<PAGE>
As filed with the Securities and Exchange Commission
on April 30, 1998
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. 8 [X]
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 10 [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)
If appropriate, check the following box:
[ ] this post effective amendment designates a new effective date for a
previously filed post-effective amendment.
This Post-Effective Amendment to the Registrant's Registration Statement has
also 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>
EXPLANATORY NOTE
----------------
This Post-Effective Amendment to the Registration Statement (the "Amendment")
of Stagecoach Trust is being filed to register the "Plain English" Prospectus
and related Statement of Additional Information for the Trust's LifePath 2000,
LifePath 2010, LifePath 2020, LifePath 2030 and LifePath 2040 Funds (the
"Funds"), to add to the Trust's Registration Statement the audited financial
statements and certain related financial information for the fiscal year ended
February 28, 1998 for the Funds and corresponding Master Portfolios, and to
register the Class B shares of the LifePath 2000 Fund and the Class C shares
of the LifePath 2040 Fund. This Amendment does not affect the Registration
Statement, Prospectus, or Statement of Additional Information for the
Institutional Class shares of the Funds.
<PAGE>
LIFEPATH FUNDS
--------------
Cross Reference Sheet
---------------------
Form N-1A Item Number
- ---------------------
Part A Prospectus Captions
- ------ -------------------
1 Cover Page
2 Summary of Fund Expenses
3 Financial Highlights
How to Read the Financial Highlights
4 General Investment Risks
Key Information
Organization and Management of the Funds
LifePath Funds
5 Organization and Management of the Funds
Summary of Expenses
6 Additional Services and Other Information
7 Additional Services and Other Information
Exchanges
Your Account
8 Additional Services and Other Information
Exchanges
Your Account
9 Not Applicable
Part B Statement of Additional Information Captions
- ------ --------------------------------------------
10 Cover Page
11 Table of Contents
12 Historical Fund Information
13 Additional Permitted Investment Activities
Appendix
Investment Restrictions
Risk Factors
14 Management
15 Management
16 Fund Expenses
Independent Auditors
Management
17 Portfolio Transactions
18 Capital Stock
Other
19 Additional Purchase and Redemption Information
Determination of Net Asset Value
20 Federal Income Taxes
21 Management
22 Performance Calculations
23 Financial Information
Part C Other 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.
<PAGE>
June 30, 1998
STAGECOACH FUNDS/R/
Stagecoach
LifePath Funds Prospectus
LifePath Conservative Please read this Prospectus and keep it for
Fund future reference. It is designed to provide you
with important information and to help you
LifePath 2010 Fund decide if the Fund's goals match your own.
LifePath 2020 Fund
These securities have not been approved or disapproved
LifePath 2030 Fund by the U.S. Securities and Exchange Commission,
any state securities commission or any other
LifePath 2040 Fund regulatory authority, nor have any of these
authorities passed upon the accuracy or adequacy
Class A, Class B, of this Prospectus. Any representation to the
and Class C contrary is a criminal offense.
Investment Advisor
Barclays Global Fund
Fund Advisors
Co-Administrators
Wells Fargo Bank
Stephens Inc.
Fund shares are NOT deposits or other obligations
of,or issued,endorsed or guaranteed by, Wells Fargo
Distributor Bank, N.A. ("Wells Fargo Bank"),Barclays Global
Stephens Inc. Investors, N.A. ("BGI"), or any of their affiliates.
Fund shares are NOT insured or guaranteed 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 RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
<PAGE>
About This Prospectus
- --------------------------------------------------------------------------------
What is a prospectus?
A prospectus provides you with the information you need in order to make an
informed investment decision. It describes how a Fund operates and invests its
assets and also contains fee and expense information.
What is different about this Prospectus?
We have rewritten our Prospectus in "Plain English" and grouped some of the most
important Fund information together to make it easier to read and understand.
How is the Fund information organized?
After important summary information and the expense fee table, each Fund's
investment objective and financial highlights are presented. The icons below
tell you where various types of information about a Fund can be found.
Important information you should look for:
- --------------------------------------------------------------------------------
[LOGO OF Investment Objective and Investment Policies
ARROW]
What is the Fund trying to achieve? How do we intend to invest
your money? What makes a Fund different from the other Funds
offered in the Prospectus? Look for the arrow icon to find out.
- --------------------------------------------------------------------------------
[LOGO OF Permitted Investment
PERCENTAGE
SIGN] A summary of a Fund's key permitted investments and practices.
- --------------------------------------------------------------------------------
[LOGO OF Important Risk Factors
EXCLAMATION
POINT] What are key risk factors about the Fund? This will include
the factors described in "General Investment Risks" together
with any special risk factors for the Fund.
- -------------------------------------------------------------------------------
[LOGO OF Additional Fund Facts
ADDITION
SIGN] Provides additional information about the Fund.
- --------------------------------------------------------------------------------
Why is italicized print used throughout the Prospectus?
Words appearing in italicized print and highlighted in color are defined in the
Glossary.
What else do I need to understand these Funds?
Each Fund has a Statement of Additional Information that supplements the
disclosures made in this Prospectus. You may also want to review the most recent
Annual or Semi-Annual Report. You can order copies of these documents without
charge by calling 1-800-222-8222. The Statement of Additional Information and
other information for the Funds is also available on the SEC's website
(http://www.sec.gov).
<PAGE>
Table of Contents
Key Information 4
Summary of Expenses 6
- --------------------------------------------------------------------------------
The Fund LifePath Conservative Fund 10
This section contains LifePath 2010 Fund 15
important information
about the individual LifePath 2020 Fund 22
Funds.
LifePath 2030 Fund 27
LifePath 2040 Fund 27
General Investment Risks 27
- --------------------------------------------------------------------------------
Your Account A Choice of Share Classes 31
Turn to this section for Reduced Sales Charges 34
information on how to
open and maintain Your Account 38
your account, including
how to buy,sell and How to Buy Shares 40
exchange Fund shares.
Selling Shares 41
Exchanges 43
Additional Services and
Other Information 44
- --------------------------------------------------------------------------------
Reference Organization and
Management of the Funds 48
Look here for details
on the organization How to Read the Financial
of the Funds and term Highlights 52
definitions.
Glossary 54
<PAGE>
Key Information
- --------------------------------------------------------------------------------
Summary of the Stagecoach LifePath Funds
The Funds described in this Prospectus pursue a strategy of allocating and
reallocating investments among various asset classes to capture returns and
reduce risk consistent with a stated investment horizon. Each Fund has a
different investment objective intended to meet different investment needs. You
should consider each Fund's objective, investment practices, permitted
investments and risks carefully before investing in a Fund. The investment
objective of each Fund is fundamental and may not be changed without the
approval of a majority of shareholders.
Should you consider investing in these Funds? Yes, if:
* you are investing with a general time horizon in mind or if you wish to use
a time horizon as a measure of the investment risk you are willing to
accept;
* you are looking for the diversification an asset allocation strategy
provides; and
* you are willing to accept the risks of investing, including the risk that
share prices may rise and fall.
You should not invest in these Funds if:
* you are looking for FDIC insurance coverage or guaranteed rates of return;
* you are unwilling to accept that you may lose money on your investment; or
* you are looking for an investment limited to a single asset class.
Who are "We"?
In this Prospectus, "We" generally means Stagecoach Funds. "We" sometimes
refers to Barclays Global Fund Advisors in their role as the Investment Advisor
or other companies hired by the Fund to perform services. The section on
"Organization and Management of the Funds" further explains how the Funds are
organized.
Who are "You"?
In this Prospectus, "You" means the potential investor or the shareholder.
What are the "Funds"?
In this Prospectus, the "Funds" refers to the Stagecoach Funds listed on the
cover of this Prospectus. The "Funds" also may refer to other mutual funds
offered by Stagecoach Funds, Inc.
What is a "Master/Feeder Fund Arrangement" and why is it used?
In a master/feeder fund arrangement, a "feeder" fund invests all of its assets
in a "master" fund that has an identical investment objective and policies as
the feeder fund. Feeder funds investing in the same master fund can reduce their
expenses through sharing the costs of managing a large pool of assets.
References to the activities of the LifePath Funds are understood to be
references to the Master Portfolio as applicable. See "Additional Services and
Information" on page ____ for additional details.
Key Terms
An "asset class" is a broad category of investments such as "bonds" or
"equities". "Allocation" refers to the division of investments among two or more
asset classes. The LifePath Funds offered in this Prospectus are managed using
a computer "model" that recommends the allocation of assets according to a
Fund's investment objective and risk tolerance.
4 Stagecoach LifePath Funds Prospectus
<PAGE>
- -------------------------------------------------------------------------------
Dividends
We pay dividends, if any, quarterly, and distribute capital gains, if any, at
least annually.
Stagecoach LifePath Funds Prospectus 5
<PAGE>
Life Path Funds Summary of Expenses
- --------------------------------------------------------------------------------
================================================================================
SHAREHOLDER TRANSACTION EXPENSES
================================================================================
These tables are intended to help you understand the various costs and expenses
you will pay as a shareholder in a Fund. These tables do not reflect any charges
that may be imposed by Wells Fargo Bank or other institutions in connection with
an account through which you hold Fund shares. See "Organization and Management
of the Funds" for more details.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Maximum sales charge on a purchase (as a percentage of offering price)
- --------------------------------------------------------------------------------
Maximum sales charge on reinvested dividends
- --------------------------------------------------------------------------------
Maximum sales charge on:
- --------------------------------------------------------------------------------
Redemption during first year
- --------------------------------------------------------------------------------
Redemption after first year
- --------------------------------------------------------------------------------
Exchange fees
- --------------------------------------------------------------------------------
================================================================================
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERGAE NET ASSETS)
================================================================================
Expenses shown reflect contract amounts and amounts payable by each Fund. The
expenses shown under "Other Expenses" and "Total Fund Operating Expenses" have
been estimated or restated to reflect current fees. Expenses shown "after
waivers and reimbursements" reflect voluntary fee waivers that may be
discontinued without prior notice. Long-term shareholders may pay more than the
equivalent of the maximum front-end sales charge allowed by the National
Association of Securities Dealers, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Rule 12b-1 fee
- --------------------------------------------------------------------------------
Management fee
- --------------------------------------------------------------------------------
Other expenses (after waivers or reimbursements)
- --------------------------------------------------------------------------------
Total Fund Operating Expenses (after waivers or reimbursements)
- --------------------------------------------------------------------------------
Other expenses (before waivers or reimbursement)
- --------------------------------------------------------------------------------
Total Fund Operating Expenses (before waivers or reimbursements)
- --------------------------------------------------------------------------------
6 Stagecoach LifePath Funds Prospectus
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
LifePath Conservative LifePath 2010 LifePath 2020 Life Path 2030 Life Path 2040
- ----------------------------------------------------------------------------------------------------------------------------
Class A Class B Class A Class B Class A Class B Class A Class B Class A Class B Class C
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4.50% None 4.50% None 4.50% None 4.50% None 4.50% None None
- ----------------------------------------------------------------------------------------------------------------------------
None None None None None None None None None None None
- ----------------------------------------------------------------------------------------------------------------------------
None 5.00% None 5.00% None 5.00% None 5.00% None 5.00% 1.00%
- ----------------------------------------------------------------------------------------------------------------------------
None 4.00% None 4.00% None 4.00% None 4 .00% None 4 .00% None
- ----------------------------------------------------------------------------------------------------------------------------
None None None None None None None None None None None
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
LifePath Conservative LifePath 2010 LifePath 2020 Life Path 2030 Life Path 2040
- ----------------------------------------------------------------------------------------------------------------------------
Class A Class B Class A Class B Class A Class B Class A Class B Class A Class B Class C
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0.25% 0.75% 0.25% 0.75% 0.25% 0.75% 0.25% 0.75% 0.25% 0.75% 0.75%
- ----------------------------------------------------------------------------------------------------------------------------
0.55% 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% 0.55%
- ----------------------------------------------------------------------------------------------------------------------------
0.40% 0.40% 0.40% 0.40% 0.40% 0.40% 0.40% 0.40% 0.40% 0.40% 0.40%
- ----------------------------------------------------------------------------------------------------------------------------
1.28% 1.70% 1.20% 1.70% 1.20% 1.70% 1.20% 1.70% 1.20% 1.70% 1.70%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Stagecoach LifePath Funds Prospectus 7
<PAGE>
Life Path Funds Summary of Expenses (continued)
- --------------------------------------------------------------------------------
================================================================================
EXAMPLE OF EXPENSES -- This example is not a representation of past or future
expenses, and actual expenses may be higher or lower than those shown.
================================================================================
You would pay the following expenses on a $1,000 investment assuming a 5% annual
return and that you redeem your shares at the end of each period.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
LifePath Conservative LifePath 2010 LifePath 2020 Life Path 2030 Life Path 2040
- -----------------------------------------------------------------------------------------------------------------------------------
Class A Class B Class A Class B Class A Class B Class A Class B Class A Class B Class C
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year $57 $67 $57 $67 $57 $67 $57 $67 $57 $67 $27
- -----------------------------------------------------------------------------------------------------------------------------------
2 year $81 $84 $81 $84 $81 $84 $81 $84 $81 $84 $54
- -----------------------------------------------------------------------------------------------------------------------------------
5 year $108 $112 $108 $112 $108 $112 $108 $112 $108 $112 $92
- -----------------------------------------------------------------------------------------------------------------------------------
10 year $184 $175 $184 $175 $184 $175 $184 $175 $184 $175 $201
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
EXAMPLE OF EXPENSES -- THIS EXAMPLE IS NOT A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE HIGHER OR LOWER THAN THOSE SHOWN.
================================================================================
You would pay the following expenses on a $1,000 investment assuming a 5% annual
return and that you do not redeem your shares at the end of each period.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
LifePath Conservative LifePath 2010 LifePath 2020 Life Path 2030 Life Path 2040
- -----------------------------------------------------------------------------------------------------------------------------------
Class A Class B Class A Class B Class A Class B Class A Class B Class A Class B Class C
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year $57 $17 $57 $17 $57 $17 $57 $17 $57 $17 $17
- -----------------------------------------------------------------------------------------------------------------------------------
2 year $81 $54 $81 $54 $81 $54 $81 $54 $81 $54 $54
- -----------------------------------------------------------------------------------------------------------------------------------
5 year $108 $92 $108 $92 $108 $92 $108 $92 $108 $92 $92
- -----------------------------------------------------------------------------------------------------------------------------------
10 year $184 $175 $184 $175 $184 $175 $184 $175 $184 $175 $201
- -----------------------------------------------------------------------------------------------------------------------------------
8 Stagecoach LifePath Funds Prospectus Stagecoach LifePath Funds Prospectus 9
</TABLE>
<PAGE>
LifePath Funds
Investment Advisor: Barclays Global Funds Advisors
- -------------------
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 that investors, on average, may
be willing to accept given their investment time horizons. Specifically:
. LifePath Conservative 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.
INVESTMENT POLICIES
The LifePath Funds were the first Funds of their kind to offer a flexible
investment strategy designed to change over specific time horizons. Typically,
long-term investment goals are pursued with a more aggressive mix of equities
and fixed-income securities than short-term goals. We manage the LifePath Funds
so that the allocation of each Fund gradually grows more conservative as the
year in the Fund's title approaches. You are encouraged to choose the LifePath
Fund whose title year most closely matches the year during which you expect to
begin regularly redeeming shares. Keep in mind, however, that the year in each
Fund's title also serves as a guide to the relative aggressiveness of each Fund,
where the LifePath 2040 Fund has the most aggressive asset allocation and the
LifePath Conservative Fund has the least aggressive asset allocation. If you
have a low risk tolerance, you may not wish to invest in the LifePath 2040 Fund,
for example, even if you do not expect to retire for another forty years.
Conversely, you may feel comfortable choosing a more aggressive LifePath Fund
for a near-term investment goal.
We allocate and reallocate assets among a wide range of U.S. and international
common stocks, fixed-income securities and money market instruments according to
the recommended mix suitable for each Fund's risk level. Under normal
conditions, the LifePath Conservative Fund will typically invest 80% of its
assets in fixed-income classes and up to 20% in equities as it seeks stable
income production and reduced volatility. The more aggressive Funds may invest
in up to 100% stocks, but as their title year approaches, their allocation will
increasingly resemble the current allocation of the LifePath Conservative Fund.
PERMITTED INVESTMENTS
We do not select individual securities based on traditional investment analysis.
Instead, we allocate investments across as many as 17 asset classes, as
represented by the indexes listed below and money market instruments.
We use a statistical method know as "sampling" in order to try to recreate the
total return of the following stock indexes as closely as possible:
. The S&P/BARRA Value Stock Index, which consists primarily of large-
capitalization U.S. stocks with lower than average price-to-book ratios;
. The S&P/BARRA Growth Stock Index, which consists primarily of large-
capitalization U.S. stocks with higher than average price-to-book ratios;
. The Intermediate Capitalization Value Index, which consists primarily of
medium-capitalization U.S. stocks with lower than average price-to-book
ratios;
Stagecoach LifePath Funds Prospectus 9
<PAGE>
. The Intermediate Capitalization Growth Index, which consists primarily of
medium-capitalization U.S. stocks with higher than average price-to-book
ratios;
. The Intermediate Capitalization Utility Stock Index, which consists primarily
of medium-capitalization U.S. utility stocks;
. The Micro Capitalization Market Index, which consists primarily of small-
capitalization U.S. stocks;
. The Small Capitalization Value Stock Index, which consists primarily of small-
capitalization U.S. stocks with lower than average price-to-book ratios;
. The Small Capitalization Growth Stock Index, which consists primarily of
small-capitalization U.S. stocks with higher than average price-to-book
ratios;
. The Morgan Stanley Capital International Japan Index, consisting of primarily
large-capitalization Japanese stocks; and
. The Morgan Stanley Capital International Europe, Australia, Far East exJapan
Index, consisting primarily of non-Japanese foreign stocks.
We seek exposure to the U.S. fixed-income markets by investing in securities
representative of the following indexes:
. The Lehman Brothers Long-Term Government Bond Index, which consists of all
U.S. Government bonds with maturities of at least ten years;
. The Lehman Brothers Intermediate-Term Government Bond Index, which consists of
all U.S. Government bonds with maturities of less than ten years but more than
one year;
. The Lehman Brothers Long-Term Corporate Bond Index, which consists of all
investment-grade U.S. corporate bonds with maturities of at least ten years;
. The Lehman Brothers Intermediate-Term Corporate Bond Index, which consists of
all investment-grade U.S. corporate bonds with maturities of less than ten
years but more than one year; and
. The Lehman Brothers Mortgage-Backed Securities Index, which consists of all
fixed-coupon mortgage pass throughs issued by or backed by the U.S. Government
or its agencies.
We seek foreign debt market exposure through investment in securities
representative of the Solomon Brothers Non-U.S. World Government Bond Index,
which consists of a range of foreign government bonds with maturities of greater
than one year.
We also invest in high-quality money market instruments, including U.S.
Government obligations, obligations of foreign and domestic banks, short-term
corporate debt instruments and repurchase agreements.
We may also invest in stocks of U.S. and foreign issuers not included in the
indexes listed above. Foreign equity exposure may be through stocks purchased on
foreign exchanges or through American Depositary Receipts or similar instruments
sold on U.S. exchanges. In addition, under normal market conditions, we may
invest:
. in call and put options on stock indexes, stock index futures, options on
stock index futures, interest rate and interest rate futures contracts as a
substitute for a comparable market position in stocks; and
. in interest rate and index swaps.
We are not required to keep a minimum investment in any of the asset classes,
nor are we prohibited from investing substantially all of our assets in a single
class. The allocation may shift at any time. As part of our investment strategy,
we may invest varying portions of our assets in money market instruments. In
addition, we may temporarily hold assets in cash or in money market instruments,
including U.S. Government obligations, repurchase agreements and other short-
term investments, to maintain liquidity or when we believe it is in the best
interest of shareholders to do so. Each Fund is a diversified portfolio.
IMPORTANT RISK FACTORS
You should consider both the General Investment Risks beginning on page ___ and
the specific risks listed below. They are all important to your investment
choice.
10 Stagecoach LifePath Funds Prospectus
<PAGE>
We may incur a higher than average portfolio turnover ratio due to allocation
shifts recommended by the investment model. Foreign obligations may entail
additional risks. The value of investments in options on stock indexes is
affected by price level movements for a particular index, rather than price
movements for an individual issue.
ADDITIONAL FUND FACTS
The allocations across asset classes are recommended by a proprietary investment
model that analyzes extensive financial and economic data, including relative
risk and return statistics. We have broad latitude in allocating the Funds'
investments and in refining the model. No person is primarily responsible for
recommending either the asset mix or the mix of securities within a class. We
may invest in fewer asset classes than listed above, particularly for any Fund
with less than $150 million in total assets.
Stagecoach LifePath Funds Prospectus 11
<PAGE>
FINANCIAL HIGHLIGHTS
The following information has been derived from the Financial Highlights of
the Class A and B shares in the Funds' financial statements for the fiscal year
ended February 28, 1998. The financial statements are incorporated by reference
into the SAI and have been audited by KPMG Peat Marwick LLP, independent
auditors, whose report dated April 3, 1998 also is incorporated by reference
into the SAI. This information should be read in conjunction with the financial
statements and notes thereto. Financial information is not provided for the
Class C shares because the Class C shares were not offered during the periods
presented.
For a Share Outstanding
<TABLE>
<CAPTION>
LifePath
LifePath 2000 Fund LifePath 2010 Fund Class B 2020 Fund
------------------------------------- ----------------------------------------------- ---------
Year Year Year Year Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended Ended Ended Ended Ended
Feb. 28, Feb. 28, Feb. 29, Feb. 28, Feb. 28, Feb. 28, Feb. 29, Feb. 28, Feb. 28, Feb. 28,
1998 1997 1996 1995 1998 1997 1996 1995 1998 1998
------- ------- -------- -------- ------- ------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of
period....................... $ 10.71 $ 10.64 $ 9.92 $ 10.00 $ 12.20 $ 11.42 $ 9.99 $ 10.00 $ 12.02 $ 12.98
Income from investment
operations:
Net investment income........ 0.43 0.42 0.40 0.34 0.36 0.34 0.32 0.34 0.19 0.28
Net realized and unrealized
gain/(loss) on investments.. 0.81 0.28 0.86 (0.14) 1.82 0.95 1.58 (0.02) 1.88 2.73
------- ------- -------- ------- ------- ------- -------- ------- ------- -------
Total from investment
operations................... 1.24 0.70 1.26 0.20 2.18 1.29 1.90 0.32 2.07 3.01
Less distributions:
From net investment income... (0.44) (0.42) (0.41) (0.27) (0.38) (0.34) (0.33) (0.28) (0.15) (0.29)
From net realized capital
gains....................... (0.68) (0.21) (0.13) (0.01) (0.84) (0.17) (0.14) (0.05) (0.84) (1.00)
------- ------- -------- ------- ------- ------- -------- ------- ------- -------
Total Distributions............ (1.12) (0.63) (0.54) (0.28) (1.22) (0.51) (0.47) (0.33) (0.99) (1.29)
------- ------- -------- ------- ------- ------- -------- ------- ------- -------
Net Asset Value, end of period. $ 10.83 $ 10.71 $ 10.64 $ 9.92 $ 13.16 $ 12.20 $ 11.42 $ 9.99 $ 13.10 $ 14.70
======= ======= ======== ======= ======= ======= ======== ======= ======= =======
Total Return (not annualized).. 11.99% 6.74% 12.98% 2.10% 18.45% 11.60% 19.40% 3.31% 17.64% 23.97%
Ratios/Supplemental Data:
Net assets, end of period
(000)....................... $67,909 $84,949 $100,700 $54,617 $89,659 $82,971 $ 67,178 $36,764 $ 6,248 $166,198
Number of shares outstanding,
end of period (000)......... 6,272 7,934 9,406 5,503 6,815 6,801 5,883 3,679 477 11,304
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% 1.70% 1.20%
Ratio of net investment
income to average net
assets...................... 3.83% 3.93% 4.00% 4.62% 2.85% 3.16% 3.06% 4.40% 2.15% 2.05%
Portfolio Turnover Rate/2/..... 39% 108% 84% 17% 46% 73% 39% 24% 46% 41%
Average Commission Rate
Paid/3/...................... $0.0300 $0.0401 -- -- $0.0304 $0.0404 -- -- $0.0304 $0.0300
</TABLE>
- -------------------
1 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.
3 The Average Commission Rate Paid reflects activity by the Master Portfolio.
For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for security trades on
which commissions are charged. This amount may vary depending on, among other
things, the mix of trades, trading practices and commission rate structures.
12 Stagecoach LifePath Funds Prospectus
<PAGE>
<TABLE>
<CAPTION>
LifePath 2020 Fund Class B LifePath 2030 Fund Class B
------------------------------------- ----------------------------------------------
Year Year Year Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended Ended Ended Ended
Feb. 28, Feb. 29, Feb. 28, Feb. 28, Feb. 28, Feb. 28, Feb. 29, Feb. 28, Feb. 28,
1997 1996 1995 1998 1998 1997 1996 1995 1998
-------- -------- -------- -------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of
period....................... $ 11.98 $ 10.17 $ 10.00 $ 12.79 $ 13.83 $ 12.34 $ 10.17 $ 10.00 $ 13.63
Income from investment
operations:
Net investment income........ 0.27 0.27 0.28 0.14 0.23 0.22 0.21 0.26 0.10
Net realized and unrealized
gain/(loss) on investments.. 1.43 2.03 0.12 2.74 3.54 1.83 2.45 0.13 3.50
------- -------- ------- ------- ------- ------- -------- ------- -------
Total from investment
operations................... 1.70 2.30 0.40 2.88 3.77 2.05 2.66 0.39 3.60
Less distributions:
From net investment income... (0.28) (0.28) (0.23) (0.12) (0.23) (0.23) (0.22) (0.22) (0.09)
From net realized capital
gains....................... (0.42) (0.21) 0.00 (1.00) (0.86) (0.33) (0.27) 0.00 (0.86)
------- -------- ------- ------- ------- ------- -------- ------- -------
Total Distributions............ (0.70) (0.49) (0.23) (1.12) (1.09) (0.56) (0.49) (0.22) (0.95)
------- -------- ------- ------- ------- ------- -------- ------- -------
Net Asset Value, end of period. $ 12.98 $ 11.98 $ 10.17 $ 14.55 $ 16.51 $ 13.83 $ 12.34 $ 10.17 $ 16.28
======= ======== ======= ======= ======= ======= ======== ======= =======
Total Return (not annualized).. 14.65% 22.94% 4.12% 23.05% 28.01% 17.01% 26.53% 4.03% 26.93%
Ratios/Supplemental Data:
Net assets, end of period
(000)....................... $146,226 $122,488 $66,036 $12,129 $126,131 $101,078 $ 83,012 $41,153 $12,469
Number of shares outstanding,
end of period (000)......... 11,264 10,224 6,494 884 7,642 7,307 6,728 4,045 766
Ratios to average net assets
(annualized)/1/
Ratio of expenses to average
net assets.................. 1.20% 1.20% 1.20% 1.70% 1.20% 1.20% 1.20% 1.20% 1.70%
Ratio of net investment
income to average net
assets...................... 2.33% 2.45% 3.64% 1.33% 1.50% 1.81% 1.92% 3.35% 0.76%
Portfolio Turnover Rate/2/..... 61% 49% 28% 41% 27% 42% 39% 40% 27%
Average Commission Rate
Paid/3/...................... $0.0451 -- -- $0.0300 $0.0302 $0.0364 -- -- $0.0302
<CAPTION>
LifePath 2040 Fund Class B
----------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
Feb. 28, Feb. 28, Feb. 29, Feb. 28, Feb. 28,
1998 1997 1996 1995 1998
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of
period....................... $ 14.50 $ 12.84 $ 10.37 $ 10.00 $ 14.29
Income from investment
operations:
Net investment income........ 0.13 0.16 0.15 0.18 0.03
Net realized and unrealized
gain/(loss) on investments.. 4.17 2.35 2.82 0.34 4.06
------- ------- -------- ------- -------
Total from investment
operations................... 4.30 2.51 2.97 0.52 4.09
Less distributions:
From net investment income... (0.14) (0.16) (0.16) (0.15) (0.03)
From net realized capital
gains....................... (1.59) (0.69) (0.34) 0.00 (1.59)
------- ------- -------- ------- -------
Total Distributions............ (1.73) (0.85) (0.50) (0.15) (1.62)
------- ------- -------- ------- -------
Net Asset Value, end of period. $ 17.07 $ 14.50 $ 12.84 $ 10.37 $ 16.76
======= ======= ======== ======= =======
Total Return (not annualized).. 30.66% 20.17% 28.91% 5.26% 29.47%
Ratios/Supplemental Data:
Net assets, end of period
(000)....................... $248,195 $189,560 $142,738 $56,737 $30,754
Number of shares outstanding,
end of period (000)......... 14,537 13,073 11,114 5,472 1,835
Ratios to average net assets
(annualized)/1/
Ratio of expenses to average
net assets.................. 1.20% 1.20% 1.20% 1.20% 1.70%
Ratio of net investment
income to average net
assets...................... 0.82% 1.22% 1.29% 2.35% 0.08%
Portfolio Turnover Rate/2/..... 34% 48% 29% 5% 34%
Average Commission Rate
Paid/3/...................... $0.0248 $0.0351 -- -- $0.0248
</TABLE>
- -------------------
1 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.
3 The Average Commission Rate Paid reflects activity by the Master Portfolio.
For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for security trades on
which commissions are charged. This amount may vary depending on, among other
things, the mix of trades, trading practices and commission rate structures.
Stagecoach LifePath Funds Prospectus 13
<PAGE>
General Investment Risks
- --------------------------------------------------------------------------------
Understanding the risks involved in mutual fund investing will help you make an
informed decision that takes into account your tolerance and preferences. You
should carefully consider risks common to all mutual funds, including the
Stagecoach Funds. Chief among these risks are the following:
* Unlike bank deposits such as CDs or savings accounts, mutual funds are not
insured by the FDIC.
* We cannot guarantee that we will meet our investment objectives.
* We do not guarantee the performance of a Fund, nor can we assure you that the
market value of your investment will not decline. We will not "make good" any
investment loss you may suffer, nor can anyone we contract with to perform
certain functions, such as selling agents or investment advisors, offer or
promise to make good any such losses.
* Share prices- and therefore the value of your investment-will increase and
decrease with changes in the value of the underlying securities and other
investments. This is referred to as volatility.
* Investing in any mutual fund, including those deemed conservative, involves
risk, including the possible loss of any money you invest.
* An investment in a single Fund, by itself, does not constitute a complete
investment plan.
The Funds invest in securities that involve particular kinds of risk.
* The Funds invest in equities which are subject to equity market risk. This is
the risk that stock prices will fluctuate and can decline and reduce the
value of the portfolio. Certain types of stock and certain stocks selected
for a Fund's portfolio may underperform or decline in value more than the
overall market. As of the date of this Prospectus, the equity market, as
measured by the S&P 500 Index and other commonly used indexes, is trading at
or close to record levels. There can be no guarantee that these performance
levels will continue.
* The Funds invest in debt instruments, such as notes and bonds, that are
subject to credit risk and interest rate risk. Credit risk is the possibility
that an issuer of a security will be unable to make interest payments or
repay principal. Changes in the financial strength of an issuer or changes in
the credit rating of a security may affect its value. Interest rate risk is
the possibility that interest rates may increase and reduce the resale value
of securities in a Fund's portfolio. Debt instruments with longer maturities
are generally more sensitive to interest rate changes than those with shorter
maturities. Changes in market interest rates do not affect the rate payable
on debt instruments held in a Fund, unless the instrument has adjustable or
14 Stagecoach LifePath Funds Prospectus
<PAGE>
General Investment Risks
- --------------------------------------------------------------------------------
variable rate features. Changes in market interest rates may also extend
or shorten the duration of certain types of instruments, such as asset-
backed securities, thereby affecting their value and the return on your
investment.
* The Funds invest in smaller companies, foreign companies (including
investments made through American Depository Receipts and similar
instruments), and emerging markets that are subject to additional risks,
including less liquidity and greater volatility. A Fund's investment in
foreign and emerging markets may also be subject to special risks
associated with international trade, including currency, political,
regulatory and diplomatic risk.
* The Funds may invest a portion of their assets in U.S. Government
obligations. It is important to recognize that the U.S. Government does
not guarantee the market value or current yield of those obligations. Not
all U.S. Government obligations are backed by the full faith and credit
of the U.S. Treasury, and the U.S. Government's guarantee does not extend
to the Fund itself.
* The Funds may also use certain derivative instruments, such as options or
futures contracts. The term "derivatives" covers a wide number of
investments, but in general it refers to any financial instrument whose
value is derived, at least in part, from the price of another security or
a specified index, asset or rate. Some derivatives may be more sensitive
to interest rate changes or market moves, and some may be susceptible to
changes in yields or values due to their structure or contract terms.
What follows is a general list of the types of risks (some of which are
described above) that may apply to a given Fund and a table showing some of the
additional investment practices that each Fund may use. Additional information
about these practices is available in the Statement of Additional Information.
Counter-Party Risk- The risk that the other party in a repurchase agreement or
other transaction will not fulfill its contract obligation.
Credit Risk- The risk that the issuer of a debt security will be unable to make
interest payments or repay principal on schedule. If an issuer does default, the
affected security could lose all of its value, or be renegotiated at a lower
interest rate or principal amount. Affected securities might also lose
liquidity. Credit risk also includes the risk that a party in a transaction may
not be able to complete the transaction as agreed.
Currency Risk- The risk that a change in the exchange rate between U.S. dollars
and a foreign currency may reduce the value of an investment made in a security
denominated in that foreign currency.
Stagecoach LifePath Funds Prospectus 15
<PAGE>
- --------------------------------------------------------------------------------
Diplomatic Risk- The risk that an adverse change in the diplomatic relations
between the United States and another country, and between other countries,
might reduce the value or liquidity of investments in either country.
Experience Risk- The risk presented by a new or innovative security. The risk is
that insufficient experience exists to forecast how the security's value might
be affected by various economic conditions.
Information Risk- The risk that information about a security is either
unavailable, incomplete or is inaccurate.
Interest Rate Risk- The risk that changes in interest rates can reduce the value
of an existing security. Generally, when interest rates increase, the value of a
debt security decreases. The effect is usually more pronounced for securities
with longer dates to maturity.
Liquidity Risk- The risk that a security cannot be sold, or cannot be sold
without adversely affecting the price.
Market Risk- The risk that the value of a stock, bond or other security will be
reduced by market activity. This is a basic risk associated with all securities.
Political Risk- The risk that political actions, events or instability may be
unfavorable for investments made in a particular nation's or region's industry,
government or markets.
Regulatory Risk- The risk that changes in government regulations will adversely
affect the value of a security. Also the risk that an insufficiently regulated
market might permit inappropriate trading practices.
-----------------------------------------------------------------------
Investment Practice/Risk
The following table lists some of the additional investment practices of
the Funds, including some not disclosed in the Investment Objective and
Investment Policies sections of the Prospectus. The risks indicated
after the description of the practice are NOT the only potential risks
associated with that practice, but are among the more prominent. Market
risk is assumed for each. See the Investment Objective and Investment
Policies for each Fund or the Statement of Additional Information for
more information on these practices.
Remember, each LifePath Fund has the same investment practices and
available asset classes. The degree to which these practices and
classes, and their attendant risks, are present in each Fund depends
upon how aggressive a Fund's allocation mix is. Longer dated Funds are
more aggressive than near-dated Funds and are generally more volatile.
In addition to the general risks discussed above, you should carefully
consider and evaluate any special risks that may apply to investing in a
particular Fund. See the "Important Risk Factors" in the summary for
each Fund. You should also see the Statement of Additional Information
for additional information about the investment practices and risks
particular to each Fund.
Investment practices and risk levels are carefully monitored. We attempt
to ensure that the risk exposure for each Fund remains within the
parameters of its objective.
------------------------------------------------------------------------
16 Stagecoach LifePath Funds Prospectus
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIFEPATH
ALL FUNDS
===========================================================================
INVESTMENT PRACTICE: RISK:
===========================================================================
<S> <C> <C>
Floating and Variable Rate Debt
Instruments with interest Interest Rate and *
rates that are adjusted Credit Risk
either on a schedule or
when an index or benchmark
changes.
- ---------------------------------------------------------------------------
Repurchase Agreements
A transaction in which Credit and *
the seller of a security Counter-Party Risk
agrees to buy back a
security at an agreed
upon time and price,
usually with interest.
- ---------------------------------------------------------------------------
Other Mutual Funds
The temporary investment Market Risk *
in shares of another
mutual fund. A pro
rata portion of the other
fund's expenses, in
addition to the expenses
paid by the Fund, will be
borne by Fund shareholders.
- ---------------------------------------------------------------------------
Foreign Securities
Securities in a dollar- Information, Political, *
denominated debt of non-US. Regulatory, Diplomatic
companies of foreign Liquidity and Currency
government. Risk
- ---------------------------------------------------------------------------
Options
The right or obligation to Credit, Information and
receive or deliver a security Liquidity Risk
or cash payment depending on
the security's price or the
performance of an index or
benchmark.
-------------------------------------------------------------------------
Stock Index Futures *
Options on a Stock Index Futures *
Index Swaps *
Interest Rate Futures *
Interest Rate Futures Options *
Interest Rate Swaps *
- ---------------------------------------------------------------------------
Loans of Portfolio Securities
The practice of loaning Credit and *
securities to brokers, Counter-Party Risk
dealers and financial
institutions to increase
return on those securities.
Loans may be made in
accordance with existing
investment policies.
- ---------------------------------------------------------------------------
Borrowing Policies
The ability to borrow an Counter-Party Risk *
equivalent of 20% of
assets from banks for
temporary purposes to meet
shareholder redemptions.
- ---------------------------------------------------------------------------
Illiquid Securities
A security that cannot be Liquidity Risk *
readily sold, or cannot be
readily sold without
negatively affecting its fair
price. Limited to 15% of
assets.
- ---------------------------------------------------------------------------
</TABLE>
Stagecoach LifePath Funds Prospectus 17
<PAGE>
A Choice of Share Classes
- -------------------------------------------------------------------------------
After choosing a Fund, your next most important choice is which share class to
buy. The following classes of shares are available through this Prospectus:
* Class A Shares - with a front-end sales charge, volume reductions and lower
on-going expenses than Class B and Class C shares.
* Class B Shares - with a contingent deferred sales charge (CDSC) that
diminishes over time, and higher on-going expenses than Class A shares.
* Class C Shares - with a 1.00% contingent deferred sales charge (CDSC) on
redemptions made within one year of purchase, and higher on-going expenses
than Class A shares.
The choice between share classes is largely a matter of preference. You should
consider, among other things, the different fees and sales loads assessed on
each share class and the length of time you anticipate holding your investment.
If you prefer to pay sales charges up front, wish to avoid higher on-going
expenses, or, more importantly, you think you may qualify for volume discounts
based on the amount of your investment, then Class A shares may be the choice
for you.
You may prefer to see "every dollar working" from the moment you invest. If so,
then consider Class B or Class C shares. Please note that Class B shares convert
to Class A shares after six years to avoid the higher on-going expenses assessed
against Class B shares.
Class C shares are available for the LifePath 2040 Fund. They are similar to
Class B shares, with some important differences. Unlike Class B shares, Class C
shares do not convert to Class A shares. The higher on-going expenses will be
assessed as long as you hold the shares. The choice between Class B and Class C
shares may depend on how long you intend to hold Fund shares before redeeming
them.
Please see the expenses listed for each Fund and the following charge schedule
before making your decision. You should also review the "Reduced Sales Charges"
section of this Prospectus. You may wish to discuss this choice with your
financial consultant.
Class A Share Sales Charge Schedule
If you choose to buy Class A shares, you will pay the Public Offering Price
(POP) which is the Net Asset Value (NAV) plus the applicable sales charge. Since
sales charges are reduced for Class A share purchases above certain dollar
amounts, known as "breakpoint levels", the POP is lower for these purchases.
18 Stagecoach LifePath Funds Prospectus
<PAGE>
<TABLE>
<CAPTION>
A Choice of Share Classes
- -----------------------------------------------------------------------------------------------------------------
=================================================================================================================
CLASS A SHARES LISTED IN THIS PROSPECTUS HAVE THE FOLLOWING CHARGE SHEDULE:
=================================================================================================================
AMOUNT FRONT-END SALES CHARGE AS FRONT-END SALES CHARGE AS DEALER ALLOWNACE AS %
OF PURCHASE % OF PUBLIC OFFERING PRICE % OF NET AMOUNT INVESTED OF PUBLICE OFFERING PRICE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 4.50% 4.71% 4.00%
- ------------------------------------------------------------------------------------------------------------------
$50,000 to $99,999 4.00% 4.17% 3.55%
- ------------------------------------------------------------------------------------------------------------------
$100,000 to $249,999 3.50% 3.63% 3.125%
- ------------------------------------------------------------------------------------------------------------------
$250,000 to $499,999 2.50% 2.56% 2.00%
- ------------------------------------------------------------------------------------------------------------------
$500,000 to $999,999 2.00% 2.04% 1.75%
- ------------------------------------------------------------------------------------------------------------------
$1,000,000 and over /1/ 0.00% 0.00% 1.00%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ We will assess Class A share purchases of $1,000,000 or more a 1.00% CDSC if
they are redeemed within one year from the date of purchase. Charges are based
on the lower of the NAV on the date of purchase or the date of redemption.
Please note that Class A shares of other Funds listed in other prospectuses have
different loads and breakpoints levels.
Class B Share CDSC Schedule
If you choose Class B shares, you buy them at NAV and agree that if you redeem
your shares within six years of the purchase date, you will pay a contingent
deferred sales charge (CDSC) based on how long you have held your shares.
Certain exceptions apply (see "Class B and Class C share CDSC Reductions" and
"Waivers for Certain Parties"). The CDSC schedule is as follows:
================================================================================
CLASS B SHARES LISTED IN THIS PROSPECTUS HAVE THE FOLLOWING CHARGE SCHEDULE:
================================================================================
Redemptions Within 1 Year 2 Years 3 Years 4 Years 5 Years 6 Years
- --------------------------------------------------------------------------------
CDSC 5.00% 4.00% 3.00% 3.00% 2.00% 1.00%
- --------------------------------------------------------------------------------
The CDSC percentage you pay is based on the lower of the NAV on the date of the
original purchase, or the NAV on the date of redemption. The distributor pays
sales commissions of up to 4.00% of the purchase price of Class B shares to
selling agents at the time of the sale.
We always process partial redemptions so that the least expensive shares are
redeemed first in order to reduce your sales charges. After shares are held for
six years, the CDSC expires and the B shares are converted to A shares to reduce
your future on-going expenses.
Stagecoach LifePath Funds Prospectus 19
<PAGE>
- --------------------------------------------------------------------------------
Class C Share CDSC Schedule
If you choose Class C shares, you buy them at NAV and agree that if you redeem
your shares within one year of the purchase date, you will pay a contingent
deferred sales charge (CDSC) of 1.00%.
The CDSC percentage you pay is based on the lower of the NAV on the date of the
original purchase, or the NAV on the date of redemption. The distributor pays
sales commissions of up to 1.00% of the purchase price of Class C shares to
selling agents at the time of the sale.
We always process partial redemptions so that the least expensive shares are
redeemed first in order to reduce your sales charges. Class C shares do not
convert to Class A shares, and therefore continue to pay the higher on-going
expenses.
20 Stagecoach LifePath Funds Prospectus
<PAGE>
Reduced Sales Charges
- --------------------------------------------------------------------------------
Generally, we offer more sales charge reductions for Class A shares than for
Class B and Class C shares, particularly if you intend to invest greater
amounts. You should consider whether you are eligible for any of these potential
reductions when you are deciding which share class to buy.
Class A Share Reductions:
* You pay no sales charges on Fund shares you buy with reinvested
distributions.
* You pay a lower sales charge if you are investing an amount over a breakpoint
level. See the "Class A Share Sales Charge Schedule" above.
* By signing a Letter of Intent (LOI), you pay a lower sales charge now in
exchange for promising to invest an amount over a specified breakpoint within
the next 13 months. We will hold in escrow shares equal to approximately 5%
of the amount you intend to buy. If you do not invest the amount specified in
the LOI before the expiration date, we will redeem enough escrowed shares to
pay the difference between the reduced sales load you paid and the sales load
you should have paid. Otherwise, we will release the escrowed shares when you
have invested the agreed amount.
* Rights of Accumulation (ROA) allow you to combine the amount you invest with
the total NAV of shares you own in other Stagecoach front-end load Funds in
order to reach breakpoint levels for a reduced load. We give you a discount
on the entire amount of the investment that puts you over the breakpoint
level.
* If you are reinvesting the proceeds of a Stagecoach Fund redemption for
shares on which you have already paid a front-end sales charge, you have 120
days to reinvest the proceeds of that redemption with no sales charge into a
Fund that charges the same or a lower front-end sales charge. If you use such
a redemption to purchase shares of a Fund with a higher front-end sales
charge, you will have to pay the difference between the lower and higher
charge.
* You may reinvest into a Stagecoach Fund with no sales charge a required
distribution from a pension, retirement, benefits, or similar plan for which
Wells Fargo Bank acts as trustee provided the distribution occurred within
the last 30 days.
If you believe you are eligible for any of these reductions, it is up to you to
ask the selling agent or the shareholder servicing agent for the reduction and
to provide appropriate proof of eligibility.
Stagecoach LifePath Funds Prospectus 21
<PAGE>
- --------------------------------------------------------------------------------
You, or your fiduciary or trustee, may also tell us to extend volume discounts,
including the reductions offered for rights of accumulation and letters of
intent, to include purchases made by:
* a family unit, consisting of a husband and wife and children under the age of
twenty-one or single trust estate;
* a trustee or fiduciary purchasing for a single fiduciary relationship; or
* members of a "qualified group" which consists of a "Company" (as defined in
the 1940 Act), and related parties of such a "Company", which has been in
existence for at least six months and which has a primary purpose other than
acquiring Fund shares at a discount.
------------------------------------------------------------------------
How a Letter of Intent Can Save You Money!
If you plan to invest, for example, $100,000 in a Stagecoach Fund in
installments over the next year, by signing a letter of intent you would
pay only a 3.50% sales load on the entire purchase. Otherwise, you might
pay 4.50% on the first $50,000, then 4.00% on the next $49,999!
------------------------------------------------------------------------
22 Stagecoach LifePath Funds Prospectus
<PAGE>
Reduced Sales Charges
- --------------------------------------------------------------------------------
Class B and Class C Share CDSC Reductions:
* You pay no CDSC on Funds shares you purchase with reinvested distributions.
* We waive the CDSC for all redemptions made because of scheduled or mandatory
distributions for certain retirement plans. (See your retirement plan
disclosure for details.)
* We waive the CDSC for redemptions made in the event of the
shareholder's death or for a disability suffered after purchasing shares.
("Disability" is defined by the Internal Revenue Code of 1986.)
* We waive the CDSC for redemptions made at the Company's direction in order
to, for example, complete a merger or close an account whose value has fallen
below the minimum balance.
Waivers for Certain Parties
If you are eligible for certain waivers, we will sell you Class A shares so you
can avoid higher on-going expenses. The following people can buy Class A shares
at NAV:
* Current and retired employees, directors and officers of:
* Stagecoach Funds and its affiliates;
* Wells Fargo Bank and its affiliates;
* Stephens Inc. and its affiliates; and
* Broker-Dealers who act as selling agents.
* The spouses of any of the above, as well as the grandparents, parents,
siblings, children, grandchildren, aunts, uncles, nieces, nephews, fathers-in
-law, mothers-in-law, brothers-in-law and sisters-in-law of either the spouse
or the current or retired employee, director or officer.
You may also buy Class A Fund shares at NAV if they are to be included in
certain retirement, benefits, pension or investment wrap accounts with whom the
Stagecoach Funds has reached an agreement, or through an omnibus account
maintained with a Fund by a broker/dealer.
We reserve the right to enter into agreements that reduce or eliminate sales
charges for groups or classes of shareholders, or for Fund shares included in
other investment plans such as "wrap accounts". If you own Fund shares as part
of another account or package such as an IRA or a sweep account, you must read
the directions for that account. These directions may supercede the terms and
conditions discussed here.
Stagecoach LifePath Funds Prospectus 23
<PAGE>
Your Account
- -------------------------------------------------------------------------------
This section tells you how to open an account and how to buy, sell or exchange
Fund shares once your account is open.
You can buy Fund shares:
* By opening an account directly with the Fund (simply complete and return a
Stagecoach Funds application with proper payment);
* Through a brokerage account with an approved selling agent; or
* Through certain retirement, benefits and pension plans, or through certain
packaged investment products (please see the providers of the plan for
instructions).
Minimum Investments:
* $1,000 per Fund minimum initial investment; or
* $100 per Fund minimum initial investment if you use the AutoSaver option.
* $100 per Fund for all investments after your first.
* We may waive the minimum for Funds you purchase through certain retirement,
benefit and pension plans, through certain packaged investment products, or
for certain classes of shareholders as permitted by the Securities and
Exchange Commission. Check the specific disclosure statements and
applications for the program through which you intend to invest.
24 Stagecoach LifePath Funds Prospectus
<PAGE>
- --------------------------------------------------------------------------------
Important Information:
* Read this Prospectus carefully. Discuss any questions you have with your
selling agent. You may also ask for copies of the Statement of Additional
Information and Annual Report. Copies are available free of charge from your
selling agent or by calling 1-800-222-8222.
* We process requests to buy or sell shares each business day as of the close
of regular trading on the New York Stock Exchange, which is usually 1:00 PM
Pacific Time. Any request we receive in proper form before the close of
regular trading on the New York Stock Exchange is processed the same day.
Requests we receive after the close are processed the next business day.
* As with all mutual fund investments, the price you pay to purchase shares or
the price you receive when you redeem shares is not determined until after a
request has been received in proper form.
* We determine the Net Asset Value (NAV) of each class of the Funds' shares
each business day as of the close of regular trading on the New York Stock
Exchange. We determine the NAV by subtracting the Fund class' liabilities
from its total assets, and then dividing the result by the total number of
outstanding shares of that class. Each Fund's assets are generally valued at
current market prices. See the Statement of Additional Information for
further disclosure.
* We will process all requests to buy and sell shares at the first NAV
calculated after the request in proper form is received.
* You may have to complete additional paperwork for certain types of account
registrations, such as a Trust. Please speak to Stagecoach Investor Services
(1-800-222-8222) if you are investing directly with Stagecoach Funds, or
speak to your selling agent if you are buying shares through a brokerage
account.
* Once an account has been opened, you can add additional Funds under the same
registration without requiring a new application.
* We reserve the right to cancel any purchase order or delay redemption if your
check does not clear.
Stagecoach LifePath Funds Prospectus 25
<PAGE>
Your Account
- --------------------------------------------------------------------------------
How to Buy Shares
The following section explains how you can buy shares directly from Stagecoach
Funds. For Funds held through brokerage and other types of accounts, please
consult your selling agent.
================================================================================
By Mail
================================================================================
If you are buying shares for the first time:
- --------------------------------------------------------------------------------
Complete a stagecoach Funds application. Be sure to indicate |
the Fund name and the share class into which you intend to | Mail to:
invest. | Stagecoach Funds
- -------------------------------------------------------------| PO Box 7066
Enclose a check for at least $1,000 made out in the full | San Francisco,CA
name and share class of the Fund. For example, "Stagecoach | 94120-9201
Strategic Growth Fund, Class B." |
- -------------------------------------------------------------|
You may start your account with $100 if you elect the Auto |
Saver option on the application. |
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If you are buying additional shares:
- --------------------------------------------------------------------------------
Make a check payable to the full name and share class of your| Mail to:
Fund for at least $100. Be sure to write your account number| Stagecoach Funds
on the check as well. | PO Box 7066
- -------------------------------------------------------------| San Francisco,CA
Enclose the payment stub/card from your statement if | 94120-9201
available. |
- --------------------------------------------------------------------------------
================================================================================
BY WIRE
================================================================================
If you are buying for the first time:
- --------------------------------------------------------------------------------
If you do not currently have an account, complete a | Mail to:
Stagecoach Funds application. You must wire at least $1,000.| Stagecoach Funds
Be sure to indicate the Fund name and the share class into | PO Box 7066
which you intend to invest. | San Francisco,CA
_____________________________________________________________| 94120-9201
Mail the completed application. |
- -------------------------------------------------------------|
You may also fax the completed applicaiton (with original to | Fax to:
follow). | 1-415-546-0280
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If you are buying additional shares:
- --------------------------------------------------------------------------------
Instruct your wiring bank to transmit | Wire to:
at least $100 according to the | Wells Fargo Bank, N.A.
instructions given to the right. | San Francisco, California
Be sure to have the wiring bank include |
your current account number and the name | Bank Routing Number:
your account is registered in. | 121000248
- --------------------------------------------|
| Wire Purchase Account Number:
| 4068-000587
|
| Attention:
| Stagecoach Funds (Name of Fund
| and Share Class)
| Account Name:
| (Registration Name Indicated
| on Application)
|-----------------------------------
26 Stagecoach LifePath Funds Prospectus
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
BY PHONE:
================================================================================
If you are buying shares for the first time:
- --------------------------------------------------------------------------------
You can only make your first purchase of a Fund |
by phone if you already have an existing | CALL:
Stagecoach Account. | 1-800-222-8222
- ---------------------------------------------------------|
Call Investor Services and instruct the representative |
to either: |
* transfer at least $1,000 from a linked settlement |
account, or |
* exchange at least $1,000 worth of shares from an |
existing Stagecoach Fund. Please see "Exchanges" |
for special rules. |
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If you are buying additional shares:
- --------------------------------------------------------------------------------
Call Investor Services and instruct the representative |
to either: |
* transfer at least $100 from a linked settlement | Call:
account, or | 1-800-222-8222
* exchange at least $100 worth of shares from another |
Stagecoach Fund. |
- --------------------------------------------------------------------------------
Selling Shares:
The following section explains how you can sell shares held directly through an
account with Stagecoach Funds. For Fund shares held through brokerage and other
types of accounts, please consult your selling agent.
================================================================================
BY MAIL
================================================================================
Write a letter stating your account registration, |
your account number, the Fund you wish to redeem |
and the dollar amount ($100 or more) of the redemption |
you wish to receive (or write "Full Redemption"). |
- --------------------------------------------------------|
Make sure all the account owners sign the request. |
- --------------------------------------------------------| Mail to:
You may request that redemption proceeds be sent | Stagecoach Funds
you by check, by ACH transfer into a bank account, | PO Box 7066
or by wire ($5,000 minimum). Please call Investor | San Francisco, CA
Services regarding requirements for linking bank | 94120-9201
accounts or for wiring funds. We reserve the right |
to charge a fee for wiring funds although it is not |
currently our practice to do so. |
- --------------------------------------------------------|
Signature Guarantees are required for mailed redemption |
requests over $5,000. You can get a signature guarantee |
at financial institutions such as a bank or brokerage |
house. We do not accept notarized signatures. |
- --------------------------------------------------------------------------------
Stagecoach LifePath Funds Prospectus 27
<PAGE>
Your Account
- --------------------------------------------------------------------------------
================================================================================
BY PHONE
================================================================================
Call Investor Services to request a redemption of at least |
$100. Be prepared to provide your account number and Tax |
Identification Number. |
- -----------------------------------------------------------|
Unless you have instructed us otherwise, only one account |
owner needs to call in redemption requests. |
- -----------------------------------------------------------|
You may request that redemption proceeds be sent to you by |
check, by transfer into an ACH-linked bank account, or by |
wire ($5,000 minimum). Please call Investor Services |
regarding requirements for linking bank accounts or for |
wiring funds. We reserve the right to charge a fee for |
wiring funds although it is not currently our practice to |
do so. | Call:
- -----------------------------------------------------------| 1-800-222-8222
Telephone privileges are automatically made available to |
you unless you specifically decline them on your |
application or subsequently in writing. |
- -----------------------------------------------------------|
Phone privileges allow us to accept transaction |
instructions by anyone representing themselves as the |
shareholder and who provides reasonable confirmation of |
their identity, such as providing the Taxpayer |
Identification Number on the account. We will not be |
liable for any losses incurred if we follow telephone |
instructions we reasonably believe to be genuine. |
- --------------------------------------------------------------------------------
================================================================================
GENERAL NOTES FOR SELLING SHARES
================================================================================
We will process requests to sell shares at the first NAV calculated after a
request in proper form is received. Requests received before the close of
trading on the New York Stock Exchange are processed on the same business day.
- --------------------------------------------------------------------------------
Your redemptions are net of any applicable CDSC.
- --------------------------------------------------------------------------------
If you purchased shares through a packaged investment product or retirement
plan, read the directions for selling shares provided by the product or plan.
There maybe special requirements that supercede the directions in this
Prospectus.
- --------------------------------------------------------------------------------
We reserve the right to delay payment of a redemption for up to ten days so that
we may be reasonably certain that investments made by check have been collected.
Payments of redemptions may also be delayed under extraordinary circumstances or
as permitted by the Securities and Exchange Commission in order to protect
remaining shareholders. Payments of redemptions also may be delayed up to seven
days under normal circumstances, although it is not our policy to delay such
payments.
- --------------------------------------------------------------------------------
Generally, we pay redemption requests in cash, unless the redemption request is
for more than $250,000 or 1% of the net assets of the Fund by a single
shareholder over any ninety-day period. If a request for a redemption is over
these limits, it may be to the detriment of existing shareholders to pay such
redemption in cash. Therefore, we may pay all or part of the redemption in
securities of equal value.
- --------------------------------------------------------------------------------
28 Stagecoach LifePath Funds Prospectus
<PAGE>
Exchanges
- --------------------------------------------------------------------------------
Exchanges between Stagecoach Funds are two transactions: a sale of one Fund and
the purchase of another. In general, the same rules and procedures that apply to
sales and purchases apply to exchanges. There are, however, additional factors
you should keep in mind while making or considering an exchange:
* You should carefully read the Prospectus for the Fund into which you wish to
exchange.
* Every exchange involves selling Fund shares and that sale may produce a
capital gain or loss for federal income tax purposes.
* You may make exchanges between like share classes. You may also exchange
between A, B or C share classes and non-Institutional class shares of a money
market fund.
* If you are making an initial investment into a new Fund through an exchange,
you must exchange at least the minimum first purchase amount of the Fund you
are redeeming, unless your balance has fallen below that amount due to market
conditions.
* Any exchange between Funds you already own must meet the minimum redemption
and subsequent purchase amounts for the Funds involved.
* Exchanges between Class B shares, between Class C shares or between either
Class B or Class C shares and a Stagecoach Money Market Fund will not trigger
the CDSC. The new shares will continue to age according to their original
schedule while in the new Fund and will be charged the CDSC applicable to the
original shares upon redemption. This also applies to exchanges of Class C
shares that are subject to a CDSC.
* Exchanges from any share class to a money market fund can only be
re-exchanged for the original share class.
* In order to discourage excessive Fund transaction expenses that must be borne
by other shareholders, we reserve the right to limit or reject exchange
orders. Generally, we will notify you 60 days in advance of any changes to
the Fund's exchange privileges.
Stagecoach LifePath Funds Prospectus 29
<PAGE>
Additional Services and Other Information
- --------------------------------------------------------------------------------
Automatic Programs:
These programs help you conveniently purchase or redeem shares each month:
* AutoSaver Plan - you need only specify an amount of at least $100 and a day
of the month. We will automatically transfer that amount from your linked
bank account each month to purchase additional shares. We will transfer the
amount on or about the day you specify, or on or about the 20th of each month
if you have not specified a day. Please call Stagecoach Investor Services at
1-800-222-8222 if you wish to change or add linked accounts.
* Systematic Withdrawal Program - Stagecoach will automatically redeem enough
shares to equal a specified dollar amount of at least $100 on or about
the fifth business day prior to the end of each month and either send
you the proceeds by check or transfer it into your linked bank account.
In order to set up a Systematic Withdrawal Program, you:
* must have a Fund account valued at $10,000 or more;
* must have distributions reinvested; and
* may not be simultaneously participate in an AutoSaver Plan.
It generally takes about ten days to set up either plan once we have received
your instructions. It generally takes about five days to change or cancel
participation in either plan. We automatically cancel your program if the linked
account you specified is closed.
Dividend and Capital Gain Distribution Options
You may choose to do any of the following:
* Automatic Reinvestment Option - Lets you buy new shares of the same class of
the Fund that generated the distributions. The new shares are purchased at
NAV generally on the day the income is paid. This option is automatically
assigned to your account unless you specify another plan.
* Fund Purchase Plan - Uses your distributions to buy shares at NAV of another
Stagecoach Fund of the same share class or a Money Market Fund. You must have
already satisfied the minimum investment requirements of the Fund into which
your distributions are being transferred in order to participate.
* Automatic Clearing House Option - Deposits your dividends and capital gains
into any bank account you link to your Fund account if it is part of the ACH
system. If your specified bank account is closed, we will reinvest your
distributions.
30 Stagecoach LifePath Funds Prospectus
<PAGE>
- --------------------------------------------------------------------------------
* Check Payment Option - Allows you to receive checks for distributions mailed
to your address of record or to another name and address which you have
specified in written, signature guaranteed instructions. If checks remain
uncashed for six months or are undeliverable by the Post Office, we will
reinvest the distributions at the earliest date possible.
------------------------------------------------------------------------
Two Things to Keep In Mind About Distributions
Remember, distributions have the effect of reducing the NAV per share by
the amount distributed. Also, distributions on new shares shortly after
purchase would be in effect a return of capital, although the
distribution may still be taxable to you.
------------------------------------------------------------------------
Taxes
The following discussion regarding taxes is based on laws that were in effect as
of the date of this Prospectus. The discussion summarizes only some of the
important tax considerations that affect the Funds and you as a shareholder. It
is not intended as substitute for careful tax planning. You should consult your
tax advisor about your specific tax situation. Federal income tax considerations
are discussed further in the Statement of Additional Information.
We will pass on to you net investment income and net short-term capital gains
earned by a Fund as dividend distributions. These are taxable to you as ordinary
income.
We will pass on to you any net capital gains earned by a Fund as a capital gain
distribution. In general, these distributions will be taxable to you as long-
term capital gains and are taxable when paid. However, distributions declared in
October, November and December and distributed by the following January will be
taxable as if they were paid on December 31 of the year in which they were
declared. We will notify you as to the status of your Fund distributions.
Your redemptions, including exchanges, will ordinarily result in a taxable
capital gain or loss, depending on the amount you receive for your shares and
the amount you paid for them. Foreign shareholders may be subject to different
tax treatment, including withholding. In certain circumstances, U.S. residents
will be subject to back-up withholding.
Historical Fund Information
The Company was organized as an unincorporated Massachusetts business trust on
May 14, 1993. The Class B shares of the LifePath 2000 Fund and the Class C
shares of the LifePath 2040 Fund commenced operations as of July 1, 1998. The
Class B Shares of the other Funds commenced operations on May 3, 1997.
Stagecoach LifePath Funds Prospectus 31
<PAGE>
Additional Services and Other Information
- --------------------------------------------------------------------------------
Each Fund invests all of its assets in the Master Portfolio of MIP with the
same investment objective. To achieve its investment objective, a Fund may
decide to move all of its assets into a different master fund, or to hire an
investment adviser to actively manage the Fund's assets. No action would be
taken unless the Company's Board of Directors first determines it is in the best
interests of the Fund.
Share Class - This Prospectus contains information about Class A, Class B and
Class C shares. Some of the Funds may offer additional share classes with
different expenses and returns than those described here. Call Stephens Inc. at
1-800-643-9691 for information on these or other investment options in
Stagecoach Funds.
Conversion of Class B shares - We will convert Class B shares into Class A
shares at the month end following the six-year anniversary of their original
purchase. This is done to avoid the higher on-going Rule 12b-1 fees assessed to
Class B shares. The conversion is done at NAV and, since it is unlikely that
Class A and Class B shares of the same Fund will have the same NAV on a given
date, the conversion is on a dollar-value basis, not a share-for-share basis.
Minimum Account Value - Due to the expense involved in maintaining low-balance
accounts, we reserve the right to close accounts that have fallen below the
$1,000 minimum balance due to redemptions (as opposed to market conditions). You
will be given an opportunity to make additional investments to prevent account
closure before any action is taken.
Statements - We mail statements after any account activity, including
transactions, dividends or capital gains, and at year-end. We do not send
statements for Funds held in brokerage, retirement or other similar accounts.
You must check with the administrators of these accounts for statement policies.
32 Stagecoach LifePath Funds Prospectus
<PAGE>
- --------------------------------------------------------------------------------
The Fund will also send any necessary tax reporting documents in January, and
will send Annual and Semi-Annual Reports each year.
Dealer Concessions and Rule 12b-1 fees - Stephens Inc., as the Fund's
distributor, will pay the portion of the Class A share sales charge shown as the
Dealer Allowance to the selling agent, if any. Stephens Inc. also compensates
selling agents for the sale of Class A shares of Index Allocation, Class B and
Class C shares and is reimbursed through Rule 12b-1 fees and contingent deferred
sales charges. Selling agents may receive different compensation for sales of
Class A, Class B and Class C shares of the same Fund.
Statement of Additional Information - Additional information about some of the
topics discussed in this Prospectus as well as details about performance
calculations, distribution plans, servicing plans, tax issues and other
important issues are available in the Statement of Additional Information for
each Fund. The Statement of Additional Information should be read along with
this Prospectus and may be obtained free of charge by calling Investor Services
at 1-800-222-8222.
Glass-Steagall Act - Morrison & Foerster LLP, counsel to the Funds and special
counsel to Wells Fargo Bank, has advised us and Wells Fargo Bank that Wells
Fargo Bank and its affiliates may perform the services contemplated by the
Advisory Contracts and detailed in this Prospectus and the Statement of
Additional Information without violation of the Glass-Steagall Act. Counsel has
pointed out that future judicial or administrative decisions, or future federal
or state laws may prevent these entities from continuing in their roles.
Voting Rights - All shares of the Funds have equal voting rights and are voted
in the aggregate, rather than by series or class, unless the matter affects only
one series or class. A shareholder of record is entitled to one vote for each
share owned and fractional votes for each fractional share owned. For a detailed
description of voting rights, see the "Capital Stock" section of the Statement
of Additional Information.
Stagecoach LifePath Funds Prospectus 33
<PAGE>
Organization and Management of the Funds
- --------------------------------------------------------------------------------
A number of different entities provide services to the Funds. This section shows
how the Funds are organized, the entities that perform different services, and
how they are compensated. Further information is available in the Statement of
Additional Information for the Funds.
About Stagecoach
Each Fund is one of over 30 Funds of Stagecoach Funds, Inc., an open-end
management investment company. Stagecoach was organized on September 9, 1991, as
a Maryland Corporation.
The Board of Directors of Stagecoach supervises the Funds' activities and
approves the selection of various companies hired to manage the Funds'
operation. The major service providers are described in the diagram below.
If the Board believes that it is in the best interests of the shareholders it
may make a change in one of these companies.
================================================================================
Shareholders
================================================================================
Financial Services Firms and Selling Sgents
================================================================================
Advise current and prospective shareholders on their Fund investments
- --------------------------------------------------------------------------------
|
================================================================================
Distributor & Transfer and Shareholder
Co-Administrator Co-Administrator Divided Disbursing Servicing Agents
================================================================================
Stephens Inc. | Wells Fargo Bank | Wells Fargo Bank | Various Agents
111 Center St. | 525 Market St. | 525 Market St. |
Little Rock, AR | San Francisco, CA | San Francisco, CA |
| | |
Markets the Funds, | Manages the Funds' | Maintains records | Provide services
distributes shares,| business activities| of shares and | to customers
and manages the | | supervises the |
Funds' business | | paying of dividends|
activities | | |
- --------------------------------------------------------------------------------
|
================================================================================
Investment Advisor
================================================================================
Barclay Global Fund Advisors, 45 Fremont Street, San Francisco, CA
Manages the Funds' investment activities
- --------------------------------------------------------------------------------
|
================================================================================
Custodian
================================================================================
| Barclay's Global Investors, N.A.
| 45 Fremont St., San Francisco, CA
| Provides safekeeping for the
| Funds' assets
- --------------------------------------------------------------------------------
|
================================================================================
Board of Trustees
================================================================================
Supervises the Funds' activities
- --------------------------------------------------------------------------------
34 Stagecoach LifePath Funds Prospectus
<PAGE>
- --------------------------------------------------------------------------------
We do not hold annual shareholder meetings. We may hold special shareholder
meetings to ask shareholders to vote on items such as electing or removing board
members, amending fundamental investment strategies or policies.
In the following sections, the percentages shown are the percentages of the
average daily net assets of each Fund class paid on an annual basis for the
services described. The Statement of Additional Information has more detailed
information about the Investment Advisor and the other service providers and
plans described here.
The Investment Advisor
Barclays Global Fund Advisors ("BGFA"), a wholly owned subsidiary of Barclays
Global Investors and an indirect subsidiary of Barclays Bank PLC, is the sub-
advisor for each of the Funds. BGFA was created from the reorganization of Wells
Fargo Nikko Investment Advisors, a former affiliate of Wells Fargo Bank. As of
September 30, 1997, BGFA managed or provided investment advice for assets
aggregating in excess of $495 billion. For providing sub-advisory services to
the Funds, BGFA is entitled to receive 0.55% of each Fund's net assets.
Stagecoach LifePath Funds Prospectus 35
<PAGE>
Organization and Management of the Funds
- --------------------------------------------------------------------------------
The Funds paid BGFA the following for advisory services for the last fiscal
year:
- --------------------------------------------------------------------------------
LifePath Conservative Fund
- --------------------------------------------------------------------------------
LifePath 2010 Fund
- --------------------------------------------------------------------------------
LifePath 2020 Fund
- --------------------------------------------------------------------------------
LifePath 2030 Fund
- --------------------------------------------------------------------------------
LifePath 2040 Fund
- --------------------------------------------------------------------------------
The Co-Administrators
Wells Fargo Bank and Stephens are the co-administrators of the Funds. Wells
Fargo Bank and Stephens are paid an all-in fee of 0.10% of each Fund's assets
for these services.
The Distributor
Stephens Inc. is the Fund's distributor. Stephens
Inc. receives all loads, CDSCs and distribution plan fees. It uses a
portion of these amounts to compensate selling agents for their role in
marketing the Funds' shares.
Distribution Plan
We have adopted distribution plans for the Funds. For Class A shares the plan is
used to defray all or part of the cost of preparing and distributing
prospectuses and promotional materials. For Class B and Class C shares, these
plans are used to pay for distribution-related services, including on-going
compensation to selling agents. Each Fund may participate in joint distribution
activities with other Stagecoach Funds. The cost of these activities is
generally allocated among the Funds. Funds with higher asset levels pay a higher
proportion of these costs. The fees paid under these plans are as follows:
- --------------------------------------------------------------------------------
Class A Class B Class C
- --------------------------------------------------------------------------------
LifePath Conservative Fund .25% .75% .75%
- --------------------------------------------------------------------------------
LifePath 2010 Fund .25% .75% .75%
- --------------------------------------------------------------------------------
LifePath 2020 Fund .25% .75% .75%
- --------------------------------------------------------------------------------
LifePath 2030 Fund .25% .75% .75%
- --------------------------------------------------------------------------------
LifePath 2040 Fund .25% .75% .75%
- --------------------------------------------------------------------------------
36 Stagecoach LifePath Funds Prospectus
<PAGE>
- --------------------------------------------------------------------------------
Shareholder Servicing Plan
We have Shareholder Servicing Plans for each Fund class. We have agreements with
various shareholder servicing agents to process purchase and redemption
requests, to service shareholder accounts, and to provide other related
services.
For these services each Fund pays as follows:
- --------------------------------------------------------------------------------
Class A Class B Class C
- --------------------------------------------------------------------------------
LifePath Conservative Fund .20% .20% .20%
- --------------------------------------------------------------------------------
LifePath 2010 Fund .20% .20% .20%
- --------------------------------------------------------------------------------
LifePath 2020 Fund .20% .20% .20%
- --------------------------------------------------------------------------------
LifePath 2030 Fund .20% .20% .20%
- --------------------------------------------------------------------------------
LifePath 2040 Fund .20% .20% .20%
- --------------------------------------------------------------------------------
Stagecoach LifePath Funds Prospectus 37
<PAGE>
How to Read the Financial Highlights
- --------------------------------------------------------------------------------
After the description of each Fund, there are charts showing important financial
information about the Fund. The charts are called the "Financial Highlights" and
are designed to help you understand the past performance of the Fund. The
financial statements from which these Financial Highlights were derived were
audited by KPMG Peat Marwick LLP, except as indicated. The financial statements
are included in each Fund's most recent Annual Report and are available free of
charge by calling 1-800-222-8222. For the year ended February 28, 1995, the
Master Portfolio was audited by other auditors.
Here is an explanation of some terms that will help you read these charts.
Net Asset Value (NAV)- The net value of one share of a class of a Fund. See the
Glossary for a fuller definition.
Net Investment Income- Net investment income is calculated by subtracting the
aggregate Fund expenses from the Fund's investment income. The number in the
financial highlights is the net investment income of a class divided by the
number of outstanding shares of that class. The amount distributed to
shareholders is listed under the heading "Less Distributions-Dividends from Net
Investment Income."
Net Realized and Unrealized Gains (Loss) on Investments- We continually buy and
sell investments. The profit on an investment sold for more than its purchase
price is a realized capital gain while a loss on an investment sold for less
than its purchase price is a realized capital loss. An unrealized gain or loss
occurs when an investment gains or loses value but is not sold. The amount of
capital gain or loss per share that was paid to shareholders is listed under the
heading "Less Distributions-Distributions From Net Realized Gains."
Net Assets- The value of the investments in a Fund's portfolio (after accounting
for expenses) that are attributable to a particular class of the Fund.
Ratio of Expenses to Average Net Assets- This ratio reflects the amount paid by
a Fund to cover the costs of its daily operations, and includes advisory,
administration and other operating expenses. It is expressed as a percentage of
the average daily net assets of a class.
Ratio of Net Investment Income (Loss) to Average Net Assets- This ratio is the
result of dividing net investment income (or loss) by average net assets.
38 Stagecoach LifePath Funds Prospectus
<PAGE>
- --------------------------------------------------------------------------------
Portfolio Turnover- Portfolio turnover reflects the trading activity in the
Fund's portfolio and is expressed as a percentage of a Fund's investment
portfolio. For example, a Fund with a 50% portfolio turnover has sold and bought
half of its investment portfolio during the given period.
Average Commission Rate Paid- The average brokerage commission paid by a Fund
when it buys or sells shares of securities. The rate is expressed on a per share
basis and the amount paid may vary depending upon trading practices or other
conditions. This information is required only for fiscal years beginning after
September 1, 1995.
Total Return- The annual return on an investment, including any appreciation or
decline in share value, assumes reinvestment of all dividends and capital gains,
reflects fee waivers, and excludes sales loads.
Stagecoach LifePath Funds Prospectus 39
<PAGE>
Glossary
- --------------------------------------------------------------------------------
ACH
Refers to the "Automated Clearing House" system maintained by the Federal
Reserve System which allows banks to process checks, transfer funds and perform
other tasks.
American Depository Receipts ("ADRs")
Receipts for non-U.S. company stocks. The stocks underlying ADRs are typically
held in bank vaults. The ADR's owner is entitled to any capital gains or
dividends. ADRs are one way of owning an equity interest in foreign companies.
Annual/Semi-Annual Report
A document that provides certain financial and other important information for
the most recent reporting period and each Fund's portfolio of investments.
Business Day
Any day the New York Stock Exchange is open is a business day for the Fund.
Capital Appreciation, Capital Growth
The increase in the value of a security. See also "total return".
Current Income
Earnings in the form of dividends or interest as opposed to capital growth. See
also "Total Return".
Derivatives
Securities whose values are derived in part from the value of another security
or index. An example is a stock option.
Distributions
Dividends and/or capital gains paid by a Fund on its shares.
Diversified
A diversified fund, as defined by the Investment Company Act, is one that
invests in cash, Government securities, other investment companies and no more
than 5% of its total assets in a single issuer. These policies must apply to 75%
of the Fund's total assets.
Dollar-Denominated
Securities issued by foreign banks, companies or governments in U.S. dollars.
Duration
A measure of a security's or portfolio's sensitivity to changes in interest
rates. Duration is usually expressed in years, with longer durations typically
more sensitive to interest rate changes than shorter durations.
40 Stagecoach LifePath Funds Prospectus
<PAGE>
- --------------------------------------------------------------------------------
FDIC
The Federal Deposit Insurance Corporation. This is the company that provides
federally-sponsored insurance covering bank deposits such as savings accounts
and CDs. Mutual funds are not FDIC insured.
Illiquid Security
A security which cannot be readily sold, or cannot be readily sold without
negatively affecting its fair price.
Investment Grade Debt
A type of bond rated in the top four investment categories by a nationally
recognized ratings organization. Generally these are bonds whose issuers are
considered to have a strong ability to pay interest and repay principal,
although some investment grade bonds may have some speculative characteristics.
Lehman Brothers 20+ Bond Index
An unmanaged index composed of U.S. Treasury bonds with 20 years or longer dates
to maturity.
Liquidity
The ability to readily sell a security at its fair price.
Moody's
One of the largest nationally recognized ratings organizations.
Nationally Recognized Rating Organization (NRRO)
A company that examines the ability of a bond issuer to meet its obligations and
which rates the bonds accordingly.
Net Asset Value (NAV)
The value of a single Fund share. It is determined by adding together all of a
Fund's assets, subtracting expenses and other liabilities, then dividing by the
total number of shares. The NAV is calculated separately for each class of the
Fund, and is determined as of the close of regular trading on each business day
the New York Stock Exchange is open, typically 1:00 p.m. Pacific Time.
Non-Diversified
Any fund that does not have a policy as described under "diversified" in this
Glossary.
Options
An option is the right to buy or sell a security based on an agreed upon price
at a specified time. For example, an option may give the holder of a stock the
Stagecoach LifePath Funds Prospectus 41
<PAGE>
Glossary
- --------------------------------------------------------------------------------
right to sell the stock to another party, allowing the seller to profit if the
price has fallen below the agreed price. Options can also be based on the
movement of an index such as the S&P 500.
Public Offering Price (POP)
The NAV with the sales load added.
Repurchase Agreement
An agreement between a buyer and seller of a security in which the seller agrees
to repurchase the security at an agreed upon price and time.
42 Stagecoach LifePath Funds Prospectus
<PAGE>
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- --------------------------------------------------------------------------------
<PAGE>
This page intentionally left blank
- --------------------------------------------------------------------------------
<PAGE>
STAGECOACH FUNDS /R/
You may wish to review the following
documents:
Statement of Additional Information
supplements the disclosure made by this
Prospectus. The Statement of Additional
Information has been filed with the SEC and
is incorporated by reference into this
Prospectus and is legally part of this
Prospectus.
Annual/Semi-Annual Report
provides certain financial and other important
information for the most recent reporting period and
each Fund's portfolio of investments.
These are available free of
charge by calling
1-800-222-8222, or from
Stagecoach Funds
PO Box 7066
San Francisco, CA
94120-7066
========================================================================
STAGECOACH FUNDS:
------------------------------------------------------------------------
* are not insured by the FDIC
* are not obligations or deposits of Wells Fargo Bank, nor guaranteed
by the Bank
* involve investment risk, including possible loss of principal
========================================================================
[LOGO OF RECYCLED PAPER] SC LP P (6/98)
Printed on Recycled Paper
<PAGE>
STAGECOACH TRUST
Telephone: 1-800-643-9691
STATEMENT OF ADDITIONAL INFORMATION
July 1, 1998
LIFEPATH 2000/TM/ FUND
LIFEPATH 2010/TM/ FUND
LIFEPATH 2020/TM/ FUND
LIFEPATH 2030/TM/ FUND
LIFEPATH 2040/TM/ FUND
Class A, Class B and Class C
Stagecoach Trust (the "Trust") is an open-end management investment company.
This Statement of Additional Information ("SAI"), contains additional
information about the LIFEPATH 2000, LIFEPATH 2010, LIFEPATH 2020, LIFEPATH 2030
and LIFEPATH 2040 FUNDS. Each Fund offers Class A and Class B shares. The
LifePath 2040 Fund also offers Class C shares.
This SAI is not a prospectus and should be read in conjunction with the Funds'
Prospectus, also dated July 1, 1998, 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") 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 Fund has the
same investment objective as the corresponding Master Portfolio. Barclays
Global Fund Advisors ("BGFA") serves as investment adviser to each Master
Portfolio. References to the investments, investment policies and risks of the
Funds, unless otherwise indicated, should be understood as references to the
investments, investment policies and risks of the corresponding Master
Portfolios.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Historical Fund Information....................................................... 1
Investment Restrictions........................................................... 2
Additional Permitted Investment Activities........................................ 4
Risk Factors...................................................................... 19
Management........................................................................ 21
Management Arrangements........................................................... 24
Performance Calculations.......................................................... 30
Determination of Net Asset Value.................................................. 36
Additional Purchase and Redemption Information.................................... 37
Federal Income Taxes.............................................................. 38
Capital Stock..................................................................... 43
Portfolio Transactions............................................................ 46
Information About the Funds....................................................... 48
Counsel........................................................................... 48
Independent Auditors.............................................................. 49
Financial Information............................................................. 49
Appendix.......................................................................... A-1
</TABLE>
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HISTORICAL FUND 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 and Institutional Class shares. The
LifePath 2040 Fund also offers Class C 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.
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."
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.
Each LifePath Fund currently invests all of its assets in a LifePath Master
Portfolio of MIP with a corresponding investment objective. Whenever a Fund, as
a Master Portfolio's interestholder, is requested to vote on matters submitted
to interestholders of the Master Portfolio, the Funds will hold a meeting of its
shareholders to consider such matters and the Fund will cast its votes in
proportion to the votes received from Fund shareholders. Each LifePath Fund
will vote Master Portfolio shares for which it receives no voting instructions
in the same proportion as the votes received from Fund shareholders. If a
Master Portfolio's investment objective or policies are changed, the
corresponding LifePath Fund could subsequently change its objective or policies
to correspond to those of the Master Portfolio. The Fund may also elect to
redeem its interests in the Master Portfolios and either seek a new investment
company with a substantially matching objective in which to invest or retain its
own investment adviser to manage the 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 the Fund.
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INVESTMENT RESTRICTIONS
Fundamental Investment Policies
- -------------------------------
Each LifePath Fund seeks to achieve its investment objective by investing all
of its assets in a corresponding master portfolio of Master Investment Portfolio
("MIP"), with a substantially similar investment objective and policies. Each
Fund has adopted the following fundamental investment restrictions, which can
not be changed 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.
The LifePath Funds may not:
(1) purchase securities of any issuer (except securities issued or guaranteed
by the U.S. Government, its agencies and instrumentalities, including
government-sponsored enterprises) if, as a result, more than 5% of the value of
the Fund's total assets would be invested in the securities of any one issuer or
the Fund would hold more than 10% of the outstanding voting securities of such
issuer, except that up to 25% of the Fund's total assets may be invested without
regard to these limitations;
(2) invest in commodities, except that each Fund or Master Portfolio may
purchase and sell (i.e., write) options, forward contracts, and futures
contracts, including those relating to indices and options on futures contracts
or indices;
(3) 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;
(4) borrow money, except as permitted by applicable law (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 "Risk Factors" below);
(5) make loans, except as permitted by applicable law, including through the
purchase of debt obligations and the entry into repurchase agreements, 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;
(6) underwrite securities of other issuers, except to the extent that the
purchase of securities directly from the issuer thereof or from an underwriter
for an issuer and the later disposition of such securities in accordance with
the Fund's investment program may be deemed to be an underwriting;
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(7) 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;
(8) issue senior securities, except as permitted by applicable law;
(9) 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;
(10) make investments for the purpose of exercising control or management.
Non-Fundamental Investment Policies
-----------------------------------
The Funds have adopted the following non-fundamental policies which may be
changed by a majority vote of the Board of Directors of the Company at any time
and without shareholder approval.
(1) The Funds may invest in shares of other open-end management investment
companies, subject to the limitations of Section 12(d)(1) of the 1940 Act.
Under the 1940 Act, a Fund'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 Fund's net assets with respect to any one
investment company, and (iii) 10% of such Fund's net assets in the aggregate.
Other investment companies in which the Funds invest can be expected to charge
fees for operating expenses, such as investment advisory and administration
fees, that would be in addition to those charged by a Fund.
(2) The Funds may not invest or hold more than 15% of their respective net
assets in illiquid securities. For this purpose, illiquid securities include,
among others, (a) securities that are illiquid by virtue of the absence of a
readily available market or legal or contractual restrictions on resale, (b)
fixed time deposits that are subject to withdrawal penalties and that have
maturities of more than seven days, and (c) repurchase agreements not terminable
within seven days.
(3) The Funds may lend portfolio securities to brokers, dealers and financial
institutions, in amounts not to exceed (in the aggregate) one-third of the
respective Fund's total assets. Any such loans of portfolio securities will be
fully collateralized based on values that are marked to market daily. The Funds
will not enter into any portfolio security lending arrangement having a duration
of longer than one year.
The Funds do not invest in the following types of derivatives that generally
are considered to be potentially volatile: capped floaters, leveraged floaters,
range floaters, dual index floaters or inverse floaters. Additionally, the
Funds will not invest in securities whose interest rate reset
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provisions materially lag short-term interest rates, such as Cost of Funds Index
Floaters or other derivative instruments the Funds consider to have the
potential for excessive volatility.
The LifePath Funds contain both "strategic" and "tactical" components, with
the strategic component weighted more heavily than the tactical component. The
strategic component of the Funds 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 addresses short-term market
conditions. The tactical component thus adjusts the amount of investment risk
taken by each LifePath Fund without regard to horizon, but rather in
consideration of the relative risk-adjusted short-term attractiveness of various
asset classes.
Set forth below are descriptions of certain investments and additional
investment policies of the Funds.
ADDITIONAL PERMITTED INVESTMENT ACTIVITIES
Bank Obligations.
----------------
The Funds 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 Fund 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. In addition,
foreign branches of U.S. banks and foreign banks may be subject to less
stringent reserve requirements and to different accounting, auditing, reporting
and recordkeeping standards than those applicable to domestic branches of U.S.
banks.
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 Fund will not benefit from insurance from the Bank Insurance
Fund or the Savings Association Insurance Fund administered by the Federal
Deposit Insurance Corporation ("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
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<PAGE>
amount of the instrument upon maturity. The other short-term obligations may
include uninsured, direct obligations, bearing fixed, floating- or variable-
interest rates.
Fixed-Income Securities.
-----------------------
Investors should be aware that even though interest-bearing securities are
investments which 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
particular LifePath Master Portfolio considers all circumstances deemed relevant
in determining whether to continue to hold the security. Certain securities
that may be purchased by the 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 which
are 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. 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 to be 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.
Floating- and Variable-Rate Obligations.
---------------------------------------
The Funds may purchase floating- and variable-rate obligations. Each Fund may
purchase floating- and variable-rate demand notes and bonds. These obligations
may have stated maturities in excess of thirteen months, but they permit the
holder to demand payment of principal at any time, or at specified intervals not
exceeding thirteen months. Variable-rate demand notes include master demand
notes that are obligations that permit a Fund to invest fluctuating amounts,
which may change daily without penalty, pursuant to direct arrangements between
the Fund, as lender, and the borrower. The interest rates on these notes may
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
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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
arrangements between the lender and borrower, it is not contemplated that such
instruments generally will be traded, and 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, a Fund's 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 Fund may
invest in obligations which are not so rated only if Wells Fargo Bank determines
that at the time of investment the obligations are of comparable quality to the
other obligations in which such Fund may invest. Wells Fargo Bank, on behalf of
each Fund, considers on an ongoing basis the creditworthiness of the issuers of
the floating- and variable-rate demand obligations in such Fund's portfolio. No
Fund will invest more than 10% of the value of its total net assets in floating-
or variable-rate demand obligations whose demand feature is not exercisable
within seven days. Such obligations may be treated as liquid, provided that an
active secondary market exists.
Foreign Currency Transactions.
-----------------------------
The Funds may enter into foreign currency exchange contracts in order to
protect against uncertainty in the level of future foreign exchange rates. A
forward foreign currency exchange contract involves an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of days
from the date of the contract agreed upon by the parties, at a price set at the
time of the contract. These contracts are entered into the interbank market
conducted between currency traders (usually large commercial banks) and their
customers. Forward foreign currency exchange contracts may be bought or sold to
protect a Fund against a possible loss resulting from an adverse change in the
relationship between foreign currencies and the U.S. dollar, or between foreign
currencies. Although such contracts are intended to minimize the risk of loss
due to a decline in the value of the hedged currency, at the same time, they
tend to limit any potential gain which might result should the value of such
currency increase.
Because the Balanced and Equity Value Funds may invest in securities
denominated in currencies other than the U.S. dollar and may temporarily hold
funds in bank deposits or other money market investments denominated in foreign
currencies, they may be affected favorably or unfavorably by exchange control
regulations or changes in the exchange rate between such currencies and the
dollar. Changes in foreign currency exchange rates influence values within a
Fund from the perspective of U.S. investors. Changes in foreign currency
exchange rates may also affect the value of dividends and interest earned, gains
and losses realized on the sale of securities, and any net investment income and
gains to be distributed to shareholders by a Fund. The rate of exchange between
the U.S. dollar and other currencies is determined by the forces of supply and
demand in the foreign exchange markets. These forces are affected by the
international balance of
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payments and other economic and financial conditions, government intervention,
speculation and other factors.
Investments in foreign securities also involve certain inherent risks, such as
political or economic instability of the issuer or the country of issue, the
difficulty of predicting international trade patterns and the possibility of
imposition of exchange controls. Such securities may also be subject to greater
fluctuations in price than securities of domestic corporations. In addition,
there may be less publicly available information about a foreign company than
about a domestic company. Foreign companies generally are not subject to
uniform accounting, auditing and financial reporting standards comparable to
those applicable to domestic companies. Investments in foreign securities and
forward contracts may also be subject to withholding and other taxes imposed by
foreign governments. With respect to certain foreign countries, there is also a
possibility of expropriation or confiscatory taxation, or diplomatic
developments which could affect investments in those countries.
Forward Commitments, When-Issued Purchases and Delayed-Delivery Transactions.
----------------------------------------------------------------------------
Each Fund may purchase or sell securities on a when-issued or delayed-delivery
basis and make contracts to purchase or sell securities for a fixed price at a
future date beyond customary settlement time. Securities purchased or sold on a
when-issued, delayed-delivery or forward commitment basis involve a risk of loss
if the value of the security to be purchased declines, or the value of the
security to be sold increases, before the settlement date. Although each Fund
will generally purchase securities with the intention of acquiring them, a Fund
may dispose of securities purchased on a when-issued, delayed-delivery or a
forward commitment basis before settlement when deemed appropriate by the
Advisor. Securities purchased on a when-issued or forward commitment basis may
expose the relevant Fund 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.
Each Fund will segregate cash, U.S. Government obligations or other high-
quality debt instruments in an amount at least equal in value to the Fund's
commitments to purchase when-issued securities. If the value of these assets
declines, the Fund will segregate additional liquid assets on a daily basis so
that the value of the segregated assets is equal to the amount of such
commitments.
Futures Contracts.
-----------------
The LifePath Master Portfolios may use futures contracts as a hedge against
the effects of interest rate changes or changes in the market value of the
stocks comprising the index in which such Master Portfolio invests. In managing
their cash flows, these Master Portfolios also may use futures contracts as a
substitute for holding the designated securities underlying the futures
contract. A futures contract is an agreement between two parties, a buyer and a
seller, to exchange a particular commodity at a specific price on a specific
date in the future. At the time it enters into a futures transaction, a Master
Portfolio is required to make a performance deposit
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(initial margin) of cash or liquid securities in a segregated account in the
name of the futures broker. Subsequent payments of "variation margin" are then
made on a daily basis, depending on the value of the futures position which is
continually "marked to market."
A Master Portfolio may engage only in futures contract transactions involving
(i) the sale of a futures contract (i.e., short positions) to hedge the value of
securities held by such Master Portfolio; (ii) the purchase of a futures
contract when such Master Portfolio hold a short position having the same
delivery month (i.e., a long position offsetting a short position); or (iii) the
purchase of a futures contract to permit the Master Portfolio to, in effect,
participate in the market for the designated securities underlying the futures
contract without actually owning such designated securities. When a Master
Portfolio purchases a futures contract, it will create a segregated account
consisting of cash or other liquid assets in an amount equal to the total market
value of such futures contract, less the amount of initial margin for the
contract.
If a Master Portfolio enters into a short position in a futures contract as a
hedge against anticipated adverse market movements and the market then rises,
the increase in the value of the hedged securities will be offset, in whole or
in part, by a loss on the futures contract. If instead a Master Portfolio
purchases a futures contract as a substitute for investing in the designated
underlying securities, a Master Portfolio experiences gains or losses that
correspond generally to gains or losses in the underlying securities. The
latter type of futures contract transactions permits a Master Portfolio to
experience the results of being fully invested in a particular asset class,
while maintaining the liquidity needed to manage cash flows into or out of the
Master Portfolio (e.g., from purchases and redemptions of Master Portfolio
shares). Under normal market conditions, futures contract positions may be
closed out on a daily basis. The LifePath Master Portfolios expect to apply a
portion of their cash or cash equivalents maintained for liquidity needs to such
activities.
Transactions by a Master Portfolio in futures contracts involve certain risks.
One risk in employing futures contracts as a hedge against cash market price
volatility is the possibility that futures prices will correlate imperfectly
with the behavior of the prices of the securities in the Master Portfolio's
investment portfolio. Similarly, in employing futures contracts as a substitute
for purchasing the designated underlying securities, there is a risk that the
performance of the futures contract may correlate imperfectly with the
performance of the direct investments for which the futures contract is a
substitute. In addition, commodity exchanges generally limit the amount of
fluctuation permitted in futures contract prices during a single trading day,
and the existence of such limits may prevent the prompt liquidation of futures
positions in certain cases. Limits on price fluctuations are designed to
stabilize prices for the benefit of market participants; however, there could be
cases where the Master Portfolio could incur a larger loss due to the delay in
trading than it would have if no limit rules had been in effect.
In order to comply with undertakings made by the Master Portfolio pursuant to
Commodity Futures Trading Commission ("CFTC") Regulation 4.5, the Master
Portfolios will use futures and option contracts solely for bona fide hedging
purposes within the meaning and intent of CFTC Reg. 1.3(z); provided, however,
that in addition, with respect to positions in commodity futures or commodity
option contracts which do not come within the meaning and intent of
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CFTC Reg. 1.3(z), the aggregate initial margin and premiums required to
establish such positions will not exceed five percent of the liquidation value
of the Master Portfolio's portfolio, after taking into account unrealized
profits and unrealized losses on any such contract it has entered into; and
provided further, that in the case of an option that is in-the-money at the time
of purchase, the in-the-money amount as defined in CFTC Reg. 190.01(x) may be
excluded in computing such five percent.
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.
Loans of Portfolio Securities.
-----------------------------
Each Fund may lend its portfolio securities to brokers, dealers and financial
institutions, provided: (1) the loan is secured continuously by collateral
consisting of U.S. Government securities or cash or letters of credit maintained
on a daily marked-to-market basis in an amount at least equal to the current
market value of the securities loaned; (2) the Fund may at any time call the
loan and obtain the return of the securities loaned within five business days;
(3) the Fund will receive any interest or dividends paid on the loaned
securities; and (4) the aggregate market value of securities loaned will not at
any time exceed one third of the total assets of the Fund.
A Fund will earn income for lending its securities because cash collateral
pursuant to these loans will be invested in short-term money market instruments.
In connection with lending securities, a Fund may pay reasonable finders,
administrative and custodial fees. A Fund will not enter into any security
lending arrangement having a duration longer than one year. Loans of securities
involve a risk that the borrower may fail to return the securities or may fail
to provide additional collateral. In either case, a Fund could experience
delays in recovering securities or collateral or could lose all or part of the
value of the loaned securities. When a Fund lends its securities, it continues
to receive interest or dividends on the securities loaned and may simultaneously
earn interest on the collateral received from the borrower or from the
investment of cash collateral in readily marketable, high-quality, short-term
obligations. Although voting rights, or rights to consent, attendant to
securities on loan pass to the borrower, such loans may be called at any time
and will be called so that the securities may be voted by a Fund if a material
event affecting the investment is to occur. A Fund may pay a portion of the
interest or fees earned from securities lending to a borrower or placing broker.
Borrowers and placing brokers may not be affiliated, directly or indirectly,
with Wells Fargo Bank, Stephens Inc. or any of their affiliates.
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Money Market Instruments and Temporary Investments.
--------------------------------------------------
The Funds may invest in the following types of high quality money market
instruments that have remaining maturities not exceeding one year: (i) U.S.
Government obligations; (ii) negotiable certificates of deposit, bankers'
acceptances and fixed time deposits and other obligations of domestic banks
(including foreign branches) that have more than $1 billion in total assets at
the time of investment and are members of the Federal Reserve System or are
examined by the Comptroller of the Currency or whose deposits are insured by the
FDIC; (iii) commercial paper rated at the date of purchase "Prime-1" by Moody's
or "A-1" or "A-1--" by S&P, or, if unrated, of comparable quality as determined
by Wells Fargo Bank, as investment advisor; and (iv) repurchase agreements. The
Funds also may invest in short-term U.S. dollar-denominated obligations of
foreign banks (including U.S. branches) that at the time of investment: (i) have
more than $10 billion, or the equivalent in other currencies, in total assets;
(ii) are among the 75 largest foreign banks in the world as determined on the
basis of assets; (iii) have branches or agencies in the United States; and (iv)
in the opinion of Wells Fargo Bank, as investment advisor, are of comparable
quality to obligations of U.S. banks which may be purchased by the Funds.
Letters of Credit. Certain of the debt obligations (including certificates of
participation, commercial paper and other short-term obligations) which the
Funds may purchase may be backed by an unconditional and irrevocable letter of
credit of a bank, savings and loan association or insurance company which
assumes the obligation for payment of principal and interest in the event of
default by the issuer. Only banks, savings and loan associations and insurance
companies which, in the opinion of Wells Fargo Bank, are of comparable quality
to issuers of other permitted investments of the Fund may be used for letter of
credit-backed investments.
Repurchase Agreements. A Fund may enter into repurchase agreements, wherein
the seller of a security to the Fund agrees to repurchase that security from the
Fund at a mutually agreed upon time and price. A Fund may enter into repurchase
agreements only with respect to securities that could otherwise be purchased by
the Fund. All repurchase agreements will be fully collateralized at 102% based
on values that are marked to market daily. The maturities of the underlying
securities in a repurchase agreement transaction may be greater than twelve
months, although the maximum term of a repurchase agreement will always be less
than twelve months. If the seller defaults and the value of the underlying
securities has declined, a Fund may incur a loss. In addition, if bankruptcy
proceedings are commenced with respect to the seller of the security, the Fund's
disposition of the security may be delayed or limited.
A Fund will only enter into repurchase agreements with primary broker/dealers
and commercial banks that meet guidelines established by the Board of Directors
and that are not affiliated with the investment advisor. The Funds may
participate in pooled repurchase agreement transactions with other funds advised
by Wells Fargo Bank.
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Mortgage-Related Securities.
---------------------------
The Funds may invest in mortgage-related securities. Mortgage pass-through
securities are securities representing interests in "pools" of mortgages in
which payments of both interest and principal on the securities are made
monthly, in effect "passing through" monthly payments made by the individual
borrowers on the residential mortgage loans which underlie the securities (net
of fees paid to the issuer or guarantor of the securities). Early repayment of
principal on mortgage pass-through securities (arising from prepayments of
principal due to sale of the underlying property, refinancing, or foreclosure,
net of fees and costs which may be incurred) may expose a Fund to a lower rate
of return upon reinvestment of principal. Also, if a security subject to
prepayment has been purchased at a premium, in the event of prepayment the value
of the premium would be lost. Like other fixed-income securities, when interest
rates rise, the value of a mortgage-related security generally will decline;
however, when interest rates decline, the value of mortgage-related securities
with prepayment features may not increase as much as other fixed-income
securities. Payment of principal and interest on some mortgage pass-through
securities (but not the market value of the securities themselves) may be
guaranteed by the full faith and credit of the U.S. Government or its agencies
or instrumentalities. Mortgage pass-through securities created by non-
government issuers (such as commercial banks, savings and loan institutions,
private mortgage insurance companies, mortgage bankers and other secondary
market issuers) may be supported by various forms of insurance or guarantees,
including individual loan, title, pool and hazard insurance, and letters of
credit, which may be issued by governmental entities, private insurers or the
mortgage poolers. The Funds may also invest in investment grade Collateralized
Mortgage Obligations ("CMOs"). CMOs may be collateralized by whole mortgage
loans but are more typically collateralized by portfolios of mortgage pass-
through securities guaranteed by the Government National Mortgage Association
("GNMA"), the Federal Home Loan Mortgage Corporation ("FHLMC") or the Federal
National Mortgage Association (" FNMA"). CMOs are structured into multiple
classes, with each class bearing a different stated maturity. Payments of
principal, including prepayments, are first returned to investors holding the
shortest maturity class; investors holding the longer maturity classes receive
principal only after the first class has been retired. As new types of
mortgage-related securities are developed and offered to investors, the advisor
will, consistent with a Fund's investment objective, policies and quality
standards, consider making investments in such new types of mortgage-related
securities.
There are risks inherent in the purchase of mortgage-related securities. For
example, these securities are subject to a risk that default in payment will
occur on the underlying mortgages. In addition to default risk, these
securities are subject to the risk that prepayment on the underlying mortgages
will occur earlier or later or at a lessor or greater rate than expected. To
the extent that the advisor's assumptions about prepayments are inaccurate,
these securities may expose the Funds to significantly greater market risks than
expected.
Nationally Recognized Statistical Ratings Organizations.
-------------------------------------------------------
The ratings of Moody's Investors Service, Inc., Standard & Poor's Ratings
Group, Division of McGraw Hill, Duff & Phelps Credit Rating Co., Fitch Investors
Service, Inc. Thomson Bank Watch and IBCA Inc. represent their opinions as to
the quality of debt securities. It should be
11
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emphasized, however, that ratings are general and not absolute standards of
quality, and debt securities with the same maturity, interest rate and rating
may have different yields while debt securities of the same maturity and
interest rate with different ratings may have the same yield. Subsequent to
purchase by a Fund, an issue of debt securities may cease to be rated or its
rating may be reduced below the minimum rating required for purchase by a Fund.
The advisor will consider such an event in determining whether the Fund involved
should continue to hold the obligation.
The payment of principal and interest on debt securities purchased by the
Balanced and Equity Value Funds depends upon the ability of the issuers to meet
their obligations. An issuer's obligations under its debt securities are subject
to the provisions of bankruptcy, insolvency, and other laws affecting the rights
and remedies of creditors, such as the Federal Bankruptcy Code, and laws, if
any, which may be enacted by federal or state legislatures extending the time
for payment of principal or interest, or both, or imposing other constraints
upon enforcement of such obligations or, in the case of governmental entities,
upon the ability of such entities to levy taxes. The power or ability of an
issuer to meet its obligations for the payment of interest and principal of its
debt securities may be materially adversely affected by litigation or other
conditions. Further, it should also be, noted with respect to all municipal
obligations issued after August 15, 1986 (August 31, 1986 in the case of certain
bonds), the issuer must comply with certain rules formerly applicable only to
"industrial development bonds" which, if the issuer fails to observe them, could
cause interest on the municipal obligations to become taxable retroactive to the
date of issue.
Options Trading.
---------------
The Funds may purchase or sell options on individual securities or options on
indices of securities as described below. The purchaser of an option risks a
total loss of the premium paid for the option if the price of the underlying
security does not increase or decrease sufficiently to justify exercise. The
seller of an option, on the other hand, will recognize the premium as income if
the option expires unrecognized but foregoes any capital appreciation in excess
of the exercise price in the case of a call option and may be required to pay a
price in excess of current market value in the case of a put option.
Call and Put Options on Specific Securities. The Funds may invest in call and
put options on a specific security. A call option gives the purchaser of the
option the right to buy, and obligates the writer to sell, an underlying
security at the exercise price at any time during the option period.
Conversely, a put option gives the purchaser of the option the right to sell,
and obligates the writer to buy, an underlying security at the exercise price at
any time during the option period. Investments by a Fund in off-exchange
options will be treated as "illiquid" and therefore subject to the Fund's policy
of not investing more than 15% of its net assets in illiquid securities.
The Funds may write covered call option contracts and secured put options as
BGFA deems appropriate. A covered call option is a call option for which the
writer of the option owns the security covered by the option. Covered call
options written by a Fund expose the Fund during the term of the option (i) to
the possible loss of opportunity to realize appreciation in the market price of
the underlying security or (ii) to possible loss caused by continued holding of
a security which
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<PAGE>
might otherwise have been sold to protect against depreciation in the market
price of the security. If a Fund writes a secured put option, it assumes the
risk of loss should the market value of the underlying security decline below
the exercise price of the option. The aggregate value of the securities subject
to options written by a Fund will not exceed 25%. The use of covered call
options and securities put options will not be a primary investment technique of
the Funds, and they are expected to be used infrequently. If the advisor is
incorrect in its forecast of market value or other factors when writing the
foregoing options, a Fund would be in a worse position than it would have been
had the foregoing investment techniques not been used.
Each Fund may engage in unlisted over-the-counter options with broker/dealers
deemed creditworthy by the advisor. Closing transactions for such options are
usually effected directly with the same broker/dealer that effected the original
option transaction. A Fund bears the risk that the broker/dealer will fail to
meet its obligations. There is no assurance that a liquid secondary trading
market exists for closing out an unlisted option position. Furthermore,
unlisted options are not subject to the protections afforded purchasers of
listed options by the Options Clearing Corporation, which performs the
obligations of its members who fail to perform in connection with the purchase
or sale of options.
Each Fund may buy put and call options and write covered call and secured put
options. Options trading is a highly specialized activity which entails greater
than ordinary investment risk. Options may be more volatile than the underlying
instruments, and therefore, on a percentage basis, an investment in options may
be subject to greater fluctuation than an investment in the underlying
instruments themselves. Purchasing options is a specialized investment
technique that entails a substantial risk of a complete loss of the amounts paid
as premiums to the writer of the option.
The Funds may also write covered call and secured put options from time to
time as the advisor deems appropriate. By writing a covered call option, a Fund
forgoes the opportunity to profit from an increase in the market of the
underlying security above the exercise price except insofar as the premium
represents such a profit, and it is not able to sell the underlying security
until the option expires or is exercised or the Fund effects a closing purchase
transaction by purchasing an option of the same series. If a Fund writes a
secured put option, it assumes the risk of loss should the market value of the
underlying security decline below the exercise price of the option. If the
advisor is incorrect in its forecast of market value or other factors when
writing the foregoing options, the Fund would be in a worse position than it
would have been had the foregoing investment techniques not been used.
A call option for a particular security gives the purchaser of the option the
right to buy, and a writer the obligation to sell, the underlying security at
the stated exercise price at any time prior to the expiration of the option,
regardless of the market price of the security. The premium paid to the writer
is in consideration for undertaking the obligation under the option contract. A
put option for a particular security gives the purchaser the right to sell the
security at the stated exercise price at any time prior to the expiration date
of the option, regardless of the market price of the security. Options on
indices provide the holder with the right to make or receive a cash settlement
upon exercise of the option. With respect to options on indices, the amount of
the settlement equals the
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difference between the closing price of the index at the time of exercise and
the exercise price of the option expressed in dollars, times a specified
multiple.
The Funds will write call options only if they are "covered." In the case of
a call option on a security or currency, the option is "covered" if a Fund owns
the instrument underlying the call or has an absolute and immediate right to
acquire that instrument without additional cash consideration (or, if additional
cash consideration is required, cash, U.S. Government securities or other liquid
high grade debt obligations, in such amount are held in a segregated account by
the Fund's custodian) upon conversion or exchange of other securities held by
it. For a call option on an index, the option is covered if a Fund maintains
with its custodian a diversified portfolio of securities comprising the index or
liquid assets equal to the contract value. A call option is also covered if a
Fund holds a call on the same instrument or index as the call written where the
exercise price of the call held is (i) equal to or less than the exercise price
of the call written, or (ii) greater than the exercise price of the call written
provided the difference is maintained by the Fund in liquid assets in a
segregated account with its custodian. The Funds will write put options only if
they are "secured" by liquid assets maintained in a segregated account by the
Funds' custodian in an amount not less than the exercise price of the option at
all times during the option period.
A Fund's obligation to sell an instrument subject to a covered call option
written by it, or to purchase an instrument subject to a secured put option
written by it, may be terminated prior to the expiration date of the option by
the Fund's execution of a closing purchase transaction, which is effected by
purchasing on an exchange an option of the same series (i.e., same underlying
instrument, exercise price and expiration date) as the option previously
written. Such a purchase does not result in the ownership of an option. A
closing purchase transaction is ordinarily effected to realize a profit on an
outstanding option, to prevent an underlying instrument from being called, to
permit the sale of the underlying instrument or to permit the writing of a new
option containing different terms on such underlying instrument. The cost of
such a liquidation purchase plus transaction costs may be greater than the
premium received upon the original option, in which event the Fund will have
incurred a loss in the transaction. There is no assurance that a liquid
secondary market will exist for any particular option. An option writer, unable
to effect a closing purchase transaction, will not be able to sell the
underlying instrument (in the case of a covered call option) or liquidate the
segregated account (in the case of a secured put option) until the option
expires or the optioned instrument or currency is delivered upon exercise with
the result that the writer in such circumstances will be subject to the risk of
market decline or appreciation in the instrument during such period.
When a Fund purchases an option, the premium paid by it is recorded as an
asset of the Fund. When a Fund writes an option, an amount equal to the net
premium (the premium less the commission) received by a Fund is included in the
liability section of the Fund's statement of assets and liabilities as a
deferred credit. The amount of this asset or deferred credit will be
subsequently marked-to-market to reflect the current value of the option
purchased or written. The current value of the traded option is the last sale
price or, in the absence of a sale, the current bid price. If an option
purchased by a Fund expires unexercised the Fund realizes a loss equal to the
premium paid. If a Fund enters into a closing sale transaction on an option
purchased by it, the Fund realizes a gain if the premium received by the Fund on
the closing transaction is more than the premium paid to
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<PAGE>
purchase the option, or a loss if it is less. If an option written by a Fund
expires on the stipulated expiration date or if a Fund enters into a closing
purchase transaction, it realizes a gain (or loss if the cost of a closing
purchase transaction exceeds the net premium received when the option is sold)
and the deferred credit related to such option is eliminated. If an option
written by a Fund is exercised, the proceeds of the sale are increased by the
net premium originally received and the Fund realizes a gain or loss.
There are several risks associated with transactions in options. For example,
there are significant differences between the securities, currency and options
markets that could result in an imperfect correlation between these markets,
causing a given transaction not to achieve its objectives. In addition, a liquid
secondary market for particular options, whether traded over-the-counter or on
an exchange, may be absent for reasons that include the following: there may be
insufficient trading interest in certain options; restrictions may be imposed by
an exchange on opening transactions or closing transactions or both; trading
halts, suspensions or other restrictions may be imposed with respect to
particular classes or series of options or underlying securities or currencies;
unusual or unforeseen circumstances may interrupt normal operations on an
exchange; the facilities of an exchange or the Options Clearing Corporation may
not be adequate at all times to handle current trading value; or one or more
exchanges could, for economic or other reasons, decide or be compelled at some
future date to discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that exchange (or in
that class or series of options) would cease to exist, although outstanding
options that had been issued by the Options Clearing Corporation as a result of
trades on that exchange would continue to be exercisable in accordance with
their terms. A Fund is likely to be unable to control losses by closing its
position where a liquid secondary market does not exist. A decision as to
whether, when and how to use options involves the exercise of skill and
judgment, and even a well-conceived transaction may be unsuccessful to some
degree because of market behavior or unexpected events.
The Funds may purchase or sell options on individual securities or options on
indices of securities as described below. The purchaser of an option risks a
total loss of the premium paid for the option if the price of the underlying
security does not increase or decrease sufficiently to justify exercise. The
seller of an option, on the other hand, will recognize the premium as income if
the option expires unrecognized but foregoes any capital appreciation in excess
of the exercise price in the case of a call option and may be required to pay a
price in excess of current market value in the case of a put option.
The Funds may engage in unlisted over-the-counter options with broker/dealers
deemed creditworthy by the advisor. Closing transactions for such options are
usually effected directly with the same broker/dealer that effected the original
option transaction. A Fund bears the risk that the broker/dealer will fail to
meet its obligations. There is no assurance that a liquid secondary trading
market exists for closing out an unlisted option position. Furthermore, unlisted
options are not subject to the protections afforded purchasers of listed options
by the Options Clearing Corporation, which performs the obligations of its
members who fail to perform in connection with the purchase or sale of options.
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<PAGE>
Stock Index Options. The Funds may purchase call and put options and write
covered call options on stock indices listed on national securities exchanges or
traded in the over-the-counter market to the extent of 25% of the value of its
net assets.
The effectiveness of purchasing or writing stock index options will depend
upon the extent to which price movements in a Fund's investment portfolio
correlate with price movements of the stock index selected. Because the value of
a stock index option depends upon changes to the price of all stocks comprising
the index rather than the price of a particular stock, whether a Fund will
realize a gain or loss from the purchase or writing of options on an index
depends upon movements in the price of all stocks in the index, rather than
movements in the price of a particular stock. Accordingly, successful use by a
Fund of options on stock indexes will be subject to Wells Fargo Bank's ability
to correctly analyze movements in the direction of the stock market generally or
of particular industry or market segments.
Stock Index Futures Contracts and Options on Stock Index Futures Contracts.
The Funds may participate in stock index futures contracts and options on stock
index futures contracts. A futures transaction involves a firm agreement to buy
or sell a commodity or financial instrument at a particular price on a specified
future date, while an option transaction generally involves a right, which may
or may not be exercised, to buy or sell a commodity of financial instrument at a
particular price on a specified future date. Futures contracts and options are
standardized and exchange-traded, where the exchange serves as the ultimate
counterparty for all contracts. Consequently, the only credit risk on futures
contracts is the creditworthiness of the exchange. Futures contracts, however,
are subject to market risk (i.e., exposure to adverse price changes).
A stock index futures contract is an agreement in which one party agrees to
deliver to the other an amount of cash equal to a specific dollar amount
multiplied by 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. As the aggregate market value of the stocks in the index
changes, the value of the index also changes. In the event that the index level
rises above the level at which the stock index futures contract was sold, the
seller of the stock index futures contract realizes a loss determined by the
difference between the two index levels at the time of expiration of the stock
index futures contract, and the purchaser realizes a gain in that amount. In the
event the index level falls below the level at which the stock index futures
contract was sold, the seller recognizes a gain determined by the difference
between the two index levels at the expiration of the stock index futures
contract, and the purchaser realizes a loss. Stock index futures contracts
expire on a fixed date, currently one to seven months from the date of the
contract, and are settled upon expiration of the contract.
Stock index futures contracts may be purchased to protect a Fund against an
increase in the prices of stocks that Fund intends to purchase. If a Fund is
unable to invest its cash (or cash equivalents) in stock in an orderly fashion,
a Fund may purchase a stock index futures contract to offset any increase in the
price of the stock. However, it is possible that the market may decline instead,
resulting in a loss on the stock index futures contract. If Fund then concludes
not to invest in stock at that time, or if the price of the securities to be
purchased remains constant or increases, a Fund realizes a loss on the stock
index futures contract that is not offset by a reduction in the price
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<PAGE>
of securities purchased. The Funds also may buy or sell stock index futures
contracts to close out existing futures positions.
The Funds may also purchase put options on stock index futures contracts.
Sales of such options may also be made to close out an open option position. The
Funds may, for example, purchase a put option on a particular stock index
futures contract or stock index to protect against a decline in the value of the
common stocks it holds. If the stocks in the index decline in value, the put
should become more valuable and the Funds could sell it to offset losses in the
value of the common stocks. In this way, put options may be used to achieve the
same goals the Funds seek in selling futures contracts. A put option on a stock
index future gives the purchaser the right, in return for a premium paid, to
assume a short (i.e., the right to sell stock index futures) position in a stock
index futures contract at a specified exercise price ("strike price") at any
time during the period of the option. If the option is exercised by the holder
before the last trading date during the option period, the holder receives the
futures position, as well as any balance in the futures margin account. If an
option is exercised on the last trading day prior to the expiration date of the
option, the settlement is made entirely in cash in an amount equal to the
difference between the strike price and the closing level of the relevant index
on the expiration date.
BGFA expects that an increase or decrease in the index in relation to the
strike price level would normally correlate to an increase or decrease (but not
necessarily to the same extent) in the value of a Fund's common stock portfolio
against which the option was written. Thus, any loss in the option transaction
may be offset by an increase in the value of the common stock portfolio to the
extent changes in the index correlate to changes in the value of that portfolio.
The Funds may liquidate the put options they have purchased by effecting a
closing sale transaction rather than exercising the option. This is accomplished
by selling an option of the same series as the option previously purchased.
There is no guarantee that the Funds will be able to effect the closing sale
transaction. The Funds realize a gain from a closing sale transaction if the
price at which the transaction is effected exceeds the premium paid to purchase
the option and, if less, the Funds realize a loss.
The Funds may each invest in stock index futures in order to protect the value
of common stock investments or to maintain liquidity, provided not more than 5%
of a Fund's net assets are committed to such transactions. 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, the Funds intend to purchase and sell futures
contracts on the stock index for which it can obtain the best price with
consideration also given to liquidity. There can be no assurance that a liquid
market will exist at the time when a Fund seeks to close out a futures contract
or a futures option position. Lack of a liquid market may prevent liquidation of
an unfavorable position.
Other Asset-Backed Securities.
-----------------------------
The Funds may purchase asset-backed securities unrelated to mortgage loans.
These asset-backed securities may consist of undivided fractional interests in
pools of consumer loans or
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receivables held in trust. Examples include certificates for automobile
receivables (CARS) and credit card receivables (CARDS). Payments of principal
and interest on these asset-backed securities are "passed through" on a monthly
or other periodic basis to certificate holders and are typically supported by
some form of credit enhancement, such as a letter of credit, surety bond,
limited guaranty, or subordination. The extent of credit enhancement varies, but
usually amounts to only a fraction of the asset-backed security's par value
until exhausted. Ultimately, asset-backed securities are dependent upon payment
of the consumer loans or receivables by individuals, and the certificate holder
frequently has no recourse to the entity that originated the loans or
receivables. The actual maturity and realized yield will vary based upon the
prepayment experience of the underlying asset pool and prevailing interest rates
at the time of prepayment. Asset-backed securities are relatively new
instruments and may be subject to greater risk of default during periods of
economic downturn than other instruments. Also, the secondary market for certain
asset-backed securities may not be as liquid as the market for other types of
securities, which could result in a Fund experiencing difficulty in valuing or
liquidating such securities.
Other Investment Companies.
--------------------------
The Funds may invest in shares of other open-end management investment
companies, up to the limits prescribed in Section 12(d) of the 1940 Act. Under
the 1940 Act, a Fund'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 Fund's net assets with respect to any one
investment company and (iii) 10% of such Fund's net assets in aggregate. Other
investment companies in which the Funds invest can be expected to charge fees
for operating expenses such as investment advisory and administration fees, that
would be in addition to those charged by the Funds.
Privately Issued Securities.
---------------------------
The Funds may invest in privately issued securities, including those which may
be resold only in accordance with Rule 144A under the Securities Act of 1933
("Rule 144A Securities"). Rule 144A Securities are restricted securities that
are not publicly traded. Accordingly, the liquidity of the market for specific
Rule 144A Securities may vary. Delay or difficulty in selling such securities
may result in a loss to a Fund. Privately issued or Rule 144A securities that
are determined by the investment advisor to be "illiquid" are subject to the
Funds' policy of not investing more than 15% of its net assets in illiquid
securities. The investment advisor, under guidelines approved by Board of
Directors of the Company, will evaluate the liquidity characteristics of each
Rule 144A Security proposed for purchase by a Fund on a case-by-case basis and
will consider the following factors, among others, in their evaluation: (1) the
frequency of trades and quotes for the Rule 144A Security; (2) the number of
dealers willing to purchase or sell the Rule 144A Security and the number of
other potential purchasers; (3) dealer undertakings to make a market in the Rule
144A Security; and (4) the nature of the Rule 144A Security and the nature of
the marketplace trades (e.g., the time needed to dispose of the Rule 144A
Security, the method of soliciting offers and the mechanics of transfer).
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U.S. Government Obligations.
---------------------------
The Funds may invest in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities ("U.S. Government obligations").
Payment of principal and interest on U.S. Government obligations (i) may be
backed by the full faith and credit of the United States (as with U.S. Treasury
bills and GNMA certificates) or (ii) may be backed solely by the issuing or
guaranteeing agency or instrumentality itself (as with FNMA notes). In the
latter case investors must look principally to the agency or instrumentality
issuing or guaranteeing the obligation for ultimate repayment, which agency or
instrumentality may be privately owned. There can be no assurance that the U.S.
Government will provide financial support to its agencies or instrumentalities
where it is not obligated to do so. In addition, U.S. Government obligations are
subject to fluctuations in market value due to fluctuations in market interest
rates. As a general matter, the value of debt instruments, including U.S.
Government obligations, declines when market interest rates increase and 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.
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.
RISK FACTORS
Investments in a Fund are not bank deposits or obligations of Wells Fargo
Bank, are not insured by the FDIC and are not insured against loss of principal.
When the value of the securities that a Fund owns declines, so does the value of
your Fund shares. You should be prepared to accept some risk with the money you
invest in a Fund.
The portfolio equity securities of each Fund are subject to equity market
risk. Equity market risk is the risk that stock prices will fluctuate or
decline over short or even extended periods. Throughout most of 1997, the stock
market, as measured by the S&P 500 Index and other commonly used indices, has
been trading at or close to record levels. There can be no guarantee that these
performance levels will continue. The portfolio debt instruments of a Fund are
subject to credit and interest-rate risk. Credit risk is the risk that issuers
of the debt instruments in which a Fund invests may default on the payment of
principal and/or interest. Interest-rate risk is the risk that increases in
market interest rates may adversely affect the value of the debt instruments in
which the Funds invest and hence the value of your investment in a Fund.
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The market value of a Fund's investment in fixed-income securities will change
in response to various factors, such as changes in market interest-rates and the
relative financial strength of an issuer. During periods of falling interest
rates, the value of fixed-income securities generally rises. Conversely, during
periods of rising interest rates, the value of such securities generally
declines. Debt securities with longer maturities, which tend to produce higher
yields, are subject to potentially greater capital appreciation and depreciation
than obligations with shorter maturities. Fluctuations in the market value of
fixed-income securities can be reduced, but not eliminated, by variable and
floating-rate features.
Securities rated in the fourth highest rating category are regarded by S&P as
having an adequate capacity to pay interest and repay principal, but changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity to make such repayments. Moody's considers such securities as having
speculative characteristics. Subsequent to its purchase by the Fund, an issue of
securities may cease to be rated or its rating may be reduced below the minimum
rating required for purchase by the Fund. The advisor will consider such an
event in determining whether a Fund should continue to hold the obligation.
Securities rated below the fourth highest rating category (sometimes called
"junk bonds") are often considered to be speculative and involve greater risk of
default or price changes due to changes in the issuer's credit-worthiness. The
market prices of these securities may fluctuate more than higher quality
securities and may decline significantly in periods of general economic
difficulty.
There may be some additional risks associated with investments in smaller
and/or newer companies because their shares tend to be less liquid than
securities of larger companies. Further, shares of small and new companies are
generally more sensitive to purchase and sale transactions and changes in the
issuer's financial condition and, therefore, the prices of such stocks may be
more volatile than those of larger company stocks and may be subject to more
abrupt price movements than securities of larger companies.
Investing in the securities of issuers in any foreign country, including
American Depository Receipts ("ADRs") and European Depository Receipts ("EDRs")
and similar securities, involves special risks and considerations not typically
associated with investing in U.S. companies. These include differences in
accounting, auditing and financial reporting standards; generally higher
commission rates on foreign portfolio transactions; the possibility of
nationalization, expropriation or confiscatory taxation; adverse changes in
investment or exchange control regulations (which may include suspension of the
ability to transfer currency from a country); and political, social and monetary
or diplomatic developments that could affect U.S. investments in foreign
countries. Additionally, dispositions of foreign securities and dividends and
interest payable on those securities may be subject to foreign taxes, including
withholding taxes. Foreign securities often trade with less frequency and volume
than domestic securities and, therefore, may exhibit greater price volatility.
Additional costs associated with an investment in foreign securities may include
higher custodial fees than apply to domestic custodial arrangements and
transaction costs of foreign currency conversions. Changes in foreign exchange
rates also will affect the value of securities denominated or quoted in
currencies other than the U.S. dollar. A Fund's performance may be affected
either unfavorably or favorably by fluctuations in the relative rates of
exchange between
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the currencies of different nations, by exchange control regulations and by
indigenous economic and political developments.
Illiquid securities, which may include certain restricted securities, may be
difficult to sell promptly at an acceptable price. Certain restricted securities
may be subject to legal restrictions on resale. Delay or difficulty in selling
securities may result in a loss or be costly to a Fund.
The advisor may use certain derivative investments or techniques, such as
buying and selling options and futures contracts and entering into currency
exchange contracts or swap agreements, to adjust the risk and return
characteristics of a Fund's portfolio. Derivatives are financial instruments
whose value is derived, at least in part, from the price of another security or
a specified asset, index or rate. Some derivatives may be more sensitive than
direct securities to changes in interest rates or sudden market moves. Some
derivatives also may be susceptible to fluctuations in yield or value due to
their structure or contract terms. If a Fund's advisor judges market conditions
incorrectly, the use of certain derivatives could result in a loss, regardless
of the advisor's intent in using the derivatives.
There is, of course, no assurance that a Fund will achieve its investment
objective or be successful in preventing or minimizing the risk of loss that is
inherent in investing in particular types of investment products.
MANAGEMENT
The following information supplements and should be read in conjunction with
the Prospectus section entitled "Organization and Management of the Funds."
Trustees and officers of the Trust, together with information as to their
principal 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, 75 Trustee Private Investor.
415 Walsh Road
Atherton, CA 94027.
*R. Greg Feltus, 46 Trustee, Executive Vice President of Stephens,
Chairman Manager of Financial Services Group,
and President President of Stephens Insurance Services Inc.;
Senior Vice President of Stephens Sports Management Inc.;
and President of Investors Brokerage Insurance Inc.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
Name, Address and Age Position During Past 5 Years
- ----------------------------------- ------------------- ----------------------------------------------------------
<S> <C> <C>
Thomas S. Goho, 55 Trustee Associate Professor of Finance,
P.O. Box 7285 Calloway School of Business and Accounting at
Reynolds Station Wake Forest University since 1982.
Winston-Salem, NC 27109
Peter G. Gordon, 54 Trustee Chairman and Co-Founder of Crystal Geyser Water Company
Crystal Geyser Water Co. and President of Crystal Geyser Roxane Water Company
55 Francisco Street since 1977.
San Francisco, CA 94133
Joseph N. Hankin, 57 Trustee President of Westchester Community College since 1971;
75 Grasslands Road Adjunct Professor of Columbia University Teachers College
Valhalla, NY 10595 since 1976.
(appointed as of September 6, 1996
*W. Rodney Hughes, 71 Trustee Private Investor.
31 Dellwood Court
San Rafael, CA 94901
*J. Tucker Morse, 53 Trustee Private Investor; Chairman of Home Account Network, Inc.;
4 Beaufain Street Real Estate Developer; Chairman of Renaissance Properties
Charleston, SC 29401 Ltd., President of Morse Investment Corporation; and
Co-Managing Partner of Main Street Ventures.
Richard H. Blank, Jr., 41 Chief Operating Vice-President of Stephens Inc.; Director of Stephens
Officer, Secretary Sports Management Inc.; and Director of Capo Inc.
and Treasurer
</TABLE>
Compensation Table
For the Fiscal Year-ended February 28, 1997
<TABLE>
<CAPTION>
Aggregate Total Compensation
Compensation from Registrant
Name and Position from Registrant and Fund Complex
- ----------------------- -------------------------- -------------------------------------
<S> <C> <C>
Jack S. Euphrat 0 $33,750
Trustee
R. Greg Feltus 0 0
Trustee
Thomas S. Goho 0 $33,750
Trustee
Peter G. Gordon 0 0
Trustee
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Aggregate Total Compensation
Compensation from Registrant
Name and Position from Registrant and Fund Complex
- ----------------------- -------------------------- -------------------------------------
<S> <C> <C>
Joseph N. Hankin 0 $26,250
Trustee
W. Rodney Hughes 0 $27,750
Trustee
Robert M. Joses 0 $33,750
Trustee
J. Tucker Morse 0 $27,750
Trustee
</TABLE>
As of January 1, 1998, Peter G. Gordon replaced Robert H. Joses on the Board
of Trustees.
Trustees of the Trust are compensated annually by the Trust and by all the
registrants in each fund complex they serve as indicated above and also are
reimbursed for all out-of-pocket expenses relating to attendance at board
meetings. The Trust, Stagecoach Funds, Inc. and Life & Annuity Trust are
considered to be members of the same fund complex as such term is defined in
Form N-1A under the 1940 Act (the "Wells Fargo Fund Complex"). MasterWorks
Funds Inc., Master Investment Portfolio, and Managed Series Investment Trust
together form a separate fund complex (the "BGFA Fund Complex"). Each of the
Trustees and Officers of the Trust serves in the identical capacity as trustees
and officers or as trustees and/or officers of each registered open-end
management investment company in both the Wells Fargo and BGFA Fund Complexes,
except for Joseph N. Hankin and Peter G. Gordon, who only serve the
aforementioned members of the Wells Fargo Fund Complex. The Trustees are
compensated by other companies and trusts within a fund complex for their
services as Directors to such companies and trusts. Currently the Trustees do
not receive any retirement benefits or deferred compensation from the Trust or
any other member of each fund complex.
As the date of this SAI, the Trustees and Officers of the Trust as a group
beneficially owned less than 1% of the outstanding shares of the Trust.
MASTER/FEEDER STRUCTURE. Each LifePath Fund seeks to achieve its investment
objective by investing all of its assets in a corresponding LifePath Master
Portfolio of MIP. The Funds and other entities investing in a Master Portfolio
are each 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 existed and MIP itself is
unable to meet its obligations. Accordingly, the Trust's Board of Trustees
believes that neither a Fund nor its shareholders will be adversely affected by
investing Fund assets in the Master Portfolio. However, if a mutual fund or
other investor withdraws its investment from the Master Portfolio, the economic
23
<PAGE>
efficiencies (e.g., spreading fixed expenses among a larger asset base) that the
Board believes may be available through investment in the Master Portfolio may
not be fully achieved. In addition, given the relative novelty of the
master/feeder structure, accounting or operational difficulties, although
unlikely, could arise. See "Organization and Management of the Funds" in the
Prospectus for additional description of the Funds' and Master Portfolios'
expenses and management.
Each Fund may withdraw its investment in the corresponding Master Portfolio
only if the Trust's Board of Trustees determines that such action is in the best
interests of such Fund and its shareholders. Upon such withdrawal, the Board
would consider alternative investments, including investing all of the Fund's
assets in another investment company with the same investment objective as the
Fund or hiring an investment adviser to manage the Fund's assets in accordance
with the investment policies described below with respect to the Master
Portfolio.
The investment objective and other fundamental policies of a Master Portfolio
cannot be changed without approval by the holders of a majority (as defined in
the 1940 Act) of the Master Portfolio's outstanding interests. See "Investment
Objectives" and "Investment Policies" in the Prospectus. Whenever a Fund, as an
interestholder of a Master Portfolio, is requested to vote on any matter
submitted to interestholders of the Master Portfolio, the Fund will hold a
meeting of its shareholders to consider such matters. The Fund will cast its
votes in proportion to the votes received from its shareholders. Shares for
which the Fund receives no voting instructions will be voted in the same
proportion as the votes received from the other Fund shareholders.
Certain policies of a Master Portfolio which are non-fundamental may be
changed by vote of a majority of MIP's Trustees without interestholder approval.
If a Master Portfolio's investment objective or fundamental or non-fundamental
policies are changed, the corresponding Fund may elect to change its objective
or policies to correspond to those of the Master Portfolio. The Fund may also
elect to redeem its interests in the Master Portfolio and either seek a new
investment company with a matching objective in which to invest or retain its
own investment adviser to manage the Fund's portfolio in accordance with its
objective. In the latter case, a Fund's inability to find a substitute
investment company in which to invest or equivalent management services could
adversely affect shareholders' investments in the Fund. Each Fund will provide
shareholders with 30 days' written notice prior to the implementation of any
change in the investment objective of the Fund or the Master Portfolio, to the
extent possible. See "Investment Objectives and Policies" in the Prospectus for
additional information regarding the Funds' and the Master Portfolios'
investment objectives and policies.
MANAGEMENT ARRANGEMENTS
Investment Adviser. BGFA provides investment advisory services to each
------------------
LifePath Master Portfolio. For providing investment advisory services, BGFA is
entitled to receive a monthly fee of 0.55% of each LifePath Master Portfolio's
average daily net assets. The Master Portfolios' 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
24
<PAGE>
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 Advisory
Contract is terminable without penalty, on 60 days' written notice, by either
party and will terminate automatically, as to the relevant Master Portfolio, in
the event of its assignment (as defined in the 1940 Act).
BGFA was created by the reorganization of Wells Fargo Nikko Investment
Advisors ("WFNIA") with and into an affiliate of Wells Fargo Institutional Trust
Company ("WFITC"), the former custodian to the Funds. BGFA is now a subsidiary
of WFITC which, effective January 1, 1996, changed its name to Barclays Global
Investors, N.A. ("BGI").
For the period beginning January 1, 1996 and ended February 29, 1996, and for
the fiscal years-ended February 28, 1997 and February 28, 1998, the advisory
fees paid to BGFA by the corresponding Master Portfolio of each LifePath Fund is
shown below.
<TABLE>
<S> <C> <C> <C>
Fiscal Year - Fiscal Year -
1/1/96- 2/29/96 Ended 2/28/97 Ended 2/28/98
---------------- ---------------------- ----------------------
Master Portfolio
- -------------------------
LifePath 2000 Master $ 99,511 $ 689,347 $ 689,347
Portfolio
LifePath 2010 Master $ 86,919 $ 757,505 $ 757,505
Portfolio
LifePath 2020 Master $ 141,075 $1,149,160 $1,149,160
Portfolio
LifePath 2030 Master $ 93,240 $ 714,647 $ 714,647
Portfolio
LifePath 2040 Master $ 148,324 $1,154,337 $1,154,337
Portfolio
</TABLE>
Prior to January 1, 1996, Wells Fargo Bank, N.A. ("Wells Fargo Bank") provided
investment advisory services to each Master Portfolio.
For the fiscal year-ended February 28, 1995 and the period beginning March 1,
1995 and ended December 31, 1995, the advisory fees paid to Wells Fargo Bank by
the corresponding Master Portfolio of each LifePath Fund is shown below.
<TABLE>
<S> <C> <C>
Fiscal Year - 3/31/95-
Master Portfolio Ended 2/28/95 12/31/95
- ------------------------- ----------------------- -------------------------
LifePath 2000 Master $217,676 $ 363,537
Portfolio
LifePath 2010 Master $158,218 $ 312,434
Portfolio
LifePath 2020 Master $252,413 $ 520,296
Portfolio
LifePath 2030 Master $156,397 $ 343,850
Portfolio
LifePath 2040 Master $189,121 $ 503,315
Portfolio
</TABLE>
SUB-INVESTMENT ADVISER. Prior to January 1, 1996 WFNIA provided sub-investment
----------------------
advisory services to each Master Portfolio. As of January 1, 1996, the Funds,
no longer retain a sub-investment adviser.
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 sub-advisory fees to
WFNIA as follows:
25
<PAGE>
<TABLE>
<S> <C> <C>
Fiscal Year - 3/1/95 -
Master Portfolio Ended 2/28/95 12/31/95
- ----------------------- -------------------------- ---------
LifePath 2000 Master $159,494 $ 261,344
Portfolio
LifePath 2010 Master $115,647 $ 224,903
Portfolio
LifePath 2020 Master $184,341 $ 374,802
Portfolio
LifePath 2030 Master $114,426 $ 247,703
Portfolio
LifePath 2040 Master $138,511 $ 361,673
Portfolio
</TABLE>
CO-ADMINISTRATORS. The Trust has engaged Wells Fargo Bank and Stephens to
-----------------
provide certain administration services. Pursuant to a Co-Administration
Agreement 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. For providing such services, Wells
Fargo Bank and Stephens are entitled to a combined all-in fee of 0.10% of each
Funds average daily net assets. Wells Fargo Bank has contracted with Investors
Bank & Trust Company ("IBT") to provide certain sub-administration services in
connection with its co-administration services to the Trust. Prior to February
1, 1997, Stephens served as sole administrator to the Trust.
For the fiscal years ended February 28, 1995, February 29, 1996 and February
28, 1997, the Funds paid administration and co-administration fees to Stephens
as follows:
<TABLE>
<S> <C> <C> <C>
FYE FYE FYE
2/29/95 2/29/96 2/28/97
Fund Fees Paid Fees Paid Fees Paid
- ---------- ------------------ -------------------- ------------------
LifePath $ 39,834 $ 84,548 $ 92,243
2000 Fund
LifePath $ 28,945 $ 72,832 $ 81,180
2010 Fund
LifePath $ 46,153 $120,505 $135,162
2020 Fund
LifePath $ 28,565 $ 79,564 $ 89,938
2030 Fund
LifePath $ 34,460 $118,468 $164,384
2040 Fund
</TABLE>
For the period beginning February 1, 1997 and ended February 28, 1997, the
Funds paid administration fees to Well Fargo Bank and for the fiscal year-ended
February 28, 1998, the Funds paid administration fees to Wells Fargo Bank and
Stephens as follows:
26
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year
Ended 2/28/98
2/1/97-2/28/97 Fees Paid
-------------------------
Fund Fees Paid Wells Fargo Stephens
- ------------------- -------------------------- -------------------------
<S> <C> <C> <C>
LifePath 2000 Fund $39,834
LifePath 2010 Fund $28,945
LifePath 2020 Fund $46,153
LifePath 2030 Fund $28,565
LifePath 2040 Fund $34,460
</TABLE>
Under the Co-Administration Agreement, 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
advisory fees, 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 Prospectus Section entitled "Operation and Management of
the Funds -- Distributor."
As indicated in the Prospectus, Class A, Class B and Class C 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").
Under the Plans and pursuant to a Distribution Agreement 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 and Class C shares of each Fund offering such 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
Conduct Rules. 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 Plan 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
27
<PAGE>
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.
Each Plan 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 28, 1998, the Class A and Class B shares of
the Funds paid to Stephens as compensation for distribution related services the
amounts shown below. All of the compensation to underwriters was retained by
Wells Fargo Securities Inc.
<TABLE>
<CAPTION>
Printing &
Mailing Marketing Compensation to
Fund Total Prospectuses Brochures Underwriters
- ------------------------ ----------------- ----------------- -------------- ----------------------
<S> <C> <C> <C> <C>
LifePath 2000 Fund N/A N/A
Class A $ $
Class B $ $
LifePath 2010 Fund N/A N/A
Class A $ $
Class B $ $
LifePath 2020 Fund N/A N/A
Class A $ $
Class B $ $
LifePath 2030 Fund N/A N/A
Class A $ $
Class B $ $
LifePath 2040 Fund N/A N/A
Class A $ $
Class B $ $
</TABLE>
SHAREHOLDER SERVICES AGREEMENT. Wells Fargo Bank acts as the shareholder
------------------------------
servicing agent ("Agent") for Class A, Class B and Class C shares of the Funds
pursuant to a Shareholder Servicing Agreement and the related Shareholder
Servicing 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, shareholder servicing agents are entitled to
receive 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 28, 1998, Class A and Class B shares of the
Funds paid shareholder servicing fees to Wells Fargo Bank as follows:
28
<PAGE>
<TABLE>
<CAPTION>
Fees Paid Fees Paid
Fund Class A Class B
- -------- -------------- --------------
<S> <C> <C>
LifePath 2000 Fund $ $
LifePath 2010 Fund $ $
LifePath 2020 Fund $ $
LifePath 2030 Fund $ $
LifePath 2030 Fund $ $
</TABLE>
SELLING GROUP AGREEMENT. Wells Fargo Securities Inc., ("WFSI") 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 Class A, Class B and Class C shares of the
Funds pursuant to a Selling Group Agreement with Stephens authorized pursuant to
the Shareholder Servicing Plans. As a Selling Agent, WFSI has an indirect
financial interest in the operation of the Plans. The Board of Trustees believes
that it is reasonably likely that the Plans will benefit the Funds and their
shareholders because the Plans authorize the relationship with WFSI, and WFSI
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. IBT currently acts as custodian to each Fund and Master Portfolio.
---------
The principal business address of IBT is 200 Clarendon Street, Boston, MA 02116.
IBT is not entitled to receive a fee for providing custodial services so long as
it is entitled to receive fees from Wells Fargo Bank for providing sub-
administration services to the Funds. 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. 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.
TRANSFER AND DIVIDEND DISBURSING AGENT. Wells Fargo Bank acts as the Trust's
--------------------------------------
transfer and dividend disbursing agent and performs such services at 525 Market
Street, San Francisco, California 94163. 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.
29
<PAGE>
For the fiscal year-ended February 28, 1998, the Trust paid dividend
disbursing agency fees to Wells Fargo Bank as follows:
<TABLE>
<CAPTION>
FUND Fees Paid
- ----------------------- --------------------------
<S> <C>
LifePath 2000 Fund $
LifePath 2010 Fund $
LifePath 2020 Fund $
LifePath 2030 Fund $
LifePath 2040 Fund $
</TABLE>
PERFORMANCE CALCULATIONS
The Funds may advertise certain yield and total return information.
Quotations of yield and total return reflect only the performance of a
hypothetical investment in a Fund or class of shares during the particular time
period shown. Yield and total return vary based on changes in the market
conditions and the level of a Fund's expenses, and no reported performance
figure should be considered an indication of performance which may be expected
in the future.
In connection with communicating its performance to current or prospective
shareholders, these figures may also be compared to the performance of other
mutual funds tracked by mutual fund rating services or to unmanaged indices
which may assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs.
Performance information for a Fund or Class of shares in a Fund may be useful
in reviewing the performance of such Fund or Class of shares and for providing a
basis for comparison with investment alternatives. The yield of a Fund and the
yield of a Class of shares in a Fund, however, may not be comparable to the
yields from investment alternatives because of differences in the foregoing
variables and differences in the methods used to value portfolio securities,
compute expenses and calculate yield.
Performance information may be advertised for non-standardized periods,
including year-to-date and other periods less than a year for the Funds.
AVERAGE ANNUAL TOTAL RETURN: The Funds may advertise certain total return
---------------------------
information. As and to the extent required by the SEC, an average annual
compound rate of return ("T") is computed by using the redeemable value at the
end of a specified period ("ERV") of a hypothetical initial investment ("P")
over a period of years ("n") according to the following formula: P(1+T)n=ERV.
30
<PAGE>
Average Annual Total Return for the Applicable Period Ended February 28,
------------------------------------------------------------------------
1998/1/
- ----
<TABLE>
<CAPTION>
Five Three One
Inception/2/ Year Year Year
-------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
LifePath 2000
Class A 11.76% 12.35% 13.42% 18.79%
Class B* 11.82% 12.54% 13.96% 19.57%
LifePath 2010
Class A 16.15% N/A 20.24% 22.31%
Class B* 16.37% N/A 21.05% 23.26%
LifePath 2020
Class A 15.82% 20.31% 22.28% 36.62%
Class B* 15.91% 20.63% 23.06% 38.40%
LifePath 2030
Class A 15.57% 15.85% 21.29% 23.57%
Class B* 15.74% 16.22% 22.13% 24.41%
LifePath 2040
Class A 38.80% N/A N/A 18.74%
Class B* 39.99% N/A N/A 19.53%
Class C** 40.53% N/A N/A 23.53%
</TABLE>
- ---------------
/1/ Return calculations reflect the inclusion of front-end sales charges for
Class A shares and the maximum applicable contingent deferred sales charge
for Class B and Class C shares.
/2/ For purposes of showing performance information, the inception date of each
Fund is as follows: LifePath 2000 ___________ __, 19__; LifePath 2010
___________ __, 19__; LifePath 2020 ___________ __, 19__; LifePath 2030
___________ __, 19__; LifePath 2040 ___________ __, 19__. The actual
inception date of each Class may differ from the inception date of the
corresponding Fund.
/3/ Performance shown is for the applicable period ended June 30, 1997.
* Class B shares commenced operations on March 3, 1998.
CUMULATIVE TOTAL RETURN: In addition to the above performance information,
-----------------------
each Fund may also advertise the cumulative total return of the Fund.
Cumulative total return is based on the overall percentage change in value of a
hypothetical investment in the Fund, assuming all
31
<PAGE>
Fund dividends and capital gain distributions are reinvested, without reflecting
the effect of any sales charge that would be paid by an investor, and is not
annualized.
Cumulative Total Return for the Applicable Period Ended September 30, 1997/1/
--------------------------------------------------------------------------
<TABLE>
<CAPTION>
Five Three
Inception/2/ Year Year
-------------- -------------- ------------
<S> <C> <C> <C>
LifePath 2000
Class A 123.89% 78.88% 45.89%
Class B 124.85% 80.50% 48.01%
LifePath 2010
Class A 107.48% N/A 73.85%
Class B 110.74% N/A 77.36%
LifePath 2020
Class A 190.01% 152.03% 82.85%
Class B 191.59% 155.48% 86.36%
LifePath 2030
Class A 182.18% 108.71% 78.43%
Class B 185.10% 112.02% 82.18%
LifePath 2040
Class A 160.21% N/A N/A
Class B 166.77% N/A N/A
Class C 169.77% N/A 23.53%
</TABLE>
- ---------------
/1/ Return calculations reflect the inclusion of front-end sales charges for
Class A shares and the maximum applicable contingent deferred sales charge
for Class B and Class C shares.
/2/ For purposes of showing performance information, the inception date of each
Fund is as follows: LifePath 2000 ___________ __, 19__; LifePath 2010
___________ __, 19__; LifePath 2020 ___________ __, 19__; LifePath 2030
___________ __, 19__; LifePath 2040 ___________ __, 19__. The actual
inception date of each Class may differ from the inception date of the
corresponding Fund.
/3/ Performance shown is for the applicable period ended June 30, 1997.
From time to time and only to the extent the comparison is appropriate for a
Fund or a Class of shares, the Company may quote the performance or price-
earning ratio of a Fund or Class in advertising and other types of literature as
compared to the performance of the S&P Index, the
32
<PAGE>
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 World Gold Council),
Bank Averages (which are 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), other managed or
unmanaged indices or performance data of bonds, municipal securities, 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
performance of the Funds or a Class also may be compared to that 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 Funds'
performance will be calculated by relating net asset value per share 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. The Funds' comparative performance will be based on a comparison of
yields, as described above, or total return, as reported by Lipper, Survey
Publications, Donoghue or Morningstar, Inc.
Any such comparisons may be useful to investors who wish to compare past
performance of the Funds or a Class with that of competitors. Of course, past
performance cannot be a guarantee of future results. The Company 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.
The Company also may use the following information in advertisements and other
types of literature, only to the extent the information is appropriate for the
Fund: (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 a Fund or the general economic, business,
investment, or financial environment in which a Fund operates; (iii) the effect
of tax-deferred compounding on the investment returns of a Fund, 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 investment
in a Fund (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 a Fund's historical performance or current or
potential value with respect to the particular industry or sector.
33
<PAGE>
In addition, the Company 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 Company
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 Company also may discuss in advertising and other types of literature that
a Fund has been assigned a rating by an NRSRO, such as Standard & Poor's
Corporation. Such rating would assess the creditworthiness of the investments
held by the Fund. The assigned rating would not be a recommendation to
purchase, sell or hold the Fund's shares since the rating would not comment on
the market price of the Fund's shares or the suitability of the 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 the Fund or its investments. The Company may
compare the Fund's performance with other investments which are assigned ratings
by NRSROs. Any such comparisons may be useful to investors who wish to compare
the Fund's 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 Company also may disclose, in advertising and other types of literature,
information and statements that Wells Capital Management (formerly "Wells Fargo
Investment Management"), a division of Wells Fargo Bank, is listed in the top
100 by Institutional Investor magazine in its July 1997 survey "America's Top
300 Money Managers." This survey ranks money managers in several asset
categories. The Company may also disclose in advertising and other types of
sales literature the assets and categories of assets under management by the
Company's investment adviser. The Company 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 and the total amount of
assets and mutual fund assets managed by Wells Fargo Bank. As of December 31,
1997, Wells Fargo Bank and its affiliates provided investment Advisory services
for approximately $62 billion of assets of individual, trusts, estates and
institutions and $23 billion of mutual fund assets.
The Company also may discuss in advertising and other types of literature the
features, terms and conditions of Wells Fargo Bank accounts through which
investments in the Funds may be made via a "sweep" arrangement, including,
without limitation, the Managed Sweep Account, Money Market Checking Account,
California Tax-Free Money Market Checking Account,
34
<PAGE>
Money Market Access Account and California Tax-Free Money Market Access Account
(collectively, the "Sweep Accounts"). Such advertisements and other literature
may include, without limitation, discussions of such terms and conditions as the
minimum deposit required to open a Sweep Account, a description of the yield
earned on shares of the Funds through a Sweep Account, a description of any
monthly or other service charge on a Sweep Account and any minimum required
balance to waive such service charges, any overdraft protection plan offered in
connection with a Sweep Account, a description of any ATM or check privileges
offered in connection with a Sweep Account and any other terms, conditions,
features or plans offered in connection with a Sweep Account. Such advertising
or other literature may also include a discussion of the advantages of
establishing and maintaining a Sweep Account, and may include statements from
customers as to the reasons why such customers have established and maintained a
Sweep Account.
The Company may disclose in advertising and other types of literature that
investors can open and maintain Sweep Accounts over the Internet or through
other electronic channels (collectively, "Electronic Channels"). Such
advertising and other literature may discuss the investment options available to
investors, including the types of accounts and any applicable fees. Such
advertising and other literature may disclose that Wells Fargo Bank is the first
major bank to offer an on-line application for a mutual fund account that can be
filled out completely through Electronic Channels. Advertising and other
literature may disclose that Wells Fargo Bank may maintain Web sites, pages or
other information sites accessible through Electronic Channels (an "Information
Site") and may describe the contents and features of the Information Site and
instruct investors on how to access the Information Site and open a Sweep
Account. Advertising and other literature may also disclose the procedures
employed by Wells Fargo Bank to secure information provided by investors,
including disclosure and discussion of the tools and services for accessing
Electronic Channels. Such advertising or other literature may include
discussions of the advantages of establishing and maintaining a Sweep Account
through Electronic Channels and testimonials from Wells Fargo Bank customers or
employees and may also include descriptions of locations where product
demonstrations may occur. The Company may also disclose the ranking of Wells
Fargo Bank as one of the largest money managers in the United States.
DETERMINATION OF NET ASSET VALUE
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
35
<PAGE>
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.
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 a 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.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares may be purchased on any day the Fund is open for business. The Fund is
open for business each day the NYSE is open for trading (a "Business Day").
Currently, the NYSE is closed
36
<PAGE>
on New Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day
(each a "Holiday"). When any Holiday falls on a weekend, the NYSE typically is
closed on the weekday immediately before or after such Holiday.
Payment for shares may, in the discretion of the adviser, be made in the form
of securities that are permissible investments for the Fund as described in the
Prospectus. For further information about this form of payment please contact
Stephens. In connection with an in-kind securities payment, the Fund will
require, among other things, that the securities be valued on the day of
purchase in accordance with the pricing methods used by the Fund and that the
Fund receives satisfactory assurances that (i) it will have good and marketable
title to the securities received by it; (ii) that the securities are in proper
form for transfer to the Fund; and (iii) adequate information will be provided
concerning the basis and other matters relating to the securities.
Under the 1940 Act, the Fund may suspend the right of redemption or postpone
the date of payment upon redemption for any period during which the NYSE is
closed (other than customary weekend and holiday closings, or during which
trading is restricted, or during which as determined by the SEC by rule or
regulation) an emergency exists as a result of which disposal or valuation of
portfolio securities is not reasonably practicable, or for such periods as the
SEC may permit.
The Company may suspend redemption rights or postpone redemption payments for
such periods as are permitted under the 1940 Act. The Company may also redeem
shares involuntarily or make payment for redemption in securities or other
property if it appears appropriate to do so in light of the Company's
responsibilities under the 1940 Act.
In addition, the Company may redeem shares involuntarily to reimburse the Fund
for any losses sustained by reason of the failure of a shareholders to make full
payment for shares purchased or to collect any charge relating to a transaction
effected for the benefit of a shareholder which is applicable to shares of the
Fund as provided from time to time in the Prospectus.
FEDERAL INCOME TAXES
The following information supplements and should be read in conjunction with
the Prospectus section entitled "Taxes." The Prospectus describes generally the
tax treatment of distributions by the Funds. This section of the SAI includes
additional information concerning income taxes.
General. The Company intends to qualify each Fund as a regulated investment
-------
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), as long as such qualification is in the best interest of the Fund's
shareholders. Each Fund will be treated as a separate entity for tax purposes
and thus the provisions of the Code applicable to regulated investment companies
will generally be applied to each Fund, rather than to the Company as a whole.
In addition, net capital gain, net investment income, and operating expenses
will be determined separately for each Fund. As a regulated investment company,
each Fund will not be taxed on its net investment income and capital gains
distributed to its shareholders.
37
<PAGE>
Qualification as a regulated investment company under the Code requires, among
other things, that (a) each Fund derive at least 90% of its annual gross income
from dividends, interest, certain payments with respect to securities loans,
gains from the sale or other disposition of stock or securities or foreign
currencies (to the extent such currency gains are directly related to the
regulated investment company's principal business of investing in stock or
securities) and other income (including but not limited to gains from options,
futures or forward contracts) derived with respect to its business of investing
in such stock, securities or currencies; and (b) the Fund diversify its holdings
so that, at the end of each quarter of the taxable year, (i) at least 50% of the
market value of the 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 the 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
obligations and the securities of other regulated investment companies), or in
two or more issuers which the Fund controls and which are determined to be
engaged in the same or similar trades or businesses.
The Funds must also distribute or be deemed to distribute to their
shareholders at least 90% of their net investment income earned in each taxable
year. In general, these distributions must actually or be deemed to be made in
the taxable year. However, in certain circumstances, such distributions may be
made in the 12 months following the taxable year. The Funds intend to pay out
substantially all of their net investment income and net realized capital gains
(if any) for each year.
In addition, a regulated investment company must, in general, derive less than
30% of its gross income from the sale or other disposition of securities or
options thereon held for less than three months. However, this restriction has
been repealed with respect to a regulated investment company's taxable years
beginning after August 5, 1997.
Excise Tax. A 4% nondeductible excise tax will be imposed on each Fund (other
----------
than to the extent of its tax-exempt interest income) to the extent it does not
meet certain minimum distribution requirements by the end of each calendar year.
Each Fund intends to actually or be deemed to distribute substantially all of
its net investment income and net capital gains by the end of each calendar year
and, thus, expects not to be subject to the excise tax.
Taxation of Fund Investments. Except as provided herein, gains and losses on
----------------------------
the sale of portfolio securities by a Fund will generally be capital gains and
losses. Such gains and losses will ordinarily be long-term capital gains and
losses if the securities have been held by the Fund for more than one year at
the time of disposition of the securities.
Gains recognized on the disposition of a debt obligation (including tax-exempt
obligations purchased after April 30, 1993) purchased by the Fund at a market
discount (generally at a price less than its principal amount) will be treated
as ordinary income to the extent of the portion of market discount which
accrued, but was not previously recognized pursuant to an available election,
during the term the Fund held the debt obligation.
38
<PAGE>
If an option granted by a Fund lapses or is terminated through a closing
transaction, such as a repurchase by the Fund of the option from its holder, the
Fund 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 Fund in the
closing transaction. Some realized capital losses may be deferred if they
result from a position which is part of a "straddle," discussed below. If
securities are sold by a Fund pursuant to the exercise of a call option written
by it, the Fund will add the premium received to the sale price of the
securities delivered in determining the amount of gain or loss on the sale.
Under Section 1256 of the Code, a Fund will be required to "mark to market"
its positions in "Section 1256 contracts," which generally include regulated
futures contracts and listed options. In this regard, Section 1256 contracts
will be deemed to have been sold at market value. Sixty percent (60%) of any
net gain or loss realized on all dispositions of Section 1256 contracts,
including deemed dispositions under the mark-to-market regime, will generally be
treated as long-term capital gain or loss, and the remaining forty percent (40%)
will be treated as short-term capital gain or loss. Transactions that qualify
as designated hedges are excepted from the mark-to-market and 60%/40% rules.
Under Section 988 of the Code, a Fund will generally recognize ordinary income
or loss to the extent gain or loss realized on the disposition of portfolio
securities is attributable to changes in foreign currency exchange rates. In
addition, gain or loss realized on the disposition of a foreign currency forward
contract, futures contract, option or similar financial instrument, or of
foreign currency itself, will generally be treated as ordinary income or loss.
The Funds will attempt to monitor Section 988 transactions, where applicable, to
avoid adverse tax impact.
Offsetting positions held by a regulated investment company involving certain
financial forward, futures or options 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 were treated as entering into "straddles" by
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 of
the Code. The regulated investment company may make one or more elections with
respect to "mixed straddles." Depending upon which election is made, if any,
the results with respect to the regulated investment company 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.
If a Fund enters into a "constructive sale" of any appreciated position in
stock, a partnership interest, or certain debt instruments, the Fund must
recognize gain (but not loss) with respect to
39
<PAGE>
that position. For this purpose, a constructive sale occurs when the Fund enters
into one of the following transactions with respect to the same or substantially
identical property: (i) a short sale; (ii) an offsetting notional principal
contract; or (iii) a futures or forward contract.
If a Fund purchases shares in a "passive foreign investment company" ("PFIC"),
the Fund may be subject to federal income tax and an interest charge imposed by
the IRS upon certain distributions from the PFIC or the Fund's disposition of
its PFIC shares. If the Fund invests in a PFIC, the Fund intends to make an
available election to mark-to-market its interest in PFIC shares. Under the
election, the Fund will be treated as recognizing at the end of each taxable
year the difference, if any, between the fair market value of its interest in
the PFIC shares and its basis in such shares. In some circumstances, the
recognition of loss may be suspended. The Fund will adjust its basis in the
PFIC shares by the amount of income (or loss) recognized. Although such income
(or loss) will be taxable to the Fund as ordinary income (or loss)
notwithstanding any distributions by the PFIC, the Fund will not be subject to
federal income tax or the interest charge with respect to its interest in the
PFIC.
Foreign Taxes. Income and dividends received by a 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. Although in some circumstances a regulated
investment company can elect to "pass through" foreign tax credits to its
shareholders, the Funds do not expect to be eligible to make such an election.
Capital Gain Distributions. Distributions which are designated by a Fund as
--------------------------
capital gain distributions will be taxed to shareholders as long-term capital
gain (to the extent such dividends do exceed the Fund's actual net capital gain
for the taxable year), regardless of how long a shareholder has held Fund
shares. Such distributions will be designated as capital gain distributions in
a written notice mailed by the Fund to its shareholders not later than 60 days
after the close of the Fund's taxable year.
The Taxpayer Relief Act of 1997 (the "1997 Act") created several new
categories of capital gains applicable to noncorporate taxpayers. Under prior
law, noncorporate taxpayers were generally taxed at a maximum rate of 28% on net
capital gain (generally, the excess of net long-term capital gain over net
short-term capital loss). Noncorporate taxpayers are now generally taxed at a
maximum rate of 20% on net capital gain attributable to gains realized on the
sale of property held for greater than 18 months, and a maximum rate of 28% on
net capital gain attributable to gain realized on the sale of property held for
greater than one year and not more than 18 months. The 1997 Act retains the
treatment of short term capital gain or loss (generally, gain or loss
attributable to capital assets held for 1 year or less) and did not affect the
taxation of capital gains in the hands of corporate taxpayers.
Under the 1997 Act, the Treasury is authorized to issue regulations for
application of the reduced capital gains tax rates to pass-through entities,
including regulated investment companies, such as the Funds. The Internal
Revenue Service has published a notice describing temporary Regulations to be
issued pursuant to such authority, permitting the application of the
40
<PAGE>
reduced capital gains tax rates to pass-through entities such as the Funds.
Under the Regulations to be issued, if a regulated investment company designates
a dividend as a capital gain dividend for a taxable year ending on or after May
7, 1997, then such regulated investment company may also designate the dividends
as one of two classes: a 20% rate gain distribution, or a 28% rate gain
distribution. Thus, noncorporate shareholders of the Funds may qualify for the
reduced rate of tax on capital gain dividends paid by the Funds, subject only to
the limitation as to the maximum amounts which may be designated in each class.
Such maximum amount for each class is determined by performing the computation
required by Section 1(h) of the Code as if the Fund were an individual whose
ordinary income is subject to a marginal rate of at least 28%.
Disposition of Fund Shares. A disposition of Fund shares pursuant to
--------------------------
redemption (including a redemption in-kind) or exchanges will ordinarily result
in a taxable capital gain or loss, depending on the amount received for the
shares (or are deemed to receive in the case of an exchange) and the cost of the
shares.
If a shareholder exchanges or otherwise disposes of Fund shares within 90 days
of having acquired such shares and if, as a result of having acquired those
shares, the shareholder subsequently pays a reduced sales charge on a new
purchase of shares of the Fund or a different regulated investment company, the
sales charge previously incurred acquiring the Fund's shares shall not be taken
into account (to the extent such previous sales charges do not exceed the
reduction in sales charges on the new purchase) for the purpose of determining
the amount of gain or loss on the disposition, but will be treated as having
been incurred in the acquisition of such other shares. Also, any loss realized
on a redemption or exchange of shares of the Fund will be disallowed to the
extent that substantially identical shares are acquired within the 61-day period
beginning 30 days before and ending 30 days after the shares are disposed of.
If a shareholder receives a designated capital gain distribution (to be
treated by the shareholder as long-term capital gain) with respect to any 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 long-term capital loss to the extent of the designated capital gain
distribution. The foregoing loss disallowance rule does not apply to losses
realized under a periodic redemption plan.
Federal Income Tax Rates. As of the printing of this SAI, the maximum
------------------------
individual tax rate applicable to ordinary income is 39.6% (marginal tax rates
may be higher for some individuals to reduce or eliminate the benefit of
exemptions and deductions); the maximum individual marginal tax rate applicable
to net capital gain is 28% (however, see "Capital Gain Distributions" above);
and the maximum corporate tax rate applicable to ordinary income and net capital
gain is 35% (marginal tax rates may be higher for some corporations to reduce or
eliminate the benefit of lower marginal income tax rates). Naturally, the
amount of tax payable by an individual or corporation will be affected by a
combination of tax laws covering, for example, deductions, credits, deferrals,
exemptions, sources of income and other matters.
Corporate Shareholders. Corporate shareholders of the Funds may be eligible
----------------------
for the dividends-received deduction on dividends distributed out of a Fund's
net investment income
41
<PAGE>
attributable to dividends received from domestic corporations, which, if
received directly by the corporate shareholder, would qualify for such
deduction. A Fund's distribution attributable to dividends of a domestic
corporation will only qualify for the dividends-received deduction if (i) the
corporate shareholder generally holds the Fund shares upon which the
distribution is made for at least 46 days during the 90 day period beginning 45
days prior to the date upon which the shareholder becomes entitled to the
distribution; and (ii) the Fund generally holds the shares of the domestic
corporation producing the dividend income for at least 46 days during the 90 day
period beginning 45 days prior to the date upon which the Fund becomes entitled
to the dividends.
Backup Withholding. The Company 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 and redemptions in-kind) paid or credited to an individual Fund
shareholder, unless the shareholder certifies that the Taxpayer Identification
Number ("TIN") provided is correct and that the shareholder is not subject to
backup withholding, or the IRS notifies the Company that the shareholder's TIN
is incorrect or that the shareholder is subject to backup withholding. Such tax
withheld does not constitute any additional tax imposed on the shareholder, and
may be claimed as a credit or refund on the shareholder's federal income tax
return. An investor must provide a valid TIN upon opening or reopening an
account. Failure to furnish a valid TIN to the Company could subject the
investor to penalties imposed by the IRS. Foreign shareholders of the Funds
(described below) are generally not subject to backup withholding.
Foreign Shareholders. Under the Code, distributions of net investment income
--------------------
by a Fund to a nonresident alien individual, foreign trust (i.e., trust which a
U.S. court is able to exercise primary supervision over administration of that
trust and one or more U.S. persons have authority to control substantial
decisions of that trust), foreign estate (i.e., the income of which is not
subject to U.S. tax regardless of source), foreign corporation, or foreign
partnership (a "foreign shareholder") will be subject to U.S. income tax
withholding (at a rate of 30% or a lower treaty rate, if applicable).
Withholding will not apply if a dividend distribution paid by a Fund to a
foreign shareholder is "effectively connected" with a U.S. trade or business
(or, if an income tax treaty applies, is attributable to a U.S. permanent
establishment of the foreign shareholder), in which case the reporting and
withholding requirements applicable to U.S. residents will apply. Distributions
of net capital gain are generally not subject to U.S. income tax withholding.
New Regulations. On October 6, 1997, the Treasury Department issued new
---------------
regulations (the "New Regulations") which make certain modifications to the
backup withholding, U.S. income tax withholding and information reporting rules
applicable to foreign shareholders. The New Regulations will generally be
effective for payments made after December 31, 1998, subject to certain
transition rules. Among other things, the New Regulations will permit the Funds
to estimate the portion of their distributions qualifying as capital gain
distributions for purposes of determining the portion of such distributions paid
to foreign shareholders which will be subject to U.S. income tax withholding.
Prospective investors are urged to consult their own tax advisors regarding the
New Regulations.
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<PAGE>
Tax-Deferred Plans. The shares of the Funds are available for a variety of
------------------
tax-deferred retirement and other plans, including Individual Retirement
Accounts ("IRA"), Simplified Employee Pension Plans ("SEP-IRA"), Savings
Incentive Match Plans for Employees ("SIMPLE plans"), Roth IRAs, and Education
IRAs, which permit investors to defer some of their income from taxes. Investors
should contact their selling agents for details concerning retirement plans.
Other Matters. Investors should be aware that the investments to be made by a
-------------
Fund may involve sophisticated tax rules that may result in income or gain
recognition by the Fund without corresponding current cash receipts. Although
the Funds will seek to avoid significant noncash income, such noncash income
could be recognized by a Fund, in which case the Fund may distribute cash
derived from other sources in order to meet the minimum distribution
requirements described above.
The foregoing discussion and the discussions in the Prospectus applicable to
each shareholder address only some of the federal income tax considerations
generally affecting investments in a Fund. Each investor is urged to consult
his or her tax advisor regarding specific questions as to federal, state, local
and foreign taxes.
CAPITAL STOCK
As of May 30, 1997, the shareholders identified below were known by the Trust
to own 5% or more of a LifePath Fund or 5% or more of the Class A, Class B and
Class C shares of a LifePath Fund's outstanding shares in the following
capacity:
<TABLE>
<CAPTION>
Name and Address Percentage Percentage Capacity
Name of Fund of Shareholder of Class of Fund Owned
- ----------------------------- ---------------------------------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
LifePath 2000 Wells Fargo Bank 15.61% 15.61% Record
Class A FBO Retirement Plans Omnibus
P.O. Box 63015
San Francisco, CA 94163
LifePath 2000 Stephens Inc. 100% N/A Record
Class B 111 Center Street
Little Rock, AR 72201
LifePath 2010 Wells Fargo Bank 26.91% 26.75% Record
Class A FBO Retirement Plans Omnibus
P.O. Box 63015
San Francisco, CA 94163
LifePath 2010 Dorothy J. Duncan 5.70% N/A Beneficial
Class B 11707 Judy Ave.
Bakersfield, CA 93312
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
Name and Address Percentage Percentage Capacity
Name of Fund of Shareholder of Class of Fund Owned
- ----------------------------- ---------------------------------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
LifePath 2010 Stephens Inc. 7.15% N/A Record
Class B FBO Account 77379072
P.O. Box 34127
Little Rock, AR 72203
LifePath 2010 Stephens Inc. 11.39% N/A Record
Class B FBO Account 74037384
P.O. Box 34127
Little Rock, AR 72203
LifePath 2010 Stephens Inc. 14.47% N/A Record
Class B FBO Account 76167325
P.O. Box 34127
Little Rock, AR 72203
LifePath 2020 Wells Fargo Bank 32.09% 31.71% Record
Class A FBO Retirement Plans Omnibus
P.O. Box 63015
San Francisco, CA 94163
LifePath 2020 Herman Goldstein 6.97% N/A Beneficial
Class B 150 Font Blvd. Apt. 5-L
San Francisco, CA 94132
LifePath 2020 Fred S. and Barbara J. Holmes 24.66% N/A Beneficial
Class B 801 A Street
Taft, CA 93268
LifePath 2030 Wells Fargo Bank 35.25% 34.72% Record
Class A FBO Retirement Plans Omnibus
P.O. Box 63015
San Francisco, CA 94163
LifePath 2030 Stephens Inc. 6.88% N/A Record
Class B FBO Account 75910760
P.O. Box 34127
Little Rock, AR 72203
LifePath 2030 Stephens Inc. 8.17% N/A Record
Class B FBO Account 75922715
P.O. Box 34127
Little Rock, AR 72203
LifePath 2030 Nirmal S. Gill 8.21% N/A Beneficial
Class B 3404 McKee Road
Bakersfield, CA 93313
LifePath 2030 Fred S. and Barbara J. Holmes 9.17% N/A Beneficial
Class B 801 A Street
Taft, CA 93268
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
Name and Address Percentage Percentage Capacity
Name of Fund of Shareholder of Class of Fund Owned
- ----------------------------- ---------------------------------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
LifePath 2030 Stephens Inc. 38.98% N/A Beneficial
Institutional Class 111 Center Street
Little Rock, AR 72201
LifePath 2030 Charles Schwab & Co, Inc. 61.02% N/A Record
Institutional Class Special Custody A/C FEBO
Customers
101 Montgomery Street
San Francisco, CA 94104
LifePath 2040 Wells Fargo Bank 38.05% 37.52% Record
Class A FBO Retirement Plans Omnibus
P.O. Box 63015
San Francisco, CA 94163
LifePath 2040 Stephens Inc. 6.77% N/A Beneficial
Class B FBO Account 74023594
P.O. Box 34127
Little Rock, AR 72203
LifePath 2040 Stephens Inc. 80.22 N/A Beneficial
Class C 111 Center Street
Little Rock, AR 72201
</TABLE>
For purposes of the 1940 Act, any person who owns directly or through one or
more controlled companies more than 25% of the voting securities of a company is
presumed to "control" such company. Accordingly, to the extent that a
shareholder identified in the foregoing table is identified as the beneficial
holder of more than 25% of a class (or Fund), or is identified as the holder of
record of more than 25% of a class (or Fund) and has voting and/or investment
powers, it may be presumed to control such class (or Fund).
PORTFOLIO TRANSACTIONS
Since each Fund invests all of its assets in a corresponding Master Portfolio
of MIP, set forth below is a description of the Master Portfolios' policies
governing portfolio securities transactions.
Purchases and sales of equity securities on a securities exchange usually are
effected through brokers who charge a negotiated commission for their services.
Commission rates are established pursuant to negotiations with the broker based
on the quality and quantity of execution services provided by the broker in
light of generally prevailing rates. Orders may be directed to any broker
including, to the extent and in the manner permitted by applicable law, Stephens
or Barclays Global Investors Services. In the over-the-counter market,
securities are generally traded on a "net" basis with dealers acting as
principal for their own accounts without a stated commission, although the price
of the security usually includes a profit to the dealer. In underwritten
offerings, securities are
45
<PAGE>
purchased at a fixed price that includes an amount of compensation to the
underwriter, generally referred to as the underwriter's concession or discount.
Purchases of debt securities generally are principal transactions. Debt
securities normally are purchased or sold from or to dealers serving as market
makers for the securities at a net price. Debt securities may also be purchased
in underwritten offerings or directly from an issuer. Generally debt obligations
are traded on a net basis and do not involve brokerage commissions. The cost of
executing transactions in debt securities consists primarily of dealer spreads
and underwriting commissions. Under the 1940 Act, persons affiliated with MIP
are prohibited from dealing with MIP as a principal in the purchase and sale of
portfolio securities unless an exemptive order allowing such transactions is
obtained from the Commission or an exemption is otherwise available. The Master
Portfolios may purchase securities from underwriting syndicates of which
Stephens or BGFA is a member under certain conditions in accordance with the
provisions of a rule adopted under the 1940 Act and in compliance with
procedures adopted by MIP's Board of Trustees.
MIP has no obligation to deal with any dealer or group of dealers in the
execution of transactions in portfolio securities. Subject to policies
established by MIP's Board of Trustees, BGFA, as adviser, is responsible for the
Master Portfolio's investment decisions and the placing of portfolio
transactions. In placing orders, it is MIP's policy to obtain the best overall
terms taking into account the dealer's general execution and operational
facilities, the type of transaction involved and other factors such as the
dealer's risk in positioning the securities involved. BGFA generally seeks
reasonably competitive spreads or commissions.
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 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. As a result, a
Master Portfolio may pay a broker/dealer which furnishes brokerage services a
higher commission than that which might be charged by another broker/dealer for
effecting the same transaction, provided that such commission is determined to
be reasonable in relation to the value of the brokerage services provided by
such broker/dealer. Certain of the broker/dealers with whom the Master
Portfolios may transact business may offer commission rebates to the Master
Portfolios. BGFA considers such rebates in assessing the best overall terms
available for any transaction. MIP's Board of Trustees will periodically review
the commissions paid by the Master Portfolios to consider whether the
commissions paid over representative periods of time appear to be reasonable in
relation to the benefits inuring to the Master Portfolios.
Under Section 28(e) of the Securities Exchange Act of 1934, an adviser shall
not be "deemed to have acted unlawfully or to have breached its fiduciary duty"
solely because under certain circumstances it has caused the account to pay a
higher commission than the lowest available. To obtain the benefit of Section
28(e), an adviser must make a good faith determination that the commissions paid
are "reasonable in relation to the value of the brokerage and research services
provided . . . viewed in terms of either that particular transaction or its
overall responsibilities with respect to the accounts as to which it exercises
investment discretion and that the services provided
46
<PAGE>
by a broker provide an adviser with lawful and appropriate assistance in the
performance of its investment decision-making responsibilities." Accordingly,
the price to a Master Portfolio in any transaction may be less favorable than
that available from another broker/dealer if the difference is reasonably
justified by other aspects of the portfolio execution services offered.
BROKERAGE COMMISSIONS. For the fiscal years-ended February 29, 1996, February
---------------------
28, 1997 and February 28, 1998, 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 1996 1997 1998
- -------------------------------------------- ------------------ --------------- ----------------
<S> <C> <C> <C>
LifePath 2000 Master Portfolio $ 8,311 $ 3,639 $
LifePath 2010 Master Portfolio $12,053 $ 8,837 $
LifePath 2020 Master Portfolio $29,666 $12,383 $
LifePath 2030 Master Portfolio $33,786 $ 6,927 $
LifePath 2040 Master Portfolio $71,608 $28,047 $
</TABLE>
SECURITIES OF REGULAR BROKER DEALERS. As of February 28, 1998, 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:
<TABLE>
<CAPTION>
MASTER PORTFOLIO Broker/Dealer Amount
- ------------------------------------------------- -------------------------------------- ------------------
<S> <C> <C>
LifePath 2000 Salomon Inc. $ 6,619
Goldman Sachs $15,000,000
Morgan Stanley $ 12,499
LifePath 2010 Salomon Inc. $ 52,065
Goldman Sachs $13,000,000
Morgan Stanley $ 81,431
LifePath 2020 Salomon Inc. $ 101,238
Goldman Sachs $27,000,000
Morgan Stanley $ 164,756
LifePath 2030 Salomon Inc. $ 78,209
Goldman Sachs $15,000,000
Morgan Stanley $ 126,124
LifePath 2040 Salomon Inc. $ 144,347
Goldman Sachs $19,000,000
Morgan Stanley $ 227,313
</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
47
<PAGE>
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 matters are the existence of a Distribution Plan
pursuant to Rule 12b-1 under the 1940 Act and Shareholder Servicing Plans 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 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, serves 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 28, 1997 for each LifePath
Fund of the Trust and each corresponding LifePath Master Portfolio of MIP are
hereby incorporated by reference to the Trust's Annual Reports, as filed with
the SEC on April 27, 1998. The portfolio of investments, audited financial
statements and independent auditors' report for the Funds are attached to all
SAIs delivered to shareholders or prospective shareholders.
The Trusts' Annual Report may be obtained by calling 1-800-222-8222.
48
<PAGE>
APPENDIX
The following is a 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>
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>
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>
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
- ------------
AAA
A-4
<PAGE>
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>
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>
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' reports 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 28,
1998, are hereby incorporated by reference to the Trust's Annual Reports, as
filed with the SEC on April 27, 1998.
(b) Exhibits:
Exhibit
Number Description
- ------- -----------
1 - Amended and Restated Agreement and Declaration of Trust,
incorporated by reference to Post-Effective Amendment No. 7
filed on June 30, 1997.
2 - By-Laws, incorporated by reference to Post-Effective Amendment
No. 7 filed on June 30, 1997.
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 - Distribution Agreement with Stephens Inc. incorporated by
reference to Post-Effective Amendment No. 5 to the
Registration Statement filed on June 28, 1996.
7 - Not Applicable.
8 - 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.
C-1
<PAGE>
9(c) - Class B Shares Servicing Plan, incorporated by reference to
Post-Effective Amendment No. 6 to the Registration Statement
filed on November 15, 1996.
Exhibit
Number Description
- ------- -----------
9(d) - Agency Agreement with Wells Fargo Bank, N.A., incorporated by
reference to Post-Effective Amendment No. 7 filed on June 30,
1997.
10 - Opinion and Consent of Counsel, filed herewith.
11 - Not Applicable
12 - Not Applicable
13 - Not Applicable
14 - Not Applicable
15(a) - Retail (Class A) Shares Distribution Plan, incorporated by
reference to Post-Effective Amendment No. 7 filed on June 30,
1997.
15(b) - Class B Shares Distribution Plan, incorporated by reference to
Post-Effective Amendment No. 6 to the Registration Statement
filed on November 15, 1996 .
16 - Not Applicable
17 - See Exhibit 27.
18 - Rule 18f-3 Multi-Class Plan, incorporated by reference to
Post-Effective Amendment No. 6 to the Registration Statement
filed on November 15, 1996.
19 - Powers of Attorney for R. Greg Feltus, Jack S. Euphrat, Thomas
S. Goho, Joseph N. Hankin, W. Rodney Hughes, Robert M. Joses
and J. Tucker Morse, incorporated by reference to Post-
Effective Amendment No. 7 filed on June 30, 1997.
27 - Financial Data Schedules for the Institutional Class and
Retail Class shares of the LifePath 2000 Fund, LifePath 2010
Fund, LifePath 2020 Fund, LifePath 2030 Fund and LifePath 2040
Fund are incorporated by reference to the Form N-SAR, filed
October 29, 1997.
Item 25. Persons Controlled by or Under Common Control with Registrant
-------------------------------------------------------------
As of May 30, 1997, each of the LifePath Funds owned the following
percentages of the corresponding Master Portfolios of MIP and therefore could be
considered a controlling person of the corresponding Master Portfolio for
purposes of the 1940 Act.
Percentage of
Corresponding Outstanding
C-2
<PAGE>
Fund Master Portfolio Beneficial Interests
- ---- ---------------- --------------------
LifePath 2000 Fund LifePath 2000 Master Portfolio 63.59%
LifePath 2010 Fund LifePath 2010 Master Portfolio 48.54%
LifePath 2020 Fund LifePath 2020 Master Portfolio 56.64%
LifePath 2030 Fund LifePath 2030 Master Portfolio 62.89%
LifePath 2040 Fund LifePath 2040 Master Portfolio 72.71%
Item 26. Number of Holders of Securities
-------------------------------
As of April 30, 1998, the number of record shareholders of each Class of
the Funds were as follows:
Number of
Title of Class Record Holders
- -------------- --------------
LifePath 2000 Fund
Class A 2,588
Institutional Class 1
LifePath 2010 Fund
Class A 2,645
Class B 36
Institutional Class 2
LifePath 2020 Fund
Class A 4,296
Class B 86
Institutional Class 2
LifePath 2030 Fund
Class A 3,061
Class B 100
Institutional Class 2
LifePath 2040 Fund
Class A 6,381
Class B 296
Institutional Class 2
Item 27. Indemnification
---------------
Reference is made to Article 8 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:
C-3
<PAGE>
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.
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
BGFA and the business of the former sub-adviser to the Funds, Wells Fargo Nikko
Investment Advisors ("WFNIA") and, in some cases, the service business of BGI.
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 Principal Business(es) During at
Position at BGFA Least the Last Two Fiscal Years
- ---------------- --------------------------------
<S> <C>
Frederick L.A. Grauer Director of BGFA and Co-Chairman and Director of BGI
Director 45 Fremont Street, San Francisco, CA 94105
Patricia Dunn Director of BGFA and Co-Chairman and Director of BGI
Director
Lawrence G. Tint Chairman of the Board of Directors of BGFA and
Chairman and Director Chief Executive Officer of BGI
45 Fremont Street, San Francisco, CA 94105
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Business(es) During at
Position at BGFA Least the Last Two Fiscal Years
- ---------------- --------------------------------
<S> <C>
Geoffrey Fletcher Chief Financial Officer of BGFA and BGI since May 1997
Chief Financial Officer 45 Fremont Street, San Francisco, CA 94105
Managing Director and Principal Accounting Officer at
Bankers Trust Company from 1988 - 1997
505 Market Street, San Francisco, CA 94111
</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.
<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, McGee, Willis & Greene
Director 455 Market Street
San Francisco, CA 94105
Director of Armstrong World Industries, Inc.
5037 Patata Street
South Gate, CA 90280
Director of Eastman Chemical Corporation
12805 Busch Place
Santa Fe Springs, CA 90670
Director of FPL Group, Inc.
700 Universe Blvd.
P.O. Box 14000
North Palm Beach, FL 33408
</TABLE>
C-5
<PAGE>
<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>
Michael R. Bowlin Chairman of the Board of Directors, Chief Executive Officer,
Director Chief Operating Officer and President of
Atlantic Richfield Co. (ARCO)
Highway 150
Santa Paula, CA 93060
Edward Carson Chairman of the Board and Chief Executive Officer of
Director First Interstate Bancorp
633 West Fifth Street
Los Angeles, CA 90071
Director of Aztar Corporation
2390 East Camelback Road
Suite 400
Phoenix, AZ 85016
Director of Castle & Cook, Inc.
10900 Wilshire Blvd.
Los Angeles, CA 90024
Director of Terra Industries, Inc.
1321 Mount Pisgah Road
Walnut Creek, CA 94596
William S. Davilla President (Emeritus) and a Director of
Director The Vons Companies, Inc.
618 Michillinda Ave.
Arcadia, CA 91007
Director of Pacific Gas & Electric Company
788 Taylorville Road
Grass Valley, CA 95949
Rayburn S. Dezember Director of CalMat Co.
Director 3200 San Fernando Road
Los Angeles, CA 90065
Director of Tejon Ranch Company
P.O. Box 1000
Lebec, CA 93243
Director of The Bakersfield Californian
1707 I Street P.O. Box 440
Bakersfield, CA 93302
Trustee of Whittier College
13406 East Philadelphia Ave.
P.O. Box 634
Whittier, CA 90608
</TABLE>
C-6
<PAGE>
<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>
Paul Hazen Chairman of the Board of Directors
Chairman of the Board Wells Fargo & Company
of Directors of 420 Montgomery Street
San Francisco, CA 94105
Director of Phelps Dodge Corporation
2600 North Central Ave.
Phoenix, AZ 85004
Director of Safeway, Inc.
4th and Jackson Streets
Oakland, CA 94660
Robert K. Jaedicke Professor (Emeritus) of Accounting
Director Graduate School of Business at Stanford University
MBA Admissions Office
Stanford, CA 94305
Director of Bailard Biehl & Kaiser
Real Estate Investment Trust, Inc.
2755 Campus Dr.
San Mateo, CA 94403
Director of Boise Cascade Corporation
1111 West Jefferson Street
P.O. Box 50
Boise, ID 83728
Director of California Water Service Company
1720 North First Street
San Jose, CA 95112
Director of Enron Corporation
1400 Smith Street
Houston, TX 77002
Director of GenCorp, Inc.
175 Ghent Road
Fairlawn, OH 44333
Director of Homestake Mining Company
650 California Street
San Francisco, CA 94108
Thomas L. Lee Chairman and Chief Executive Officer of
Director The Newhall Land and Farming Company
10302 Avenue 7 1-2
Firebaugh, CA 93622
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
Name and Position Principal Business(es) and Address(es)
at Wells Fargo Bank During at Least the Last Two Fiscal Years
- ------------------- -----------------------------------------
<S> <C>
Director of Calmat Co.
501 El Charro Road
Pleasanton, CA 94588
Director of First Interstate Bancorp
633 West Fifth Street
Los Angeles, CA 90071
Ellen Newman President of Ellen Newman Associates
Director 323 Geary Street
Suite 507
San Francisco, CA 94102
Chair (Emeritus) of the Board of Trustees
University of California at San Francisco Foundation
250 Executive Park Blvd.
Suite 2000
San Francisco, CA 94143
Director of the California Chamber of Commerce
1201 K Street
12th Floor
Sacremento, CA 95814
Philip J. Quigley Chairman, President and Chief Executive Officer of
Director Pacific Telesis Group
130 Kearney Street Rm. 3700
San Francisco, CA 94108
Carl E. Reichardt Director of Columbia/HCA Healthcare Corporation
Director One Park Plaza
Nashville, TN 37203
Director of Ford Motor Company
The American Road
Dearborn, MI 48121
Director of Newhall Management Corporation
23823 Valencia Blvd.
Valencia, CA 91355
Director of Pacific Gas and Electric Company
77 Beale Street
San Francisco, CA 94105
Retired Chairman of the Board of Directors
and Chief Executive Officer of Wells Fargo & Company
420 Montgomery Street
San Francisco, CA 94105
</TABLE>
C-8
<PAGE>
<TABLE>
<CAPTION>
Name and Position Principal Business(es) and Address(es)
at Wells Fargo Bank During at Least the Last Two Fiscal Years
- ------------------- -----------------------------------------
<S> <C>
Donald B. Rice President and Chief Executive Officer of Teledyne, Inc.
Director 2049 Century Park East
Los Angeles, CA 90067
Retired Secretary of the Air Force
Director of Vulcan Materials Company
One MetroPlex Drive
Birmingham, AL 35209
Richard J. Stegemeier Chairman (Emeritus) of Unocal Corp.
Director 44141 Yucca Avenue
Lancaster, CA 93534
Director of Foundation Health Corporation
166 4th
Fort Irwin, CA 92310
Director of Halliburton Company
3600 Lincoln Plaza
500 North Alcard Street
Dallas, TX 75201
Director of Northrop Grumman Corp.
1840 Century Park East
Los Angeles, CA 90067
Director of Outboard Marine Corporation
100 SeaHorse Drive
Waukegan, IL 60085
Director of Pacific Enterprises
555 West Fifth Street
Suite 2900
Los Angeles, CA 90031
Director of First Interstate Bancorp
633 West Fifth
Los Angeles, CA 90071
Susan G. Swenson President and Chief Executive Officer of Cellular One
Director 651 Gateway Blvd.
San Francisco, CA 94080
David M. Tellep Retired Chairman of the Board and Chief Executive Officer of
Director Martin Lockheed Corp
6801 Rockledge Drive
Bethesda, MD 20817
</TABLE>
C-9
<PAGE>
<TABLE>
<CAPTION>
Name and Position Principal Business(es) and Address(es)
at Wells Fargo Bank During at Least the Last Two Fiscal Years
- ------------------- -----------------------------------------
<S> <C>
Director of Edison International
and Southern California Edison Company
2244 Walnut Grove Ave.
Rosemead, CA 91770
Director of First Interstate
633 West Fifth Street
Los Angeles, CA 90071
Chang-Lin Tien Chancellor of the University of California at Berkeley
Director
Director of Raychem Corporation
300 Constitution Drive
Menlo Park, CA 94025
John A. Young President, Chief Executive Officer and Director
Director of Hewlett-Packard Company
3000 Hanover Street
Palo Alto, CA 9434
Director of Chevron Corporation
225 Bush Street
San Francisco, CA 94104
Director of Lucent Technologies
25 John Glenn Drive
Amherst, NY 14228
Director of Novell, Inc.
11300 West Olympic Blvd.
Los Angeles, CA 90064
Director of Shaman Pharmaceuticals Inc.
213 East Grand Ave. South
San Francisco, CA 94080
William F. Zuendt President of Wells Fargo & Company
President 420 Montgomery Street
San Francisco, CA 94105
Director of 3Com Corporation
5400 Bayfront Plaza, P.O. Box 58145
Santa Clara, CA 95052
Director of the California Chamber of Commerce
</TABLE>
C-10
<PAGE>
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. 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 MasterWorks Funds Inc., Stagecoach Funds, Inc.,
Nations Fund, Inc., Nations Fund Trust, Nations Fund Portfolios, Inc., Nations
LifeGoal Funds, Inc. and Nations Institutional Reserves (formerly, The Capitol
Mutual Funds), and is the exclusive placement agent for 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 Nations Government Income Term Trust 2003, Inc.,
Nations Government Income Term Trust 2004, Inc., and Nations 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 maintains all Records relating to its services as investment
adviser 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 co-administrator, and transfer and dividend disbursing agent at
525 Market Street, San Francisco, California 94105.
C-11
<PAGE>
(d) BGFA, as successor entity to WFNIA, and on behalf of BGI, as successor
entity to Wells Fargo Institutional Trust Company, N.A., maintains all Records
relating to WFNIA's and Wells Fargo Institutional Trust Company, N.A.'s services
as sub-adviser and custodian, respectively, for the period prior to January 1,
1996, at 45 Fremont Street, San Francisco, California 94105.
(e) Stephens maintains all Records relating to its services as co-
administrator and distributor at 111 Center Street, Little Rock, Arkansas 72201.
(f) Investors Bank & Trust Company maintains all Records relating to its
services as sub-administrator and custodian at 89 South Street, P.O. Box 1537,
Boston, MA 02205-1537.
Item 31. Management Services
-------------------
Other than as set forth under "Organization and Management of the Funds" in
the Prospectus constituting Part A of this Registration Statement and
"Management" in the Statement of Additional Information constituting Part B of
this Registration Statement, the Registrant is not a party to any management-
related service contract.
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-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment to its Registration
Statement pursuant to Rule 485(a)(1) under the Securities Act of 1933 and has
duly caused this 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 28th day of April, 1998.
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 on Form N-1A has been signed below by the following
persons in the capacities and on the date indicated:
Signature Title
--------- -----
* 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
------------------------
(Peter G. Gordon)
* Trustee
------------------------
(Joseph N. Hankin)
* Trustee
------------------------
(W. Rodney Hughes)
* Trustee
------------------------
(J. Tucker Morse)
*By: /s/Richard H. Blank, Jr.
------------------------
(Richard H. Blank, Jr.)
As Attorney-in-Fact
April 28, 1998
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment to the Registration
Statement pursuant to Rule 485(a)(1) under the Securities Act of 1933 and has
duly caused this 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 28th day of April, 1998.
MASTER INVESTMENT PORTFOLIO
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 on Form N-1A has been signed below by the following
persons in the capacities and on the date indicated:
Signature Title
--------- -----
* 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)
*By: /s/Richard H. Blank, Jr.
------------------------
(Richard H. Blank, Jr.)
As Attorney-in-Fact
April 28, 1998
<PAGE>
STAGECOACH TRUST
EXHIBIT INDEX
Exhibit Number Description
EX-99.B10 * Opinion and Consent of Counsel - Morrison & Foerster
LLP
<PAGE>
EXHIBIT 99.B10
[MORRISON & FOERSTER LLP LETTERHEAD]
April 30, 1998
Stagecoach Trust
111 Center Street
Little Rock, AR 72201
Re: Shares of Common Stock of Stagecoach Trust
------------------------------------------
Ladies/Gentlemen:
We refer to Post-Effective Amendment No. 8 and Amendment No. 10 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 common stock 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. We have
also verified with the Trust's transfer agent the maximum number of shares
issued by the Trust during the fiscal year ended February 28, 1998.
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 corporate action, and assuming delivery by
sale or in accord with the Trust's dividend reinvestment plan in accordance with
the description set forth in the Funds' current prospectuses, the Shares will be
validly issued, fully paid and nonassessable by the Company.
We consent to the inclusion of this opinion as an exhibit to the
Registration Statement.
<PAGE>
Stagecoach Trust
April 30, 1998
Page Two
In addition, we hereby consent to the use of our name and to the
reference to our firm under the caption "Counsel" in the Statement of Additional
Information and the description of advice rendered by our firm under the heading
"Management of the Funds" in the Prospectuses which are included as part of this
Registration Statement.
Very truly yours,
MORRISON & FOERSTER LLP
