<PAGE>
As filed with the Securities and Exchange Commission
on April 30, 1999
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. 13
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 15
(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):
<TABLE>
<S> <C>
[ ] 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)
</TABLE>
If appropriate, check the following box:
[ ] this post effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
EXPLANATORY NOTE
----------------
This Post-Effective Amendment No. 13 (the "Amendment") to the Registration
Statement of Stagecoach Trust (the "Trust") is being filed to add to Trust's
Registration Statement audited financial statements and certain other financial
information for the year ended February 28, 1999, for the LifePath Opportunity
(formerly LifePath 2000), LifePath 2010, LifePath 2020, LifePath 2030 and
LifePath 2040 Funds, and to make certain other changes to the prospectus and
statement of additional information for these Funds.
<PAGE>
LIFEPATH FUNDS
--------------
Retail Classes
--------------
Cross Reference Sheet
---------------------
Form N-1A Item Number
- ---------------------
Part A Prospectus Captions
- ------ -------------------
1 Front and Back Cover Pages
2 Objectives and Principal Strategies
Important Risks
3 Summary of Expenses
Example of Expenses
4 Objectives and Principal Strategies
Important Risks
See Individual Fund Summaries
General Investment Risks
5 Not applicable
6 Organization and Management of the Funds
7 Your Account
How to Buy Shares
Selling Shares
Dividends and Distributions
Taxes
8 A Choice of Share Classes
Reduced Sales Charges
Distribution Plan
Exchanges
9 See Individual Fund Summaries
Part B Statement of Additional Information Captions
- ------ --------------------------------------------
10 Cover Page and Table of Contents
11 Historical Fund Information
12 Investment Restrictions
Additional Investment Policies
Risk Factors
13 Management
14 Capital Stock
15 Management
16 Portfolio Transactions
17 Capital Stock
18 Determination of Net Asset Value
Additional Purchase and Redemption Information
19 Federal Income Taxes
20 Management
21 Performance Calculations
22 Financial Information
Part C Other Information
- ------ -----------------
23-30 Information required to be included in Part C is set forth under the
appropriate Item, numbered, in Part C of this Document.
<PAGE>
JUNE 30, 1999
FRONT COVER
STAGECOACH
LIFEPATH FUNDS
PROSPECTUS
LifePath Opportunity Fund Please read this prospectus and keep it for
future reference. It is designed to provide
you with important information and to help
LifePath 2010 Fund you decide if a fund's goals match your own.
LifePath 2020 Fund THESE SECURITIES HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND
LifePath 2030 Fund EXCHANGE COMMISSION ("SEC"), OR ANY
OTHER REGULATORY AUTHORITY, NOR HAS THE
LifePath 2040 Fund SEC PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
Class A, Class B REPRESENTATION TO THE CONTRARY IS A
and Class C CRIMINAL OFFENSE.
FUND SHARES ARE NOT DEPOSITS OF WELLS FARGO
BANK, N.A. ("WELLS FARGO BANK") OR ANY OF ITS
AFFILIATES. FUND SHARES ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE
FEDERAL DEPOSIT INSURANCE CORPORATION
("FDIC") OR ANY OTHER GOVERNMENTAL AGENCY. AN
INVESTMENT IN A FUND INVOLVES CERTAIN RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
<PAGE>
INSIDE FRONT COVER
TABLE OF CONTENTS
OVERVIEW OBJECTIVES AND PRINCIPAL
STRATEGIES
This section contains SUMMARY OF IMPORTANT RISKS
important summary PERFORMANCE HISTORY
information about the SUMMARY OF EXPENSES
Funds.
THE FUNDS LIFEPATH OPPORTUNITY FUND
LIFEPATH 2010 FUND
This section contains LIFEPATH 2020 FUND
important information LIFEPATH 2030 FUND
about the individual LIFEPATH 2040 FUND
Funds. GENERAL INVESTMENT RISKS
ORGANIZATION AND MANAGEMENT
OF THE FUNDS
YOUR ACCOUNT
Turn to this section for A CHOICE OF SHARE CLASSES
information on how to REDUCED SALES CHARGES
open and maintain EXCHANGES
your account, including YOUR ACCOUNT
how to buy, sell and HOW TO BUY SHARES
exchange Fund shares. SELLING SHARES
ADDITIONAL SERVICES AND
OTHER INFORMATION
- ---------------------------------------------------------------------
GLOSSARY
<PAGE>
STAGECOACH LIFEPATH FUNDS OVERVIEW
FUND OBJECTIVE
- --------------------------------------------------------------------------------
LIFEPATH FUNDS Each Fund is managed for investors planning to retire
or to begin to withdraw substantial portions of their
investment in the Fund's target year.
<PAGE>
PRINCIPAL STRATEGY
- --------------------------------------------------------------------------------
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.
Later-dated Funds invest primarily in stocks to provide capital appreciation
over the long term. Funds approaching their target date replace stock holdings
with fixed-income securities and money market instruments to reduce risk and
stabilize the portfolio for retirement withdrawals.
<PAGE>
SUMMARY OF IMPORTANT RISKS
This section summarizes important risks that are common to all of the Funds
described in this Prospectus, and important risks that relate specifically to
particular Funds. Both are important to your investment choice. Additional
information about these and other risks is included in the individual Fund
Descriptions later in this Prospectus and under General Investment Risks
beginning on page __. An investment in a Fund is not a deposit of Wells Fargo
Bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
EQUITY SECURITIES. The later-dated Funds, such as the LifePath 2030 and LifePath
2040 Funds invest a majority of their assets in equity securities, which are
subject to equity market risk. This is the risk that stock prices will fluctuate
and can decline and reduce the value of a Fund's portfolio. Certain types of
stock and certain individual 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 markets, as measured by the S&P 500 Index and other
commonly used indexes, are trading at or close to record levels. There can be no
guarantee that these levels will continue. Foreign company (made through
American Depositary Receipts and similar instruments), and emerging market
investments are subject to additional risks, including less liquidity and
greater price volatility. A Fund's investment in foreign companies and emerging
markets are also subject to special risks associated with international
investing, including currency, political, regulatory and diplomatic risks.
FIXED-INCOME SECURITIES. The Funds approaching their target dates, such as the
LifePath Opportunity and LifePath 2010 Funds, may invest in debt instruments,
such as notes and bonds, which are subject to credit risk and interest rate
risk. Credit risk is the possibility that an issuer of an instrument 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 risk that interest rates may increase,
which will reduce the resale value of instruments 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 variable rate features, which can reduce interest
rate risk. 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.
<PAGE>
ASSET ALLOCATION MODELS. The Funds use investment models to assess market
conditions and recommend asset mixes appropriate to the risk tolerance of each
Fund. There is no guarantee that the model will make accurate determinations or
that an asset class will perform as expected. Our portfolio turnover (and
therefore, transaction costs) may be higher than other funds with similar
objectives because of portfolio turnover allocation shifts recommended by the
model. This can increase transaction costs and negatively affect performance.
Portfolio turnover can result in higher fees and may trigger capital gains.
<PAGE>
PERFORMANCE HISTORY
The information on the following shows you how each Fund has performed and
illustrates the variability of a Fund's returns over time. Each Fund's average
annual returns for one-, five- and ten-year periods are compared to the
performance of an appropriate broad-based index.
The Fund's shares are sold subject to sales load that are not included in the
performance calculations. If these charges were included, performance shown
would be lower.
Please remember that past performance is no guarantee of future results.
LIFEPATH OPPORTUNITY FUND
- --------------------------------------------------------------------------------
LIFEPATH OPPORTUNITY FUND CLASS A SHARES
CALENDAR YEAR RETURNS
-----------------------------------------------------------------------
[BAR CHART]
-----------------------------------------------------------------------
Best Qtr.: Q2'97 5.62% Worst Qtr.: Q2'98 -1.10%
1. Returns do not reflect sales charges, if they did, returns would be lower.
The LifePath Opportunity Fund's year-to-date performance for the quarter ended
March 31, 1999 was 0.21%
- ---------------------------------------------------------------------------
Average Annual Total Returns (%)
for the period ended 12/31/98
- ---------------------------------------------------------------------------
LifePath Opportunity Fund 1 year Inception
-----------------------------------
Class A (Incept. 3/1/94) 5.17 7.46
-----------------------------------
Class B (Incept. 8/3/98) 4.51 7.65
-----------------------------------
Class C (Incept. 12/1/98) 8.44 7.94
- ---------------------------------------------------------------------------
[Benchmark] [ ] [ ]
- ---------------------------------------------------------------------------
LIFEPATH 2010 FUND
- --------------------------------------------------------------------------------
LIFEPATH 2010 FUND CLASS A SHARES
CALENDAR YEAR RETURNS
-----------------------------------------------------------------------
[BAR CHART]
-----------------------------------------------------------------------
Best Qtr.: Q4'98 9.99% Worst Qtr.: Q3'98 -3.57%
1. Returns do not reflect sales charges, if they did, returns would be lower.
The LifePath 2010 Fund's year-to-date performance for the quarter ended
March 31, 1999 was 1.21%.
- ---------------------------------------------------------------------------
Average Annual Total Returns (%)
for the period ended 12/31/98
- ---------------------------------------------------------------------------
LifePath 2010 Fund 1 year Inception
-----------------------------------
Class A (Incept. 3/1/94) 10.49 11.94
-----------------------------------
Class B (Incept. 3/1/97) 10.03 12.14
-----------------------------------
Class C (Incept. 12/1/98) 14.03 12.4
- ---------------------------------------------------------------------------
[Benchmark] [ ] [ ]
- ---------------------------------------------------------------------------
<PAGE>
LIFEPATH 2020 FUND
- --------------------------------------------------------------------------------
LIFEPATH 2020 FUNDS CLASS A SHARES CALENDAR
YEAR RETURNS
-----------------------------------------------------------------------
[BAR CHART]
-----------------------------------------------------------------------
Best Qtr.: Q4'98 14.48% Worst Qtr.: Q3'98 -6.81%
1. Returns do not reflect sales charges, if they did, returns would be lower.
The LifePath 2020 Fund's year-to-date performance for the quarter ended
March 31, 1999 was 1.95%.
- ---------------------------------------------------------------------------
Average Annual Total Returns (%)
for the period ended 12/31/98
- ---------------------------------------------------------------------------
LifePath 2020 Fund 1 year Inception
-----------------------------------
Class A (Incept. 3/1/94) 14.20 14.93
-----------------------------------
Class B (Incept. 3/1/97) 14.1 15.19
-----------------------------------
Class C (Incept. 12/1/98) 18.04 15.42
- ---------------------------------------------------------------------------
[Benchmark] [ ] [ ]
- ---------------------------------------------------------------------------
LIFEPATH 2030 FUND
- --------------------------------------------------------------------------------
LIFEPATH 2030 FUND CLASS A SHARES CALENDAR
YEAR RETURNS
-----------------------------------------------------------------------
[BAR CHART]
-----------------------------------------------------------------------
Best Qtr.: Q4'98 17.93% Worst Qtr.: Q3'98 -9.23%
1. Returns do not reflect sales charges, if they did, returns would be lower.
The LifePath 2030 Fund's year-to-date performance for the quarter ended
March 31, 1999 was 2.17%.
- ---------------------------------------------------------------------------
Average Annual Total Returns (%)
for the period ended 12/31/98
- ---------------------------------------------------------------------------
LifePath 2030 Fund 1 year Inception
-----------------------------------
Class A (Incept. 3/1/94) 16.86 17.17
-----------------------------------
Class B (Incept. 3/1/97) 16.78 17.42
-----------------------------------
Class C (Incept. 12/1/98) 20.73 17.63
- ---------------------------------------------------------------------------
[Benchmark] [ ] [ ]
- ---------------------------------------------------------------------------
<PAGE>
PERFORMANCE HISTORY (CONT'D)
LIFEPATH 2040 FUND
- --------------------------------------------------------------------------------
LIFEPATH 2040 FUND CLASS A SHARES CALENDAR
YEAR RETURNS
-----------------------------------------------------------------------
[BAR CHART]
-----------------------------------------------------------------------
Best Qtr.: Q4'98 21.54% Worst Qtr.: Q3'98 -11.63%
1. Returns do not reflect sales charges, if they did, returns would be lower.
The LifePath 2040 Fund's year-to-date performance for the quarter ended
March 31, 1999 was 3.23%.
- ---------------------------------------------------------------------------
Average Annual Total Returns (%)
for the period ended 12/31/98
- ---------------------------------------------------------------------------
LifePath 2010 Fund 1 year Inception
-----------------------------------
Class A (Incept. 3/1/94) 19.56 19.34
-----------------------------------
Class B (Incept. 3/1/97) 19.61 19.58
-----------------------------------
Class C (Incept. 12/1/98) 23.60 19.79
- ---------------------------------------------------------------------------
[Benchmark] [ ] [ ]
- ---------------------------------------------------------------------------
<PAGE>
SUMMARY OF EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
These tables describe the fees and expenses that you may pay if you buy and hold
shares of a Fund. These tables do not reflect charges that may be imposed in
connection with an account through which you hold Fund shares. Amounts are
expressed as a % of the initial purchase amount.
- --------------------------------------------------------------------------------
All
Funds All Funds All Funds
---------------------------------------------
Class A Class B Class C
- --------------------------------------------------------------------------------
Minimum sales charge (load)
imposed on purchases (as a
percentage of offering price) 4.50% None None
- --------------------------------------------------------------------------------
Maximum deferred sales charge
(load) (as a percentage of
purchase price) None 5.00% 1.00%
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
LifePath Opportunity Fund LifePath 2010 Fund LifePath 2020 Fund
- --------------------------------------------------------------------------------------------------------------
Class Class Class Class Class Class Class Class Class
A B C A B C A B C
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fee .55% .55% .55%
- --------------------------------------------------------------------------------------------------------------
Distribution (12b-1) Fee .25% .75% .75% .25% .75% .75% .25% .75% .75%
--------------------------------------------------------------------------------
Other Expenses .51% 1.71% 1.36% .50% .54% 6.42% .50% .54% 50.72%
- --------------------------------------------------------------------------------------------------------------
TOTAL ANNUAL 1.31% 3.01% 2.66% 1.30% 1.84% 7.72% 1.30% 1.84% 52.02%
FUND OPERATING
EXPENSES
- --------------------------------------------------------------------------------------------------------------
</TABLE>
1 The actual expenses incurred by the Funds will be lower than the contract
amounts shown above as a result of voluntary fee waivers. The Funds' actual
expenses after waivers are currently as follows: (Investment Advisory
Fee/Distribution Fee/Other Expenses/Total): LifePath Opportunity Fund
(Class A: .55%/.75%/.50%/1.30%) (Class B: .55%/.75%/.50%/1.80%) (Class C:
.55%/.75%/50%/1.80%), LifePath 2010 Fund (Class A: .55%/.25%/.50%/1.30%)
(Class B: .55%/.75%/.50%/1.80%) (Class C: .55%/.75%/.50%/1.80%), LifePath
2020 Fund (Class A: .55%/.25%/.50%/1.30%) (Class B: .55%/.75%/.50%/1.80%)
(Class C: .55%/.75%/.50%/1.80%). Fee waivers are voluntary and may be
discontinued or modified at any time.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
LifePath 2030 Fund LifePath 2040 Fund
- -------------------------------------------------------------------------------------------------------
Class Class Class Class Class Class
A B C A B C
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Management Fee .55% .55%
- -------------------------------------------------------------------------------------------------------
Distribution (12b-1) Fee .25% .75% .75% .25% .75% .75%
----------------------------------------------------------------------------
Other Expenses .50% .54% 71.57% .50% .50% 3.41%
- -------------------------------------------------------------------------------------------------------
TOTAL ANNUAL 1.30% 1.84% 72.87% 1.30% 1.80% 4.71%
FUND OPERATING
EXPENSES
- -------------------------------------------------------------------------------------------------------
</TABLE>
1 The actual expenses incurred by the Funds will be lower than the contract
amounts shown above as a result of voluntary fee waivers. The Funds' actual
expenses after waivers are currently as follows: (Investment Advisory
Fee/Distribution Fee/Other Expenses/Total): LifePath 2030 Fund (Class A:
.55%/.25%/.50%/1.30%) (Class B: .55%/.75%/.50%/1.80%) (Class C:
.55%/.75%/.50%/1.80%), LifePath 2040 Fund (Class A: .55%/.25%/.50%/1.30%)
(Class B: .55%/.75%/.50%/1.80%) (Class C: .55%/.75%/.50%/1.80%), Fee
waivers are voluntary and may be discontinued or modified at any time.
<PAGE>
SUMMARY OF EXPENSES (CONT'D)
EXAMPLE OF EXPENSES
These examples are intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. The examples assume a
fixed rate of return and that Fund operating expenses remain the same. Your
actual costs may be higher or lower than those shown.
YOU WOULD PAY THE FOLLOWING EXPENSES ON A $10,000 INVESTMENT ASSUMING A 5%
ANNUAL RETURN AND THAT YOU REDEEM YOUR SHARES AT THE END OF EACH PERIOD:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
LifePath Opportunity Fund LifePath 2010 Fund LifePath 2020 Fund
- -----------------------------------------------------------------------------------------------------------
Class Class Class Class Class Class Class Class Class
A B C A B C A B C
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 YEAR $ 577 804 $ 369 $ 576 $ 687 $ 862 $ 576 $ 687 $ 4079
- -----------------------------------------------------------------------------------------------------------
3 YEARS $ 847 $ 1230 $ 826 $ 844 $ 879 $ 2223 $ 844 $ 879 $ 7204
- -----------------------------------------------------------------------------------------------------------
5 YEARS $ 1136 $ 1782 $ 1410 $ 1131 $ 1195 $ 3606 $ 1131 $ 1195 $ 8109
- -----------------------------------------------------------------------------------------------------------
10 YEARS $ 1958 $ 2531 $ 2993 $ 1947 $ 1881 $ 6747 $ 1947 $ 1881 $ 8448
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
LifePath 2030 Fund LifePath 2040 Fund
- ----------------------------------------------------------------------------------------------------------
Class Class Class Class Class Class
A B C A B C
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 YEAR $ 576 $ 687 $ 4914 $ 576 $ 683 $ 572
- ----------------------------------------------------------------------------------------------------------
3 YEARS $ 844 $ 879 $ 6858 $ 844 $ 866 $ 1419
- ----------------------------------------------------------------------------------------------------------
5 YEARS $ 1131 $ 1195 $ 7069 $ 1131 $ 1175 $ 2372
- ----------------------------------------------------------------------------------------------------------
10 YEARS $ 1947 $ 1881 $ 7093 $ 1947 $ 1858 $ 4779
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SUMMARY OF EXPENSES (CONT'D)
YOU WOULD PAY THE FOLLOWING EXPENSES ON A $10,000 INVESTMENT ASSUMING A 5%
ANNUAL RETURN AND THAT YOU DO NOT REDEEM YOUR SHARES AT THE END OF THE PERIODS
SHOWN:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
LifePath Opportunity Fund LifePath 2010 Fund LifePath 2020 Fund
- --------------------------------------------------------------------------------------------------------------
Class Class Class Class Class Class Class Class Class
A B C A B C A B C
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 YEAR $ 577 $ 304 $ 269 $ 576 $ 187 $ 762 $ 576 $ 187 $ 3979
- --------------------------------------------------------------------------------------------------------------
3 YEARS $ 847 $ 930 $ 826 $ 844 $ 579 $ 2223 $ 844 $ 579 $ 7204
- --------------------------------------------------------------------------------------------------------------
5 YEARS $ 1136 $ 1582 $ 1410 $ 1131 $ 995 $ 3606 $ 1131 $ 995 $ 8109
- --------------------------------------------------------------------------------------------------------------
10 YEARS $ 1958 $ 2531 $ 2993 $ 1947 $ 1881 $ 6747 $ 1947 $ 1881 $ 8448
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
LifePath 2030 Fund LifePath 2040 Fund
- --------------------------------------------------------------------------------------------------------------
Class Class Class Class Class Class
A B C A B C
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 YEAR $ 576 $ 187 $ 4814 $ 576 $ 183 $ 472
- --------------------------------------------------------------------------------------------------------------
3 YEARS $ 844 $ 579 $ 6858 $ 844 $ 566 $ 1419
- --------------------------------------------------------------------------------------------------------------
5 YEARS $ 1131 $ 995 $ 7069 $ 1131 $ 975 $ 2372
- --------------------------------------------------------------------------------------------------------------
10 YEARS $ 1947 $ 1881 $ 7093 $ 1947 $ 1858 $ 4779
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
KEY INFORMATION
WHAT IS A "MASTER/FEEDER FUND ARRANGEMENT" AND WHY IS IT USED?
The Funds in this prospectus are feeder funds in a master/feeder fund
arrangement. 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 fund (also described as 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 distribution of portfolio assets 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.
<PAGE>
The summary information on the previous pages is designed to provide you with
an overview of the Funds. The sections that follow provide more detailed
information about the investments and management of each Fund. words appearing
in italicized print and highlighted in color are defined in the glossary.
Important information you should look for:
INVESTMENT OBJECTIVE AND INVESTMENT POLICIES
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 this prospectus?
PERMITTED INVESTMENTS
A summary of the Fund's key permitted investments and practices.
IMPORTANT RISK FACTORS
What are key risk factors for the Fund? This will include the factors
described in "General Investment Risks" together with any special risk factors
for the Fund.
FINANCIAL HIGHLIGHTS
Provides important financial information about each class of shares of the Fund.
<PAGE>
LIFEPATH FUNDS
INVESTMENT OBJECTIVE
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. Investors are encouraged to select
a particular LifePath Fund based on their investment time horizon. Specifically:
. LifePath Opportunity Fund is managed for investors who have retired or who
are planning to retire (or begin to withdraw substantial portions of their
investment) approximately in the year 2000. The Fund also may be
appropriate for investors with a shorter time horizon. The Fund does not
terminate in the year 2000, but will continue with the lowest risk profile
of all the LifePath Funds. It is expected that when the LifePath 2010
Fund's target date arrives, the LifePath 2010 Fund will be combined with
the LifePath Opportunity Fund under the same investment strategy. The
LifePath Opportunity Fund will continue to follow an asset allocation
strategy that will invest approximately 20% equity securities, with the
remainder in debt securities and cash.
. 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 Fund 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. The allocation of each Fund
gradually grows more conservative as the year in the Fund's title year
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.
<PAGE>
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 Opportunity 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 Opportunity 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 Opportunity Fund.
The LifePath Opportunity Fund will not terminate when it reaches the year 2000.
Instead, the Fund will employ a "post-target" strategy in which it will seek to
maximize total return consistent with assuming the lowest risk of any LifePath
series. The Fund will continue to follow an asset allocation strategy among
three broad investment classes: equity and debt securities of domestic and
foreign issuers and cash in the form of money market instruments. However,
unlike the remaining LifePath Funds with target dates, during its post-target
strategy the LifePath Opportunity Fund will no longer reduce its investment risk
through time. Instead, the Fund is expected to have a long-term average mix of
approximately 20% equity securities, with the remainder in debt securities and
cash. In the same manner as all LifePath Funds, the LifePath Opportunity Fund
will continue to employ a tactical asset allocation component, which will alter
the investment mix to account for changing expected risks and opportunities.
When other LifePath Funds reach their target date, it is expected that
shareholders will be asked to approve combining such Funds with the LifePath
Opportunity 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.
<PAGE>
LIFEPATH FUNDS (CONT'D)
We use a statistical method known 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;
. 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;
<PAGE>
. 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 Depository 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. During such periods, a Fund may not achieve
its objective. Each Fund is a diversified portfolio.
PORTFOLIO MANAGEMENT
The Funds are managed by a team of advisors who, using the allocation models,
jointly make investment decisions for the Funds.
<PAGE>
LIFEPATH FUNDS (CONT'D)
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.
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.
LIFEPATH FUNDS FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
This table is intended to help you understand the Fund's financial performance
for the past 5 years for since inception, if shorter). KPMG LLP audited this
information which, along with their report and the Fund's financial statements,
is available upon request in the Fund's annual report
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING
- ------------------------------------------------------------------------------------------------------------------------------------
LIFEPATH OPPORTUNITY FUND
CLASS A SHARES -- COMMENCED ON
MARCH 1, 1994
-------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Feb. 28, Feb. 28, Feb. 28, Feb. 29, Feb. 28,
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.83 $ 10.71 $ 10.64 $ 9.92 $ 10.00
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.36 0.43 0.42 0.40 0.34
Net realized and unrealized gain (loss)
on investments 0.32 0.81 0.28 0.86 (0.14)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (LOSS) 0.68 1.24 0.70 1.25 0.20
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
From net investment income (0.37) (0.44) (0.42) (0.41) (0.27)
From net realized capital gain (0.62) (0.68) (0.21) (0.13) (0.01)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.99) (1.12) (0.43) (0.54) (0.28)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.52 $ 10.83 $ 10.71 $ 10.64 $ 9.92
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 6.40% 11.99% 6.74% 12.98% 2.10%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000) $ 56,986 $ 67,609 $ 84,949 $100,070 $ 54,617
Number of shares outstanding,
end of period (000) 5,416 6,272 7,934 9,406 5,503
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio to average net assets (annualized)
Ratio to expenses to average net assets 1.25% 1.20% 1.20% 1.20% 1.20%
Ratio of net investment income
to average net assets 3.27% 1.83% 3.93% 4.00% 4.52%
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate/3/ 66% 39% 100% 84% 17%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets
prior to waived fees and reimbursed expenses 1.31% N/A N/A N/A N/A
Ratio of net investment income to average net
assets prior to waived fees and reimbursed expenses 3.21% N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
LIFEPATH 2010 FUND
CLASS B SHARES -- CLASS C SHARES-- CLASS A SHARES --
COMMENCED ON COMMENCED ON COMMENCED ON
AUGUST 1, 1998 DECEMBER 1, 1998 MARCH 1, 1994
-------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Feb. 28, Feb. 28, Feb. 28, Feb. 28, Feb. 29, Feb. 29,
1999 1998 1999 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.91 $ 11.24 $13.16 $ 12.20 $ 11.42 $ 9.99
- ----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.07 0.04 0.32 0.36 0.34 0.32
Net realized and unrealized gain (loss) 0.94
on investments 0.29 (0.04) 1.82 0.95 1.58
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (LOSS) 0.36 0.00 1.26 2.18 1.29 1.90
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
From net investment income (0.04) (0.01) (0.33) (0.38) (0.34) (0.33)
From net realized capital gain (0.62) (0.51) (0.82) (0.84) (0.17) (0.14)
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.66) (0.62) (1.15) (1.22) (0.51) (0.47)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.61 $ 10.62 $13.27 $ 13.16 $ 12.20 $ 11.42
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 3.35% 0.02% 9.91% 18.45% 11.60% 19.40%
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000) $ 3,161 $ 4,758 $89,543 $89,659 $82,971 $67,178
Number of shares outstanding,
end of period (000) 298 448 6,750 6,815 6,501 5,883
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio to average net assets (annualized)
Ratio of expenses to average net assets 1.70% 1.76% 1.25% 1.20% 1.20% 1.20%
Ratio of net investment income
to average net assets 2.24% 2.27% 2.42% 2.85% 3.16% 3.06%
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate/3/ 66% 66% 38% 46% 73% 39%
- ----------------------------------------------------------------------------------------------------------------------------------
3.01% 2.66% 1.28%
0.93% 1.37% 2.39%
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
LIFEPATH 2020 FUND
CLASS B SHARES -- CLASS A SHARES --
COMMENCED ON COMMENCED ON
DECEMBER 1, 1998 MARCH 1, 1994
--------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Feb. 28, Feb. 28, Feb. 29, Feb. 28,
1995 1999 1996 1997
- --------------------------------------------------------------- --------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 13.10 $ 12.02 $ 13.98
- -------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.34 0.22 0.19 0.04
Net realized and unrealized gain (loss)
on investments (0.02) 0.97 1.88 0.09
- -------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (LOSS) 0.32 1.19 2.07 0.13
- -------------------------------------------------------------------------------------------------------------
Less distributions:
From net investment income (0.28) (0.22) (0.15) (0.00)
From net realized capital gain (0.05) (0.82) (0.84) (0.82)
- -------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.33) (1.04) (0.99) (0.82)
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.99 $13.25 $ 13.10 $ 13.29
- -------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 3.31% 9.30% 17.64% 1.11%
- -------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000) $36,764 $18,158 $ 6,248 $ 675
Number of shares outstanding,
end of period (000) 3,679 1,371 477 51
- -------------------------------------------------------------------------------------------------------------
Ratio to average net assets (annualized)
Ratio to expenses to average net assets 1.20% 1.76% 1.70% 1.76%
Ratio of net investment income
to average net assets 4.40% 1.90% 2.15% 2.04%
- -------------------------------------------------------------------------------------------------------------
Portfolio turnover rate/3/ 24% 38% 46% 38%
- -------------------------------------------------------------------------------------------------------------
1.84% 7.72%
1.82% (3.92%)
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
LIFEPATH OPPORTUNITY FUND
CLASS A SHARES -- COMMENCED ON
MARCH 1, 1994
-------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Feb. 28, Feb. 28, Feb. 28, Feb. 29, Feb. 28,
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.70 $ 12.98 $ 11.98 $ 10.17 $ 10.00
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.24 0.28 0.27 0.27 0.28
Net realized and unrealized gain (loss)
on investments 1.47 2.73 1.43 2.03 0.12
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (LOSS) 1.71 3.01 1.70 2.30 0.40
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
From net investment income (0.25) (0.29) (0.28) (0.28) (0.23)
From net realized capital gain (1.25) (1.00) (0.42) (0.21) 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1.50) (1.29) (0.70) (0.49) (0.23)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 14.91 $ 14.70 $ 12.98 $ 11.98 $ 10.17
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 12.02% 23.97% 14.65% 22.94% 4.12%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000) $165,584 $166,198 $146,226 $122,488 $66,036
Number of shares outstanding,
end of period (000) 11,104 11,304 11,264 10,224 6,494
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio to average net assets (annualized)
Ratio to expenses to average net assets 1.25% 1.20% 1.20% 1.20% 1.20%
Ratio of net investment income
to average net assets 1.61% 2.05% 2.38% 2.45% 3.64%
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate/3/ 36% 41% 61% 49% 28%
- ------------------------------------------------------------------------------------------------------------------------------------
1.26%
1.60%
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES -- CLASS C SHARES --
COMMENCED ON MARCH 3, 1997 COMMENCED ON DECEMBER 1, 1998
-------------------------------------------------------------------------------
Year Ended Year Ended Year Ended
Feb. 28, Feb. 28, Feb. 28,
1999 1997 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.55 $ 12.79 $ 15.82
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.15 0.14 0.01
Net realized and unrealized gain (loss)
on investments 1.48 2.74 0.22
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (LOSS) 1.63 2.88 0.23
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
From net investment income (0.15) (0.12) (0.00)
From net realized capital gain (1.24) (1.00) (1.23)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1.39) (1.12) (1.23)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 14.79 $ 14.55 $ 14.82
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 11.56% 23.05% 1.70%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000) $28,467 $ 12,129 $ 192
Number of shares outstanding,
end of period (000) 1,925 884 13
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio to average net assets (annualized)
Ratio to expenses to average net assets 1.76% 1.70% 1.71%
Ratio of net investment income
to average net assets 1.04% 1.33% 0.76%
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate/3/ 36% 41% 36%
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
LIFEPATH FUNDS FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING
- ------------------------------------------------------------------------------------------------------------------------------------
LIFEPATH OPPORTUNITY FUND
CLASS A SHARES -- CLASS B SHARES -- CLASS A SHARES --
COMMENCED ON COMMENCED ON COMMENCED ON
MARCH 1, 1994 MARCH 3, 1997 MARCH 1, 1994
-------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Feb. 28, Feb. 28, Feb. 28, Feb. 29, Feb. 28,
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.51 $ 13.63 $ 12.34 $ 10.17 $ 10.00
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.18 0.23 0.22 0.21 0.26
Net realized and unrealized gain (loss)
on investments 1.93 3.54 1.83 2.45 0.13
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (LOSS) 2.11 3.77 2.05 2.66 0.39
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
From net investment income (0.19) (0.23) (0.23) (0.22) (0.22)
From net realized capital gain (1.28) (0.86) (0.33) (0.27) 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1.47) (1.09) (0.56) (0.49) (0.22)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 17.15 $ 16.51 $ 13.83 $ 12.34 $ 10.17
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 13.25% 28.01% 17.01% 26.53% 4.03%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000) $134,008 $126,131 $101,078 $83,012 $41,153
Number of shares outstanding,
end of period (000) 7,812 7,642 7,307 6,728 4,045
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio to average net assets (annualized)
Ratio to expenses to average net assets 1.23% 1.20% 1.20% 1.20% 1.20%
Ratio of net investment income
to average net assets 1.07% 1.50% 1.81% 1.92% 3.35%
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate/3/ 19% 27% 42% 39% 40%
- ------------------------------------------------------------------------------------------------------------------------------------
1.26%
1.04%
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
LIFEPATH OPPORTUNITY FUND
CLASS B SHARES -- CLASS B SHARES -- CLASS C SHARES -- CLASS A SHARES --
COMMENCED ON COMMENCED ON COMMENCED ON COMMENCED ON
MARCH 3, 1997 MARCH 3, 1994 DECEMBER 1, 1998 MARCH 1, 1994
-------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Feb. 28, Feb. 28, Feb. 28, Feb. 28,
1995 1999 1999 1999
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.28 $ 13.63 $ 17.89 $ 17.07
- ----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.09 0.10 0.00 0.08
Net realized and unrealized gain (loss)
on investments 1.92 3.50 0.31 2.39
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (LOSS) 2.01 3.60 0.37 2.47
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
From net investment income (0.10) (0.09) (0.00) (0.08)
From net realized capital gain (1.26) (0.86) (1.26) (1.59)
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1.36) (0.95) (1.26) (1.67)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 16.93 $ 16.28 $ 16.94 $ 17.87
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 12.64% 26.93% 1.98% 14.98%
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000) $25,206 $12,469 $91,999 $261,808
Number of shares outstanding,
end of period (000) 1,489 766 5,432 14,649
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio to average net assets (annualized)
Ratio to expenses to average net assets 1.75% 1.70% 1.73% 1.25%
Ratio of net investment income
to average net assets 0.52% 0.76% 0.16% 0.42%
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate/3/ 19% 27% 19% 19%
- ----------------------------------------------------------------------------------------------------------------------------------
1.84% 72.87% 1.26%
0.43% 70.98% 0.41%
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
LIFEPATH 2040 FUND
CLASS A SHARES --
COMMENCED ON MARCH 1, 1994
-----------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Feb. 28, Feb. 28, Feb. 29, Feb. 28, Feb. 28,
1998 1997 1996 1995 1999
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.50 $ 12.84 $ 10.37 $ 10.00 $ 16.76
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income from investment operations:
Net investment income 0.13 0.16 0.15 0.18 (0.01)
Net realized and unrealized gain (loss)
on investments 4.17 2.35 2.82 0.34 2.33
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (LOSS) 4.30 2.51 2.97 0.52 2.32
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
From net investment income (0.14) (0.16) (0.16) (0.15) (0.01)
From net realized capital gain (1.59) (0.69) (0.34) 0.00 (1.55)
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1.73) (0.85) (0.50) (0.15) (1.56)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 17.07 $ 14.50 $12.84 $10.37 $17.52
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 30.66% 20.17% 28.91% 5.26% 14.37%
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000) $248,195 $189,560 $142,738 $56,737 $63,395
Number of shares outstanding,
end of period (000) 14,537 13,073 11,114 5,472 3,678
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio to average net assets (annualized)
Ratio to expenses to average net assets 1.20% 1.20% 1.20% 1.20% 1.75%
Ratio of net investment income
to average net assets 0.82% 1.22% 1.29% 2.35% (0.12%)
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate/3/ 34% 48% 29% 5% 19%
- ----------------------------------------------------------------------------------------------------------------------------------
1.78%
(0.15%)
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
LIFEPATH OPPORTUNITY FUND
CLASS B SHARES -- CLASS C SHARES
COMMENCED ON COMMENCED ON
MARCH 3, 1997 DECEMBER 1, 1998
---------------------------------
Year Ended Year Ended
Feb. 29, Feb. 28,
1998 1999
- -------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.29 $ 18.01
- -------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.03 (0.01)
Net realized and unrealized gain (loss)
on investments 4.06 1.08
- -------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (LOSS) 4.09 1.07
- -------------------------------------------------------------------------------------
Less distributions:
From net investment income (0.03) (0.00)
From net realized capital gain (1.59) (1.55)
- -------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1.62) (1.55)
- -------------------------------------------------------------------------------------
Net asset value, end of period $16.76 $17.53
- -------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 29.47% 6.40%
- -------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000) $30,754 $3,096
Number of shares outstanding,
end of period (000) 1,835 177
- -------------------------------------------------------------------------------------
Ratio to average net assets (annualized)
Ratio to expenses to average net assets 1.70% 1.71%
Ratio of net investment income
to average net assets 0.08% (0.39%)
- -------------------------------------------------------------------------------------
Portfolio turnover rate/3/ 34% 19%
- -------------------------------------------------------------------------------------
4.71%
(3.39%)
- -------------------------------------------------------------------------------------
</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.
This amount may vary depending on, among other things, the mix of traders,
trading practices and commission rate structures.
/4/ Distribution was less than $.01 per share.
<PAGE>
GENERAL INVESTMENT RISKS
Understanding the risks involved in mutual fund investing will help you make an
informed decision that takes into account your risk tolerance and preferences.
You should carefully consider the risks common to investing in all mutual funds,
including the Stagecoach Funds. Certain common risks are identified in the
Summary of Important Risks on page ___. Other risks of mutual fund investing
include 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 provide certain services, 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 price 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 smaller companies, foreign companies (including
investments made through American Depositary Receipts and similar
instruments), and in emerging markets and are subject to additional risks,
including less liquidity and greater price 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
Funds themselves.
. 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.
<PAGE>
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 and the risks associated
with them. 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.
DIPLOMATIC RISK--The risk that an adverse change in the diplomatic relations
between the United States and another country might reduce the value of
liquidity of investments in either country.
EMERGING MARKET RISK--The risk that the emerging market, as defined in the
glossary, may be more sensitive to certain economic changes. For example,
emerging market countries are often dependent on international trade and are
therefore often vulnerable to recessions in other countries. They may have
obsolete financial systems, have volatile currencies and may be more sensitive
than more mature markets to a variety of economic factors. Emerging market
securities may also be less liquid than securities of more developed countries
and could be difficult to sell, particularly during a market downturn.
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.
<PAGE>
GENERAL INVESTMENT RISKS (CONT'D)
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.
LEVERAGE RISK--The risk that a practice may increase a Fund's exposure to market
risk, interest rate risk or other risks by, in effect, increasing assets
available for investment.
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.
YEAR 2000 RISK--The Funds' principal service providers have advised the Funds
that they are working on the necessary changes to their computer systems to
avoid any system failure based on an inability to distinguish the year 2000 from
the year 1900, and that they expect their systems to be adapted in time. There
can, of course, be no assurance of success. In addition, the companies or
entities in which the Funds invest also could be adversely impacted by the Year
2000 issue. The extent of such impact cannot be predicted.
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.
<PAGE>
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.
Remember, each Fund is designed to meet different investment needs and
objectives.
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.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
INVESTMENT PRACTICE RISK
- ------------------------------------------------------------------------------------------------
<S> <C>
FLOATING AND VARIABLE RATE DEBT
Instruments with Interest rates that are adjusted either Interest Rate and .
on a schedule or when an Index or benchmark changes. Credit Risk
- ------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
A transaction in which the seller of a security agrees to buy Credit and
back a security at an agreed upon time and price, usually with Counter-Party Risk .
interest.
- ------------------------------------------------------------------------------------------------
OTHER MUTUAL FUNDS
The temporary Investment in shares of another mutual fund. Market Risk
A pro rata portion of the other fund's expenses in addition .
to the expenses paid by the Funds, will be borne by Fund
shareholders.
- ------------------------------------------------------------------------------------------------
FOREIGN SECURITIES Information, Political
Securities in a dollar-denominated debt of non-U.S. Regulatory, Diplomatic .
companies or foreign governments. Liquidity and
Currency Risk
- ------------------------------------------------------------------------------------------------
OPTIONS
The right or obligation to receive or deliver a security or Credit, Information and
cash payment depending on the security's price or the Liquidity Risk
performance of an index or benchmark.
----------------------------------------------------------------------------------------------
Stock Index Futures .
Options on Stock Index Futures .
Index Swaps .
Interest Rate Futures .
Interest Rate Futures Options .
Interest Rate Swaps .
- ------------------------------------------------------------------------------------------------
LOANS OF PORTFOLIO SECURITIES
The practice of loaning securities to brokers, dealers Credit, Leverage and
and financial institutions to increase return on those Counter-Party Risk .
securities. Loans may be made in accordance with existing
investments policies.
- ------------------------------------------------------------------------------------------------
BORROWING POLICIES
The ability to borrow an equivalent of 20% of assets Counter-Party and
from banks for temporary purposes to meet shareholder Leverage Risk .
redemptions.
- ------------------------------------------------------------------------------------------------
ILLIQUID SECURITIES
A security that cannot be readily sold or cannot be Liquidity Risk
readily sold without negatively affecting its fair price. .
Limited to 15% of assets.
- ------------------------------------------------------------------------------------------------
</TABLE>
<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.
The Board of Trustees of Stagecoach Trust 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.
Except for the advisers, which require shareholder vote to change, if the Board
believes that it is in the best interests of the shareholders it may make a
change in one of these companies.
<PAGE>
BOARD OF DIRECTORS
- ----------------------------------------------------------------------------
Supervises the Funds' activities
- ----------------------------------------------------------------------------
INVESTMENT ADVISOR CUSTODIAN
- ----------------------------------------------------------------------------
Barclays Global Fund Advisors Barclays Global Investors, N.A.
45 Fremont Street, San Francisco, CA 45 Fremont St., San Francisco, CA
Manages the Funds' investment Provides safekeeping for the
activities Funds' assets
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHAREHOLDER
TRANSFER SERVICING
DISTRIBUTOR ADMINISTRATOR AGENT AGENTS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Stephens Inc. Wells Fargo Bank, N.A. Wells Fargo Bank, N.A. 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 Maintains records Provide
and distributes Funds' business of shares and services to
Fund shares. activities supervises the customers
paying of dividends
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL SERVICES FIRMS AND SELLING AGENTS
- --------------------------------------------------------------------------------
Advise current and prospective shareholders on their Fund investments
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHAREHOLDERS
- --------------------------------------------------------------------------------
<PAGE>
ORGANIZATION AND MANAGEMENT OF THE FUNDS (CONT'D)
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 INVESTMENT ADVISOR
BGFA, a wholly owned subsidiary of BGI and an indirect subsidiary of Barclays
Bank PLC, is the advisor for each of the LifePath Master Portfolios. BGFA
invests the Funds' assets according to various asset allocation models. No
particular individuals are responsible for the day-to-day management of the
Funds. BGFA was created from the sale of Wells Fargo Nikko Investment Advisors,
a former affiliate of Wells Fargo Bank, to BGI. As of January 1, 1999, BGFA
managed or provided investment advice for assets aggregating in excess of $27
billion. For providing advisory services to the Master Portfolios, BGFA is
entitled to receive .55% of each Master Portfolio's net assets.
THE ADMINISTRATOR
Wells Fargo Bank provides the Funds with administration services, including
general supervision of each Fund's operation, coordination of the other services
provided to each Fund, compilation of information for reports to the SEC and the
state securities commissions, preparation of proxy statements and shareholder
reports, and general supervision of data compilation in connection with
preparing periodic reports to the Trust's Trustees and officers. Wells Fargo
Bank also furnishes office space and certain facilities to conduct each Fund's
business, and compensates the Trust's Trustees.
SHAREHOLDER SERVICING PLAN
We have a shareholder servicing plan 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 .25% of its average net assets.
<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") payable
upon redemption that diminishes over time, and higher on-going expenses than
Class A shares.
. CLASS C SHARES - with a 1.00% CDSC on redemptions made within one year of
purchase, and higher on-going expenses than Class A shares.
The choice among 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 seven years to avoid the higher on-going expenses
assessed against Class B shares.
Class C shares are available for the Asset Allocation and Index Allocation Funds
only. 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 sales charge
schedules before making your decision. You should also review the "Reduced Sales
Charges" section of the 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. The
money market funds listed in this prospectus do not impose sales charges on the
purchase of Class A shares. 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.
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CLASS A SHARES LISTED IN THIS PROSPECTUS
HAVE THE FOLLOWING SALES CHARGE SCHEDULE:
- --------------------------------------------------------------------------------
FRONT-END SALES FRONT-END SALES DEALER
CHARGE AS % CHARGE AS % ALLOWANCE
AMOUNT OF PUBLIC OF NET AMOUNT AS % OF PUBLIC
OF PURCHASE OFFERING PRICE INVESTED OFFERING
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 4.50% 4.71% 4.00%
- --------------------------------------------------------------------------------
$50,000 to $99,999 4.00% 4.17% 3.50%
- --------------------------------------------------------------------------------
$100,000 to $249,999 3.50% 3.63% 3.00%
- --------------------------------------------------------------------------------
$250,000 to $499,999 2.50% 2.56% 2.25%
- --------------------------------------------------------------------------------
$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 shares 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.
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 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:
<PAGE>
A CHOICE OF SHARE CLASSES (CONT'D)
CLASS B SHARES LISTED IN THIS PROSPECTUS HAVE
THE FOLLOWING SALES CHARGE SCHEDULE:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
REDEMPTION WITHIN 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEARS 7 YEARS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
5.00% 4.00% 3.00% 3.00% 2.00% 1.00% A shares
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The CDSC percentage you pay is based on the lower of the NAV of the shares on
the date of the original purchase, or the NAV of the shares on the date of
redemption.
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. After shares are held for seven years, the Class B
shares are converted to Class A shares to reduce your future on-going expenses.
After July 17, 1999, purchases of Class A shares are subject to the following
sales charge schedule:
<TABLE>
<CAPTION>
CLASS B SHARES LISTED IN THE PROSPECTUS HAVE THE FOLLOWING CHARGE SCHEDULE
- ----------------------------------------------------------------------------------------
Redeption within 1 year 2 years 3 years 4 years 5 years 6 years 7 years
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CDSC 5.00% 4.00% 3.00% 3.00% 2.00% 1.00% 0.00%
- ----------------------------------------------------------------------------------------
</TABLE>
The CDSC percentage you pay is based on the lower of the NAV of the shares on
the date of the original purchase, or the NAV of the shares on the date of
redemption.
We always process partial redemptions so that the latest expensive shares are
redeemed first in order to reduce your sales charges. After shares are held for
six years, the CDSC expires. After shares are held for seven years, the Class B
shares are converted to Class A shares to reduce your future on-going expenses.
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 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, and up to 1.00% annually thereafter.
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.
<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 the 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. After
July 17, 1999, purchases of Norwest Advantage Funds will also be counted
toward your investment commitment.
. RIGHTS OF ACCUMULATION (ROA) allow you to combine the amount you invest
with the total NAV of shares you own in other Stagecoach (or Norwest
Advantage after July 17, 1999) 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 30 days prior to your reinvestment.
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.
<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
. the members of a "qualified group" which consists of a "company" (as
defined in the Investment Company Act of 1940 ("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 or Norwest
Advantage Fund in installments over the next year, by signing a letter of intent
you would pay only 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
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 DIRECTION of Wells Fargo in
order to, for example, complete a merger or close an account whose value
has fallen below the minimum balance.
. We waive Class C share CDSC for certain types of accounts.
<PAGE>
REDUCED SALES CHARGES (CONT'D)
For Class B shares purchased outside of an IRA or other qualified plan after
July 17, 1999, no CDSC is imposed on withdrawals that occur under the following
circumstances:
. Withdrawals are made by participating in the Systematic Withdrawal Plan;
. Withdrawals may not exceed 10% of your fund assets annually based on your
anniversary date in the Systematic Withdrawal Plan; and
. you must participate in the dividend and capital gain reinvestment program.
WAIVER 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, Norwest Bank and their affiliates;
. Stephens 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 of 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
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 supersede the terms and
conditions discussed here.
<PAGE>
REDUCED SALES CHARGES (CONT'D)
DISTRIBUTION PLAN
We have adopted a distribution plan for the Funds. This plan authorizes payment
for distribution-related expenses, and compensation 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:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Class A Class B Class C
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
LifePath Opportunity 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%
- ------------------------------------------------------------------------------------
</TABLE>
MIP RULE 12B-1 PLAN
The Board of Trustees of Master Investment Portfolio ("MIP") has adopted, on
behalf of each Master Portfolio, a "defensive" distribution plan under Section
12(b) of the 1940 Act and Rule 12b-1 thereunder (the "Plan"). The Plan does not
result in any additional expenses being borne by a Master Portfolio or a Fund.
The Plan was intended as a precaution designed to address the possibility that
certain ongoing payments by Barclays to Wells Fargo Bank in connection with the
sale of a former affiliate of Wells Fargo Bank may be characterized as indirect
payments by each Master Portfolio to finance activities primarily intended to
result in the sale of interests in such Master Portfolio. The Plan provides that
if any portion of a Master Portfolio's advisory fees (up to .25% of the average
daily net assets of each Master Portfolio on an annual basis) were deemed to
constitute an indirect payment for activities that are primarily intended to
result in the sale of interests in a Master Portfolio, such payment would be
authorized pursuant to the Plan.
<PAGE>
EXCHANGES
Exchanges between Stagecoach Funds are two transactions: a sale of shares of one
Fund and the purchase of shares 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.
. 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.
. If you exchange between Class A shares, you will have to pay any difference
between a load you have already paid and the load you are subject to in the
new Fund (less the difference between any load already paid under the maximum
3% load schedule and the maximum 4.5% schedule).
. Exchanges between Class B shares, between Class C shares or between either
Class B or Class C shares and a Wells Fargo 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.
. 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 in
your exchange privileges.
. You may make exchanges between like share classes. You may also exchange from
Class A, Class B or Class C shares and non-institutional class shares to a
non-institutional money market fund.
<PAGE>
YOUR ACCOUNT
This section tells you how Fund shares are priced, how to open an account and
how to buy and sell Fund shares once your account is open.
PRICING FUND SHARES:
. 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 NYSE. We
determine the NAV by subtracting the Fund class's 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 process requests to buy or sell shares of the funds each business day as
of the close of regular trading on the New York Stock Exchange ("NYSE"),
which is usually 1:00 p.m. (Pacific time)/3:00 p.m. (Central time). If the
markets close early, the Funds may close early and may value their shares at
earlier times under these circumstances. Any request we receive in proper
form before these times is processed the same day. Requests we receive after
the cutoff times are processed the next business day.
. The funds are open for business on each day the NYSE is open for business.
NYSE holidays include 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. When any holiday falls on a weekend, the
NYSE typically is closed on the weekday immediately before or after such
holiday.
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).
<PAGE>
MINIMUM INVESTMENTS:
. $1,000 per Fund minimum initial investment;/1/ or
. $100 per Fund if you use the Systematic Purchase Program; and
. $100 per Fund for all investments after your first.
/1/ Purchases of Class B shares in amounts of $250,000 or more require the prior
approval of your selling agent.
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 SEC. Check the specific
disclosure statements and applications for the program through which you intend
to invest.
<PAGE>
YOUR ACCOUNT (CONT'D)
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.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
BY MAIL
- -------------------------------------------------------------------------------------------------
IF YOU ARE BUYING SHARES FOR THE FIRST TIME:
- -------------------------------------------------------------------------------------------------
<S> <C>
Complete a Stagecoach Funds application. Be sure to indicate
the Fund name and the share class into which you intend to
invest. Failure to complete an application properly may result
in a delay in processing your request. MAIL TO:
- -----------------------------------------------------------------
Enclose a check for at least $1,000 made out in the full name Stagecoach Funds
and share class of the Fund. For example, "LifePath PO Box 7066
Opportunity Fund, Class B." San Francisco, CA
94120-9201
- -----------------------------------------------------------------
You may start your account with $100 if you elect the Systematic
Purchase plan 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
94120-9201
- -----------------------------------------------------------------
Enclose the payment stub/card from your statement if available.
- -------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
YOUR ACCOUNT (CONT'D)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
BY WIRE
- -------------------------------------------------------------------------------------------------
IF YOU ARE BUYING SHARES FOR THE FIRST TIME:
- -------------------------------------------------------------------------------------------------
<S> <C>
IF YOU DO NOT CURRENTLY HAVE AN ACCOUNT, COMPLETE A STAGECOACH MAIL TO:
FUNDS APPLICATION. YOU MUST WIRE AT LEAST $1,000. BE SURE TO Stagecoach Funds
INDICATE THE FUND NAME AND THE SHARE CLASS INTO WHICH YOU PO Box 7066
INTEND TO INVEST. San Francisco, CA
94120-9201
- -----------------------------------------------------------------
Mail the completed application. FAX TO:
- -----------------------------------------------------------------
You may also fax the completed application (with original to 1-415-546-0280
follow).
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
IF YOU ARE BUYING ADDITIONAL SHARES:
- --------------------------------------------------------------------------------------------------
INSTRUCT YOUR WIRING BANK TO TRANSMIT AT LEAST $100 ACCORDING TO WIRE TO:
THE INSTRUCTIONS GIVEN TO THE RIGHT. BE SURE TO HAVE THE Stagecoach Funds
WIRING BANK INCLUDE YOUR CURRENT ACCOUNT NUMBER AND THE NAME PO Box 7066
YOUR ACCOUNT IS REGISTERED IN. San Francisco, CA
94120-9201
- -----------------------------------------------------------------
Bank Routing Number:
121000248
Wire Purchase Account
Number:
4068-000587
Attention:
Stagecoach Funds (Name
of Fund and Share Class)
Account Name:
(Registration Name
Indicated on Application)
----------------------------
</TABLE>
<PAGE>
YOUR ACCOUNT (CONT'D)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
BY PHONE
- -------------------------------------------------------------------------------------------------
IF YOU ARE BUYING SHARES FOR THE FIRST TIME:
- -------------------------------------------------------------------------------------------------
<S> <C>
You can only make your first purchase of a Fund by phone if you
already have an existing Stagecoach Funds Trust Account.
CALL:
- --------------------------------------------------------------------
Call Investor Services and instruct the representative to either: 1-800-222-8222
. 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: CALL:
. transfer at least $100 from a linked settlement account, or 1-800-222-8222
. exchange at least $100 worth of shares from another
Stagecoach Fund.
- -------------------------------------------------------------------------------------------------
</TABLE>
SELLING SHARES:
The following section explains how you can sell shares held directly through an
account with Stagecoach Funds by mail or telephone. For Fund shares held through
brokerage and other types of accounts, please consult your Selling Agent.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
BY MAIL
- -------------------------------------------------------------------------------------------------
IF YOU ARE SELLING SHARES FOR THE FIRST TIME:
- -------------------------------------------------------------------------------------------------
<S> <C>
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.
- -----------------------------------------------------------------
You may request that redemption proceeds be sent to you by MAIL TO:
check, by ACH transfer into a bank account, or by wire. Please Stagecoach Funds
call Investor Services regarding requirements for linking bank PO Box 7066
accounts or for wiring funds. We reserve the right to charge a San Francisco, CA
fee for wiring funds although it is not currently our practice 94120-9201
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.
- -------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
YOUR ACCOUNT (CONT'D)
<TABLE>
BY PHONE
- -------------------------------------------------------------------------------------------------
<S> <C>
Call Investor Services to request a redemption of at least $100.
Be prepared to provide your account number and Taxpayer
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.
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 CALL:
currently our practice to do so. 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.
- ------------------------------------------------------------------
Telephone requests are not accepted if the address on your
account was changed by phone in the last 15 days.
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
GENERAL NOTES FOR SELLING SHARES
- -------------------------------------------------------------------------------------------------
We determine the NAV of the funds each day as of the close of regular trading on the NYSE, which
is generally 1:00 PM (Pacific time)/3:00 P.M. (Central time).
- -------------------------------------------------------------------------------------------------
Your redemptions are net of any applicable CDSC.
- -------------------------------------------------------------------------------------------------
We will process requests to sell shares at the first NAV calculated after a request in proper
form is received. Requests received before the cutoff times are processed on the same business
day.
- -------------------------------------------------------------------------------------------------
If your 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 supersede the directions in this Prospectus.
- -------------------------------------------------------------------------------------------------
We reserve the right to delay payment of a redemption so that we may be reasonably certain that
investments made by check or Systematic Purchase Plan have been collected. Payments of
redemptions also may be delayed under extraordinary circumstances or as permitted by the SEC in
order to protect remaining shareholders.
- -------------------------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------------------------
</TABLE>
YOUR ACCOUNT
- --------------------------------------------------------------------------------
FOR TRANSACTIONS AFTER JULY 17, 1999
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.
<TABLE>
- --------------------------------------------------------------------------------------------------------------
BY MAIL
- --------------------------------------------------------------------------------------------------------------
IF YOU ARE BUYING SHARES FOR THE FIRST TIME:
- --------------------------------------------------------------------------------------------------------------
<S> <C>
Complete a Stagecoach Fund application. Be sure to indicate the Fund name and the
share class into which you intend to invest. Failure to complete an application
properly may result in a delay in processing your request. MAIL TO:
- ----------------------------------------------------------------------------------
Enclose a check for a least $1,000 made out in the full name and share class
Stagecoach Funds, Inc.
of the Fund. For example "Growth Fund Class ?" PO box 8266
Boston, MA
02266-8266
- ----------------------------------------------------------------------------------
You may start your account with $100 if you elect the systematic Purchase Plan
option on the application.
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
IF YOU ARE BUYING ADDITIONAL SHARES:
- --------------------------------------------------------------------------------------------------------------
MAIL TO:
Make a check payable to the full name and share of your class of your Fund Stagecoach Funds, Inc.
for at least $100. Be sure to write your account number on the check as well. PO Box 8266
Boston, MA
02266--8266
- --------------------------------------------------------------------------------------------------------------
Enclose the payment stub/card from your statement if available.
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
BY WIRE
IF YOU ARE BUYING SHARES FOR THE FIRST TIME:
- --------------------------------------------------------------------------------------------------------------
<S> <C>
If you do not currently have an account, complete a Stagecoach Funds MAIL TO:
application. You must write as least $1,000. Be sure to indicate the Fund Stagecoach Funds, Inc.
name and the share class into which you intend to invest. PO Box 8266
- -----------------------------------------------------------------------------
Boston, MA
Mail the completed application. 02266-8266
You may also fax the completed application (with original to follow). FAX TO:
You must first call BFDS at 1-800-222-8222 to notify them of an 1-(617) 483-5765
incoming wire trade.
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
IF YOU ARE BUYING ADDITIONAL SHARES:
- --------------------------------------------------------------------------------------------------------------
Instruct your wiring bank to transmit at least WIRE TO:
$100 according to the instructions given to Stagecoach Funds, Inc.
the right. Be sure to have the wiring bank c/o Stage Street Bank & Trust
include your current account number and the Boston, MA
name your account is registered in.
-----------------------------------------------
Bank Routing Number
ABA 01 1000028
Wire Purchase Account
Number:
9905-437-1
Attention:
Stagecoach Funds (Name
of Fund and share Class)
Account Name:
(Registration Name
Indicated on Application)
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YOUR ACCOUNT
- --------------------------------------------------------------------------------------------------------------
BY PHONE
<S> <C>
IF YOU ARE BUYING SHARES FOR THE FIRST TIME:
- ------------------------------------------------------------------------
You can only make you first purchase of a Fund by phone if you already
have an existing Stagecoach Funds Account. CALL:
- ------------------------------------------------------------------------
Call investor Services and instruct the representative to either: 1-800-222-8222
. transfer at least $1,000 from a linked settlement account, or
. exchange at least $1,000 worth of shares from an existing Wells
Fargo Fund, Please see "Exchanges" for special rules.
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
IF YOU ARE BUYING ADDITIONAL SHARES:
- ------------------------------------------------------------------------
Call Investor Services and instruct the representative to either: CALL:
. transfer at least $100 from a linked settlement account, or 1-800-222-8222
. exchange at least $100 worth of shares from another Wells Fargo
Fund.
- --------------------------------------------------------------------------------------------------------------
</TABLE>
SELLING SHARES:
The following section explains how you can sell shares held directly through an
account with Stagecoach funds by mail or telephone. For Fund shares held through
brokerage and other types of accounts, please consult your Selling Agent
<TABLE>
<CAPTION>
BY MAIL
IF YOU ARE SELLING SHARES FOR THE FIRST TIME:
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
Write a letter stating your account registration, you 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 to you by check Stagecoach Funds, Inc.
by ACH transfer into a bank account, or by wire. Please call investor PO Box 8266
services regarding requirements for linking bank accounts or for wiring Boston, MA
funds. We reserve the right to charge fee for wiring funds although its 02266-8266
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.
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YOUR ACCOUNT (CONT'D)
- -------------------------------------------------------------------------------------------------
BY PHONE
- -------------------------------------------------------------------------------------------------
<S> <C>
Call Investor Services to request a redemption of at least $100.
Be prepared to provide your account number and Taxpayer
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.
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 its not currently our CALL:
practice to do so. 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.
- ---------------------------------------------------------------------
Telephone requests are not accepted if the address on your
account was changed by phone in the last 15 days.
- ---------------------------------------------------------------------
- --------------------------------------------------------------------------------------
GENERAL NOTES FOR SELLING SHARES
- --------------------------------------------------------------------------------------
We determine the NAV of the funds each day as of the close of regular trading on
the NYSE, which is generally 1:00 PM (Pacific time) /3:00 P.M. (Central time).
- --------------------------------------------------------------------------------------
Your redemptions are not net of any applicable CDSC
- --------------------------------------------------------------------------------------
We will process requests to sell shares at the first NAV calculated after a
request in proper form is received. Requests received before the cutoff times
are processed on the same business day.
- --------------------------------------------------------------------------------------
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 may be special requirements that supersede the directions in this
Prospectus.
- --------------------------------------------------------------------------------------
We reserve the right to delay payment of a redemption so that we may reasonably
certain that investments made by check or Systematic Purchase Plan have been
collected. Payments of redemptions also may be delayed under extraordinary
circumstances or as permitted by the SEC in order to protect remaining
shareholders.
- --------------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
ADDITIONAL SERVICES AND OTHER INFORMATION
AUTOMATIC PROGRAMS:
These programs help you conveniently purchase and/or redeem shares each month.
Call Investor Services 1-800-222-8222 for more information.
. SYSTEMATIC PURCHASE PLAN - With this program, you can regularly purchase
shares of a Wells Fargo Fund with money automatically transferred from a
linked bank account. Simply select the Fund you would like to purchase,
specify an amount of at least $100, and tell us the day of the month you
would like the money invested. If you do not specify a date, we will
transfer the money and invest in shares of the Fund you select on or about
the 25th day of the month.
. SYSTEMATIC EXCHANGE PLAN - With this program, you can regularly exchange
shares of a Wells Fargo Fund you own for shares of another Wells Fargo
Fund. The exchange amount must be at least $100, and the exchange will take
place on or about the 25th of each month. See the "Exchanges" section of
this prospectus for the conditions that apply to your shares. This feature
may not be available for certain types of accounts.
. SYSTEMATIC WITHDRAWAL PLAN - With this program, you can regularly redeem
shares and receive the proceeds by check or by transfer to a linked bank
account. Simply specify an amount of at least $100 and we will sell your
shares equal to that amount on or about the 25th of each month. To
participate in this program, you:
. must have a Fund account value at $10,000 or more;
. must have your distributions reinvested; and
. may not simultaneously participate in the Systematic Purchase Plan.
It generally takes about ten days to establish a plan once we have received your
instructions. It generally takes about five days to change or cancel
participation in a plan. We automatically cancel your program if the linked bank
account your specified is closed.
DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS OPTIONS
The Funds in this Prospectus pay dividends periodically and make capital gains
distributions annually. The equity funds, except the Small Cap Fund, pay any
dividends quarterly. The Small Cap Fund pays any dividends annually. The income
and money market funds pay any dividends monthly.
<PAGE>
We offer the following distribution options:
. 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.
. 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 a 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.
Dividends distributed from the Tax-Free Income Fund and Municipal Money Market
Fund attributable to their net interest income from tax-exempt securities will
not be subject to federal income tax. Dividends distributed from these and the
other Funds attributable to their income from other investments and net short-
term capital gain (generally, the excess of net short-term capital gains over
net long-term capital losses) will be taxable to you as ordinary income.
Corporate shareholders may be able to deduct a portion of their dividends when
determining their taxable income.
We will pass on to you any net capital gain (generally the excess of net long-
term capital gains over net short-term capital losses) earned by a Fund as a
capital gain distribution. In general, these distributions will be taxable to
you as long-term capital gains which may qualify for taxation at preferential
rates in the hands of non-corporate shareholders. Any distribution that is not
from net investment income, short term capital gains, or net capital gain may be
characterized as a return of capital to shareholders.
IMPORTANT INFORMATION FOR SHAREHOLDERS
On March 25, 1999, the Board of Directors of Stagecoach Trust (the "Company")
approved the reorganization of the Company's Funds into new portfolios of Wells
Fargo Funds Trust ("Funds Trust"). The reorganization is part of a larger plan
to consolidate the Wells Fargo Bank-advised fund family with the Norwest
Advantage fund family, following last November's merger of Wells Fargo & Company
and Norwest Corporation. The Company will present the reorganization to Fund
shareholders for their approval at a special shareholders' meeting that is
planned for August 1999.
All the Funds will, if approved by shareholders, be reorganized into new
portfolios of Funds Trust that have investment objectives and strategies that
are substantially identical to the Funds.
The Funds Trust portfolios are not yet available for purchase but corresponding
portfolios within either the Stagecoach fund family or the Norwest Advantage
fund family are currently available. No shareholder action is necessary at this
time. The Company's proxy materials, which are expected to be mailed in June to
all persons who are shareholders on May 6, 1999, will describe the
reorganization in detail, including any effect on expense ratios. If you buy
your shares after that date, you will not be entitled to vote on the
reorganization, but you may request a copy of the proxy materials.
Investors should be aware that for certain share classes of certain Funds,
expense ratios increases of up to 0.14% are contemplated. In other cases,
expense ratios are expected to remain unchanged or decline. For the LifePath
portfolios, the reorganization is expected to be a tax-free transaction. The
reorganization will not trigger any sales charges.
If you have any questions or, after early June, if you would like to request a
copy of the proxy materials, you should call 1-800-222-8222.
<PAGE>
GLOSSARY
We provide the following definitions to assist you in reading this prospectus.
For a more complete understanding of these terms you should consult your
financial adviser.
ACH
Refers to the "Automated Clearing House" system maintained by the Federal
Reserve Bank which allows banks to process checks, transfer funds and perform
other tasks.
AMERICAN DEPOSITARY 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 AND 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.
ASSET-BACKED SECURITIES
Securities consisting of an undivided fractional interest in pools of consumer
loans, such as car loans or credit card debt, or receivables held in trust.
BELOW INVESTMENT-GRADE
Securities rated BBB or lower by S&P or Baa or lower by Moody's Investor
Services, or that may be unrated securities or securities considered to be "high
risk."
BUSINESS DAY
Any day the New York Stock Exchange is open is a business day for the Funds.
CAPITAL APPRECIATION, CAPITAL GROWTH
The increase in the value of a security. See also "total return."
CAPITALIZATION
When referring to the size of a company, capitalization means the total number
of a company's outstanding shares of stock multiplied by the price per share.
This is an accepted method of determining a company's size and is sometimes
referred to as "market capitalization."
CAPITAL STRUCTURE
Refers to how a company has raised money to operate. Can include, for example,
borrowing or selling stock.
<PAGE>
COMMERCIAL PAPER
Debt instruments issued by banks, corporations and other issuers to finance
short-term credit needs. Commercial paper typically is of high credit quality
and offers below market interest rates.
CONVERTIBLE DEBT SECURITIES
Bonds or notes that are exchangeable for equity securities at a set price on a
set date or at the election of the holder.
CURRENT INCOME
Earnings in the form of dividends or interest as opposed to capital growth. See
also "total return."
DEBT SECURITIES
Generally, a promise to pay interest and repay principal by an individual or
group of individuals sold as a security. The owner of the security is entitled
to receive any such payments. Examples include bonds and mortgage- and other
asset-backed securities and can include securities in which the right to receive
interest and principal repayment have been sold separately.
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 of 1940, 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 Funds' total assets.
DOLLAR-DENOMINATED
Securities issued by foreign banks, companies or governments in U.S. dollars.
DOLLAR ROLLS
Similar to a reverse Repurchase Agreement, dollar rolls are simultaneous
agreements to sell a security held in a portfolio and to purchase a similar
security at a future date at an agreed-upon price.
<PAGE>
GLOSSARY (CONT'D)
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.
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.
FHLMC
FHLMC securities are commonly known as "Freddie Mac" and are issued by the
Federal Home Loan Mortgage Corporation.
FNMA
FNMA securities are known as "Fannie Maes" are issued by the Federal National
Mortgage Association, and FHLMC securities as "Freddie Mac" and are issued by
the Federal Home Loan Mortgage Corporation.
GNMA
GNMA securities are commonly known as "Ginnie Maes" and are issued by the
Government National Mortgage Association.
HEDGE
Strategy used to offset investment risk. A perfect hedge is one eliminating the
possibility of future gain or loss.
ILLIQUID SECURITY
A security which cannot be readily sold, or cannot be readily sold without
negatively affecting its fair price.
INITIAL PUBLIC OFFERING
The first time a company's stock is offered for sale to the public.
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.
<PAGE>
LIQUIDITY
The ability to readily sell a security at a fair price.
MONEY MARKET INSTRUMENTS
High-quality short-term instruments meeting the requirements of Rule 2a-7 of the
1940 Act, such as bankers' acceptances, commercial paper, repurchase agreements
and government obligations. In a money market fund, average portfolio maturity
does not exceed 90 days, and all investments have maturities of 397 days or less
at the time of purchase.
MOODY'S
A nationally recognized ratings organization.
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 accrued 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 NYSE is open, typically 1:00 P.M. (Pacific time).
OPTIONS
An option is the right to buy or sell a security based on an agreed upon price
for at a specified time. For example, an option may give the holder of a stock
the right to sell the stock to another party, allowing the seller to profit if
the price has fallen below the agreed price. Options may also be based on the
movement of an index such as the S&P 500.
PRESERVATION OF CAPITAL
The attempt by a fund's manager to reduce drops in the net asset value of fund
shares in order to preserve the initial investment.
PRINCIPAL STABILITY
The degree to which share prices for a fund remain steady. Money market funds
attempt to achieve the highest degree of principal stability by maintaining a
$1.00 per share net asset value. More aggressive funds may not consider
principal stability an objective.
<PAGE>
GLOSSARY (CONT'D)
PUBLIC OFFERING PRICE (POP)
The NAV with the sales load added.
PRICE-TO-EARNINGS RATIO
The ratio between a stock's price and its historical, current or anticipated
earnings. Low ratios typically indicate a high yield. High ratios are
characteristic of growth stocks which generally have low current yields.
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.
RUSSELL 1000 INDEX
An index comprised of 1000 largest firms listed on the Russell 3000 Index. The
Russell 3000 Index is a listing of 3000 corporations by the Frank Russell
Company that is intended to be representative of the U.S. economy. The Russell
1000 is considered a "large cap" index.
RUSSELL 2000 INDEX
An index comprised of the 2000 smallest firms listed on the Russell 3000 Index.
The Russell 3000 Index is a listing of 3000 corporations by the Frank Russell
Company that is intended to be representative of the U.S. economy. The Russell
2000 is considered a "small cap" index.
SELLING AGENT
A person who has an agreement with the Funds' distributors that allows them to
sell a Fund's shares.
SHAREHOLDER SERVICING AGENT
Anyone appointed by the Fund to maintain shareholder accounts and records,
assist and provide information to shareholders or perform similar functions.
SIGNATURE GUARANTEE
A guarantee given by a financial institution that has verified the identity of
the maker of the signature.
S&P, S&P 500 INDEX
Standard and Poors, a nationally recognized ratings organization. S&P's also
publishes various indexes or lists of companies representative of sectors of the
U.S. economy.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
A document that supplements the disclosure made in the Prospectus.
STRIPPED TREASURY SECURITIES
Debt obligations in which the interest payments and the repayment of principal
are separated and sold as securities.
TAXPAYER IDENTIFICATION NUMBER
Usually the social security number for an individual or the Employer
Identification Number for a corporation.
TOTAL RETURN
The total value of capital growth and the value of all distributions, assuming
that distributions were used to purchase additional shares of the Funds.
TURNOVER RATIO
The percentage of the securities held in a Fund's portfolio, other than short-
term securities, that were bought or sold within a year.
UNDERVALUED
Describes a stock that is believed to be worth more than its current price.
U.S. GOVERNMENT OBLIGATIONS
Obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
VALUE STRATEGY
A strategy of investing which tries to identify and buy undervalued stocks under
the assumption that the stock will eventually rise to its "fair market" value.
WARRANTS
The right to buy a stock at a set price for a set time.
WEIGHTED-AVERAGE MATURITY
The average maturity for the debt securities in a portfolio on a dollar-for-
dollar basis.
ZERO COUPON BONDS
Bonds that make no periodic interest payments and which are usually sold at a
discount of their face value. Zero coupon bonds are subject to interest rate
and credit risk.
<PAGE>
BACK COVER
STAGECOACH FUNDS
You may wish to review the following documents:
STATEMENT OF ADDITIONAL INFORMATION
supplements the disclosures 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, including a
discussion of the market conditions and investment strategies that significantly
affected Fund performance, for the most recent reporting period.
These documents are available free of charge:
Call 1-800-222-8222, or
Write to:
Stagecoach Funds
PO Box 7066
San Francisco, CA 94120-7066
Visit the SEC's web site:
http://www.sec.gov, or
Request copies for a fee by writing to:
SEC Public Reference Room, Washington, DC 20549-6009
(call: 1-800-SEC-0330 for details)
=====================================================
NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE
=====================================================
ICA Reg. No. 811-7780 SC LP P (6/99)
<PAGE>
STAGECOACH TRUST
Telephone: 1-800-222-8222
STATEMENT OF ADDITIONAL INFORMATION
Dated June 30, 1999
LIFEPATH OPPORTUNITYTM FUND
LIFEPATH 2010TM FUND
LIFEPATH 2020TM FUND
LIFEPATH 2030TM FUND
LIFEPATH 2040TM FUND
CLASS A, CLASS B AND CLASS C
Stagecoach Trust (the "Company") is an open-end management investment company.
This Statement of Additional Information ("SAI"), contains additional
information about the LIFEPATH OPPORTUNITY, LIFEPATH 2010, LIFEPATH 2020,
LIFEPATH 2030 and LIFEPATH 2040 FUNDS. Each Fund offers Class A, Class B, and
Class C shares.
This SAI is not a prospectus and should be read in conjunction with the Funds'
Prospectus, also dated June 30, 1999. All terms used in this SAI that are
defined in the Prospectus have the meanings assigned in the Prospectus. A copy
of the Prospectus may be obtained without charge by calling 1-800-222-8222 or
writing to Stagecoach, P.O. Box 7066, San Francisco, CA 94120-7066.
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 advisor 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
---------
<S> <C>
Historical Fund Information....................................................... 1
Investment Restrictions........................................................... 2
Additional Permitted Investment Activities........................................ 4
Risk Factors...................................................................... 19
Management........................................................................ 21
Performance Calculations.......................................................... 30
Determination of Net Asset Value.................................................. 35
Additional Purchase and Redemption Information.................................... 37
Portfolio Transactions............................................................ 38
Fund Expenses..................................................................... 40
Federal Income Taxes.............................................................. 40
Capital Stock..................................................................... 46
Other............................................................................. 48
Counsel........................................................................... 49
Independent Auditors.............................................................. 49
Financial Information............................................................. 49
Appendix.......................................................................... A-1
</TABLE>
<PAGE>
HISTORICAL FUND INFORMATION
The Company was organized as an unincorporated business Company under the laws
of the Commonwealth of Massachusetts pursuant to an Agreement and Declaration of
Trust (the "Company Agreement") dated May 14, 1993. The Company is authorized
to issue an unlimited number of shares of beneficial interest. Each LifePath
Fund of the Company offers Class A, Class B and Institutional Class shares. The
Class B shares of the LifePath Opportunity Fund commenced operations on June 30,
1998. The Class B shares of all other LifePath Funds commenced operations on
March 3, 1997. The LifePath 2040 Fund also offers Class C shares as of June 30,
1998. 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.
As of June 24, 1998, the LifePath 2000 Fund changed its name to the LifePath
Opportunity Fund.
Under the terms of a License Agreement between the Company and Wells Fargo
Bank, Wells Fargo Bank has granted the Company a non-exclusive license to use
the name "Stagecoach." If the License Agreement is terminated, the Company, 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 Company. However, the Company
Agreement disclaims shareholder liability for acts or obligations of the Company
and requires that notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Company or a Trustee.
The Company Agreement provides for indemnification from the Company's property
for all losses and expenses of any shareholder held personally liable for the
obligations of the Company. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which
the Company itself is unable to meet its obligations, a possibility which
management believes is remote. Upon payment of any liability incurred by the
Company, the shareholder paying such liability is entitled to reimbursement from
the general assets of the Company. The Trustees intend to conduct the
operations of the Company in such a way so as to avoid, as far as possible,
ultimate liability of the shareholders for liabilities of the Company. As
described under "Management" in this SAI, the Company 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. The LifePath
Opportunity Fund invests its assets in the LifePath 2000 Master Portfolio.
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
1
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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 advisor 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.
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 cannot
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
a Fund's total assets would be invested in the securities of any one issuer or
such Fund would hold more than 10% of the outstanding voting securities of such
issuer, except that up to 25% of such Fund's total assets may be invested
without regard to these limitations, and provided that each Fund may invest all
of its assets in a diversified, open-end management investment company, or a
series thereof, with substantially the same investment objective, policies and
restrictions as the Fund, without regard to the limitations set forth in this
paragraph (1);
(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");
2
<PAGE>
(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 a
Fund's investment program may be deemed to be an underwriting;
(7) invest 25% or more of their 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, although 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 Trustees 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.
Notwithstanding any other investment policy or limitation (whether or not
fundamental), each Fund may invest all of its assets in the securities of a
single open-end management investment company with substantially the same
fundamental investment objective, policies and limitations as the Fund. A
decision to so invest all of its assets may, depending on the circumstances
applicable at the time, require approval of shareholders.
(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
3
<PAGE>
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 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
4
<PAGE>
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 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 Investors Service, Inc. ("Moody's") and "BBB" by Standard &
Poor's Ratings Group ("S&P"), Fitch Investors Service, Inc. ("Fitch") and Duff &
Phelps Credit Rating Co. ("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 an 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
5
<PAGE>
Portfolio to sell the security. If such a policy would cause an 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 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 BGFA determines that at the time of investment
the obligations are of comparable quality to the other obligations in which such
Fund may invest. BGFA, 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
6
<PAGE>
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 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
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.
7
<PAGE>
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 (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
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<PAGE>
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 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
9
<PAGE>
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 BGFA, Stephens Inc. or any of their affiliates.
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 BGFA, 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
BGFA, 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 BGFA, 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
10
<PAGE>
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 Trustees
and that are not affiliated with the investment advisor. The Funds may
participate in pooled repurchase agreement transactions with other funds advised
by BGFA.
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
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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 ("NRSROs")
------------------------------------------------------------------
The ratings of Moody's, S&P, Duff, Fitch and IBCA Inc. represent their
opinions as to the quality of debt securities. It should be 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
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.
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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 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.
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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 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.
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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 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.
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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.
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 BGFA'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
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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 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
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<PAGE>
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 receivables held in Company. 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
--------------------------
Each LifePath Master Portfolio may invest in securities issued by other
investment companies which principally invest in securities of the type in which
the Master Portfolio invests. Under the 1940 Act, a Master Portfolio's
investment in such securities currently is limited to, subject to certain
exceptions, (i) 3% of the total voting stock of any one investment company, (ii)
5% of the Master Portfolio's net assets with respect to any one investment
company and (iii) 10% of the Master Portfolio's net assets in the aggregate.
Investments in the securities of other investment companies generally will
involve duplication of advisory fees and certain other expenses. The Fund may
also purchase shares of exchange listed closed-end 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
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of Trustees 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).
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 BGFA, 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.
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Throughout the first six months of 1998, 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.
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.
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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 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 Company, 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
Company for purposes of the 1940 Act are indicated by an asterisk.
21
<PAGE>
<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 Inc.;
Chairman President of Stephens Insurance Services Inc.;
and President Senior Vice President of Stephens Sports Management Inc.;
and President of Investors Brokerage Insurance Inc.
Thomas S. Goho, 55 Trustee Associate Professor of Finance,
321 Beechcliff Court Calloway School of Business and Accounting at
Winston-Salem, NC 27104 Wake Forest University since 1982.
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.
*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>
22
<PAGE>
COMPENSATION TABLE
For the Fiscal Year-ended February 28, 1998
-------------------------------------------
<TABLE>
<CAPTION>
AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM REGISTRANT
NAME AND POSITION FROM REGISTRANT AND FUND COMPLEXES
----------------- --------------- ------------------
<S> <C> <C>
Jack S. Euphrat $0 $34,500
Trustee
R. Greg Feltus $0 0
Trustee
Thomas S. Goho $0 $34,500
Trustee
Peter G. Gordon $0 $30,500
Trustee
Joseph N. Hankin $0 $34,500
Trustee
W. Rodney Hughes $0 $33,000
Trustee
Robert M. Joses $0 $ 4,000
Trustee
J. Tucker Morse $0 $33,000
Trustee
</TABLE>
As of January 1, 1998, Peter G. Gordon replaced Robert M. Joses on the Boards
of the Wells Fargo Fund Complex.
Trustees of the Company are compensated annually by the Company and by all the
registrants in each fund complex they serve as indicated below and also are
reimbursed for all out-of-pocket expenses relating to attendance at board
meetings. The Company, 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 Company serves in the identical capacity as
Trustees and officers or as Directors 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/Trustees to such companies and trusts. Currently the
Trustees do not receive any retirement benefits or deferred compensation from
the Company or any other member of each fund complex.
23
<PAGE>
As the date of this SAI, the Trustees and Officers of the Company as a group
beneficially owned less than 1% of the outstanding shares of the Company.
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 LifePath Opportunity Fund invests its assets in the
LifePath 2000 Master Portfolio. 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 Company'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 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 Company'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 advisor 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 advisor 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
24
<PAGE>
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.
INVESTMENT ADVISOR. BGFA provides investment advisory services to each
------------------
LifePath Master Portfolio. As Investment Advisor, BGFA furnishes investment
guidance and policy direction in connection with the daily portfolio management
of the Master Portfolios. BGFA furnishes to the Company's Board of Trustees
periodic reports on the investment strategy and performance of each Master
Portfolio. BGFA provides the Master Portfolios with, among other things, money
market security and fixed-income research, analysis and statistical and economic
data and information concerning interest rate and securities markets trends,
portfolio composition, and credit conditions. 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.
BGFA was created by the reorganization of Wells Fargo Nikko Investment
Advisors ("WFNIA") with and into an affiliate of Wells Fargo Institutional
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 March 1, 1995 and ending December 31, 1995, the
corresponding Master Portfolios of each LifePath Fund paid to Wells Fargo Bank,
and for all other periods indicated below, the corresponding Master Portfolio of
each LifePath Fund paid to BGFA, the following advisory fees:
<TABLE>
<CAPTION>
3/1/95- 1/1/96- Year Ended YEAR ENDED YEAR ENDED
MASTER PORTFOLIO 12/31/95 2/29/96 2/28/97 2/28/98 2/28/99
---------------- -------- ------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
LifePath 2000 Master Portfolio $ 363,537 $ 99,511 $ 689,347 $ 656,142 $ 630,133
LifePath 2010 Master Portfolio $ 312,434 $ 86,919 $ 757,505 $1,018,984 $1,236,989
LifePath 2020 Master Portfolio $ 520,296 $141,075 $1,149,160 $1,572,634 $1,882,147
LifePath 2030 Master Portfolio $ 343,850 $ 93,240 $ 714,647 $1,048,151 $1,405,948
LifePath 2040 Master Portfolio $ 503,315 $148,324 $1,154,337 $1,767,632 $2,472,170
</TABLE>
GENERAL. 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 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).
INVESTMENT SUB-ADVISOR. Prior to January 1, 1996 WFNIA provided investment
----------------------
sub-advisory services to each Master Portfolio. As of January 1, 1996, the
Funds, no longer retain an investment sub-advisor.
For the period beginning March 1, 1995 and ending December 31, 1995, Wells
Fargo Bank paid sub-advisory fees to WFNIA as follows:
25
<PAGE>
<TABLE>
<CAPTION>
MASTER PORTFOLIO 3/1/95- 12/31/95
---------------- ----------------
<S> <C>
LifePath 2000 Master Portfolio $261,344
LifePath 2010 Master Portfolio $224,903
LifePath 2020 Master Portfolio $371,802
LifePath 2030 Master Portfolio $247,703
LifePath 2040 Master Portfolio $361,673
</TABLE>
ADMINISTRATOR AND CO-ADMINISTRATOR. The Company has retained Wells Fargo Bank
----------------------------------
as Administrator and Stephens Inc. ("Stephens") as Co-Administrator on behalf of
the Funds. Under the Administration and Co-Administration Agreements among
Wells Fargo Bank, Stephens and the Company, Wells Fargo Bank and Stephens
provide as administration services, among other things: (i) general supervision
of the operation of the Company and the Funds, including coordination of the
services performed by the investment advisor, 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 U.S. Securities and Exchange Commission ("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 Company's
officers and Board of Trustees. Wells Fargo Bank and Stephens also furnish
office space and certain facilities required for conducting the business of the
Company together with those ordinary clerical and bookkeeping services.
Stephens pays the compensation of the Company's Trustees, Officers and employees
who are affiliated with Stephens. For providing such services, Wells Fargo Bank
and Stephens are entitled to receive fees of 0.3% and 0.04%, respectively, of
each Fund's average daily net assets. Prior to February 1, 1997, Stephens
served as sole administrator to the Company.
Wells Fargo Bank has delegated certain administration duties to Investors Bank
and Trust Company ("IBT") pursuant to a Sub-Administration Agreement with IBT.
Wells Fargo Bank remains fully liable for the performance of these
administration services. Compensation for sub-administration services is
entirely the responsibility of Wells Fargo Bank, but can be made directly to IBT
by the Fund, in which case, the compensation paid to Wells Fargo Bank for
administration services will be reduced accordingly.
For the periods indicated below, the Funds paid to Stephens the following
administration and co-administration fees:
<TABLE>
<CAPTION>
Year Ended Year Ended
FUND 2/29/96 2/28/97
---- ------- -------
<S> <C> <C>
LifePath Opportunity Fund $ 84,548 $ 92,243
LifePath 2010 Fund $ 72,832 $ 81,180
LifePath 2020 Fund $120,505 $135,162
LifePath 2030 Fund $ 79,564 $ 89,938
LifePath 2040 Fund $118,468 $164,384
</TABLE>
26
<PAGE>
For the period begun 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:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
2/28/98 2/28/99
------- -------
2/1/97-
FUND 2/28/97 WELLS FARGO STEPHENS WELLS FARGO STEPHENS
---- ------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
LifePath Opportunity Fund $39,834 $ 14,649 $ 58,594 $ $
LifePath 2010 Fund $28,945 $ 17,577 $ 70,309 $ $
LifePath 2020 Fund $ 46,153 $32,004 $128,017 $128,017 $ $
LifePath 2030 Fund $ 28,565 $23,443 $ 93,771 $ 93,771 $ $
LifePath 2040 Fund $ 34,460 $45,597 $182,388 $182,388 $ $
</TABLE>
DISTRIBUTOR. Stephens (the "Distributor"), located at 111 Center Street,
-----------
Little Rock, Arkansas 72201, serves as Distributor for the Funds. Each Fund
has adopted a distribution plan (a "Plan") under Section 12(b) of the 1940 Act
and Rule 12b-1 thereunder (the "Rule") for its shares. The Plans were adopted
by the Company's 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 "Non-Interested Trustees").
Under the Plans and pursuant to the related 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.
The actual fee payable to the Distributor is determined, within such limit,
from time to time by mutual agreement between the Company 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 (which may include Wells Fargo Bank and its
affiliates) under which such agents may receive compensation for distribution-
related services from the Distributor, including, but not limited to,
commissions or other payments to such agents based on the average daily net
assets of Fund shares attributable to their customers. 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.
For the fiscal year ended February 28, 1999, 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.
27
<PAGE>
<TABLE>
<CAPTION>
PRINTING &
MAILING MARKETING COMPENSATION TO
FUND TOTAL PROSPECTUSES BROCHURES UNDERWRITERS
---- ----- ------------ --------- ------------
<S> <C> <C> <C> <C>
LifePath Opportunity Fund
Class A $156,634 N/A N/A $183,075
Class B $ 4,150 N/A N/A N/A
Class C $ 4,075
LifePath 2010 Fund
Class A $224,732 N/A N/A $213,875
Class B $ 90,239 N/A N/A $ 17,269
Class C $ 594
LifePath 2020 Fund
Class A $148,136 N/A N/A $387,413
Class B $ 68 N/A N/A $ 37,350
Class C $ 2,520
LifePath 2030 Fund
Class A $145,256 N/A N/A $280,561
Class B $ 49 N/A N/A $ 37,091
Class C $ 2,520
LifePath 2040 Fund
Class A $361,128 N/A N/A $540,814
Class B $ 4,692 N/A N/A $ 87,274
Class C $ 2,520
</TABLE>
General. 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 Company
and the Non-Interested Trustees. Any Distribution Agreement related to the
Plans also must be approved by such vote of the Trustees and the Non-Interested
Trustees. The Distribution Agreement will terminate 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 relevant Fund or by vote
of a majority of the Non-Interested Trustees on not more than 60 days' written
notice. 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 Company and the Non-
Interested Trustees.
Each Plan requires that the Treasurer of the Company 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 Company be made by such disinterested Trustees.
Wells Fargo Bank, an interested person (as that term is defined in Section
2(a)(19) of the 1940 Act) of the Company, acts as a selling agent for the Funds'
shares pursuant to selling agreements with Stephens authorized under the Plans.
As a selling agent, Wells Fargo Bank has an indirect financial interest in the
operation of the Plans. The Board of Trustees has concluded that the Plans are
reasonably likely to benefit the Funds and their shareholders because the Plans
authorize the relationships with selling agents, including Wells Fargo Bank,
that have previously developed distribution channels and relationships with the
retail customers that the Funds are designed to serve. These relationships and
distribution channels are believed by the Board to provide potential for
increased Fund assets and ultimately corresponding economic efficiencies
28
<PAGE>
(i.e., lower per-share transaction costs and fixed expenses) that are generated
by increased assets under management.
SHAREHOLDER SERVICING AGENT. The Funds have approved a Shareholder Servicing
---------------------------
Plan and have entered into related Shareholder Servicing Agreements with
financial institutions, including Wells Fargo Bank, on behalf of the Class A,
Class B and Class C shares. Under the agreements, Shareholder Servicing Agents
(including Wells Fargo Bank) agree to perform, as agents for their customers,
administrative services, with respect to Fund shares, which include aggregating
and transmitting shareholder orders for purchases, exchanges and redemptions;
maintaining shareholder accounts and records; and providing such other related
services as the Company or a shareholder may reasonably request. For providing
shareholder services, a Servicing Agent is entitled to a monthly fee from the
applicable Fund, on an annualized basis, at the annual rate of up to 0.20% of
the average daily net assets of the class of shares owned of record or
beneficially by the customers of the Servicing Agent during the period for which
payment is being made. The Servicing Plan and related Shareholder Servicing
Agreements were approved by the Company's Board of Trustees and provide that a
Fund shall not be obligated to make any payments under such Plan or related
Agreements that exceed the maximum amounts payable under the Conduct Rules of
the NASD.
For the fiscal year ended February 28, 1998, Class A and Class B shares of the
Funds paid to Wells Fargo Bank the following shareholder servicing fees:
<TABLE>
<CAPTION>
FUND YEAR ENDED 2/28/98 YEAR ENDED 2/28/99
---- ------------------ ------------------
<S> <C> <C>
LifePath Opportunity Fund $146,486 $145,856
LifePath 2010 Fund $175,771 $233,826
LifePath 2020 Fund $320,043 $425,042
LifePath 2030 Fund $234,428 $329,551
LifePath 2030 Fund $455,970 $695,847
</TABLE>
General. The Servicing Plan will continue in effect from year to year if such
-------
continuance is approved by a majority vote of the Trustees of the Company,
including a majority of the Trustees who are not "interested persons" (as
defined in the 1940 Act) of the Funds ("Non-Interested Trustees"). Any form of
Servicing Agreement related to the Servicing Plan also must be approved by such
vote of the Trustees and the Non-Interested Trustees. Servicing Agreements may
be terminated at any time, without payment of any penalty, by vote of a majority
of the Board of Trustees, including a majority of the Non-Interested Trustees.
No material amendment to the Servicing Plan or related Servicing Agreements may
be made except by a majority of both the Trustees of the Company and the Non-
Interested Trustees.
The Servicing Plan requires that the Administrator 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 Servicing Plan.
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
Company, 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 Plan. As a Selling Agent, WFSI has
29
<PAGE>
an indirect financial interest in the operation of the Plan. The Board of
Trustees believes that it is reasonably likely that the Plan will benefit the
Funds and their shareholders because the Plan authorizes the relationship with
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 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. 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. Prior to October 21, 1996, BGI was custodian of each Fund's
investments. For its services as custodian, BGI is not entitled to receive a fee
so long as BGFA receives fees for providing advisory services to the Master
Portfolios.
TRANSFER AND DIVIDEND DISBURSING AGENT. Wells Fargo Bank acts as the Company's
--------------------------------------
transfer and dividend disbursing agent. Wells Fargo Bank is entitled to receive
from the Company for its services as transfer and dividend disbursing agent, a
monthly fee at the annual rate of 0.14% of each Fund's average daily net assets.
For the fiscal year ended February 28, 1998, the Company paid to Wells Fargo
Bank the following transfer and dividend disbursing agency fees:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
FUND 2/28/98 2/28/99
---- ------- -------
<S> <C> <C>
LifePath Opportunity Fund $ 73,243 $ 77,753
LifePath 2010 Fund $ 87,886 $125,849
LifePath 2020 Fund $160,021 $228,583
LifePath 2030 Fund $117,214 $185,007
LifePath 2040 Fund $227,985 $374,330
</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
30
<PAGE>
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.
Average Annual Total Return for the Year Ended February 28, 1999/1/
------------------------------------------------------------------
<TABLE>
<CAPTION>
Inception/1/ Inception Five Year Five Year Three Year Three Year One Year One Year
With No With No With No With No
Sales Sales Sales Sales Sales Sales Sales Sales
Fund Charge/2/ Charge Charge Charge Charge Charge Charge Charge
---- -------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LifePath
Opportunity
Class A 6.98% 7.96% 6.98% 7.96% 6.69% 8.34% 1.61% 6.40%
Class B** 7.16% 7.46% 7.16% 7.46% 6.99% 7.86% 0.89% 5.88%
Class C 7.43% 7.43% 7.43% 7.43% 7.81% 7.81% 4.72% 5.72%
LifePath 2010
Class A 11.35% 12.38% 11.35% 12.38% 11.53% 13.26% 4.97% 9.91%
Class B** 11.52% 11.78% 11.52% 11.78% 11.81% 12.61% 4.30% 9.30%
Class C 11.78% 11.78% 11.78% 11.78% 12.61% 12.61% 8.29% 9.29%
LifePath 2020
Class A 14.25% 15.31% 14.25% 15.31% 14.99% 16.77% 6.97% 12.01%
Class B** 14.48% 14.71% 14.48% 14.71% 15.39% 16.15% 6.56% 11.56%
Class C 14.70% 14.70% 14.70% 14.70% 16.13% 16.13% 10.51% 11.51%
LifePath 2030
Class A 16.35% 17.43% 16.35% 17.43% 17.45% 19.26% 8.15% 13.25%
Class B** 16.56% 16.77% 16.56% 16.77% 17.81% 18.53% 7.64% 12.64%
Class C 16.76% 16.76% 16.76% 16.76% 18.52% 18.52% 11.60% 12.60%
LifePath 2040
Class A 18.53% 19.62% 18.53% 19.62% 19.90% 21.76% 9.83% 14.98%
</TABLE>
31
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class B** 18.74% 18.94% 18.74% 18.94% 20.31% 21.01% 9.37% 14.37%
Class C* 18.95% 18.95% 18.95% 18.95% 21.02% 21.02% 13.42% 14.42%
</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.
* Class C shares of the LifePath 2040 Fund commenced operations on June 30,
1998 and Class B shares of the LifePath Opportunity Fund commenced
operations on August 1, 1998. Performance shown for the Class B shares is
for LifePath Opportunity Fund Class A shares calculated using Class B share
expenses. Performance shown for the Class C shares is for LifePath 2040
Fund Class B shares calculated using Class C share expenses.
** Class B shares commenced operations on March 3, 1997. Three-year
performance shown is for Class A shares calculated using Class B share
expenses.
*** Class C shares of LifePath Opportunity, LifePath 2010, LifePath 2020 and
LifePath 2030 commenced operations on December 1, 1998. Three and one year
performance shown is for Class A shares calculated using Class C share
expenses.
CUMULATIVE TOTAL RETURN: In addition to the above performance
------------------------
information, the Funds may advertise the cumulative total return for one-month,
three-month, six-month and year-to-date periods. The cumulative total return for
such periods is based on the overall percentage change in value of a
hypothetical investment in the Fund, assuming all 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 Year Ended February 28, 1999/1/
---------------------------------------------------------------
<TABLE>
<CAPTION>
Inception/1/ Inception Five Year Five Year Three Year Three Year
With No With No With No
Sales Sales Sales Sales Sales Sales
Fund Charge2 Charge Charge Charge Charge Charge
---- ------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
LifePath
Opportunity
Class A 40.10% 46.68% 40.10% 46.68% 21.46% 27.16%
Class B** 41.30% 43.30% 41.30% 43.30% 22.46% 25.49%
Class C*** 43.08% 43.08% 43.08% 43.08% 25.29% 25.29%
LifePath 2010
Class A 71.19% 79.23% 71.19% 79.23% 38.75% 45.31%
Class B** 72.50% 74.50% 72.50% 74.50% 39.78% 42.80%
Class C*** 74.49% 74.49% 74.49% 74.49% 42.79% 42.79%
LifePath 2020
Class A 94.65% 103.83% 94.65% 103.83% 52.06% 59.22%
Class B** 96.61% 98.61% 96.61% 98.61% 53.66% 56.68%
</TABLE>
32
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Class C*** 98.53% 98.53% 98.53% 98.53% 56.61% 56.61%
LifePath 2030
Class A 113.26% 123.29% 113.26% 123.29% 62.02% 69.63%
Class B** 115.11% 117.11% 115.11% 117.11% 63.51% 66.53%
Class C*** 117.04% 117.04% 117.04% 117.04% 66.47% 66.47%
LifePath 2040
Class A 133.96% 177.96% 133.96% 177.96% 72.35% 80.54%
Class B** 136.01% 138.01% 136.01% 138.01% 74.16% 77.18%
Class C* 138.11% 138.11% 138.11% 138.11% 77.26% 77.26%
</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.
* Class C shares of the LifePath 2040 Fund commenced operations on June 30,
1998 and Class B shares of the LifePath Opportunity Fund commenced
operations on August 1, 1998. Performance shown for the Class B shares is
for LifePath Opportunity Fund Class A shares calculated using Class B share
expenses. Performance shown for the Class C shares is for LifePath 2040
Fund Class B shares calculated using Class C share expenses.
** Class B shares commenced operations on March 3, 1997. Three-year
performance shown is for Class A shares calculated using Class B share
expenses.
*** Class C shares of LifePath Opportunity, LifePath 2010, LifePath 2020 and
LifePath 2030 commenced operations on December 1, 1998. Three and one year
performance shown is for Class A shares calculated using Class C share
expenses.
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 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 Companies), 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
33
<PAGE>
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.
In addition, the Company also may use, in advertisements and other types of
literature, information and statements: (i) showing that bank savings accounts
offer a guaranteed return of principal and a fixed rate of interest, but no
opportunity for capital growth; and (ii) 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
34
<PAGE>
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 LifePath Funds, provides various
services to its customers that are also shareholders of the Funds. These
services may include access to LifePath 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 LifePath 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 advisor. 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 advisor or sub-advisor and the total amount of
assets and mutual fund assets managed by Wells Fargo Bank. As of December 31,
1998, Wells Fargo Bank and its affiliates provided investment Advisory services
for approximately $121 billion of assets of individual, companies, estates and
institutions and $28 billion of mutual fund assets.
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.
35
<PAGE>
DETERMINATION OF NET ASSET VALUE
The securities of the LifePath Master Portfolios, including covered call
options written by an LifePath Master Portfolio, are valued at the last sale
price on the securities exchange or national securities market on which such
securities primarily are traded. Securities not listed on an exchange or
national securities market, or securities in which there were no transactions,
are valued at the most recent bid prices. Portfolio securities which are traded
primarily on foreign securities exchanges generally are valued at the preceding
closing values of such securities on their respective exchanges, except that
when an occurrence subsequent to the time a value was so established is likely
to have changed such value, then the fair value of those securities is
determined by consideration of other factors by or under the direction of MIP's
Board of Trustees or its delegates. Short-term investments are carried at
amortized cost, which approximates market value. Any securities or other assets
for which recent market quotations are not readily available are valued at fair
value as determined in good faith by MIP's Board of Trustees.
Restricted securities, as well as securities or other assets for which market
quotations are not readily available, or are not valued by a pricing service
approved by MIP's Board of Trustees, are valued at fair value as determined in
good faith by or under the direction of MIP's Board of Trustees or its
delegates. MIP's Board of Trustees reviews the method of valuation on a current
basis. Restricted securities that are, or are convertible into, securities of
the same class of securities for which a public market exists usually are valued
at market value less the same percentage discount at which such securities were
purchased. This discount may be revised periodically if BGFA believes that the
discount no longer reflects the value of the restricted securities. Restricted
securities not of the same class as securities for which a public market exists
usually are valued initially at cost. Any subsequent adjustment from cost is
based upon considerations deemed relevant by or under the direction of MIP's
Board of Trustees or its delegates.
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
36
<PAGE>
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 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 advisor, 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.
Investors in Norwest Advantage Funds. Class A shareholders of the Norwest
------------------------------------
Advantage Funds who redeem shares at net asset value may use the redemption
proceeds to purchase Class A shares of the Stagecoach Funds at net asset value
(without a sales charge). A reciprocal sales load waiver is available to the
Class A shareholders of Stagecoach Funds, who may use
37
<PAGE>
redemption proceeds to purchase Class A shares of the Norwest Advantage Funds at
net asset value.
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 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 advisor, 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
38
<PAGE>
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 advisor 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 advisor must make a good faith determination that the commissions paid
are "reasonable in relation to the value of the brokerage and research services
provided . . . viewed in terms of either that particular transaction or its
overall responsibilities with respect to the accounts as to which it exercises
investment discretion and that the services provided by a broker provide an
advisor 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>
YEAR ENDED YEAR ENDED YEAR ENDED
MASTER PORTFOLIO 2/28/96 2/28/97 2/28/98
---------------- -------- -------- --------
<S> <C> <C> <C>
LifePath 2000 Master Portfolio $ 8,311 $ 3,639 $ 9,361
LifePath 2010 Master Portfolio $ 12,053 $ 8,837 $ 15,306
LifePath 2020 Master Portfolio $ 29,666 $ 12,383 $ 29,153
LifePath 2030 Master Portfolio $ 33,786 $ 6,927 $ 28,908
LifePath 2040 Master Portfolio $ 71,608 $ 28,047 $ 94,717
</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 Master Portfolio Goldman Sachs $ 5,000,000
J.P. Morgan $ 41,347
Lehman Bros. Holdings $ 31,531
Merrill Lynch $ 37,928
Morgan Stanley $ 68,590
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
MASTER PORTFOLIO BROKER/DEALER AMOUNT
---------------- ------------- ------
<S> <C> <C>
LifePath 2010 Master Portfolio Goldman Sachs $ 9,000,000
J.P. Morgan $ 189,288
Lehman Bros. Holdings $ 50,450
Merrill Lynch $ 198,514
Morgan Stanley $ 328,681
LifePath 2020 Master Portfolio Goldman Sachs $14,000,000
J.P. Morgan $ 426,854
Lehman Bros. Holdings $ 126,125
Merrill Lynch $ 475,032
Morgan Stanley $ 752,033
LifePath 2030 Master Portfolio Goldman Sachs $ 9,000,000
J.P. Morgan $ 362,085
Lehman Bros. Holdings $ 132,431
Merrill Lynch $ 407,477
Morgan Stanley $ 650,094
LifePath 2040 Master Portfolio Goldman Sachs $15,000,000
J.P. Morgan $ 609,091
Lehman Bros. Holdings $ 182,881
Merrill Lynch $ 687,859
Morgan Stanley $ 1,606,436
</TABLE>
FUND EXPENSES
Except for the expenses borne by Wells Fargo Bank and Stephens, the Company
bears all costs of its operations, including the compensation of its Trustees
who are not affiliated with Stephens or Wells Fargo Bank or any of their
affiliates; advisory, shareholder servicing and administration fees; payments
pursuant to any Plan; interest charges; taxes; fees and expenses of its
independent accountants, legal counsel, transfer agent and dividend disbursing
agent; expenses of redeeming shares; expenses of preparing and printing
prospectuses (except the expense of printing and mailing prospectuses used for
promotional purposes, unless otherwise payable pursuant to a Plan),
shareholders' reports, notices, proxy statements and reports to regulatory
agencies; insurance premiums and certain expenses relating to insurance
coverage; trade association membership dues; brokerage and other expenses
connected with the execution of portfolio transactions; fees and expenses of its
custodian, including those for keeping books and accounts and calculating the
net asset value per share of the Funds; expenses of shareholders' meetings;
expenses relating to the issuance, registration and qualification of a Fund's
shares; pricing services, and any extraordinary expenses. Expenses attributable
to a Fund are charged against Fund assets. General expenses of the Company are
allocated among all of the Funds in a manner proportionate to the net assets of
a Fund, on a transactional basis, or on such other basis as the Company's Board
of Trustees deems equitable.
40
<PAGE>
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.
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
41
<PAGE>
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.
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
42
<PAGE>
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 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
43
<PAGE>
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 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.
44
<PAGE>
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 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 Company (i.e., Company
which a U.S. court is able to exercise primary supervision over administration
of that Company and one or more U.S. persons have authority to control
substantial decisions of that Company), 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
45
<PAGE>
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.
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
The Funds are authorized to issue multiple classes of shares, one class
generally subject to a front-end sales charge and classes subject to a
contingent-deferred sales charge, that are offered to retail investors. Each
class of shares in a fund represents an equal, proportionate interest in a fund
with other shares of the same class. Shareholders of each class bear their pro
rata portion of the fund's operating expenses, except for certain class-specific
expenses (e.g., any state securities registration fees, shareholder servicing
fees or distribution fees that may be paid under Rule 12b-1) that are allocated
to a particular class.
With respect to matters that affect one class but not another, shareholders
vote as a class; for example, the approval of a Plan. Subject to the foregoing,
all shares of a Fund have equal voting
46
<PAGE>
rights and will be voted in the aggregate, and not by Series, except where
voting by a Series is required by law or where the matter involved only affects
one Series. For example, a change in a Funds' fundamental investment policy
affects only one Series and would be voted upon only by shareholders of the Fund
involved. Additionally, approval of an advisory contract, since it only affects
one Fund, is a matter to be determined separately by each Series. Approval by
the shareholders of one Series is effective as to that Series whether or not
sufficient votes are received from the shareholders of the other series to
approve the proposal as to those Series.
As used in the Prospectus and in this SAI, the term "majority" when referring
to approvals to be obtained from shareholders of a Class of the Fund, means the
vote of the lesser of (i) 67% of the shares of such class the Fund represented
at a meeting if the holders of more than 50% of the outstanding shares such
class of the Fund are present in person or by proxy, or (ii) more than 50% of
the outstanding shares of such class the Fund. The term "majority," when
referring to the approvals to be obtained from shareholders of the Company as a
whole, means the vote of the lesser of (i) 67% of the Company's shares
represented at a meeting if the holders of more than 50% of the Company's
outstanding shares are present in person or by proxy, or (ii) more than 50% of
the Company's outstanding shares. Shareholders are entitled to one vote for
each full share held and fractional votes for fractional shares held.
Shareholders are not entitled to any preemptive rights. All shares, when
issued for the consideration described in the Prospectus, will be fully paid and
non-assessable by the Company. The Company may dispense with an annual meeting
of shareholders in any year in which it is not required to elect directors under
the 1940 Act.
Each share of a class of a Fund represents an equal proportional interest in a
Fund with each other share in the same class and is entitled to such dividends
and distributions out of the income earned on the assets belonging to a Fund as
are declared in the discretion of the Directors. In the event of the
liquidation or dissolution of the Company, shareholders of a Fund are entitled
to receive the assets attributable to the relevant class of shares of the Fund
that are available for distribution, and a distribution of any general assets
not attributable to a particular investment portfolio that are available for
distribution in such manner and on such basis as the Directors in their sole
discretion may determine.
Set forth below as of May 29, 1998, is the name, address and share ownership
of each person known by the Company to have beneficial or record ownership of 5%
or more of a LifePath Fund or 5% or more of a retail class of shares of a
LifePath Fund. The term "N/A" is used where a shareholder holds 5% or more of a
class, but less than 5% of a Fund as a whole.
5% OWNERSHIP AS OF MAY 28, 1999
-------------------------------
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENTAGE PERCENTAGE CAPACITY
NAME OF FUND OF SHAREHOLDER OF CLASS OF FUND OWNED
- ------------ ------------------------ ---------- ---------- --------
<S> <C> <C> <C> <C>
LifePath Wells Fargo Bank Record
Opportunity FBO Retirement Plans Omnibus
Class A P.O. Box 63015
San Francisco, CA 94163
</TABLE>
47
<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 Wells Fargo Bank Record
Class A FBO Retirement Plans Omnibus
P.O. Box 63015
San Francisco, CA 94163
State Street Bank and Trust Record
as Trustee for Various Plans
Two Heritage Drive
Quincy, MA 02171
LifePath 2020 Wells Fargo Bank Record
Class A FBO Retirement Plans Omnibus
P.O. Box 63015
San Francisco, CA 94163
LifePath 2030 Wells Fargo Bank Record
Class A FBO Retirement Plans Omnibus
P.O. Box 63015
San Francisco, CA 94163
LifePath 2040 Wells Fargo Bank Record
Class A FBO Retirement Plans Omnibus
P.O. Box 63015
San Francisco, CA 94163
</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 or
record holder 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).
OTHER
The Company's Registration Statement, including the Prospectus and SAI for the
Funds and the exhibits filed therewith, may be examined at the office of the
Securities and Exchange Commission in Washington, D.C. Statements contained in
the Prospectus or the SAI as to the contents of any contract or other document
referred to herein or in the Prospectus are not necessarily complete, and, in
each instance, reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference.
48
<PAGE>
COUNSEL
Morrison & Forester LLP, 2000 Pennsylvania Avenue, N.W., Suite 5500,
Washington, D.C. 20006, as counsel for the Company, 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 LLP, Three Embarcadero Center, San Francisco, California 94111,
independent auditors, serves as each Fund's independent auditors. KPMG 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 audited financial statements, including the portfolio of investments and
independent auditors' report for the fiscal year ended February 28, 1999 for
each LifePath Fund of the Company and each corresponding LifePath Master
Portfolio of MIP are hereby incorporated by reference to the Company's Annual
Reports, as filed with the SEC on April [27], 1999. The audited financial
statements for the Funds are attached to all SAIs delivered to shareholders or
prospective shareholders.
The Company's Annual Report may be obtained by calling 1-800-222-8222.
49
<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, 2000
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 Company 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 Opportunity (formerly, 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, 1999, are hereby incorporated by
reference to the Trust's Annual Reports, as filed with the SEC on April 27,
1999.
(b) Exhibits:
Exhibit Description
Number -----------
------
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 - Distribution Agreement with Stephens Inc.,
incorporated by reference to Post-Effective Amendment
No. 5 to the Registration Statement filed on June 28,
1996.
6 - Not Applicable.
7 - Custody and Fund Accounting Agreement with Investors
Bank & Trust Company, incorporated by reference to Post-
Effective Amendment No. 12 to the Registration Statement
filed on November 30, 1998.
8 - Administration Agreement with Stephens Inc.,
incorporated by reference to Post-Effective Amendment
No. 5 to the Registration Statement filed on June 28,
1996.
C-1
<PAGE>
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, as consolidated to include
all Classes of the Funds, incorporated by reference to
Post-Effective Amendment 12 to the Registration
Statement filed on November 30, 1998.
9(b)(i) - Form of Shareholder Services Agreement with Wells
Fargo Bank, N.A. on behalf of the Funds, incorporated by
reference to Post-Effective Amendment 12 to the
Registration Statement filed on November 30, 1998.
9(c) - Form of Agency Agreement with Wells Fargo Bank, N.A.,
incorporated by reference to Post-Effective Amendment 12
to the Registration Statement filed on November 30,
1998.
10 - Opinion and consent of counsel, filed herewith.
11 - Not Applicable.
12 - Not Applicable.
13 - Not Applicable.
14 - Distribution Plan, for all shares of the Funds,
incorporated by reference to Post-Effective Amendment 12
to the Registration Statement filed on November 30,
1998.
15 - Financial Data Schedules for the fiscal period ended
February 28, 1998, are hereby incorporated by reference
to the Trust's Annual Reports, as filed with the SEC on
April __, 1999.
16 - Rule 18f-3 Multi-Class Plan, incorporated by reference
to Post-Effective Amendment 12 to the Registration
Statement filed on November 30, 1998. .
17 - 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.
C-2
<PAGE>
Item 24. Persons Controlled by or Under Common Control with Registrant
- ------- -------------------------------------------------------------
As of May 31, 1999, 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.
<TABLE>
<CAPTION>
Percentage of
Corresponding Outstanding
Fund Master Portfolio Beneficial Interests
- ---- ---------------- --------------------
<S> <C> <C>
LifePath Opportunity Fund LifePath 2000 Master Portfolio 58.07%
LifePath 2010 Fund LifePath 2010 Master Portfolio 46.07%
LifePath 2020 Fund LifePath 2020 Master Portfolio 54.64%
LifePath 2030 Fund LifePath 2030 Master Portfolio 59.27%
LifePath 2040 Fund LifePath 2040 Master Portfolio 68.86%
</TABLE>
Item 25. 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:
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 26. Business and Other Connections of the Investment Adviser
- -------- --------------------------------------------------------
Barclays Global Fund Advisors ("BGFA"), a wholly-owned subsidiary
of Barclays Global Investors, N.A. ("BGI", formerly, Wells Fargo Institutional
Trust Company), serves as investment adviser to the Funds' corresponding Master
Portfolios and to certain other open-end management investment companies and
various other institutional investors.
C-3
<PAGE>
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 45 Fremont Street, San Francisco, CA 94105
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
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
C-4
<PAGE>
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
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
</TABLE>
C-5
<PAGE>
<TABLE>
<S> <C>
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
Paul Hazen Chairman of the Board of Directors of
Chairman of the Board of Wells Fargo & Company
Directors 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
</TABLE>
C-6
<PAGE>
<TABLE>
<S> <C>
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
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
</TABLE>
C-7
<PAGE>
<TABLE>
<S> <C>
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
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
</TABLE>
C-8
<PAGE>
<TABLE>
<S> <C>
Director of Northrop Grumman Corp.
1840 Century Park East
Los Angeles, CA 90067
Director of Outboard Marine Corporation
100 SeaHorse Drive
Waukegan, IL 60085
Director of Pacific Enterprises
555 West Fifth Street
Suite 2900
Los Angeles, CA 90031
Director of First Interstate Bancorp
633 West Fifth Street
Los Angeles, CA 90071
Susan G. Swenson President and Chief Executive 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
.
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
</TABLE>
C-9
<PAGE>
<TABLE>
<S> <C>
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 Director 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>
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" in the Statement of Additional Information. 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 27. 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., Stagecoach Trust, Nations Fund, Inc., Nations Fund
Trust, Nations Fund Portfolios, Inc., Nations LifeGoal Funds, Inc. and Nations
Institutional Reserves, 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.
(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
C-10
<PAGE>
Inc. with the Securities and Exchange Commission pursuant to The Investment
Advisers Act of 1940 (file No. 501-15510).
(c) Not applicable.
Item 28. 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.
(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 29. Undertaking
- ------- -----------
Not applicable.
C-11
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant 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 30th day of
April, 1999.
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 Date
--------- ----- ----
* Trustee, Chairman and President
-------------------------
(R. Greg Feltus) (Principal Executive Officer)
/s/ Richard H. Blank, Jr. Secretary and Treasurer 4/30/99
-------------------------
(Richard H. Blank, Jr.) (Principal Financial Officer)
* 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 30, 1999
<PAGE>
STAGECOACH TRUST
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
EX-99.B10 Opinion and Consent of Counsel
<PAGE>
[MORRISON & FOERSTER LLP LETTERHEAD]
April 30, 1999
Stagecoach Trust
111 Center Street
Little Rock, AR 72201
Re: Shares of Beneficial Interest of Stagecoach Trust
-------------------------------------------------
Ladies/Gentlemen:
We refer to Post-Effective Amendment No. 13 and Amendment No. 15 to the
Registration Statement on Form N-1A (SEC File Nos. 33-64352 and 811-7780) (the
"Registration Statement") of Stagecoach Trust (the "Trust") relating to the
registration of an indefinite number of shares of beneficial interests of the
Trust (collectively, the "Shares").
We have been requested by the Trust to furnish this opinion as Exhibit 10
to the Registration Statement.
We have examined documents relating to the organization of the Trust and
its series and the authorization and issuance of shares of its series. 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, 1999.
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 appropriate action and assuming delivery by sale or in accord with
the Trust's dividend reinvestment plan and in accordance with the description
set forth in the Trust's current prospectus, under the Securities Act of 1933,
as amended, the Shares will be legally issued, fully paid and nonassessable by
the Trust.
<PAGE>
Stagecoach Trust
April 30, 1999
Page Two
We consent to the inclusion of this opinion as an exhibit to the
Registration Statement.
In addition, we hereby consent to the use of our name and to the reference
to the description of advice rendered by our firm under the heading "Counsel" in
the Statement of Additional Information, which is included as part of the
Registration Statement.
Very truly yours,
/s/ MORRISON & FOERSTER LLP
MORRISON & FOERSTER LLP
