. Euphrat, 74 Trustee Private Investor.
415 Walsh Road
Atherton, CA 94027.
*R. Greg Feltus, 45 Trustee, Senior Vice President of Stephens,
Chairman and Manager of Financial Services Group,
President President of Stephens Insurance Services Inc.; Senior Vice
President of Stephens Sports Management Inc.; and
President of Investors Brokerage Insurance Inc.
</TABLE>
9
<PAGE> 79
<TABLE>
<S> <C> <C>
Thomas S. Goho, 54 Trustee T.B. Rose Faculty Fellow-Business,
321 Beechcliff Court Wake Forest University, Calloway
Winston-Salem, NC 27104 School of Business and Accounting. Associate Professor of
Finance, Calloway School of Business and Accounting at
Wake Forest University since 1983.
*Zoe Ann Hines, 47 Trustee Senior Vice President of Stephens and
(resigned as of Director of Brokerage Accounting; and
September 6, 1996) Secretary of Stephens Resource Management.
*W. Rodney Hughes, 70 Trustee Private Investor.
31 Dellwood Court
San Rafael, CA 94901
Robert M. Joses, 78 Trustee Private Investor.
47 Dowitcher Way
San Rafael, CA 94901
*J. Tucker Morse, 52 Trustee Private Investor; Real Estate Developer
10 Legrae Street Chairman of Renaissance Properties Ltd.,
Charleston, SC 29401 President of Morse Investment Corporation; and Co-Managing
Partner of Main Street Ventures.
Richard H. Blank, Jr., 40 Chief Associate of Financial Services
Operating Group of Stephens; Director of Stephens
Officer, Sports Management Inc.; and Director of
Secretary and Capo Inc.
Treasurer
Joseph N. Hankin, 55 Trustee President, Westchester Community
75 Grasslands Road College since 1971; President of
Valhalla, NY 10595 Hartford Junior College from 1967
(appointed as of to 1971; Adjunct Professor of
September 6, 1996) Columbia University Teachers College
since 1976.
</TABLE>
10
<PAGE> 80
COMPENSATION TABLE
For the Fiscal Year Ended February 29, 1996
<TABLE>
<CAPTION>
Total Compensation
Aggregate Compensation from Registrant
Name and Position from Registrant and Fund Complex
- ----------------- ---------------------- ------------------
<S> <C> <C>
Jack S. Euphrat 0 $39,000
Trustee
*R. Greg Feltus 0 0
Trustee
Thomas S. Goho 0 $39,000
Trustee
*Zoe Ann Hines 0 0
Trustee
*W. Rodney Hughes 0 $36,250
Trustee
Robert M. Joses 0 $38,250
Trustee
*J. Tucker Morse 0 $33,000
Trustee
</TABLE>
Trustees of the Trust are compensated annually by the Trust and by
all the registrants in the fund complex for their services as indicated above
and also are reimbursed for all out-of-pocket expenses relating to attendance
at board meetings. Each of the Trustees and Officers of the Trust serves in
the identical capacity as Directors/Trustees and/or Officers of Overland
Express Funds, Inc., ("Overland") Stagecoach Funds, Inc. ("Stagecoach"),
MasterWorks Funds Inc. ("MasterWorks," formerly, Stagecoach Inc.), Master
Investment Portfolio ("MIP"), Life & Annuity Trust, Master Investment Trust and
Managed Series Investment Trust ("MSIT"), each of which is a registered
open-end management investment company and each of which, prior to January 1,
1996 and the reorganization of WFNIA was considered to be in the same "fund
complex," as such term is defined in Form N-1A under the 1940 Act, as the
Trust. Effective January 1, 1996, MIP, MSIT and MasterWorks are considered to
be members of the same fund complex and are no longer part of the same fund
complex as the Trust, Stagecoach, Overland, Life & Annuity Trust and Master
Investment Trust. The Trustees are compensated by other Companies and Trusts
within the fund complex for their services as Directors/Trustees to such
Companies and Trusts. Currently the Trustees do not receive any retirement
benefits or deferred compensation from the Trust or any other member of the
fund complex.
11
<PAGE> 81
As the date of this SAI, the Trustees Officers of the Trust as a
group beneficially owned less than 1% of the outstanding shares of the Trust.
MANAGEMENT ARRANGEMENTS
Investment Advisory Agreement. BGFA provides investment advisory
services to each LifePath Master Portfolio pursuant to separate Investment
Advisory Contracts (each a "BGFA Advisory Contract") dated January 1, 1996 with
MIP. As to each Master Portfolio, the applicable BGFA Advisory Contract is
subject to annual approval by (i) MIP's Board of Trustees or (ii) vote of a
majority (as defined in the 1940 Act) of the outstanding voting securities of
such Master Portfolio, provided that in either event the continuance also is
approved by a majority of MIP's Board of Trustees who are not "interested
persons" (as defined in the 1940 Act) of MIP or BGFA, by vote cast in person at
a meeting called for the purpose of voting on such approval. As to each Master
Portfolio, the applicable BGFA Advisory Contract is terminable without penalty,
on 60 days' written notice, by either party. The applicable BGFA Advisory
Contract will terminate automatically, as to the relevant Master Portfolio, in
the event of its assignment (as defined in the 1940 Act).
Prior to January 1, 1996, Wells Fargo Bank provided investment
advisory services to each Master Portfolio pursuant to an Investment Advisory
Agreement (the "Advisory Agreement") dated February 25, 1994 with MIP.
For the fiscal year ended February 28, 1995 and the period
beginning March 1, 1995 and ended December 31, 1995, the portion of advisory
fees paid to Wells Fargo Bank by the corresponding Master Portfolio of each
LifePath Fund and the amount of such fees waived by Wells Fargo Bank that is
allocable to each Fund is shown below. For the period beginning January 1,
1996 and ended February 29, 1996, the portion of advisory fees paid to BGFA by
the corresponding Master Portfolio of each LifePath Fund and the amount of such
fees waived by BGFA that is allocable to each Fund is shown below.
<TABLE>
<CAPTION>
Fiscal Year 3/1/95 - 1/1/96-
End 2/28/95 12/31/95 2/29/96
----------- -------- -------
Fees Fees Fees Fees Fees Fees
Master Portfolio Paid Waived Paid Waived Paid Waived
- ---------------- ---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C>
LifePath 2000 Master Portfolio $217,676 $0 $363,537 $0 $ 99,511 $0
LifePath 2010 Master Portfolio $158,218 $0 $312,434 $0 $ 86,919 $0
LifePath 2020 Master Portfolio $252,413 $0 $520,296 $0 $141,075 $0
LifePath 2030 Master Portfolio $156,397 $0 $343,850 $0 $ 93,240 $0
LifePath 2040 Master Portfolio $189,121 $0 $503,315 $0 $148,324 $0
</TABLE>
Sub-Investment Advisory Agreement. Prior to January 1, 1996 WFNIA
provided sub-investment advisory services to each Master Portfolio pursuant to
the Sub-Investment Advisory Agreement (the "Sub-Advisory Agreement") dated
February 25, 1994 with Wells Fargo Bank.
12
<PAGE> 82
For the fiscal year ended February 28, 1995 and for the period
beginning March 1, 1995 and ended December 31, 1995, Wells Fargo Bank paid to
WFNIA the sub-advisory fees indicated below and WFNIA waived the amounts shown:
<TABLE>
<CAPTION>
Fiscal Year 3/1/95 -
End 2/28/95 12/31/95
----------- --------
Fees Fees Fees Fees
Master Portfolio Paid Waived Paid Waived
- ---------------- ---- ------ ---- ------
<S> <C> <C> <C> <C>
LifePath 2000 Master Portfolio $159,494 $0 $261,344 $0
LifePath 2010 Master Portfolio $115,647 $0 $224,903 $0
LifePath 2020 Master Portfolio $184,341 $0 $374,802 $0
LifePath 2030 Master Portfolio $114,426 $0 $247,703 $0
LifePath 2040 Master Portfolio $138,511 $0 $361,673 $0
</TABLE>
Administration Agreement. The Trust has engaged Wells Fargo Bank
and Stephens to provide certain administrative services. Pursuant to
Administration and Co-Administration Agreements with the Trust, Wells Fargo Bank
and Stephens provide as administrative services, among other things: (i)
general supervision of the operation of the Trust and the Funds, including
coordination of the services performed by the investment adviser, transfer and
dividend disbursing agent, custodian, shareholder servicing agent(s),
independent auditors and legal counsel; (ii) general supervision of regulatory
compliance matters, including the compilation of information for documents such
as reports to, and filings with, the SEC and state securities commissions, and
preparation of proxy statements and shareholder reports for the Funds; and (iii)
general supervision relative to the compilation of data required for the
preparation of periodic reports distributed to the Trust's officers and Board of
Trustees. Stephens also furnishes office space and certain facilities required
for conducting the business of the Trust together with those ordinary clerical
and bookkeeping services that are not being furnished by the Trust's investment
adviser. Stephens also pays the compensation of the Trust's Trustees, Officers
and employees who are affiliated with Stephens. Stephens has contracted with
Investors Bank & Trust Company ("IBT") to provide certain sub-administrative
services to Stephens in connection with its co-administrative services to the
Trust. Prior to February 1, 1997, Stephens served as the Trust's sole
administrator.
For the fiscal years ended February 28, 1995 and February 29,
1996, the Funds paid administrative fees to Stephens as follows:
<TABLE>
<CAPTION>
FYE FYE
2/29/95 2/28/96
Fund Fees Paid Fees Paid
- ---- --------- ---------
<S> <C> <C>
LifePath 2000 Fund $39,834 $ 84,548
LifePath 2010 Fund $28,945 $ 72,832
LifePath 2020 Fund $46,153 $120,505
LifePath 2030 Fund $28,565 $ 79,564
LifePath 2040 Fund $34,460 $118,468
</TABLE>
13
<PAGE> 83
Under the Administration Agreement, Stephens has agreed to assume
the operating expenses of each LifePath Fund and a pro rata share of the
operating expenses of each LifePath Master Portfolio, except for expenses in
connection with securities purchases, sales or other related transactions,
extraordinary expenses and fees and expenses payable pursuant to certain
service contracts, as described in the Prospectus.
Distribution Plans. The following information supplements and
should be read in conjunction with the section in the Prospectus entitled
"Management of the Funds -- Administrator and Distributor."
As indicated in the Prospectus for the Funds, Class A and Class B
shares of the LifePath Funds have each adopted a Distribution Plan (the
"Plans") under Section 12(b) of the 1940 Act and Rule 12b-1 thereunder. The
Plans were adopted by the Board of Trustees, including a majority of the
Trustees who were not "interested persons" (as defined in the 1940 Act) of the
Funds and who had no direct or indirect financial interest in the operation of
the Plans or in any agreement related to the Plans (the "Qualified Trustees").
The Class A (formerly, Retail Class) and Class B Plans were approved by the
Trust's Board of Trustees on February 1, 1995 and October 24, 1996,
respectively.
Under the Plans and pursuant to a Distribution Agreement dated
February 25, 1994 with Stephens, the Funds may pay the Distributor, as
compensation for distribution-related services, monthly fees at annual rates of
up to 0.25% of the average daily net assets of the Class A shares of each Fund
and 0.75% of the average daily net assets of the Class B shares of each Fund
offering Class B shares. The actual fee payable to the Distributor is
determined, within such limit, from time to time by mutual agreement between
the Trust and the Distributor and will not exceed the maximum sales charges
payable by mutual funds sold by members of the National Association of
Securities Dealers, Inc. ("NASD") under the NASD Rules of Fair Practice. The
Distributor may enter into selling agreements with one or more selling agents
under which such agents may receive compensation for distribution-related
services from the Distributor, including, but not limited to, commissions or
other payments to such agents based on the average daily net assets of a Fund's
shares attributable to them. The Distributor may retain any portion of the
total distribution fee payable thereunder to compensate it for
distribution-related services provided by it or to reimburse it for other
distribution-related expenses.
Each of the Plans will continue in effect from year to year if
such continuance is approved by a majority vote of both the Trustees of the
Trust and the Qualified Trustees. Any Distribution Agreement related to the
Plans also must be approved by such vote of the Trustees and the Qualified
Trustees. The Distribution Agreement terminates automatically if assigned, and
may be terminated at any time, without payment of any penalty, by a vote of a
majority of the outstanding voting securities of the Fund involved. The Plans
may not be amended to increase materially the amounts payable thereunder
without the approval of a majority of the outstanding voting securities of the
Fund involved, and no material amendments to the Plans may be made except by a
majority of both the Trustees of the Trust and the Qualified Trustees.
14
<PAGE> 84
Each of the Plans requires that the Treasurer of the Trust shall
provide to the Trustees, and the Trustees shall review, at least quarterly, a
written report of the amounts expended (and purposes therefor) under the Plans.
The Rule also requires that the selection and nomination of Trustees who are
not "interested persons" of the Trust be made by such disinterested Trustees.
For the fiscal year ended February 29, 1996, the Class A
(formerly, Retail Class) shares of the Funds paid to Stephens as compensation
for distribution related services the amounts listed below. All of the
compensation to underwriters was retained by Wells Fargo Securities Inc.
<TABLE>
<CAPTION>
Printing & Compensation
Mailing Marketing to
Fund Total Prospectuses Brochures Underwriters
- ---- ----- ------------ --------- ------------
<S> <C> <C> <C> <C>
LifePath 2000 Fund (Retail) $181,815 N/A N/A $181,815
LifePath 2010 Fund (Retail) $123,026 N/A N/A $123,026
LifePath 2020 Fund (Retail) $235,256 N/A N/A $235,256
LifePath 2030 Fund (Retail) $155,737 N/A N/A $155,737
LifePath 2040 Fund (Retail) $244,532 N/A N/A $244,532
</TABLE>
Shareholder Services Agreement. Wells Fargo Bank acts as the
shareholder servicing agent ("Agent") for Class A and Class B shares of the
Funds pursuant to a Shareholder Services Agreement (the "Agreement") and the
related Shareholder Services Plans. Wells Fargo Bank, as agent, has agreed to
perform certain shareholder liaison services such as answering shareholder
inquiries regarding account status and history, and the manner in which
purchases, exchanges and redemptions of Fund shares may be made. For the
services provided pursuant to a Shareholder Servicing Agreement, the Trust may
pay each Shareholder Servicing Agent a monthly fee at the annual rate of up to
0.20% of the average daily value of each Fund's shares beneficially owned by
customers of the Shareholder Servicing Agent.
For the fiscal year ended February 29, 1996, Class A (formerly,
Retail Class) shares of the Funds paid shareholder services fees to Wells Fargo
Bank as follows:
<TABLE>
<CAPTION>
Fund Fees Paid
- ---- ---------
<S> <C>
LifePath 2000 Fund $169,096
LifePath 2010 Fund $145,664
LifePath 2020 Fund $241,010
LifePath 2030 Fund $159,128
LifePath 2030 Fund $236,936
</TABLE>
Selling Group Agreement. Wells Fargo Securities Inc., an
interested person (as such term is defined in Section 2(a)(19) of the 1940 Act)
of the Trust, acts as a Selling Agent for the Class A (formerly, Retail Class)
shares of the Funds pursuant to a Selling Group Agreement with
15
<PAGE> 85
Stephens authorized pursuant to the Plan. As a Selling Agent, Wells Fargo
Securities Inc. has an indirect financial interest in the operation of the
Plan. The Board of Trustees believes that it is reasonably likely that the
Plan will benefit the Funds and their shareholders because the Plan authorizes
the relationship with Wells Fargo Securities Inc., and Wells Fargo Securities
Inc. has previously developed distribution channels and relationships with the
types of business and corporate customers that the Funds are designed to serve.
These relationships and distribution channels are believed by the Board of
Trustees to be responsible for significantly increased Fund assets and
corresponding economic efficiencies (i.e., lower per-share transaction costs
and fixed expenses) that are generated by increased assets under management.
Custodian, Transfer and Dividend Disbursing Agent. IBT currently
acts as custodian to each Fund and Master Portfolio. The principal business
address of IBT is 89 South Street, P.O. Box 1537, Boston, MA 02205-1537. IBT
is not entitled to receive a fee for providing custodial services so long as
IBT is entitled to receive fees for providing sub-administrative services to
Stephens. The custodian, among other things, maintains a custody account or
accounts in the name of the Funds, receives and delivers all assets for the
Funds upon purchase and upon sale or maturity; collects and receives all income
and other payments and distributions on account of the assets of the Funds and
pays all expenses of the Funds. IBT will also act as securities lending agent
on behalf of the Funds. Prior to October 21, 1996, BGI was custodian of each
Fund's investments. For its services as custodian, BGI was not entitled to
receive a fee so long as BGFA received fees for providing advisory services to
the Master Portfolios.
Wells Fargo Bank acts as the Trust's transfer and dividend
disbursing agent and performs such services at 525 Market Street, San
Francisco, California 94105. Wells Fargo Bank is entitled to receive from the
Trust for its services as transfer and dividend disbursing agent, a monthly fee
at the annual rate of 0.10% of each Fund's average daily net assets.
For the fiscal year ended February 29, 1996, the Trust paid
dividend disbursing agency fees to Wells Fargo Bank as follows:
Fund Fees Paid
---- ---------
LifePath 2000 Fund $ 84,548
LifePath 2010 Fund $ 72,832
LifePath 2020 Fund $120,505
LifePath 2030 Fund $ 79,564
LifePath 2040 Fund $118,468
16
<PAGE> 86
PURCHASE AND REDEMPTION OF SHARES
Terms of Purchase. The Trust reserves the right to reject any
purchase order and to change the amount of the minimum investment and
subsequent purchases in the Funds.
Suspension of Redemptions. The right of redemption may be
suspended or the date of payment postponed (a) during any period when the New
York Stock Exchange ("NYSE") is closed (other than customary weekend and
holiday closing), (b) when trading in the markets, the Fund or Master Portfolio
normally utilizes is restricted, or when an emergency exists as determined by
the SEC so that disposal of such Fund's or Master Portfolio's investments or
determination of its net asset value is not reasonably practicable, or (c) for
such other periods as the SEC by order may permit to protect the Fund's
shareholders.
DETERMINATION OF NET ASSET VALUE
LifePath Master Portfolios. The securities of the LifePath Master
Portfolios, including covered call options written by a LifePath Master
Portfolio, are valued at the last sale price on the securities exchange or
national securities market on which such securities primarily are traded.
Securities not listed on an exchange or national securities market, or
securities in which there were no transactions, are valued at the most recent
bid prices. Portfolio securities which are traded primarily on foreign
securities exchanges generally are valued at the preceding closing values of
such securities on their respective exchanges, except that when an occurrence
subsequent to the time a value was so established is likely to have changed
such value, then the fair value of those securities is determined by
consideration of other factors by or under the direction of MIP's Board of
Trustees or its delegates. Short-term investments are carried at amortized
cost, which approximates market value. Any securities or other assets for
which recent market quotations are not readily available are valued at fair
value as determined in good faith by MIP's Board of Trustees.
Restricted securities, as well as securities or other assets for
which market quotations are not readily available, or are not valued by a
pricing service approved by MIP's Board of Trustees, are valued at fair value
as determined in good faith by or under the direction of MIP's Board of
Trustees or its delegates. MIP's Board of Trustees reviews the method of
valuation on a current basis. Restricted securities that are, or are
convertible into, securities of the same class of securities for which a public
market exists usually are valued at market value less the same percentage
discount at which such securities were purchased. This discount may be revised
periodically if BGFA believes that the discount no longer reflects the value of
the restricted securities. Restricted securities not of the same class as
securities for which a public market exists usually are valued initially at
cost. Any subsequent adjustment from cost is based upon considerations deemed
relevant by or under the direction of MIP's Board of Trustees or its delegates.
17
<PAGE> 87
Any assets or liabilities initially expressed in terms of foreign
currency are translated into dollars using information provided by pricing
entities, such as Morgan Stanley Capital International or Gelderman Data
Service, or at a quoted market exchange rate as may be determined to be
appropriate by BGFA. Forward currency contracts are valued at the current cost
of offsetting the contract. Because of the need to obtain prices as of the
close of trading on various exchanges throughout the world, the calculation of
net asset value does not take place contemporaneously with the determination of
prices of the foreign securities held by the LifePath Master Portfolio. In
addition, foreign securities held by a LifePath Master Portfolio may be traded
actively in securities markets which are open for trading on days when the
Master Portfolio does not determine its net asset value. Accordingly, there
may be occasions when a LifePath Master Portfolio does not calculate its net
asset value but when the value of such Master Portfolio's portfolio securities
is affected by such trading activity.
Fixed-income securities are valued each business day using
available market quotations or at fair value as determined by one or more
independent pricing services (collectively, the "Service") approved by MIP's
Board of Trustees. The Service may use available market quotations, employ
electronic data processing techniques and/or a matrix system to determine
valuations. The Service's procedures are reviewed by MIP's officers under the
general supervision of MIP's Board of Trustees.
Expenses and fees, including advisory fees, are accrued daily and
are taken into account for the purpose of determining the net asset value of
each LifePath Master Portfolio's shares.
New York Stock Exchange Closings. The holidays on which the NYSE
is closed currently are: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each LifePath Fund intends to qualify each year as a "regulated
investment company" under the Code so long as such qualification is in the best
interests of its shareholders. Such qualification requires, among other
things, that (a) at least 90% of each Fund's annual gross income be derived
from interest, payments with respect to securities loans, dividends, and gains
from the sale or other disposition of securities, or foreign currencies, or
other income (including but not limited to gains from options, futures, or
forward contracts) derived with respect to each Fund's business of investing in
such securities or currencies; (b) each Fund generally derives less than 30% of
its gross income from gains from the sale or other disposition of securities,
options, futures or forward contracts held for less than three months; and (c)
each Fund diversifies its holdings so that, at the end of each quarter of the
taxable year, (i) at least 50% of the market value of each Fund's assets is
represented by cash, government securities and other securities limited in
respect of any one issuer to an amount not greater than 5% of each Fund's
assets and 10% of the outstanding voting securities of such issuer, and (ii)
not more than 25% of the value of its assets is invested in the securities of
any one issuer (other than U.S. Government securities and
18
<PAGE> 88
the securities of other regulated investment companies), or of two or more
issuers which the Fund controls and which are determined to be engaged in the
same or similar trades or businesses or related trades or businesses.
For purposes of complying with these qualification requirements,
each LifePath Fund will be deemed to own a proportionate share of its
corresponding Master Portfolio's assets. As a regulated investment company,
each Fund will not be subject to federal income tax on its net investment
income and net capital gains distributed to its shareholders, provided that it
distributes to its shareholders at least 90% of its net investment income
(including its net tax-exempt income) earned in each year.
Generally, dividends and capital gain distributions are taxable to
shareholders when they are received. However, such dividends and distributions
declared payable as of a record date in October, November or December of any
calendar year are deemed under the Code to have been paid by the Fund and
received by the shareholder on December 31 of that calendar year if the
dividend is actually paid in the following January. Such dividends and
distributions will, accordingly, be taxable to the recipient shareholders in
the year in which the record date falls.
In addition, a 4% nondeductible excise tax will be imposed on each
Fund to the extent it does not meet certain minimum distribution requirements
of its net investment income and net realized capital gains by the end of each
calendar year, but each Fund will either actually or be deemed to distribute
substantially all of this income and therefore expects not to be subject to the
excise.
Depending on the composition of a regulated investment company's
income, a portion of the dividends paid by the regulated investment company
from its net investment income may qualify for the dividends-received deduction
allowable to certain U.S. corporate shareholders. In general, dividend income
of the regulated investment company distributed to qualifying corporate
shareholders is eligible for the dividends-received deduction only to the
extent that (i) the regulated investment company's income consists of dividends
paid by U.S. corporations and (ii) the regulated investment company would have
been entitled to the dividends received deduction with respect to such dividend
income if the regulated investment company were not a regulated investment
company under the Code. A corporate shareholder of the Fund must hold the Fund
shares upon which the qualifying dividend is paid for at least 46 days to be
entitled to the dividends-received deduction. The Code also provides other
limitations with respect to the ability of a qualifying corporate shareholder
to claim the dividends-received deduction.
Income received by each Fund from sources within foreign countries
may be subject to withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. Because not more than 50% of the value of the total
assets of any Fund is expected to consist of securities of foreign issuers, no
Fund will be eligible to elect to "pass through" foreign tax credits to its
shareholders.
Ordinarily, gains and losses realized from portfolio transactions
are treated as capital gain or loss, except in certain cases, including where a
Master Portfolio acquires a put or grants a
19
<PAGE> 89
call thereon. Gain recognized on the disposition of a debt obligation
(including tax-exempt obligations purchased after April 30, 1993) purchased by
the Master Portfolio at a market discount (generally, at a price less than its
principal amount) will generally be treated as ordinary income to the extent of
the portion of the market discount which accrued during the period of time the
Master Portfolio held the debt obligation. Other gains or losses on the sale
of securities will generally be short-term capital gains or losses. To the
extent that a Fund recognizes long-term capital gains, such gains will be
distributed at least annually. Distributions of long-term capital gains will
be taxable to shareholders as long-term capital gains, regardless of how long a
shareholder has held Fund shares.
If a shareholder receives a designated capital gain distribution
on a Fund share and such Fund share is held for six months or less, then
(unless otherwise disallowed) any loss on the sale or exchange of that Fund
share will be treated as a long-term capital loss to the extent of the
designated capital gain distribution. In addition, any loss realized by a
shareholder upon the sale or redemption of Fund shares held less than six
months will be disallowed to the extent of any tax-exempt interest dividends
received by the shareholder thereon. These rules shall not apply to losses
incurred under a periodic redemption plan.
As of the printing of this SAI, the maximum individual tax rate
applicable to ordinary income is 39.6% (marginal rates may be higher for some
individuals due to phase out of exemptions and elimination of deductions); the
maximum individual tax rate applicable to net capital gains is 28%; and the
maximum corporate tax rate applicable to ordinary income and net capital gains
is 35% (however, to eliminate the benefit of lower marginal corporate income
tax rates, corporations which have taxable income in excess of $100,000 for a
taxable year will be required to pay an additional amount of income tax of up
to $11,750 and corporations which have taxable income in excess of $15,000,000
for a taxable year will be required to pay an additional amount of tax of up to
$100,000).
If a shareholder disposes of Fund shares with reinvestment rights
within 90 days of acquiring such shares and subsequently reacquires Fund shares
or shares of another regulated investment company with a reduced or eliminated
sales charge pursuant to the reinvestment rights, the sales charge incurred, if
any, to acquire the disposed shares (to the extent such previous sales charges
do not exceed the reduction or elimination of sales charges incurred on the
subsequent acquisition) shall not be taken into account for the purpose of
determining the amount of gain or loss on the initial disposition. To the
extent any sales charge is consequently not taken into account, it will be
treated as having been incurred in the subsequent acquisition. In addition,
any loss realized on a redemption or exchange of shares of a Fund will be
disallowed to the extent that substantially identical shares are reacquired
within the 61-day period beginning 30 days before and ending 30 days after the
shares are disposed of.
If an option granted by a Master Portfolio lapses or is terminated
through a closing transaction, such as a repurchase by the Master Portfolio of
the option from its holder, the Master Portfolio will realize a short-term
capital gain or loss, depending on whether the premium income is greater or
less than the amount paid by the Master Portfolio in the closing transaction.
Recognition of capital losses may be deferred if they result from a position
which is part of a tax
20
<PAGE> 90
"straddle," as discussed below. If securities are sold by a Master Portfolio
pursuant to the exercise of a call option granted by it, such Master Portfolio
will add the premium received to the sale price of the securities delivered in
determining the amount of gain or loss on the sale. If securities are
purchased by a Master Portfolio pursuant to the exercise of a put option
granted by it, the Master Portfolio will subtract the premium received from its
cost basis in the securities purchased.
Under Section 1256 of the Code, gain or loss realized by a
regulated investment company from certain financial forward, futures and
options transactions is treated as 60% long-term capital gain (or loss) and 40%
short- term capital gain (or loss) (the "60%/40% rule"). Gain or loss may
arise upon the exercise or lapse of such forward contracts, futures and options
as well as from closing transactions. In addition, any such forward contracts,
futures or options remaining unexercised at the end of the regulated investment
company's taxable year are treated as sold for their then fair market value,
resulting in additional gain or loss to the regulated investment company
characterized in the manner described above (the "marked-to-market rule").
Transactions that qualify as designated hedges are expected from the
marked-to-market rule and the 60%/40% rule.
All or a portion of the gain or loss from the disposition of
non-U.S. dollar denominated securities (including debt instruments, certain
financial forward, futures and option contracts, and certain preferred stock)
may be treated as ordinary income or loss under Section 988 of the Code
(relating to the taxation of foreign currency transactions). Furthermore, all
or a portion of the gain realized from engaging in "conversion transactions"
may be treated as ordinary income under Section 1258. Conversion transactions
are defined to include certain forward, futures, option and straddle
transactions, transactions marketed or sold to produce capital gains, or
transactions described in Treasury regulations to be issued in the future.
Offsetting positions held by a regulated investment company
involving certain financial forward, futures or option contracts may be
considered, for tax purposes, to constitute straddles. Straddles are defined
to include "offsetting positions" in actively traded personal property. The
tax treatment of straddles is governed by Section 1092 of the Code which, in
certain circumstances, overrides or modifies the provisions of Section 1256.
If a regulated investment company was treated as entering into
straddles by reason of its engaging in certain financial forward, futures or
option contracts, such straddles could be characterized as "mixed straddles" if
the futures, forwards, or options comprising a part of such straddles were
governed by Section 1256. The regulated investment company may make one or
more elections with respect to mixed straddles, and, depending upon which
elections are made, if any, the tax consequences with respect to the
transaction may differ. Generally, to the extent the straddle rules apply to
positions established by the regulated investment company, losses realized by
the regulated investment company may be deferred to the extent of unrealized
gain in any offsetting positions. Moreover, as a result of the straddle and
the conversion transaction rules, short-term capital loss on straddle positions
may be recharacterized as long-term capital loss, and long-term capital gain
may be characterized as short-term capital gain or ordinary income.
21
<PAGE> 91
Foreign Shareholders. Under the Code, distributions of net
investment income by a Fund to a nonresident alien individual, nonresident
alien fiduciary of a trust or estate, foreign corporation, or foreign
partnership (a "foreign shareholder") will be subject to U.S. withholding tax
(at a rate of 30% or a lower treaty rate). Withholding will not apply if a
dividend paid by a Fund to a foreign shareholder is "effectively connected"
with a U.S. trade or business, in which case the reporting and withholding
requirements applicable to U.S. citizens, U.S. residents or domestic
corporations will apply. Distributions of net long-term capital gains are not
subject to tax withholding, but in the case of a foreign shareholder who is a
nonresident alien individual, such distributions ordinarily will be subject to
U.S. withholding tax at a rate of 30% if the individual is physically present
in the U.S. for more than 182 days during the taxable year.
Other Matters. Investors should be aware that the investments to
be made by a Master Portfolio may involve sophisticated tax rules such as the
original issue discount and real estate mortgage investment conduit ("REMIC")
rules that would result in income or gain recognition by the Master Portfolio,
and its corresponding Fund, without corresponding cash receipts. Although the
Funds will seek to avoid significant noncash income, such noncash income could
be recognized by the Funds, in which case a Fund may distribute cash derived
from other sources in order to meet the minimum distribution requirements
described above.
CAPITAL STOCK
As of October 31, 1996, no shareholders were known by the Trust to
own 5% or more of the Class A or Class B shares of the LifePath Funds. As of
October 31, 1996, the shareholders identified below were known by the Trust to
own 5% or more of the Institutional Class shares of the LifePath Fund's
outstanding shares in the following capacity:
<TABLE>
<CAPTION>
Name and Address Percentage Capacity
Name of Fund of Shareholder of Fund Owned
- ------------ ---------------- ---------- --------
<S> <C> <C> <C>
LifePath 2000 Stephens Inc. 100% Beneficial
(Institutional) 111 Center Street
Little Rock, AR 72201
LifePath 2010 Stephens Inc. 28.37% Beneficial
(Institutional) 111 Center Street
Little Rock, AR 72201
</TABLE>
22
<PAGE> 92
<TABLE>
<S> <C> <C> <C>
Charles Schwab & Co. Inc. 71.63% Beneficial
Special Custody for the
Benefit of Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104
LifePath 2020 Stephens Inc. 21.29% Beneficial
(Institutional) 111 Center Street
San Francisco, CA 94104
Charles Schwab & Co. Inc. 78.71% Beneficial
Special Custody for the
Benefit of Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104
LifePath 2030 Stephens Inc. 6.15% Beneficial
(Institutional) 111 Center Street
San Francisco, CA 94104
Charles Schwab & Co. Inc. 93.85% Beneficial
Special Custody for the
Benefit of Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104
LifePath 2040 Stephens Inc. 80.22% Beneficial
(Institutional) 111 Center Street
San Francisco, CA 94104
Charles Schwab & Co. Inc. 19.78% Beneficial
Special Custody for the
Benefit of Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104
</TABLE>
23
<PAGE> 93
PERFORMANCE INFORMATION
LifePath Funds. Average annual total return is calculated by
determining the ending redeemable value of an investment purchased with a
hypothetical $1,000 payment made at the beginning of the period (assuming the
reinvestment of dividends and distributions), dividing by the amount of the
initial investment, taking the "n"th root of the quotient (where "n" is the
number of years in the period) and subtracting 1 from the result.
Total return is calculated by subtracting the amount of the net
asset value per share of a class at the beginning of a stated period from the
net asset value per share of a class at the end of the period (after giving
effect to the reinvestment of dividends and distributions during the period),
and dividing the result by the net asset value per share of a class at the
beginning of the period.
Because of the difference in the fees and expenses borne by Class
A and Class B shares of the Funds, the return on such shares can be expected,
at any given time, to be lower than the return on Institutional Class shares.
For the fiscal year ended February 29, 1996, the average annual
total returns on the Funds were as follows:
<TABLE>
<CAPTION>
Class A
Fund (formerly, Retail) Institutional
- ---- ------------------ -------------
<S> <C> <C>
LifePath 2000 Fund 12.98% 13.19%
LifePath 2010 Fund 19.40% 19.69%
LifePath 2020 Fund 22.94% 23.18%
LifePath 2030 Fund 26.53% 26.88%
LifePath 2040 Fund 28.91% 29.32%
</TABLE>
The Funds may advertise the cumulative total return on a class of
its shares. Cumulative total return is computed on a per share basis and
assumes the reinvestment of dividends and distributions. Cumulative total
return generally is expressed as a percentage rate which is calculated by
combining the income and principal changes for a specified period and dividing
by the net asset value per share of a class at the beginning of the period.
Advertisements may include the percentage rate of total return on a class of
shares or may include the value of a hypothetical investment in shares at the
end of the period which assumes the application of the percentage rate of total
return.
In addition to the above performance information, the Funds may
also advertise the cumulative total return for one-month, three-month,
six-month, and year-to-date periods. The cumulative total return for such
periods is based on the overall percentage change in value of a hypothetical
investment in a class of shares of the Fund, assuming all dividends and capital
gain
24
<PAGE> 94
distributions are reinvested, without reflecting the effect of any sales charge
that would be paid by an investor, and is not annualized.
For the period from inception (March 1, 1994) to February 29,
1996, the cumulative total returns on the Funds were as follows:
<TABLE>
<CAPTION>
Class A
Fund (formerly, Retail)
- ---- ------------------
<S> <C>
LifePath 2000 Fund 15.35%
LifePath 2010 Fund 23.35%
LifePath 2020 Fund 28.01%
LifePath 2030 Fund 31.63%
LifePath 2040 Fund 35.68%
</TABLE>
For the period from inception (March 1, 1994) to February 29,
1996, the average annual total returns on the Funds were as follows:
<TABLE>
<CAPTION>
Class A
Fund (formerly, Retail) Institutional
- ---- ------------------ -------------
<S> <C> <C>
LifePath 2000 Fund 7.40% 7.65%
LifePath 2010 Fund 11.06% 11.33%
LifePath 2020 Fund 13.14% 13.40%
LifePath 2030 Fund 14.73% 15.11%
LifePath 2040 Fund 16.48% 16.85%
</TABLE>
From time to time, the Trust may use, in advertisements and other
types of literature, information and statements describing the LifePath Funds
as the first mutual funds to offer a flexible investment strategy designed to
change over specific time horizons.
From time to time and only to the extent the comparison is
appropriate for the LifePath Funds, the Trust may quote performance or
price-earning ratios for a class of the Funds in advertising and other types of
literature as compared to the performance of the Lehman Brothers Municipal Bond
Index, 1-Year Treasury Bill Rate, S&P Index, the Dow Jones Industrial Average,
the Lehman Brothers 20+ Treasury Index, the Lehman Brothers 5-7 Year Treasury
Index, Donoghue's Money Fund Averages, Real Estate Investment Averages (as
reported by the National Association of Real Estate Investment Trusts), Gold
Investment Averages (provided by the World Gold Council), Bank Averages (which
is calculated from figures supplied by the U.S. League of Savings Institutions
based on effective annual rates of interest on both passbook and certificate
accounts), average annualized certificate of deposit rates (from the Federal
Reserve G-13 Statistical Releases or the Bank Rate Monitor), the Salomon One
Year Treasury Benchmark Index, the Consumer Price Index (as published by the
U.S. Bureau of Labor Statistics), Ten Year U.S. Government Bond Average, S&P's
Corporate Bond Yield Averages, Schabacter Investment Management Indices,
Salomon Brothers High Grade Bond Index, Lehman Brothers Long-Term
25
<PAGE> 95
High Quality Government/Corporate Bond Index, other managed or unmanaged
indices or performance data of bonds, stocks or government securities
(including data provided by Ibbotson Associates), or by other services,
companies, publications or persons who monitor mutual funds on overall
performance or other criteria. The S&P Index and the Dow Jones Industrial
Average are unmanaged indices of selected common stock prices. The Funds'
performance also may be compared to the performance of other mutual funds
having similar objectives. This comparative performance could be expressed as
a ranking prepared by Lipper Analytical Services, Inc., CDA Investment
Technologies, Inc., Bloomberg Financial Markets or Morningstar, Inc.,
independent services which monitor the performance of mutual funds. The
performance of a class of the Funds will be calculated by relating net asset
value per share of a class at the beginning of a stated period to the net asset
value of the investment, assuming reinvestment of all gains, distributions and
dividends paid, at the end of the period. Any such comparisons may be useful
to investors who wish to compare the Funds' past performance with that of its
competitors. Of course, past performance cannot be a guarantee of future
results. The Trust also may include, from time to time, a reference to certain
marketing approaches of the Distributor, including, for example, a reference to
a potential shareholder being contacted by a selected broker or dealer.
General mutual fund statistics provided by the Investment Company Institute may
also be used.
In addition, the Trust also may use, in advertisements and other
types of literature, information and statements: (1) showing that bank savings
accounts offer a guaranteed return of principal and a fixed rate of interest,
but no opportunity for capital growth; and (2) describing Wells Fargo Bank, and
its affiliates and predecessors, as one of the first investment managers to
advise investment accounts using asset allocation and index strategies. The
Trust also may include in advertising and other types of literature information
and other data from reports and studies prepared by the Tax Foundation,
including information regarding federal and state tax levels and the related
"Tax Freedom Day." The Trust also may disclose in advertising and other types
of sales literature the assets and categories of assets under management by the
Master Portfolios' investment adviser or its affiliates.
From time to time the Trust may reprint, reference or otherwise
use material from magazines, newsletters, newspapers and books including, but
not limited to the Wall Street Journal, Money Magazine, Barrons, Kiplingers,
Business Week, Fortune, Forbes, the San Francisco Chronicle, the San Jose
Mercury News, The New York Times, the Los Angeles Times, the Boston Globe, the
Washington Post, the Chicago Sun-Times, Investor Business Daily, Worth, Bank
Investor, American Banker, Smart Money, the 100 Best Mutual Funds (Adams
Publishing), Morningstar or Value Line.
The Trust may use the following information in advertisements and
other types of literature, only to the extent the information is appropriate
for the Funds: (i) the Consumer Price Index may be used to assess the real
rate of return from an investment in a Fund; (ii) other government statistics,
including, but not limited to, The Survey of Current Business, may be used to
illustrate investment attributes of the Funds or the general economic,
business, investment, or financial environment in which the Funds operate;
(iii) the effect of tax-deferred compounding on the investment returns of the
Funds, or on returns in general, may be illustrated by graphs, charts, etc.,
where such graphs or charts would compare, at various points in time, the
return from an
26
<PAGE> 96
investment in the Funds (or returns in general) on a tax-deferred basis
(assuming reinvestment of capital gains and dividends and assuming one or more
tax rates) with the return on a taxable basis; and (iv) the sectors or
industries in which a Fund invests may be compared to relevant indices of
stocks or surveys (e.g., S&P Industry Surveys) to evaluate the historical
performance of the Funds or current or potential value with respect to the
particular industry or sector.
The Trust also may discuss in advertising and other types of
literature that the Funds have been assigned a rating by a nationally
recognized statistical rating organization ("NRSRO"), such as Standard & Poor's
Corporation. Such rating would assess the creditworthiness of the investments
held by a Fund. The assigned rating would not be a recommendation to purchase,
sell or hold the Funds' shares since the rating would not comment on the market
price of the Funds' shares or the suitability of a Fund for a particular
investor. In addition, the assigned rating would be subject to change,
suspension or withdrawal as a result of changes in, or unavailability of,
information relating to a Fund or its investments. The Trust may compare the
Funds' performance with other investments which are assigned ratings by NRSROs.
Any such comparisons may be useful to investors who wish to compare the Funds'
past performance with other rated investments.
From time to time, the Funds may use the following statements, or
variations thereof, in advertisements and other promotional materials: "Wells
Fargo Bank, as a Shareholder Servicing Agent for the Stagecoach Funds, provides
various services to its customers that are also shareholders of the Funds.
These services may include access to Stagecoach Funds' account information
through Automated Teller Machines (ATMs), the placement of purchase and
redemption requests for shares of the Funds through ATMs and the availability
of combined Wells Fargo Bank and Stagecoach Funds account statements." The
Trust may also disclose in advertising and other types of sales literature the
assets and categories of assets under management by the Trust's investment
adviser. The Trust may also disclose in advertising and other types of sales
literature the assets and categories of assets under management by a Fund's
investment adviser or sub-adviser. The Trust may disclose in advertising,
statements and other literature the amount of assets and mutual fund assets
managed by Wells Fargo Bank or BGFA. As of June 30, 1996, Wells Fargo Bank
provided investment advisory services for approximately $56 billion of assets
of individuals, trusts, estates and institutions and $17 billion of mutual fund
assets. As of September 30, 1996, BGFA and its affiliates provided investment
advisory services for over $327 billion of assets.
PORTFOLIO TRANSACTIONS
General. BGFA assumes general supervision over placing orders on
behalf of MIP for the purchase or sale of portfolio securities. Allocation of
brokerage transactions, including their frequency, is made in the best judgment
of BGFA and in a manner deemed fair and reasonable to shareholders. In
executing portfolio transactions and selecting brokers or dealers, BGFA seeks
to obtain the best overall terms available for each Master Portfolio. In
assessing the best overall terms available for any transaction, BGFA considers
factors deemed relevant, including the breadth of the market in the security,
the price of the security, the financial condition and
27
<PAGE> 97
execution capability of the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a continuing
basis. The primary consideration is prompt execution of orders at the most
favorable net price.
Certain of the brokers or dealers with whom the Master Portfolios
may transact business offer commission rebates to the Master Portfolios. BGFA
considers such rebates in assessing the best overall terms available for any
transaction. The overall reasonableness of brokerage commissions paid is
evaluated by BGFA based upon its knowledge of available information as to the
general level of commissions paid by other institutional investors for
comparable services. While BGFA generally seeks reasonably competitive spreads
or commissions, the Master Portfolios will not necessarily be paying the lowest
spread or commissions available. BGFA does not preference its orders to
brokers or dealers based on receipt of statistical or other research services.
Brokers also are selected because of their ability to handle
special executions such as are involved in large block trades or broad
distributions, provided the primary consideration is met. Portfolio turnover
may vary from year to year, as well as within a year. High turnover rates over
100% are likely to result in comparatively greater brokerage expenses.
Purchases and sales of fixed-income securities usually are
principal transactions. Portfolio securities ordinarily are purchased directly
from the issuer or from an underwriter or market maker. Usually no brokerage
commissions are paid by the LifePath Master Portfolio for such purchases and
sales. The prices paid to the underwriters of newly-issued securities usually
include a concession paid by the issuer to the underwriter, and purchases of
securities from market makers may include the spread between the bid and asked
price.
Brokerage Commissions. For the fiscal years ended February 28,
1995 and February 29, 1996, the corresponding Master Portfolio of each LifePath
Fund paid the dollar amounts of brokerage commissions indicated below. None of
these brokerage commissions were paid to affiliated brokers.
<TABLE>
<CAPTION>
Commissions Paid
----------------
Master Portfolio 1995 1996
- ---------------- ---- ----
<S> <C> <C>
LifePath 2000 Master Portfolio $24,231 $71,608
LifePath 2010 Master Portfolio $28,830 $33,786
LifePath 2020 Master Portfolio $56,540 $29,666
LifePath 2030 Master Portfolio $37,890 $12,053
LifePath 2040 Master Portfolio $56,183 $ 8,311
</TABLE>
Securities of Regular Broker Dealers. As of February 29, 1996,
the corresponding Master Portfolio of each LifePath Fund owned securities of
its "regular brokers or dealers" or their parents, as defined in the 1940 Act,
as follows:
28
<PAGE> 98
<TABLE>
<CAPTION>
Master Portfolio Broker/Dealer Amount
- ---------------- ------------- ------
<S> <C> <C>
LifePath 2000 CitiCorp $ 92,000
Lehman Brothers 30,000
Merrill Lynch & Co. 29,000
J.P. Morgan Securities 40,000
LifePath 2010 CitiCorp $295,000
Lehman Brothers 25,000
Merrill Lynch & Co. 79,000
J.P. Morgan Securities 123,000
LifePath 2020 CitiCorp $549,000
Lehman Brothers 45,000
Merrill Lynch & Co. 170,000
J.P. Morgan Securities 255,000
LifePath 2030 CitiCorp $431,000
Lehman Brothers 40,000
Merrill Lynch & Co. 134,000
J.P. Morgan Securities 198,000
LifePath 2040 CitiCorp $784,000
Lehman Brothers 79,000
Merrill Lynch & Co. 213,000
J.P. Morgan Securities 319,000
</TABLE>
INFORMATION ABOUT THE FUNDS
Each Fund share, irrespective of class, has one vote and when
issued and paid for in accordance with the terms of the offering, is fully paid
and non-assessable. Shares have no preemptive, subscription or conversion
rights and are freely transferable. Each share of a class has identical voting
rights with respect to the Fund of which it is a part provided that there are
certain matters which affect one class but not another. Currently, the only
such matter is the existence of a Distribution Plan pursuant to Rule 12b-11
under the 1940 Act with respect to the Class A and Class B shares but not the
Institutional Class shares. On this matter the shareholders of the affected
class vote as a class.
Rule 18f-2 under the 1940 Act provides that any matter required to
be submitted under the provisions of the 1940 Act or applicable state law or
otherwise to the holders of the outstanding voting securities of an investment
trust, such as the Trust, will not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each Fund affected by such matter. Rule 18f-2 further provides that a Fund
shall be deemed to be affected by a matter unless it is clear that the
interests of such Fund in the matter are identical
29
<PAGE> 99
or that the matter does not affect any interest of such Fund. However, the
Rule exempts the selection of independent accountants and the election of
Trustees from the separate voting requirements of the Rule.
Each Fund sends annual and semi-annual financial statements to all
its shareholders of record.
COUNSEL
Morrison & Forester LLP, 2000 Pennsylvania Avenue, N.W., Suite
5500, Washington, D.C. 20006, as counsel for the Trust, has rendered its
opinion as to certain legal matters regarding the due authorization and valid
issuance of the shares of beneficial interest being sold pursuant to the Funds'
Prospectus.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, Three Embarcadero Center, San Francisco,
California 94111, independent auditors, have been selected as each Fund's
independent auditors. KPMG Peat Marwick LLP provides audit services, tax
return preparation and assistance and consultation in connection with review of
certain Securities and Exchange Commission filings.
FINANCIAL INFORMATION
The portfolio of investments, audited financial statements and
independent auditors' report for the fiscal year ended February 29, 1996 for
each LifePath Fund of the Trust and each corresponding LifePath Master
Portfolio of MIP are hereby incorporated by reference to the Trust's LifePath
Funds Annual Reports, as filed with the SEC on May 28, 1996. The portfolio of
investments and financial statements for the period ended August 31, 1996 for
each LifePath Fund and corresponding Master Portfolio are hereby incorporated
by reference to the Trust's Semi-Annual Reports, as filed with the SEC on
November 7, 1996. These portfolio of investments, audited financial statements
and independent auditors' report for the Funds are attached to all SAIs
delivered to shareholders or prospective shareholders.
30
<PAGE> 100
APPENDIX
Description of certain ratings assigned by Standard & Poor's
Corporation ("S&P"), Moody's Investors Service, Inc. ("Moody's"), Fitch
Investors Service, Inc. ("Fitch"), Duff & Phelps, Inc. ("Duff") and IBCA Inc.
and IBCA Limited ("IBCA"):
S&P
Bond Ratings
AAA
Bonds rated AAA have the highest rating assigned by S&P. Capacity
to pay interest and repay principal is extremely strong.
AA
Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small degree.
A
Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in higher
rated categories.
BBB
Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for bonds in this category than for bonds in higher rated categories.
S&P's letter ratings may be modified by the addition of a plus (+)
or minus (-) sign designation, which is used to show relative standing within
the major rating categories, except in the AAA (Prime Grade) category.
Commercial Paper Rating
The designation A-1 by S&P indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are denoted with a
plus sign (+) designation. Capacity for timely payment on issues with an A-2
designation is strong. However, the relative degree of safety is not as high
as for issues designated A-1.
A-1
<PAGE> 101
Moody's
Bond Ratings
Aaa
Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what generally are known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A
Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa
Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Moody's applies the numerical modifiers 1, 2 and 3 to show
relative standing within the major rating categories, except in the Aaa
category. The modifier 1 indicates a ranking for the security in the higher
end of a rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates a ranking in the lower end of a rating category.
Commercial Paper Rating
The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. Issuers of P-1 paper must have a superior capacity for
repayment of short-term promissory
A-2
<PAGE> 102
obligations, and ordinarily will be evidenced by leading market positions in
well established industries, high rates of return on funds employed,
conservative capitalization structures with moderate reliance on debt and ample
asset protection, broad margins in earnings coverage of fixed financial charges
and high internal cash generation, and well established access to a range of
financial markets and assured sources of alternate liquidity.
Issuers (or relating supporting institutions) rated Prime-2 (P-2)
have a strong capacity for repayment of short-term promissory obligations.
This ordinarily will be evidenced by many of the characteristics cited above
but to a lesser degree. Earnings trends and coverage ratios, while sound, will
be more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
Fitch
Bond Ratings
The ratings represent Fitch's assessment of the issuer's ability
to meet the obligations of a specific debt issue or class of debt. The ratings
take into consideration special features of the issue, its relationship to
other obligations of the issuer, the current financial condition and operative
performance of the issuer and of any guarantor, as well as the political and
economic environment that might affect the issuer's future financial strength
and credit quality.
AAA
Bonds rated AAA are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA
Bonds rated AA are considered to be investment grade and of very
high credit quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated F-1+.
A
Bonds rated A are considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
A-3
<PAGE> 103
BBB
Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to have an adverse impact on these
bonds and, therefore, impair timely payment. The likelihood that the ratings
of these bonds will fall below investment grade is higher than for bonds with
higher ratings.
Plus (+) and minus (-) signs are used with a rating symbol to
indicate the relative position of a credit within the rating category.
Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are
payable on demand or have original maturities of up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal and
investment notes.
Although the credit analysis is similar to Fitch's bond rating
analysis, the short-term rating places greater emphasis than bond ratings on
the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.
F-1+
Exceptionally Strong Credit Quality. Issues assigned this rating
are regarded as having the strongest degree of assurance for timely payment.
F-1
Very Strong Credit Quality. Issues assigned this rating reflect
an assurance of timely payment only slightly less in degree than issues rated
F-1+.
F-2
Good Credit Quality. Issues carrying this rating have a
satisfactory degree of assurance for timely payments, but the margin of safety
is not as great as the F-1+ and F-1 categories.
Duff
Bond Ratings
A-4
<PAGE> 104
AAA
Bonds rated AAA are considered highest credit quality. The risk
factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.
AA
Bonds rated AA are considered high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to time
because of economic conditions.
A
Bonds rated A have protection factors which are average but
adequate. However, risk factors are more variable and greater in periods of
economic stress.
BBB
Bonds rated BBB are considered to have below average protection
factors but still considered sufficient for prudent investment. Considerable
variability in risk during economic cycles.
Plus (+) and minus (-) signs are used with a rating symbol (except
AAA) to indicate the relative position of a credit within the rating category.
Commercial Paper Rating
The rating Duff-1 is the highest commercial paper rating assigned
by Duff. Paper rated Duff-1 is regarded as having very high certainty of
timely payment with excellent liquidity factors which are supported by ample
asset protection. Risk factors are minor. Paper rated Duff-2 is regarded as
having good certainty of timely payment, good access to capital markets and
sound liquidity factors and Trust fundamentals. Risk factors are small.
IBCA
Bond and Long-Term Ratings
Obligations rated AAA by IBCA have the lowest expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial, such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk significantly. Obligations
for which there is a very low expectation of investment risk are rated AA by
IBCA. Capacity for timely repayment of principal and interest is substantial.
Adverse changes in business, economic or financial conditions may increase
investment risk albeit not very significantly.
A-5
<PAGE> 105
Commercial Paper and Short-Term Ratings
The designation A1 by IBCA indicates that the obligation is
supported by a very strong capacity for timely repayment. Those obligations
rated A1+ are supported by the highest capacity for timely repayment.
Obligations rated A2 are supported by a strong capacity for timely repayment,
although such capacity may be susceptible to adverse changes in business,
economic or financial conditions.
International and U.S. Bank Ratings
An IBCA bank rating represents IBCA's current assessment of the
strength of the bank and whether such bank would receive support should it
experience difficulties. In its assessment of a bank, IBCA uses a dual rating
system comprised of Legal Ratings and Individual Ratings. In addition, IBCA
assigns banks Long- and Short-Term Ratings as used in the corporate ratings
discussed above. Legal Ratings, which range in gradation from 1 through 5,
address the question of whether the bank would receive support provided by
central banks or shareholders if it experienced difficulties, and such ratings
are considered by IBCA to be a prime factor in its assessment of credit risk.
Individual Ratings, which range in gradations from A through E, represent
IBCA's assessment of a bank's economic merits and address the question of how
the bank would be viewed if it were entirely independent and could not rely on
support from state authorities or its owners.
A-6
<PAGE> 106
STAGECOACH TRUST
FILE NOS. 33-64352; 811-7780
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
The portfolio of investments, audited financial statements and
independent auditors' report for the LifePath 2000, LifePath 2010, LifePath
2020, LifePath 2030 and LifePath 2040 Funds of the Trust and corresponding
Master Portfolios of Master Investment Portfolio ("MIP"), for the fiscal year
ended February 29, 1996, are hereby incorporated by reference to the Trust's
Annual Reports, as filed with the SEC on May 28, 1996.
The portfolio of investments and financial statements for the
LifePath 2000, LifePath 2010, LifePath 2020, LifePath 2030 and LifePath 2040
Funds of the Trust and corresponding Master Portfolios of MIP, for the period
ended August 31, 1996, are hereby incorporated by reference to the Trust's
Semi-Annual Reports, as filed with the SEC on November 7, 1996.
(b) Exhibits:
Exhibit
Number Description
------- -----------
1(a) - Amended and Restated Agreement and Declaration
of Trust, incorporated by reference to
Pre-Effective Amendment No. 2 to the
Registration Statement filed on January 11,
1994.
2(a) - By-Laws, incorporated by reference to
Pre-Effective Amendment No. 1 to the
Registration Statement filed on November 16,
1993.
3 - Not Applicable.
4 - Not Applicable.
5 - Administration Agreement with Stephens Inc.,
incorporated by reference to Post-Effective
Amendment No. 5 to the Registration Statement
filed on June 28, 1996.
6(a) - Distribution Agreement with Stephens Inc.
incorporated by reference to Post-Effective
Amendment No. 5 to the Registration Statement
filed on June 28, 1996.
6(b) - Retail (Class A) Shares Distribution Plan,
incorporated by reference to Post-Effective
Amendment No. 1 to the Registration Statement
filed on January 28, 1994.
6(c) - Class B Shares Distribution Plan, filed
herewith.
C-1
<PAGE> 107
7 - Not Applicable.
8 - Form of Custody Agreement with Investors Bank &
Trust Company., to be filed by amendment.
9(a) - Shareholder Services Agreement with Stephens
Inc. incorporated by reference to Post-
Effective Amendment No. 5 to the Registration
Statement filed on June 28, 1996.
9(b) - Shareholder Services Plan, incorporated by
reference to Post-Effective Amendment No. 5 to
the Registration Statement filed on June 28,
1996.
9(c) - Class B Shares Servicing Plan, filed herewith.
10 - Opinion and Consent of Counsel, filed herewith.
11 - Not Applicable
18 - Rule 18f-3 Multi-Class Plan, filed herewith.
27 - Financial Data Schedules for the Institutional
Class and Retail Class shares of the LifePath
2000, LifePath 2010 Fund, LifePath 2020 Fund,
LifePath 2030 Fund and LifePath 2040 Fund,
incorporated by reference to the Form N-SAR,
filed April 29, 1996.
Item 25. Persons Controlled by or Under Common Control with Registrant
As of November 1, 1996, each of the LifePath Funds owned the
following percentages of the corresponding Master Portfolios of Master
Investment Portfolio and therefore could be considered a controlling person of
the corresponding Master Portfolio for purposes of the 1940 Act.
<TABLE>
<CAPTION>
Percentage of outstanding
beneficial interests
Corresponding ---------------------------------
Fund Master Portfolio Class A Institutional
- ---- ---------------- ------- -------------
<S> <C> <C> <C>
LifePath 2000 Fund LifePath 2000 Master Portfolio 69.77% 0.01%
LifePath 2010 Fund LifePath 2010 Master Portfolio 50.36% 0.03%
LifePath 2020 Fund LifePath 2020 Master Portfolio 61.11% 0.03%
LifePath 2030 Fund LifePath 2030 Master Portfolio 66.38% 0.17%
LifePath 2040 Fund LifePath 2040 Master Portfolio 75.44% 0.01%
</TABLE>
Item 26. Number of Holders of Securities
As of November 15, 1996, there were no record holders of Class B
shares of the Funds. As of October 31, 1996, the number of record holders of
Class A and Institutional Class shares of the Registrant were as follows:
C-2
<PAGE> 108
<TABLE>
<CAPTION>
Number of
Title of Class Record Holders
-------------- --------------
<S> <C>
LifePath 2000 Fund
Class A (Retail Class) 4006
Institutional Class 1
LifePath 2010 Fund
Class A (Retail Class) 3121
Institutional Class 2
LifePath 2020 Fund
Class A (Retail Class) 5083
Institutional Class 2
LifePath 2030 Fund
Class A (Retail Class) 3432
Institutional Class 2
LifePath 2040 Fund
Class A (Retail Class) 6741
Institutional Class 2
</TABLE>
Item 27. Indemnification
Reference is made to Article Eight of the Registrant's Declaration
of Trust. The application of these provisions is limited by Article 10 of the
Registrant's By-Laws filed as and by the following undertaking set forth in the
rules promulgated by the Securities and Exchange Commission:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in such Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a trustee, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in such Act
and will be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of the Investment Adviser
Barclays Global Fund Advisors ("BGFA"), a wholly-owned subsidiary
of Barclays Global Investors, N.A. ("BGI", formerly, Wells Fargo Institutional
Trust Company), serves as investment adviser to the Funds' corresponding Master
Portfolios and to certain other open-end management investment companies and
various other institutional investors.
C-3
<PAGE> 109
The directors and officers of BGFA consist primarily of persons
who during the past two years have been active in the investment management
business of the former sub-adviser to the Funds, Wells Fargo Nikko Investment
Advisors ("WFNIA") and, in some cases, the service business of BGI. With the
exception of Irving Cohen, each of the directors and executive officers of BGFA
will also have substantial responsibilities as directors and/or officers of
BGI. To the knowledge of the Registrant, except as set forth below, none of
the directors or executive officers of BGFA is or has been at any time during
the past two fiscal years engaged in any other business, profession, vocation
or employment of a substantial nature.
<TABLE>
<CAPTION>
Name and Position Principal Business(es) During at
at BGFA Least the Last Two Fiscal Years
- ------------- --------------------------------
<S> <C>
Frederick L.A. Grauer Chairman and Director of WFNIA and WFITC
Chairman, Director 45 Fremont Street, San Francisco, CA 94105
Donald L. Luskin Chief Executive Officer of WFNIA's Defined Contribution Group
Vice Chairman & Director 45 Fremont Street, San Francisco, CA 94105
Irving Cohen Chief Financial Officer and Chief Operating Officer of Barclays Bank
Director PLC, New York Branch and Chief Operating Officer of Barclays Group,
Inc. (USA)*: previously Chief Financial Officer of Barclays de Zoete
Wedd Securities Inc. (1994)
222 Broadway, New York, NY 10038
Andrea M. Zolberti Chief Financial Officer of WFNIA and WFITC
Chief Financial Officer 45 Fremont Street, San Francisco, CA 94105
Vincent J. Bencivenga Previously Vice President at State Street Bank & Trust Company
Chief Fiduciary Officer One Financial Center, Boston, Massachusetts 02111
</TABLE>
Prior to January 1, 1996, Wells Fargo Bank, N.A. ("Wells Fargo
Bank"), a wholly owned subsidiary of Wells Fargo & Company, served as
investment adviser to each of the Fund's corresponding Master Portfolio's
investment portfolios, and to certain other registered open-end management
investment companies. Wells Fargo Bank's business is that of a national
banking association with respect to which it conducts a variety of commercial
banking and trust activities.
To the knowledge of Registrant, none of the directors or
executive officers of Wells Fargo Bank, except those set forth below, is or has
been at any time during the past two fiscal years engaged in any other
business, profession, vocation or employment of a substantial nature, except
that certain executive officers also hold various positions with and engage in
business for Wells Fargo & Company. Set forth below are the names and
principal businesses of the directors and executive officers of Wells Fargo
Bank who are or during the past two fiscal years have been engaged in any other
business, profession, vocation or employment of a substantial nature for their
own account or in the capacity of director, officer, employee, partner or
trustee. All the directors of Wells Fargo Bank also serve as directors of
Wells Fargo & Company.
C-4
<PAGE> 110
<TABLE>
<CAPTION>
Name and Position Principal Business(es) and Address(es)
at Wells Fargo Bank During at Least the Last Two Fiscal Years
- ------------------- ------------------------------------------
<S> <C>
H. Jesse Arnelle Senior Partner of Arnelle & Hastie
Director 455 Market Street
San Francisco, CA 94105
Director of FPL Group, Inc.
700 Universe Blvd.
P.O. Box 14000
North Palm Beach, FL 33408
William R. Breuner General Partner in Breuner Associates, Breuner Properties and
Director Breuner-Pavarnick Real Estate Developers. Retired Chairman of
the Board of Directors of John Breuner Co.
2300 Clayton Road, Suite 1570
Concord, CA 94520
Vice Chairman of the California State Railroad
Museum Foundation.
111 I Street
Old Sacramento, CA 95814
William S. Davila President and Director of The Vons Companies, Inc.
Director 618 Michillinda Avenue
Arcadia, CA 91007
Officer of Western Association of Food Chains
825 Colorado Blvd. #203
Los Angeles, CA 90041
Rayburn S. Dezember Director of CalMat Co.
Director 3200 San Fernando Road
Los Angeles, CA 90065
Director of Tejon Ranch Co.
P.O. Box 1000
Lebec, CA 93243
Director of Turner Casting Corp.
P.O. Box 1099
Cudahy, CA 90201
Director of The Bakersfield Californian
P.O. Box 440
1707 I Street
Bakersfield, CA 93302
Director of Kern County Economic Development Corp.
P.O. Box 1229
2700 M Street, Suite 225
Bakersfield, CA 93301
</TABLE>
C-5
<PAGE> 111
<TABLE>
<S> <C>
Chairman of the Board of Trustees of Whittier College
13406 East Philadelphia Ave. P.O. Box 634
Whittier, CA 90608
Paul Hazen Chairman of the Board of Directors of
Chairman of the Wells Fargo & Company
Board of Directors 420 Montgomery Street
San Francisco, CA 94105
Director of Pacific Telesis Group
130 Kearny Street
San Francisco, CA 94108
Director of Phelps Dodge Corp.
2600 North Central Avenue
Phoenix, AZ 85004
Director of Safeway Inc.
Fourth and Jackson Streets
Oakland, CA 94660
Robert K. Jaedicke Accounting Professor and Dean Emeritus of
Director Graduate School of Business, Stanford University
MBA Admissions Office
Stanford, CA 94305
Director of Homestake Mining Co.
650 California Street
San Francisco, CA 94108
Director of California Water Service Company
1720 North First Street
San Jose, CA 95112
Director of Boise Cascade Corp.
1111 West Jefferson Street
P.O. Box 50
Boise, ID 83728
Director of Enron Corp.
1400 Smith Street
Houston, TX 77002
Director of GenCorp, Inc.
175 Ghent Road
Fairlawn, OH 44333
Paul A. Miller Chairman of Executive Committee and Director of
Director Pacific Enterprises
633 West Fifth Street
Los Angeles, CA 90071
</TABLE>
C-6
<PAGE> 112
<TABLE>
<S> <C>
Trustee of Mutual Life Insurance Company of New York
1740 Broadway
New York, NY 10019
Director of Newhall Management Corporation
23823 Valencia Blvd.
Valencia, CA 91355
Trustee of University of Southern California
University Park TGF 200
665 Exposition Blvd.
Los Angeles, CA 90089
Ellen M. Newman President of Ellen Newman Associates
Director 323 Geary Street, Suite 507
San Francisco, CA 94102
Chair of Board of Trustees of
University of California at San Francisco Foundation
250 Executive Park Blvd., Suite 2000
San Francisco, CA 94143
Director of American Conservatory Theater
30 Grant Avenue
San Francisco, CA 94108
Director of California Chamber of Commerce
1201 K Street, 12th Floor
Sacramento, CA 95814
Philip J. Quigley Chairman, Chief Executive Officer and
Director Director of Pacific Telesis Group
130 Kearney Street, Rm. 3700
San Francisco, CA 94108
Director of Varian Associates
3050 Hansen Way
P.O. Box 10800
Palo Alto, CA 94303
Carl E. Reichardt Chairman and Chief Executive Officer of the
Director Board of Directors of Wells Fargo & Company
420 Montgomery Street
San Francisco, CA 94105
Director of Ford Motor Company
The American Road
Dearborn, MI 48121
Director of Hospital Corporation of America,
HCA-Hospital Corp. of America
One Park Plaza
Nashville, TN 37203
</TABLE>
C-7
<PAGE> 113
<TABLE>
<S> <C>
Director of Pacific Gas and Electric Company
77 Beale Street
San Francisco, CA 94105
Director of Newhall Management Corporation
23823 Valencia Blvd.
Valencia, CA 91355
Donald B. Rice President, Chief Operating Officer and Director of
Director Teledyne, Inc.
2049 Century Park East
Los Angeles, CA 90067
Director of Vulcan Materials Company
One Metroplex Drive
Birmingham, AL 35209
Retired Secretary of the Air Force
Susan G. Swenson President and Chief Executive Officer of Cellular One
Director 651 Gateway Blvd.
San Francisco, CA 94080
Chang-Lin Tien Chancellor of University of California at Berkeley
Director UC at Berkeley
Berkeley, CA 94720
John A. Young President, Director and Chief Executive Officer of
Director Hewlett-Packard Company
3000 Hanover Street
Palo Alto, CA 94304
Director of Chevron Corporation
225 Bush Street
San Francisco, CA 94104
William F. Zuendt Director of 3Com Corp.
President 5400 Bayfront Plaza
P.O. Box 58145
Santa Clara, CA 95052
Director of MasterCard International
888 Seventh Avenue
New York, NY 10106
Trustee of Golden Gate University
536 Mission Street
San Francisco, CA 94163
</TABLE>
Prior to January 1, 1996, WFNIA served as sub-adviser to the Funds
corresponding Master Portfolios, and as adviser or sub-adviser to various other
open-end management investment companies. For additional information, see
"Management of the Trust" in the Part B.
C-8
<PAGE> 114
For information as to the business, profession, vocation or employment of a
substantial nature of each of the officers and management committees of WFNIA,
reference is made to WFNIA's Form ADV and Schedules A and D filed under the
Investment Advisers Act of 1940, SEC File No. 801-36479, incorporated herein by
reference.
Item 29. Principal Underwriters
(a) Stephens Inc., distributor for the Registrant, does not
presently act as investment adviser for any other registered investment
companies, but does act as principal underwriter for Overland Express Funds,
Inc., Stagecoach Funds Inc. and MasterWorks Funds Inc. (formerly, Stagecoach
Inc.), Nations Fund Trust, Nations Funds, Inc., Nations Fund Portfolio, Inc.
and Nations Institutional Reserves, and is the exclusive placement agent for
Master Investment Trust, Managed Series Investment Trust, Life & Annuity Trust
and Master Investment Portfolio, all of which are registered open-end
management investment companies, and has acted as principal underwriter for the
Liberty Term Trust, Inc., Nations Government Income Term Trust 2003, Inc., and
Nations Government Income Term Trust 2004, Inc., and Managed Balanced Target
Maturity Fund, Inc., which are closed-end management investment companies.
(b) Information with respect to each director and officer of
the principal underwriter is incorporated by reference to Form ADV and
Schedules A and D filed by Stephens Inc. with the Securities and Exchange
Commission pursuant to The Investment Advisers Act of 1940 (file No.
501-15510).
(c) Not applicable.
Item 30. Location of Accounts and Records
(a) The Registrant maintains accounts, books and other
documents required by Section 31(a) of the Investment Company Act of 1940 and
the rules thereunder (collectively, "Records") at the offices of Stephens Inc.,
111 Center Street, Little Rock, Arkansas 72201.
(b) BGFA and BGI maintain all Records relating to their
services as investment adviser and custodian, respectively, for the period
beginning January 1, 1996 at 45 Fremont Street, San Francisco, California
94105.
(c) Wells Fargo Bank maintains all Records relating to its
services as investment adviser and custodian for the period prior to January 1,
1996 and for its services as transfer and dividend disbursing agent at 525
Market Street, San Francisco, California 94105.
(d) WFNIA and Wells Fargo Institutional Trust Company, N.A.
maintain all Records relating to their services as sub-adviser and custodian,
respectively, for the period prior to January 1, 1996, at 45 Fremont Street,
San Francisco, California 94105.
C-9
<PAGE> 115
(e) Stephens maintains all Records relating to its services as
sponsor, administrator and distributor at 111 Center Street, Little Rock,
Arkansas 72201.
(e) Investors Bank & Trust Company maintains all Records
relating to its services at 89 South Street, P.O. Box 1537, Boston, MA
02205-1537.
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
(a) Not Applicable.
(b) Not Applicable.
(c) Registrant hereby undertakes to call a meeting of
shareholders for the purpose of voting upon the question of removal of a
trustee or trustees when requested in writing to do so by the holders of at
least 10% of the Registrant's outstanding shares of beneficial interest and in
connection with such meeting to comply with the provisions of Section 16(c) of
the Investment Company Act of 1940 relating to shareholder communications.
(d) Registrant hereby undertakes to furnish each person to whom
a prospectus is delivered with a copy of its most current annual report to
shareholders, upon request and without charge.
C-10
<PAGE> 116
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment
to its Registration Statement on Form N-1A to be signed on its behalf by the
undersigned, thereto duly authorized in the City of Little Rock, State of
Arkansas on the 14th day of November, 1996.
STAGECOACH TRUST
By /s/ Richard H. Blank, Jr.
-------------------------
(Richard H. Blank, Jr.)
Secretary and Treasurer
(Principal Financial Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------- -----
<S> <C>
* Trustee, Chairman and President
- -------------------------------------- (Principal Executive Officer)
(R. Greg Feltus)
/s/ Richard H. Blank, Jr. Secretary and Treasurer
- -------------------------------------- (Principal Financial Officer)
(Richard H. Blank, Jr.)
* Trustee
- --------------------------------------
(Jack S. Euphrat)
* Trustee
- --------------------------------------
(Thomas S. Goho)
* Trustee
- --------------------------------------
(Zoe Ann Hines)
* Trustee
- --------------------------------------
(W. Rodney Hughes)
* Trustee
- --------------------------------------
(Robert M. Joses)
* Trustee
- --------------------------------------
(J. Tucker Morse)
November 14, 1996
*By: /s/ Richard H. Blank, Jr.
-------------------------
(Richard H. Blank, Jr.)
As Attorney-in-Fact
</TABLE>
<PAGE> 117
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Registrant has duly caused this Amendment
to the Registration Statement on Form N-1A to be signed on its behalf by the
undersigned, thereto duly authorized in the City of Little Rock, State of
Arkansas on the 14th day of November, 1996.
MASTER INVESTMENT PORTFOLIO
By /s/ Richard H. Blank, Jr.
-------------------------
(Richard H. Blank, Jr.)
Chief Operating Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form N-1A has been signed below by the following
persons in the capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------- -----
<S> <C>
* Chairman, President
- -------------------------------------- (Principal Executive
(R. Greg Feltus) Officer) and Trustee
/s/ Richard H. Blank, Jr. Chief Operating Officer,
- -------------------------------------- Secretary and Treasurer
(Richard H. Blank, Jr.) (Principal Financial
and Accounting Officer)
* Trustee
- --------------------------------------
(Jack S. Euphrat)
* Trustee
- --------------------------------------
(Thomas S. Goho)
* Trustee
- --------------------------------------
(Zoe Ann Hines)
* Trustee
- --------------------------------------
(W. Rodney Hughes)
* Trustee
- --------------------------------------
(Robert M. Joses)
* Trustee
- --------------------------------------
(J. Tucker Morse)
November 14, 1996
*By: /s/ Richard H. Blank, Jr.
-------------------------
(Richard H. Blank, Jr.)
</TABLE>
<PAGE> 118
STAGECOACH TRUST
FILE NOS. 33-64352; 811-7780
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
EX-99.B6(c) Class B Shares Distribution Plan
EX-99.B9(c) Class B Shares Servicing Plan
EX-99.B10 Opinion and Consent of Counsel
</TABLE>
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EXHIBIT 99.B6(c)
DISTRIBUTION PLAN
(CLASS B SHARES)
WHEREAS, Stagecoach Trust ("Trust") is an open-end management
investment company and is registered as such under the Investment Company Act
of 1940, as amended ("Act"); and
WHEREAS, the Trust desires to adopt a Distribution Plan ("Plan")
pursuant to Rule 12b-1 under the Act on behalf of the Class B shares of each
Fund listed on the attached Appendix A as it may be amended from time to time
(each, a "Fund" and collectively, the "Funds") and the Board of Trustees,
including a majority of the Qualified Trustees (as defined below), has
determined that there is a reasonable likelihood that adoption of the Plan will
benefit the Fund and its Class B shareholders;
NOW THEREFORE, the Fund hereby adopts the Plan in accordance with Rule
12b-1 under the Act on the following terms and conditions:
Section 1. Pursuant to the Plan, the Trust may pay to Stephens Inc.
("Distributor"), as compensation for distribution-related services provided, or
reimbursement for distribution-related expenses incurred, a monthly fee at
annual rates as set forth on Appendix A. The actual fee payable to the
Distributor shall, within such limit, be determined from time to time by mutual
agreement between the Trust and the Distributor. The Distributor may enter
into selling agreements with one or more selling agents under which such agents
may receive compensation for distribution- related services from the
Distributor, including, but not limited to, commissions or other payments to
such agents based on the average daily net assets of Fund shares attributable
to them. The Distributor may retain any portion of the total distribution fee
payable hereunder to compensate it for distribution-related services provided
by it or to reimburse it for other distribution-related expenses.
Section 2. The Plan shall be effective on the date upon which it is
approved by "vote of a majority of the outstanding voting securities" (as
defined below) of Class B shares of the Fund and a majority of the Trustees of
the Trust, including a majority of the Qualified Trustees, pursuant to a vote
cast in person at a meeting or meetings called for the purpose of voting on the
approval of the Plan, or the date the Fund commences operations, if such date
is later.
Section 3. The Plan (and each related agreement) will continue in
effect for one year from its effective date, unless earlier terminated in
accordance with its terms, and will remain in effect from year to year
thereafter if such continuance is specifically approved at least annually by
vote of a majority of both (a) the Trustees of the Trust and (b) the Qualified
Trustees, cast in person at a meeting (or meetings) called for the purpose of
voting on such approval.
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Section 4. The Trust shall provide to the Trust's Board of Trustees
and the Trustees shall review, at least quarterly, a written report of the
amounts expended by the Trust under the Plan and each related agreement and the
purposes for which such expenditures were made.
Section 5. The Plan may be terminated at any time by vote of a
majority of the Qualified Trustees or by vote of a majority of the outstanding
voting securities of Class B shares of the Fund.
Section 6. All agreements related to the Plan shall be in writing and
shall be approved by vote of a majority of both (a) the Trustees of the Trust
and (b) the Qualified Trustees, cast in person at a meeting called for the
purpose of voting on such approval. Any agreement related to the Plan shall
provide:
A. That such agreement may be terminated at any time, without payment
of any penalty, by vote of a majority of the Qualified Trustees or
by vote of a majority of the outstanding voting securities of
Class B shares of the Fund, on not more than 60 days' written
notice to any other party to the agreement; and
B. That such agreement shall terminate automatically in the event of
its "assignment" (as defined below).
Section 7. The Plan may not be amended to increase materially the
amount that may be expended by the Fund pursuant to the Plan without the
approval by a vote of a majority of the outstanding voting securities of Class
B shares of the Fund, and no material amendment to the Plan shall be made
unless approved by vote of a majority of both (a) the Trustees of the Trust and
(b) the Qualified Trustees, cast in person at a meeting (or meetings) called
for the purpose of voting on such approval.
Section 8. While the Plan is in effect, the selection and nomination
of each Director who is not an "interested person" (as defined below) of the
Trust shall be committed to the discretion of the Trustees who are not
interested persons.
Section 9. To the extent any payments made by the Fund pursuant to a
Servicing Agreement are deemed to be payments for the financing of any activity
primarily intended to result in the sale of Class B shares within the context
of Rule 12b-1 under the Act, such payments shall be deemed to have been
approved pursuant to this Plan. Notwithstanding anything herein to the
contrary, the Fund shall not be obligated to make any payments under this Plan
that exceed the maximum amounts payable under Article III, Section 26 of the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.
Section 10. The Trust shall preserve copies of the Plan, each related
agreement and each report made pursuant to Section 4 hereof, for a period of
not less than six years from the date of the Plan; such agreement or such
report, as the case may be, being kept the first two years in an easily
accessible place.
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Section 11. As used in the Plan, (a) the terms "assignment,"
"interested person" and "vote of a majority of the outstanding voting
securities" shall have the respective meanings specified in the Act and the
rules and regulations thereunder, subject to such exemption as may be granted
by the Securities and Exchange Commission and (b) the term "Qualified Trustees"
shall mean the Trustees of the Trust who are not interested persons of the
Trust and have no direct or indirect financial interest in the operation of the
Plan or in any agreements related to the Plan.
Dated: October 24, 1996
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APPENDIX A
<TABLE>
<CAPTION>
Percentage of Funds
Average Daily Net Assets
<S> <C>
LifePath 2010 Fund 0.75%
LifePath 2020 Fund 0.75%
LifePath 2030 Fund 0.75%
LifePath 2040 Fund 0.75%
</TABLE>
Approved: October 24, 1996
4
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EXHIBIT 99.B9(c)
STAGECOACH TRUST
SERVICING PLAN
CLASS B SHARES
Section 1. Each of the proper officers of Stagecoach Trust (the
"Trust") is authorized to execute and deliver, in the name and on behalf of the
Trust, written agreements based substantially on the form attached hereto as
Exhibit A or any other form duly approved by the Trust's Board of Trustees
("Agreements") with broker/dealers, banks and other financial institutions that
are dealers of record or holders of record or which have a servicing
relationship with the beneficial owners of Class B shares ("Servicing Agents")
of the Trust's Funds listed on the attached Appendix (each a "Fund"). Pursuant
to such Agreements, Servicing Agents shall provide support services as set
forth therein to their clients who beneficially own Class B shares of the Fund
in consideration of a fee, computed monthly in the manner set forth in the
Fund's then current prospectus, at an annual rate of up to 0.20% of the average
daily net asset value of the Class B shares beneficially owned by or
attributable to such clients. The Trust's distributor, administrator and
adviser, if any, and their respective affiliates are eligible to become
Servicing Agents and to receive fees under this Servicing Plan. All expenses
incurred by the Fund in connection with the Agreements and the implementation
of this Servicing Plan shall be borne entirely by the holders of the Class B
shares of the Fund.
Section 2. The Trust's administrator shall monitor the arrangements
pertaining to the Trust's Agreements with Servicing Agents. The Trust's
administrator shall not, however, be obligated by this Servicing Plan to
recommend, and the Trust shall not be obligated to execute, any Agreement with
any qualifying Servicing Agents.
Section 3. So long as this Servicing Plan is in effect, the Trust's
administrator shall provide to the Trust's Board of Trustees, and the Trustees
shall review, at least quarterly, a written report of the amounts expended
pursuant to this Servicing Plan and the purposes for which such expenditures
were made.
Section 4. The Plan shall be effective on the date upon which it is
approved by "vote of a majority of the outstanding voting securities," as
defined in the Investment Company Act of 1940, as amended, and rules and
regulations thereunder, of Class B shares of the Fund and a majority of the
Trustees of the Trust, including a majority of the Qualified Trustees, pursuant
to a vote cast in person at a meeting or meetings called for the purpose of
voting on the approval of the Plan, or on the date the Fund commences
operations, if such date is later.
Section 5. Unless sooner terminated, this Servicing Plan (and each
related agreement) shall continue in effect for a period of one year from its
date of approval and shall continue thereafter for successive annual periods,
provided that such Plan is not specifically terminated by a majority of the
Board of Trustees, including a majority of the
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Trustees who are not "interested persons," as defined in the Investment Company
Act of 1940, of the Trust and have no direct or indirect financial interest in
the operation of this Servicing Plan or in any Agreement related to this
Servicing Plan (the "Disinterested Trustees") cast in person at a meeting called
for the purpose of voting on such approval.
Section 6. This Servicing Plan may be amended at any time with
respect to the Fund by the Trust's Board of Trustees, provided that any
material amendment of the terms of this Servicing Plan (including a material
increase of the fee payable hereunder) shall become effective only upon the
approvals set forth in Section 5.
Section 7. This Servicing Plan is terminable at any time with respect
to the Fund by vote of a majority of the Disinterested Trustees.
Section 8. While this Servicing Plan is in effect, the selection and
nomination of the Disinterested Trustees shall be committed to the discretion
of such Disinterested Trustees.
Section 9. Notwithstanding anything herein to the contrary, the Fund
shall not be obligated to make any payments under this Plan that exceed the
maximum amounts payable under Article III, Section 26 of the Rules of Fair
Practice of the National Association of Securities Dealers, Inc.
Section 10. The Trust will preserve copies of this Servicing Plan,
Agreements, and any written reports regarding this Servicing Plan presented to
the Board of Trustees for a period of not less than six years.
Dated: October 24, 1996
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APPENDIX
LifePath 2010 Fund
LifePath 2020 Fund
LifePath 2030 Fund
LifePath 2040 Fund
Approved: October 24, 1996
3
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EXHIBIT 99.B10
[MORRISON & FOERSTER LLP LETTERHEAD]
November 15, 1996
Stagecoach Trust
111 Center Street
Little Rock, Arkansas 72201
Re: Shares of Beneficial Interest of
Stagecoach Trust
Gentlemen:
We refer to Post-Effective Amendment No. 6 and Amendment No. 8 to
the Registration Statement on Form N-1A (SEC File Nos. 33-64352 and 811-7780)
(the "Registration Statement") of Stagecoach Trust (the "Trust") relating to
the registration of an indefinite number of shares of beneficial interests of
the Trust (collectively, the "Shares").
We have been requested by the Trust to furnish this opinion as
Exhibit 10 to the Registration Statement.
We have examined documents relating to the organization of the
Trust and its series and the authorization and issuance of shares of its
series.
Based upon and subject to the foregoing, we are of the opinion
that:
The issuance and sale of the Shares by the Trust has been duly and
validly authorized by all appropriate action, and assuming delivery by sale or
in accord with the Fund's dividend reinvestment plan and in accordance with the
description set forth in the Funds' current prospectuses, the Shares will be
validly issued, fully paid and nonassessable by the Trust.
We consent to the inclusion of this opinion as an exhibit to the
Registration Statement.
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Stagecoach Trust
November 15, 1996
Page 2
In addition, we hereby consent to the use of our name and to the
reference to our firm under the caption "Legal Counsel" in the Prospectuses and
the description of advice rendered by our firm under the heading "Management of
the Funds" in the Prospectuses and "Counsel" in the Statement of Additional
Information, both of which are included as part of the Registration Statement.
Very truly yours,
/s/ MORRISON & FOERSTER LLP
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MORRISON & FOERSTER LLP
