<PAGE>
As filed with the Securities and Exchange Commission
on June 30, 1997
Registration No. 811-8140
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM N-1A
AMENDMENT NO. 6 TO THE
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
MANAGED SERIES INVESTMENT TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
111 Center Street, Little Rock, Arkansas 72201
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
_______________________________________
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., Suite 5500
Washington, D.C. 20006-1812
<PAGE>
EXPLANATORY NOTE
----------------
This Amendment No. 6 to the Registration Statement of Managed Series
Investment Trust (the "Trust") is being filed to add to the Trust's Registration
Statement the audited financial statements and certain related financial
information for the fiscal year ended February 28, 1997 for the Growth Stock and
Short-Intermediate Term Master Portfolios, and to add certain other non-material
changes to the Registration Statement.
This amendment to the Registration Statement has been filed by the
Registrant pursuant to Section 8(b) of the Investment Company Act of 1940.
However, beneficial interests in the Registrant are not being registered under
the Securities Act of 1933 (the "1933 Act") because such interests will be
issued solely in private placement transactions that do not involve any "public
offering" within the meaning of Section 4(2) of the 1933 Act. Investments in
the Registrant may only be made by registered broker/dealers or by investment
companies, insurance company separate accounts, common commingled trust funds,
group trusts or similar organizations or entities that are "accredited
investors" within the meaning of Regulation D under the 1933 Act. This
Registration Statement does not constitute an offer to sell, or the solicitation
of an offer to buy, any beneficial interest in the Registrant.
<PAGE>
Managed Series Investment Trust
Cross Reference Sheet
---------------------
Form N-1A Item Number
- ---------------------
<TABLE>
<CAPTION>
Part A Prospectus Caption
- ------ ------------------
<C> <S>
4 General Description of Registrant
Investment Objectives
Investment Policies
Risk Considerations
5 Management of the Master Portfolios
Investment Adviser and Sub-Investment Adviser
Co-Administrator and Placement Agent
Custodian; Transfer Agent; Expenses
6 Capital Stock and Other Securities
Organization and Interests
Dividends and Distributions
Taxes
7 Purchase of Interests
Determination of Net Asset Value
8 Redemption or Repurchase
9 Not Applicable
<CAPTION>
Part B Statement of Additional Information
- ------ -----------------------------------
<C> <S>
10 Cover Page
11 Table of Contents
12 General Information and History
13 Investment Objectives and Policies
14 Management of MSIT
15 Control Persons and Principal Holders of Securities
16 Investment Advisory and Other Services
17 Brokerage Allocation and Other Practices
18 Capital Stock and Other Securities
19 Purchase, Redemption and Pricing of Securities
20 Tax Status
21 Underwriters
22 Calculation of Performance Data
23 Financial Information
<CAPTION>
Part C Other Information
- ------ -----------------
<C> <S>
24-32 Information required to be included in Part C is set forth under
the appropriate Item, so numbered, in Part C of this Document.
</TABLE>
<PAGE>
MANAGED SERIES INVESTMENT TRUST
GROWTH STOCK MASTER PORTFOLIO
SHORT-INTERMEDIATE TERM MASTER PORTFOLIO
PART A
JUNE 30, 1997
Responses to Items 1 through 3 have been omitted pursuant to paragraph F.4. of
the General Instructions to Form N-1A.
ITEM 4. GENERAL DESCRIPTION OF REGISTRANT.
Managed Series Investment Trust ("MSIT") is a no-load, open-end, management
investment company which was organized as a business trust under the laws of
Delaware on October 28, 1993. MSIT currently offers two series: the Growth Stock
Master Portfolio and the Short-Intermediate Term Master Portfolio (each, a
"Master Portfolio" and together, the "Master Portfolios"). Beneficial interests
in each Master Portfolio are issued solely in private placement transactions
that do not involve any "public offering" within the meaning of Section 4(2) of
the Securities Act of 1933, as amended (the "1933 Act"). Investments in each
Master Portfolio may only be made by registered broker/dealers or by investment
companies, insurance company separate accounts, common or commingled trust
funds, group trusts or other "accredited investors" within the meaning of
Regulation D under the 1933 Act. This registration statement does not constitute
an offer to sell, or the solicitation of an offer to buy, any security within
the meaning of the 1933 Act.
INVESTMENT OBJECTIVES.
The GROWTH STOCK MASTER PORTFOLIO seeks above-average long-term total return,
with a primary focus on capital appreciation. Current income is a secondary
consideration. The Master Portfolio seeks to provide investors with a rate of
total return that, over a three to five year time horizon, exceeds that of the
S&P 500 Index (before fees and expenses) over comparable periods by investing in
a diversified portfolio consisting primarily of growth-oriented common stocks.
The SHORT-INTERMEDIATE TERM MASTER PORTFOLIO seeks to provide investors with a
total return, before fees and expenses, exceeding that of the Lehman Brothers
Intermediate Government/Corporate Bond Index ("LB Intermediate Bond Index"). The
Master Portfolio seeks to achieve its investment objective by investing in a mix
of the following types of securities: U.S. Treasury and agency debt securities,
corporate bonds, collateralized mortgage obligations and mortgage-backed
securities, other types of asset-backed securities and money market instruments.
The investment objective of each Master Portfolio cannot be changed without
approval by the holders of a majority (as defined in the 1940 Act) of such
Master Portfolio's outstanding voting securities. The differences in investment
objectives and policies between each Master Portfolio determines the types of
portfolio securities in which each Master Portfolio invests and can be expected
to affect the degree of risk to which each Master Portfolio is subject and the
yield or return of each Master Portfolio. There can be no assurance that the
investment objective of each Master Portfolio will be achieved.
INVESTMENT POLICIES.
The GROWTH STOCK MASTER PORTFOLIO seeks above-average, long-term total return,
with a primary focus on capital appreciation. Current income is a secondary
consideration. This investment objective is fundamental and cannot be changed
without shareholder approval. The Growth Stock Master Portfolio seeks to provide
investors
1
<PAGE>
with a rate of total return that, over a three to five year time horizon,
exceeds that of the S&P 500 Index/1/ (before fees and expenses) over comparable
periods by investing in a diversified portfolio consisting primarily of growth-
oriented common stocks. The Growth Stock Master Portfolio is advised by BGFA and
sub-advised by Wells Fargo Bank, N.A. ("Wells Fargo Bank").
The Growth Stock Master Portfolio invests primarily in common stocks that
Wells Fargo Bank, as sub-adviser, believes have better-than-average prospects
for appreciation. Under normal market conditions, the Master Portfolio will hold
at least 20 common stock issues spread across multiple industry groups, with the
majority of these holdings consisting of established growth companies,
turnaround or acquisition candidates, or attractive larger capitalization
companies. The Master Portfolio also may invest up to 25% of its assets in
American Depositary Receipts ("ADRs") and similar instruments and may invest up
to 15% of its assets in equity securities of companies in emerging or less
developed markets. The stock issues held by the Master Portfolio may have some
of the following characteristics: low or no dividends; smaller market
capitalizations; less market liquidity; relatively short operating histories;
aggressive capitalization structures (including high debt levels); and
involvement in rapidly growing/changing industries and/or new technologies.
Additionally, it is expected that the Master Portfolio may from time to time
acquire securities through initial public offerings, and may acquire and hold
common stocks of smaller and newer issuers. It is expected that no more than 40%
of the Master Portfolio's assets will be invested in these highly aggressive
issues at one time.
Though the Master Portfolio will hold a number of larger capitalization
stocks, under normal market conditions more than 50% of the Master Portfolio's
total assets will be invested in companies whose market capitalizations at the
time of acquisition are within the capitalization range of companies listed on
the S&P Small Cap 600 Index. As of December 1996, the capitalization range for
the S&P Small Cap 600 was from $40 million to $2.6 billion. The capitalization
range for the S&P Small Cap 600 Index is expected to change frequently. The
Master Portfolio may invest in companies with a market capitalization under $40
million if the investment adviser to the Master Portfolio believes such
investments to be in the best interest of the Master Portfolio.
Under ordinary market conditions, at least 65% of the value of the total
assets of the Master Portfolio will be invested in common stocks and in
securities which are convertible into common stocks that Wells Fargo Bank, as
sub-adviser, believes have better-than-average prospects for appreciation. The
Master Portfolio also may invest in convertible debt securities. At most, 5% of
the Master Portfolio's net assets will be invested in convertible debt
securities that are either not rated in the four highest rating categories by
one or more nationally recognized statistical rating organizations ("NRSROs"),
such as Moody's Investor Service, Inc. ("Moody's") or Standard & Poor's Rating
Group ("S&P"), or unrated securities determined by Wells Fargo Bank to be of
comparable quality.
From time to time, when the adviser or sub-adviser determines that market
conditions make pursuing the Master Portfolio's basic investment strategy
inconsistent with the best interests of the Master Portfolio's investors, the
Master Portfolio may use temporary alternative strategies, primarily designed to
reduce fluctuations in the value of the Master Portfolio's assets. In
implementing these temporary "defensive" strategies, the Master Portfolio may
invest in preferred stock or investment-grade debt securities that are
convertible into common stock and in money market instruments. Generally, these
temporary "defensive" investments will not exceed 30% of the Master Portfolio's
total assets.
The Growth Stock Master Portfolio pursues an active-trading investment
strategy, and the length of time the Growth Stock Master Portfolio has held a
particular security is not generally a consideration in investment decisions.
Accordingly, the portfolio turnover rate of the Growth Stock Master Portfolio
may be higher than that of other growth stock funds that do not pursue an
active-trading investment strategy. Portfolio turnover generally involves some
expense to the Growth Stock Master Portfolio, including brokerage commissions or
dealer mark-ups, and other transaction costs on the sale of securities and the
reinvestment in other securities.
- -------------
/1/ S&P does not sponsor the Growth Stock Master Portfolio, nor is it affiliated
in any way with BGFA, or the Master Portfolio. "Standard & Poor's"(R), "S&P"(R),
"S&P 500"(R) and "Standard & Poor's 500"(R) are trademarks of McGraw-Hill, Inc.
The Growth Stock Master Portfolio is not sponsored, endorsed, sold or promoted
by S&P and S&P makes no representation or warranty, express or implied,
regarding the advisability of investing in the Master Portfolio.
2
<PAGE>
The SHORT-INTERMEDIATE TERM MASTER PORTFOLIO seeks to provide a total return,
before fees and expenses, exceeding that of the Lehman Brothers Intermediate
Government/Corporate Bond Index (the "LB Intermediate Bond Index").
Historically, the LB Intermediate Bond Index has outperformed short-term
investments such as Treasury bills and has generally experienced a positive
return on an annual basis. The Master Portfolio's investment objective is
fundamental and cannot be changed without shareholder approval. The Short-
Intermediate Term Master Portfolio invests in a mix of the following types of
instruments: U.S. Treasury and agency debt securities, corporate bonds,
collateralized mortgage obligations and mortgage-backed securities, other types
of asset-backed securities, and money market instruments such as commercial
paper, bankers' acceptances, certificates of deposits, fixed time deposits,
repurchase agreements, and short-term debt of the U.S. Government or its
agencies. The Short-Intermediate Term Master Portfolio is actively managed.
Although its investment objective is related to the performance of the LB
Intermediate Bond Index, the Short-Intermediate Term Master Portfolio does not
attempt to replicate the portfolio composition of that Index. The Short-
Intermediate Term Master Portfolio may hold instruments with different
maturities, as well as certain investment securities -- such as collateralized
mortgage obligations and other asset-backed securities -- which are not included
in the Index. A more complete description of the securities that may be
purchased by the Short-Intermediate Term Master Portfolio is contained in
"Appendix -- Additional Investment Policies." As similar types of securities are
developed in the marketplace, they may be considered for investment by the
Short-Intermediate Term Master Portfolio, but the Short-Intermediate Term Master
Portfolio may not invest in such securities prior to adding appropriate
disclosure. The Short-Intermediate Term Master Portfolio is advised by BGFA and
sub-advised by Wells Fargo Bank.
Under normal market conditions, the Short-Intermediate Term Master Portfolio
seeks to maintain an average weighted portfolio maturity generally in the 2-to-5
year range. Under unusual market conditions, the Short-Intermediate Term Master
Portfolio may shorten or lengthen its average weighted portfolio maturity beyond
the 2-to-5 year range.
The LB Intermediate Bond Index consists of government (Treasury and agency)
and corporate debt obligations with remaining maturities between one and ten
years. Each obligation is represented in the LB Intermediate Bond Index in
proportion to its outstanding market value. The exact composition of the LB
Intermediate Bond Index varies according to the characteristics of the
securities outstanding in the marketplace.
Only investment-grade securities are considered for investment. These
securities are identified by their ratings according to one of two major rating
services, S&P and Moody's. The rating systems employed by each service are
described in the Appendix to this Prospectus. Each service classifies securities
into broad categories starting with "investment grade" at the top and ranging
downward through more speculative classes, including so-called "junk bonds," to
securities that are virtually worthless. The "investment grade" category is
subdivided into four rating groups by both services. The four rating groups are
called "AAA"/"Aaa," "AA"/"Aa," "A/A," and "BBB"/"Baa" by S&P and Moody's,
respectively. Obligations with the lowest investment grade rating have
speculative characteristics, and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than in the case of higher grade debt obligations. The
Short-Intermediate Term Master Portfolio may invest in securities of all four
rating groups; however, most of the Master Portfolio's assets are invested in
securities that, at the time of purchase, are rated in the third group or
higher, denoted "A" or better by both rating services. Asset-backed securities
are further restricted to the top two rating groups at time of purchase.
Mortgage-related securities which are issued or guaranteed by U.S. Government
agencies are all currently considered to be in the highest rating category.
Subsequent to its purchase by the Master Portfolio, an issue of securities may
cease to be rated or its rating may be reduced below the minimum rating required
for purchase by the Master Portfolio. The adviser and sub-adviser consider such
an event in determining whether the Master Portfolio should continue to hold the
obligation. To the extent the Master Portfolio continues to hold such
obligations, it may be subject to additional risk of default.
In the marketplace it is generally the case that higher-risk securities carry
higher yields-to-maturity. That is, investors tend to demand higher returns for
securities with longer maturities or lower credit quality rating than for
similar securities of shorter maturities or higher credit quality ratings. The
amount of increased return for increased risk, however, changes from time to
time. The Master Portfolio seeks to emphasize those maturity
3
<PAGE>
segments or rating groups that appear to offer the most favorable returns
relative to their risks, within the maturity and quality ranges described above.
The Short-Intermediate Term Master Portfolio may invest some of its assets (no
more than 10% of total assets under normal market conditions) in high quality
money market instruments, which include U.S. Government obligations, obligations
of domestic and foreign banks, repurchase agreements, commercial paper
(including variable amount master demand notes) and short-term corporate debt
obligations. Such investments are made on an ongoing basis to provide liquidity
and, to a greater extent, on a temporary basis when there is an unexpected or
abnormal level of investor purchases or redemptions of Master Portfolio shares
or when "defensive" strategies are appropriate.
The portfolio turnover rate for the Short-Intermediate Term Master Portfolio
is not expected to exceed 300%. Portfolio turnover generally involves some
expense to the Master Portfolio, including brokerage commissions or dealer mark-
ups and other transaction costs on the sale of securities and the reinvestment
in other securities. Portfolio turnover also can generate short-term capital
gains tax consequences.
RISK CONSIDERATIONS.
GENERAL -- The net asset value per interest of each Master Portfolio is neither
insured nor guaranteed, is not fixed and should be expected to fluctuate.
EQUITY SECURITIES -- The stock investments of the Master Portfolios are subject
to equity market risk. Equity market risk is the possibility that common stock
prices will fluctuate or decline over short or even extended periods. The U.S.
stock market tends to be cyclical, with periods when stock prices generally rise
and periods when prices generally decline. Throughout the first six months of
1997, the stock market, as measured by the S&P 500 Index and other commonly used
indices, was trading at or close to record levels. There can be no guarantee
that these performance levels will continue.
The Growth Stock Master Portfolio may invest a significant portion of its assets
in the securities of smaller and newer issuers. Investments in such companies
may present opportunities for capital appreciation because of high potential
earnings growth. However, such investments may present greater risks than
investments in larger-size companies with more established operating histories,
diverse product lines and financial capacity. Securities of small and new
companies generally trade less frequently or in limited volume, or only in the
over-the-counter market or a regional securities exchange. As a result, the
prices of such securities may be more volatile than those of larger, more
established companies and, as a group, these securities may suffer more severe
price declines during periods of generally declining equity prices.
DEBT SECURITIES -- The debt instruments in which the Master Portfolios may
invest are subject to credit and interest rate risk. Credit risk is the risk
that issuers of the debt instruments in which the Master Portfolios invest may
default on the payment of principal and/or interest. Interest-rate risk is the
risk that increases in market interest rates may adversely affect the value of
the debt instruments in which the Master Portfolios invest. The value of the
debt instruments generally changes inversely to market interest rates. 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. Changes in the financial strength of an
issuer or changes in the ratings of any particular security may also affect the
value of these investments. Although some of the Master Portfolios' portfolio
securities are guaranteed by the U.S. Government, its agencies or
instrumentalities, such securities are subject to interest rate risk and the
market value of these securities, upon which the Master Portfolios' daily net
asset value is based, will fluctuate. No assurance can be given that the U.S.
Government would provide financial support to its agencies or instrumentalities
where it is not obligated to do so.
In addition, some of the asset-backed securities in which the Short-Intermediate
Term Master Portfolio may invest are subject to extension risk. This is the risk
that when interest rates rise prepayments of the underlying obligations slow,
thereby lengthening the duration and potentially reducing the value of the
securities.
FOREIGN SECURITIES -- The Master Portfolios may invest in the securities of
foreign issuers. Investing in the securities of issuers in any foreign country,
including American Depository Receipts ("ADRs") and European Depository Receipts
("EDRs") and similar securities, involves special risks and considerations not
typically associated with investing in U.S. companies. These include
differences in accounting, auditing and financial reporting standards; generally
higher commission rates on foreign portfolio transactions; the possibility of
nationalization, expropriation or confiscatory taxation; adverse changes in
investment or exchange control regulations (which may include suspension of the
ability to transfer currency from a country); and political, social and monetary
or diplomatic developments that could affect U.S. investments in foreign
countries. Additionally, dispositions of foreign securities and dividends and
interest payable on those securities may be subject to foreign taxes, including
withholding taxes. Foreign securities often trade with less frequency and
volume than domestic securities and, therefore, may exhibit greater price
volatility. Additional costs associated with an investment in foreign
securities may include higher custodial fees than apply to domestic custodial
arrangements and transaction costs of foreign currency conversions. Changes in
foreign exchange rates also will affect the value of securities denominated or
quoted in currencies other than the U.S. dollar. A Master Portfolio's
performance may be affected either
4
<PAGE>
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.
ITEM 5. MANAGEMENT OF THE MASTER PORTFOLIOS.
INVESTMENT ADVISER AND SUB-INVESTMENT ADVISER -- Barclays Global Fund Advisors
("BGFA") serves as investment adviser to each Master Portfolio. BGFA is an
indirect subsidiary of Barclays Bank PLC ("Barclays") and is located at 45
Fremont Street, San Francisco, CA 94105. As of April 30, 1997, BGFA and its
affiliates provide investment advisory services for $428.9 billion of assets
under management.
BGFA furnishes to each Master Portfolio investment guidance and policy
direction in connection with the daily portfolio management of such Master
Portfolio. BGFA furnishes to MSIT's Board of Trustees periodic reports on the
investment strategy and performance of each Master Portfolio.
BGFA has retained Wells Fargo Bank as sub-investment adviser to each Master
Portfolio. Prior to January 1, 1996, Wells Fargo Bank served as investment
adviser to each Master Portfolio. As sub-investment adviser, Wells Fargo Bank is
responsible for the day-to-day portfolio management of each Master Portfolio.
The same Wells Fargo Bank investment professionals that previously managed the
investment portfolio of each Master Portfolio continue to manage, subject to the
overall supervision of BGFA, each Master Portfolio's investment portfolio.
Currently, Wells Fargo Bank is the investment adviser or sub-investment adviser
to five other registered investment companies. Wells Fargo Bank, a wholly owned
subsidiary of Wells Fargo & Company, is located at 525 Market Street, San
Francisco, California 94105.
BGFA is entitled to receive monthly fees at the annual rate of 0.60% and 0.45%
of the average daily net assets of the Growth Stock and Short-Intermediate Term
Master Portfolio, respectively, as compensation for its advisory services. From
time to time, BGFA may waive such fees in whole or in part. Any such waiver will
reduce the expenses of a Master Portfolio and, accordingly, have a favorable
impact on the return and yield of such Master Portfolio. Wells Fargo Bank is
entitled to receive from BGFA monthly fees at the annual rate of 0.15% and 0.10%
of the average daily net assets of the Growth Stock and Short-Intermediate Term
Master Portfolio, respectively, as compensation for its sub-advisory services.
For the year ended February 28, 1997, the Growth Stock Master Portfolio and
the Short-Intermediate Term Master Portfolio paid fees at the annual rate of
0.60% and 0.45%, respectively, of their average daily net assets to BGFA for its
services as investment adviser. For the year ended February 28, 1997, BGFA paid
fees at the annual rate of 0.15% and 0.10% of the average daily net assets of
the Growth Stock Master Portfolio and Short-Intermediate Term Master Portfolio,
respectively, to Wells Fargo Bank as compensation for its sub-advisory services.
Purchase and sale orders of the securities held by the Master Portfolio may be
combined with those of other accounts that Wells Fargo Bank manages or advises,
and for which it has brokerage placement authority, in the interest of seeking
the most favorable overall net results. When Wells Fargo Bank, subject to the
supervision of BGFA and the overall authority of MSIT's Board of Trustees,
determines that a particular security should be bought or sold for the Master
Portfolio and other accounts managed by Wells Fargo Bank, it undertakes to
allocate those transactions among the participants equitably. From time to time,
a Master Portfolio, to the extent consistent with its investment objective,
policies and restrictions, may invest in securities of companies with which
Wells Fargo Bank has a lending relationship. BGFA may deal, trade and invest
for its own account in the types of securities in which the Master Portfolio may
invest. BGFA has informed MSIT that in making its investment decisions it does
not obtain or use material inside information in its possession.
Morrison & Foerster LLP, counsel to MSIT and special counsel to BGFA and Wells
Fargo Bank, has advised MSIT, BGFA and Wells Fargo Bank that BGFA, Wells Fargo
Bank and their affiliates may perform the services contemplated by the advisory
contracts, sub-advisory contracts and this Part A without violation of the
Glass-Steagall Act. Such counsel has pointed out, however, that there are no
controlling judicial or administrative
5
<PAGE>
interpretations or decisions and that future judicial or administrative
interpretations of, or decisions relating to, present federal or state statutes,
including the Glass-Steagall Act, and regulations relating to the permissible
activities of banks and their subsidiaries or affiliates, as well as future
changes in such statutes, regulations and judicial or administrative decisions
or interpretations, could prevent such entities from continuing to perform, in
whole or in part, such services. If any such entity were prohibited from
performing any such services, it is expected that new agreements would be
proposed or entered into with another entity or entities qualified to perform
such services.
PORTFOLIO MANAGERS.
THE GROWTH STOCK MASTER PORTFOLIO
Mr. Steve Enos, as co-portfolio manager, is responsible for the day-to-day
management of the Growth Stock Master Portfolio. Mr. Enos joined Wells Fargo
Bank in 1993 and is a member of the Wells Fargo Bank Growth Equity Team. He
began his career with First Interstate Bank, where he was assistant vice
president and portfolio manager. From 1991 to 1993, Mr. Enos was a principal at
Dolan Capital Management where he managed both personal and pension portfolios.
Mr. Enos received his undergraduate degree in Economics from the University of
California at Davis. Mr. Enos is a Chartered Financial Analyst and a member of
the Association for Investment Management and Research.
Mr. Thomas Zeifang, as co-portfolio manager, is also responsible for the day-
to-day management of the Growth Stock Master Portfolio. Mr. Zeifang joined
Wells Fargo Bank in the summer of 1995 and is primarily responsible for
providing fundamental equity analysis. Mr. Zeifang was an analyst at Fleet
Investment Advisors from 1992 to 1995 and prior to that worked for three years
as an assistant portfolio manager at Marine Midland Bank. Mr. Zeifang holds a
B.B.A. in finance from Saint Bonaventure University, an M.B.A. in finance and
business policy from the William E. Simon School of Business Administration, and
is a Chartered Financial Analyst.
THE SHORT-INTERMEDIATE TERM MASTER PORTFOLIO
Ms. Tamyra Thomas, who co-manages the portfolio of the Short-Intermediate Term
Master Portfolio with Mr. Smith, has been both manager and co-manager of the
portfolio of the Master Portfolio since its inception. Ms. Thomas is a senior
vice-president and the chief fixed income investment officer of the Wells Fargo
Investment Management Group Policy Committee. Ms. Thomas has managed bond
portfolios for over a decade. She currently manages in excess of $1 billion of
long-term taxable bond portfolios for various foundations, defined benefit plans
and other clients. Prior to joining Wells Fargo Bank in early 1988, she held a
number of senior investment positions for the Valley Bank & Trust Company of
Utah including Vice President and Manager of the investment department and
Chairman of the Trust Investment Committee. She hold a B.S. from the University
of Utah and was past president of the Utah Bond Club. Ms. Thomas is a chartered
financial analyst.
Mr. Scott Smith has been co-manager of the portfolio of the Short-Intermediate
Term Master Portfolio since June of 1995. He joined Wells Fargo Bank in 1988 as
a taxable money market portfolio specialist. His experience includes a position
with a private money management firm with mutual fund investment operations. Mr.
Smith holds a B.A. from the University of San Diego and is a chartered financial
analyst.
CO-ADMINISTRATORS -- Stephens and Barclays Global Investors, N.A. ("BGI") are
the Master Portfolios' co-administrators. Stephens and BGI provide the Master
Portfolios with administration services, including general supervision of the
Master Portfolios' non-investment operations, coordination of the other services
provided to the Master Portfolios, 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 MSIT's trustees and officers. Stephens also
furnishes office space and certain facilities to conduct the Master Portfolios'
business, and compensates MSIT's trustees, officers and employees who are
affiliated with Stephens. In addition, except as outlined below under
"Expenses", Stephens and BGI will be
6
<PAGE>
responsible for paying all expenses incurred by the Master Portfolios other than
the fees payable to BGFA. Stephens and BGI are not entitled to compensation for
providing administration services to a Master Portfolio.
BGI has delegated certain of its duties as co-administrator to Investors Bank
& Trust Company ("IBT"). IBT, as sub-administrator, is compensated by BGI for
performing certain administration services. Prior to October 21, 1996, Stephens
was the Master Portfolios' sole administrator and received fees for its services
as described in the SAI.
PLACEMENT AGENT -- Stephens is the placement agent for the Master Portfolios.
Stephens is a full service broker/dealer and investment advisory firm located at
111 Center Street, Little Rock, Arkansas 72201. Stephens and its predecessor
have been providing securities and investment services for more than 60 years,
including discretionary portfolio management services since 1983. Stephens
currently manages investment portfolios for pension and profit sharing plans,
individual investors, foundations, insurance companies and university
endowments. Stephens does not receive compensation for acting as placement
agent.
CUSTODIAN -- IBT currently acts as the Master Portfolios' custodian. The
principal business address of IBT is 200 Clarendon Street, Boston, Massachusetts
02116. IBT is not entitled to receive compensation for its custodial services so
long as it is entitled to receive compensation for providing sub-administration
services to the Master Portfolios. Prior to October 21, 1996, Barclays Global
Investors, N.A. ("BGI") acted as the Master Portfolios' custodian. The principal
business address of BGI is 45 Fremont Street, San Francisco, California 94105.
BGI did not receive compensation for its custodial services.
TRANSFER AGENT -- Wells Fargo Bank is each Master Portfolio's Transfer and
Dividend Disbursing Agent (the "Transfer Agent"). The principle business
address of Wells Fargo Bank is 525 Market Street, San Francisco, California
94105.
EXPENSES -- Except for extraordinary expenses, brokerage and other expenses
connected to the execution of portfolio transactions and certain other expenses
as described above which are borne by the Master Portfolios, Stephens and BGI
have agreed to bear all costs of the Master Portfolios' and MSIT's operations.
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.
ORGANIZATION AND INTERESTS
MSIT is organized as a trust under the laws of the State of Delaware.
Investors in MSIT are each liable for all of its obligations. However, the risk
of an investor incurring financial loss on account of such liability is limited
to circumstances in which both inadequate insurance exists and MSIT itself is
unable to meet its obligations.
MSIT's Declaration of Trust permits the Board of Trustees to issue beneficial
interests in the series of MSIT, and to permit investors to increase or decrease
their interest in such series. MSIT has no intention to hold annual meetings of
investors, but will hold special meetings of investors when, in the judgment of
the Trustees, it is necessary or desirable to submit matters for an investor
vote. Investors holding 10% or more of the shares outstanding and entitled to
vote are entitled to call a meeting of investors for purposes of voting on
removal of a Trustee or Trustees.
Each investor is entitled to a vote in proportion to the amount of the
investor's investment in MSIT. Interests in a Master Portfolio may not be
transferred, but an investor may withdraw all or any portion of its investment
at any time at net asset value. All interests in a Master Portfolio, when
issued, will be fully paid and nonassessable, and investors have no preemptive
rights. A more detailed statement of the rights of investors is contained in the
Part B.
As of June 1, 1997, the Growth Stock Fund and the Short-Intermediate Term Fund
of MasterWorks Funds Inc., 111 Center Street, Little Rock, Arkansas 72201, owned
approximately 99% of the voting securities of the Growth Stock Master Portfolio
and approximately 99% of the voting securities of the Short Intermediate Term
Master
7
<PAGE>
Portfolio, respectively, and each Fund could be considered a "controlling
person" (for purposes of the 1940 Act) of the corresponding Master Portfolio.
INTERESTS IN A MASTER PORTFOLIO ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR
ISSUED, ENDORSED OR GUARANTEED BY, BGFA, WELLS FARGO BANK OR ANY OF THEIR
AFFILIATES. SUCH INTERESTS ARE NOT INSURED BY THE U.S. GOVERNMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT
AGENCY. AN INVESTMENT IN A MASTER PORTFOLIO INVOLVES CERTAIN RISKS, INCLUDING
THE POSSIBLE LOSS OF PRINCIPAL. THE SHARE PRICE AND INVESTMENT RETURN OF EACH
MASTER PORTFOLIO IS EXPECTED TO FLUCTUATE AND INVESTMENTS IN THE MASTER
PORTFOLIOS ARE NOT GUARANTEED.
DIVIDENDS AND DISTRIBUTIONS
The net investment income of a Master Portfolio generally will be declared and
paid as a dividend daily to all investors of record as of 1:00 p.m. (Pacific
time) with respect to each Master Portfolio. Net investment income for a
Saturday, Sunday or Holiday (as defined below) will be declared as a dividend to
investors of record as of 1:00 p.m. (Pacific time) on the previous business day
with respect to each Master Portfolio. All the net investment income of a Master
Portfolio so determined is allocated pro rata among the investors in such Master
Portfolio at the time of such determination.
Dividends and capital gain distributions, if any, paid by a Master Portfolio
will be reinvested in the investor's interest in such Master Portfolio at net
asset value and credited to the investor's account on the payment date.
TAXES
Based upon the anticipated classification of each Master Portfolio for federal
income tax purposes, MSIT believes that each Master Portfolio will qualify as a
partnership for such purposes. MSIT therefore believes that each Master
Portfolio will not be subject to any federal income tax on its income and net
capital gains (if any). However, each investor in a Master Portfolio will be
taxable on its distributive share of such Master Portfolio's taxable income in
determining its federal income tax liability. The determination of such share
will be made in accordance with the Internal Revenue Code of 1986, as amended
(the "Code"), and regulations promulgated thereunder.
It is intended that each Master Portfolio's assets, income and distributions
will be managed in such a way that a regulated investment company investing in
such Master Portfolio may satisfy the requirements of Subchapter M of the Code
by investing substantially all of its assets in such Master Portfolio.
Investor inquiries should be directed to Managed Series Investment Trust, 111
Center Street, Little Rock, Arkansas 72201.
ITEM 7. PURCHASE OF INTERESTS.
Interests in a Master Portfolio may be purchased on any day such Master
Portfolio is open for business (a "Business Day"). Each Master Portfolio is open
for business each day the New York Stock Exchange ("NYSE") is open for trading.
The NYSE currently observes the following holidays: New Year's Day, Martin
Luther King, Jr.'s Birthday, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day (each, a
"Holiday").
MSIT is a no-load open-end management investment company which was organized
as a business trust under the laws of Delaware on October 28, 1993. Beneficial
interests in a Master Portfolio are issued solely in private placement
transactions that do not involve any "public offering" within the meaning of
Section 4(2) of the 1933 Act. Investments in a Master Portfolio may only be made
by registered broker/dealers or by investment companies, insurance company
separate accounts, common or commingled trust funds, group trusts or "accredited
investors"
8
<PAGE>
within the meaning of Regulation D under the 1933 Act. This registration
statement does not constitute an offer to sell, or the solicitation of an offer
to buy, any "security" within the meaning of the 1933 Act.
There is no minimum initial or subsequent purchase amount in a Master
Portfolio. MSIT, on behalf of each Master Portfolio, reserves the right to
reject any purchase order. If accepted by a Master Portfolio, investments in
such Master Portfolio may be made in exchange for securities which are eligible
for acquisition by such Master Portfolio as described in this Part A. All
dividends, interest, subscription, or other rights pertaining to such securities
shall become the property of such Master Portfolio and must be delivered to such
Master Portfolio by the investor upon receipt from the issuer.
A Master Portfolio will not accept securities in exchange for interests
unless: (1) such securities are, at the time of the exchange, eligible for
purchase by such Master Portfolio; (2) the investor represents and agrees that
all securities offered to be exchanged are not subject to any restrictions upon
their sale by such Master Portfolio under the 1933 Act or under the laws of the
country in which the principal market for such securities exists, or otherwise;
(3) the value of any such security (except U.S. Government securities) being
exchanged together with any other securities of the same issuer owned by a
Master Portfolio will not exceed 5% of the net assets of such Master Portfolio
immediately after the transaction; and (4) such securities are consistent with
the Master Portfolio's investment objective and policies, as applied by BGFA.
Interests in a Master Portfolio are offered continuously at the net asset
value ("NAV") next determined after a purchase order is effective, without a
sales load. Purchase orders for interests in a Master Portfolio will be effected
if received by 1:00 p.m. (Pacific time) on any Business Day.
Each investor in a Master Portfolio may add to or reduce its investment in
such Master Portfolio on any Business Day. The NAV of each Master Portfolio is
calculated at 1:00 p.m. (Pacific time) on any Business Day. The value of each
investor's beneficial interest in a Master Portfolio will be determined by
multiplying the net asset value of such Master Portfolio by the percentage,
effective for that day, that represents that investor's share of the aggregate
beneficial interests in a Master Portfolio. Any additions or withdrawals, which
are to be effected on that day, will then be effected. The investor's percentage
of the aggregate beneficial interests in a Master Portfolio will then be re-
computed as the percentage equal to the fraction (i) the numerator of which is
the value of such investor's investment in a Master Portfolio as of 1:00 p.m. on
such day plus or minus, as the case may be, the amount of any additions to or
withdrawals from the investor's investment in a Master Portfolio effected on
such day, and (ii) the denominator of which is the aggregate net asset value of
such Master Portfolio as of 1:00 p.m. on such day plus or minus, as the case may
be, the amount of the net additions to or withdrawals from the aggregate
investments in such Master Portfolio by all investors in a Master Portfolio. The
percentage so determined will then be applied to determine the value of the
investor's interest in a Master Portfolio as of 1:00 p.m. on the following
Business Day.
By investing in MSIT, an investor appoints the Transfer Agent, as agent, to
establish an open account to which all investments will be credited, together
with any dividends and capital gain distributions that are paid in additional
interests in the Trust.
DETERMINATION OF NET ASSET VALUE
The net asset value of each Master Portfolio is determined on any Business
Day.
Except for debt obligations with remaining maturities of 60 days or less,
which are valued at amortized cost, the other assets of each Master Portfolio
are valued at current market prices, or, if such prices are not readily
available, at fair value as determined in good faith in accordance with
guidelines approved by MSIT's Board of Trustees. Prices used for such valuations
may be provided by independent pricing services.
9
<PAGE>
ITEM 8. REDEMPTION OR REPURCHASE.
An investor in a Master Portfolio may withdraw all or a portion of its
investment on any Business Day at the net asset value next determined after a
withdrawal request in proper form is furnished by the investor to such Master
Portfolio. The Master Portfolios make no charge for redemption transactions. The
proceeds of a withdrawal will be paid by the Master Portfolios in federal funds
normally on the day after the withdrawal is effected, but in any event within
seven days. At a Master Portfolio's option, payment of redemption proceeds may
be made in securities, subject to regulation by some state securities
commissions. Investments in a Master Portfolio may not be transferred.
The right of any investor to receive payment with respect to any withdrawal
may be suspended or the payment of the withdrawal proceeds postponed during any
period in which the NYSE is closed (other than weekends or Holidays) or trading
on the NYSE is restricted, or, to the extent otherwise permitted by the 1940
Act, if an emergency exists.
ITEM 9. PENDING LEGAL PROCEEDINGS.
Not applicable.
10
<PAGE>
APPENDIX -- ADDITIONAL INVESTMENT POLICIES
The following describes certain instruments in which the Master Portfolios may
invest.
U.S. GOVERNMENT OBLIGATIONS -- The Master Portfolios may invest in various
types of U.S. Government obligations. U.S. Government obligations include
securities issued or guaranteed as to principal and interest by the U.S.
Government, its agencies or instrumentalities. 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 obligations 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, the investor
must look principally to the agency or instrumentality issuing or guaranteeing
the obligation for ultimate repayment, which agency or instrumentality may be
privately owned. There can be no assurance that the U.S. Government would
provide financial support to its agencies or instrumentalities where it is not
obligated to do so. 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.
SECURITIES OF NON-U.S. ISSUERS -- The Master Portfolios may invest in certain
securities of non-U.S. issuers as discussed below.
Obligations of Foreign Governments, Banks and Corporations -- Each Master
----------------------------------------------------------
Portfolio may invest in U.S. dollar-denominated short-term obligations issued or
guaranteed by one or more foreign governments or any of their political
subdivisions, agencies or instrumentalities that are determined by BGFA or Wells
Fargo Bank to be of comparable quality to the other obligations in which such
Master Portfolio may invest. The Master Portfolios may also invest in debt
obligations of supranational entities. Supranational entities include
international organizations designated or supported by governmental entities to
promote economic reconstruction or development and international banking
institutions and related government agencies. Examples include the International
Bank for Reconstruction and Development (the World Bank), the European Coal and
Steel Community, the Asian Development Bank and the InterAmerican Development
Bank. The percentage of each Master Portfolio's assets invested in obligations
of foreign governments and supranational entities will vary depending on the
relative yields of such securities, the economic and financial markets of the
countries in which the investments are made and the interest rate climate of
such countries.
Each Master Portfolio may invest a portion (up to 25% for the Short-
Intermediate Term Master Portfolio) of its total assets in high-quality, short-
term (one year or less) debt obligations of foreign branches of U.S. banks or
U.S. branches of foreign banks that are denominated in and pay interest in U.S.
dollars. The Short-Intermediate Term Master Portfolio may also invest in U.S.
dollar-denominated debt obligations issued by Foreign corporations, sometimes
called Yankee bonds.
Emerging Market Securities -- The Growth Stock Master Portfolio may invest up
--------------------------
to 15% of its assets in equity securities of companies in "emerging markets."
The Master Portfolio considers countries with emerging markets to include the
following: (i) countries with an emerging stock market as defined by the
International Finance Corporation; (ii) countries with low- to middle-income
economies according to the International Bank for Reconstruction and Development
(more commonly referred to as the World Bank); and (iii) countries listed in
World Bank publications as developing. The adviser may invest in those emerging
markets that have a relatively low gross national product per capita, compared
to the world's major economies, and which exhibit potential for rapid economic
growth. The adviser believes that investment in equity securities for emerging
market issuers offers significant potential for long-term capital appreciation.
Equity securities of emerging market issuers may include common stock,
preferred stocks (including convertible preferred stocks) and warrants; bonds,
notes and debentures convertible into common or preferred stock; equity
interests in foreign investment funds or trusts and real estate investment trust
securities. The Master
A-1
<PAGE>
Portfolio also may invest in American Depositary Receipts, European Depositary
Receipts, Continental Depositary Receipts, Global Depositary Receipts,
International Depositary Receipts and similar instruments.
Emerging market countries include, but are not limited to: Argentina, Brazil,
Chile, China, the Czech Republic, Columbia, Ecuador, Greece, Hong Kong,
Indonesia, India, Malaysia, Mexico, the Philippines, Poland, Portugal, Peru,
Russia, Singapore, South Africa, Thailand, Taiwan and Turkey. A company is
considered in a country, market or region if it conducts its principal business
activities there, namely, if it derives a significant portion (at least 50%) of
its revenues or profits from goods produced or sold, investments made, or
services performed therein or has at least 50% of its assets situated in such
country, market or region.
American Depositary Receipts and Similar Instruments -- The Growth Stock
-----------------------------------------------------
Master Portfolio may invest in foreign securities through American Depositary
Receipts ("ADRs"), Canadian Depositary Receipts ("CDRs"), European Depositary
Receipts ("EDRs"), International Depositary Receipts ("IDRs") and Global
Depositary Receipts ("GDRs") or other similar securities convertible into
securities of foreign issuers. These securities may not necessarily be
denominated in the same currency as the securities into which they may be
converted. ADRs (sponsored or unsponsored) are receipts typically issued by a
U.S. bank or trust company and traded on a U.S. stock exchange, and CDRs are
receipts typically issued by a Canadian bank or trust company that evidence
ownership of underlying foreign securities. Issuers of unsponsored ADRs are not
contractually obligated to disclose material information in the U.S. and,
therefore, such information may not correlate to the market value of the
unsponsored ADR. EDRs and IDRs are receipts typically issued by European banks
and trust companies, and GDRs are receipts issued by either a U.S. or non-U.S.
banking institution, that evidence ownership of the underlying foreign
securities. Generally, ADRs in registered form are designed for use in U.S.
securities markets and EDRs and IDRs in bearer form are designed primarily for
use in Europe. The Master Portfolio may invest up to 25% of its assets in these
types of securities.
FLOATING- AND VARIABLE-RATE OBLIGATIONS -- The Master Portfolios may purchase
debt instruments with interest rates that are periodically adjusted at specified
intervals or whenever a benchmark rate or index changes. These adjustments
generally limit the increase or decrease in the amount of interest received on
the debt instruments. Floating- and variable-rate instruments are subject to
interest-rate risk and credit risk.
BONDS -- Certain of the debt instruments purchased by the Short-Intermediate
Term Master Portfolio may be bonds. A bond is an interest-bearing security
issued by a company or governmental unit. The issuer of a bond has a contractual
obligation to pay interest at a stated rate on specific dates and to repay
principal (the bond's face value) periodically or on a specified maturity date.
An issuer may have the right to redeem or "call" a bond before maturity, in
which case the investor may have to reinvest the proceeds at lower market rates.
Most bonds bear interest income at a "coupon" rate that is fixed for the life of
the bond. The value of a fixed rate bond usually rises when market interest
rates fall, and falls when market interest rates rise. Accordingly, a fixed rate
bond's yield (income as a percent of the bond's current value) may differ from
its coupon rate as its value rises or falls.
Other types of bonds bear income at an interest rate that is adjusted
periodically. Because of their adjustable interest rates, the value of
"floating-rate" or "variable-rate" bonds fluctuates much less in response to
market interest rate movements than the value of fixed rate bonds. Also, the
Master Portfolios may treat some of these bonds as having a shorter maturity for
purposes of calculating the weighted average maturity of their investment
portfolios. Bonds may be senior or subordinated obligations. Senior obligations
generally have the first claim on a corporation's earnings and assets and, in
the event of liquidation, are paid before subordinated debt. Bonds may be
unsecured (backed only by the issuer's general creditworthiness) or secured
(also backed by specified collateral).
ASSET-BACKED SECURITIES -- The Short-Intermediate Term Master Portfolio 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,
A-2
<PAGE>
net of fees and costs which may be incurred) may expose the Master Portfolio 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 Master Portfolio may invest up to 25% of its total assets in investment
grade collateralized mortgage obligations ("CMOs"). 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. The Master Portfolio may
purchase CMOs that are:
(1) collateralized by fixed rate or adjustable rate mortgages that are
guaranteed, as to payment of principal and interest, by a U.S. Government
agency or instrumentality;
(2) directly guaranteed, as to payment of principal and interest by the
issuer, which guarantee is collateralized by U.S. Government securities;
or
(3) collateralized by mortgage-backed securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities.
The Short-Intermediate Term Master Portfolio may invest in asset-backed
securities ("ABSs"), which are unrelated to mortgage loans. These asset-backed
securities may consist of undivided fractional interests in pools of consumer
loans or receivables held in trust. Examples include certificates for automobile
receivables (CARS) and credit card receivables (CARDS). Payments of principal
and interest on these asset-backed securities are "passed through" on a monthly
or other periodic basis to certificate holders and are typically supported by
some form of credit enhancement, such as a letter of credit, surety bond,
limited guaranty, or subordination. The extent of credit enhancement varies, but
usually amounts to only a fraction of the asset-backed security's par value
until exhausted. Ultimately, asset-backed securities are dependent upon payment
of the consumer loans or receivables by individuals, and the certificate holder
frequently has no recourse to the entity that originated the loans or
receivables. The actual maturity and realized yield will vary based upon the
prepayment experience of the underlying asset pool and prevailing interest rates
at the time of prepayment. Asset-backed securities are relatively new
instruments and may be subject to greater risk of default during periods of
economic downturn than other instruments. Also, the secondary market for certain
asset-backed securities may not be as liquid as the market for other types of
securities, which could result in a Master Portfolio experiencing difficulty in
valuing or liquidating such securities.
OPTION TRANSACTIONS -- The Growth Stock Master Portfolio may use options as a
substitute for a comparable market position in the underlying securities. The
Master Portfolio may invest in call and put options on a specific security. The
Master Portfolio may invest up to 15% of its assets, represented by the premium
paid, in the purchase of call and put options in respect of specific securities
(or groups of "baskets" of specific securities). The purchaser of an option
risks a total loss of the premium paid for the option if the price of the
underlying security does not increase or decrease sufficiently to justify
exercise. The seller of an option, on the other hand, will recognize the premium
as income if the option expires unrecognized but foregoes any capital
appreciation in excess of the exercise price in the case of a call option and
may be required to pay a price in excess of current market value in the case of
a put option. The Master Portfolio may purchase and write unlisted over-the-
counter options with
A-3
<PAGE>
broker/dealers deemed creditworthy by the adviser. Closing transactions for such
options are usually effected directly with the same broker/dealer that effected
the original option transaction. The Master Portfolio 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.
INVESTMENT COMPANY SECURITIES -- Each Master Portfolio may invest in
securities issued by other investment companies which principally invest in
securities of the type in which 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 Master Portfolio may also purchase shares of exchange listed closed-end
funds.
ILLIQUID SECURITIES -- Each Master Portfolio may invest up to 15% of the value
of its net assets in securities as to which a liquid trading market does not
exist, provided such investments are consistent with its investment objective.
Such securities may include securities that are not readily marketable, such as
privately issued securities and other securities that are subject to legal or
contractual restrictions on resale, floating- and variable-rate demand
obligations as to which the Master Portfolio cannot exercise a demand feature on
not more than seven days' notice and as to which there is no secondary market
and repurchase agreements providing for settlement more than seven days after
notice.
RESTRICTED (RULE 144A) SECURITIES -- The Growth Stock Master Portfolio may
invest in privately issued securities 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
Master Portfolio. Privately issued securities that are determined by the sub-
adviser to be "illiquid" will be subject to each Master Portfolio's policy of
not investing more than 15% of its net assets in illiquid securities.
CONVERTIBLE SECURITIES -- The Growth Stock Master Portfolio may invest in
convertible securities that provide current income and are issued by companies
with the characteristics described above for the Master Portfolio and that have
a strong earnings and credit record. The Master Portfolio may purchase
convertible securities that are fixed-income debt securities or preferred
stocks, and which may be converted at a stated price within a specific period of
time into a certain quantity of the common stock of the same issuer. Convertible
securities, while usually subordinate to similar nonconvertible securities, are
senior to common stocks in an issuer's capital structure. Convertible securities
offer flexibility by providing the investor with a steady income stream (which
generally yield a lower amount than similar nonconvertible securities and a
higher amount than common stocks) as well as the opportunity to take advantage
of increases in the price of the issuer's common stock through the conversion
feature. Fluctuations in the convertible security's price can reflect changes in
the market value of the common stock or changes in market interest rates. At
most, 5% of the Master Portfolio's net assets will be invested, at the time of
purchase, in convertible securities that are not rated in the four highest
rating categories by one or more NRSROs, such as Moody's or S&P, or unrated but
determined by BGFA or Wells Fargo Bank to be of comparable quality.
CORPORATE REORGANIZATIONS -- The Growth Stock Master Portfolio may invest in
securities for which a tender or exchange offer has been made or announced, and
in securities of companies for which a merger, consolidation, liquidation or
similar reorganization proposal has been announced if, in the judgment of BGFA
or Wells Fargo Bank, there is a reasonable prospect of capital appreciation
significantly greater than the added portfolio turnover expenses inherent in the
short term nature of such transactions. The principal risk associated with such
investments is that such offers or proposals may not be consummated within the
time and under the terms
A-4
<PAGE>
contemplated at the time of the investment, in which case, unless such offers or
proposals are replaced by equivalent or increased offers or proposals which are
consummated, the Master Portfolio may sustain a loss.
SHORT-TERM INSTRUMENTS AND TEMPORARY INVESTMENTS -- The Master Portfolios may
invest in high-quality money market instruments on an ongoing basis to provide
liquidity, for temporary purposes when there is an unexpected level of
shareholder purchases or redemptions or when "defensive" strategies are
appropriate. The instruments in which the Master Portfolios may invest include:
(i) short-term obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities (including government-sponsored enterprises); (ii)
negotiable certificates of deposit ("CDs"), bankers' acceptances, 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
that 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 or
Wells Fargo Bank; (iv) non-convertible corporate debt securities (e.g., bonds
and debentures) with remaining maturities at the date of purchase of not more
than one year that are rated at least "Aa" by Moody's or "AA" by S&P; (v)
repurchase agreements; and (vi) short-term, U.S. dollar-denominated obligations
of foreign banks (including U.S. branches) that, at the time of investment have
more than $10 billion, or the equivalent in other currencies, in total assets
and in the opinion of BGFA or Wells Fargo Bank are of comparable quality to
obligations of U.S. banks which may be purchased by the Master Portfolio.
Bank Obligations -- Each Master Portfolio may invest in bank obligations,
----------------
including certificates of deposit, time deposits, bankers' acceptances and other
short-term obligations of domestic banks, foreign subsidiaries of domestic
banks, foreign branches of domestic banks, and domestic and foreign branches of
foreign banks, domestic savings and loan associations and other banking
institutions.
Certificates of deposit are negotiable certificates evidencing the obligation
of a bank to repay funds deposited with it for a specified period of time.
Time deposits are non-negotiable deposits maintained in a banking institution
for a specified period of time at a stated interest rate. Time deposits which
may be held by a Master Portfolio will not benefit from insurance from the Bank
Insurance Fund or the Savings Association Insurance Fund administered by the
Federal Deposit Insurance Corporation.
Bankers' acceptances are credit instruments evidencing the obligation of a
bank to pay a draft drawn on it by a customer. These instruments reflect the
obligation both of the bank and of the drawer to pay the face amount of the
instrument upon maturity. The other short-term obligations may include
uninsured, direct obligations, bearing fixed, floating- or variable-interest
rates.
Commercial Paper and Short-Term Corporate Debt Instruments -- Each Master
----------------------------------------------------------
Portfolio may invest in commercial paper (including variable amount master
demand notes), which consists of short-term, unsecured promissory notes issued
by corporations to finance short-term credit needs. Commercial paper is usually
sold on a discount basis and has a maturity at the time of issuance not
exceeding nine months. Variable amount master demand notes are demand
obligations that permit the investment of fluctuating amounts at varying market
rates of interest pursuant to arrangements between the issuer and a commercial
bank acting as agent for the payee of such notes whereby both parties have the
right to vary the amount of the outstanding indebtedness on the notes. The
investment adviser and/or sub-adviser to each Master Portfolio monitors on an
ongoing basis the ability of an issuer of a demand instrument to pay principal
and interest on demand.
Each Master Portfolio also may invest in non-convertible corporate debt
securities (e.g., bonds and debentures) with not more than one year remaining to
maturity at the date of settlement. A Master Portfolio will invest only in such
corporate bonds and debentures that are rated at the time of purchase at least
"Aa" by Moody's or "AA" by S&P. Subsequent to its purchase by the Master
Portfolio, an issue of securities may cease to be rated or its rating may be
reduced below the minimum rating required for purchase by the Master Portfolio.
The investment adviser
A-5
<PAGE>
and/or sub-adviser to each Master Portfolio will consider such an event in
determining whether the Master Portfolio should continue to hold the obligation.
To the extent the Master Portfolio continues to hold such obligations, it may be
subject to additional risk of default.
Repurchase Agreements -- Each Master Portfolio may enter into repurchase
---------------------
agreements wherein the seller of a security to a Master Portfolio agrees to
repurchase that security from the Master Portfolio at a mutually-agreed upon
time and price. The period of maturity is usually quite short, often overnight
or a few days, although it may extend over a number of months. A Master
Portfolio may enter into repurchase agreements only with respect to securities
that could otherwise be purchased by the Master Portfolio, and all repurchase
transactions must be collateralized. A Master Portfolio may incur a loss on a
repurchase transaction if the seller defaults and the value of the underlying
collateral declines or is otherwise limited or if receipt of the security or
collateral is delayed. The Master Portfolios may participate in pooled
repurchase agreement transactions with other funds advised by BGFA or Wells
Fargo Bank. See "Additional Permitted Investment Activities" in the SAI for
additional information.
FORWARD COMMITMENTS, WHEN-ISSUED PURCHASES AND DELAYED-DELIVERY TRANSACTIONS
- -- Each Master Portfolio may purchase or sell securities on a when-issued or
delayed-delivery basis and make contracts to purchase or sell securities for a
fixed price at a future date beyond customary settlement time. Securities
purchased or sold on a when-issued, delayed-delivery or forward commitment basis
involve a risk of loss if the value of the security to be purchased declines, or
the value of the security to be sold increases, before the settlement date.
Although a Master Portfolio will generally purchase securities with the
intention of acquiring them, a Master Portfolio may dispose of securities
purchased on a when-issued, delayed-delivery or a forward commitment basis
before settlement when deemed appropriate by the adviser.
BORROWING MONEY -- As a fundamental policy, each Master Portfolio is permitted
to borrow to the extent permitted under the 1940 Act. However, each Master
Portfolio currently intends to borrow money only for temporary or emergency (not
leveraging) purposes, and may borrow up to one-third of the value of its total
assets (including the amount borrowed) valued at the lesser of cost or market,
less liabilities (not including the amount borrowed) at the time the borrowing
is made. While borrowings exceed 5% of a Master Portfolio's total assets, the
Master Portfolio will not make any new investments.
LOANS OF PORTFOLIO SECURITIES -- Each Master Portfolio may lend securities
from their portfolios to brokers, dealers and financial institutions (but not
individuals) in order to increase the return on such Master Portfolio's
portfolio. The value of the loaned securities may not exceed one-third of a
Master Portfolio's total assets and loans of portfolio securities are fully
collateralized based on values that are market-to-market daily. The Master
Portfolios will not enter into any portfolio security lending arrangement having
a duration of longer than one year. The principal risk of portfolio lending is
potential default or insolvency of the borrower. In either of these cases, a
Master Portfolio could experience delays in recovering securities or collateral
or could lose all or part of the value of the loaned securities. The Master
Portfolios may pay reasonable administrative and custodial fees in connection
with loans of portfolio securities and may pay a portion of the interest or fee
earned thereon the borrower or a placing broker. See "Additional Permitted
Investment Activities" in the Part B for additional information.
INVESTMENT POLICIES
As a matter of fundamental policy, each Master Portfolio may: (i) not purchase
securities of any issuer (except U.S. Government obligations) if as a result,
with respect to 75% of its total assets, more than 5% of the value of the Master
Portfolio's total assets would be invested in the securities of such issuer or,
with respect to 100% of its total assets, the Master Portfolio would own more
than 10% of the outstanding voting securities of such issuer; (ii) borrow from
banks up to 10% of the current value of its net assets for temporary purposes
only in order to meet redemptions, and these borrowings may be secured by the
pledge of up to 10% of the current value of its net assets (but investments may
not be purchased while any such outstanding borrowing in excess of 5% of its net
assets exists); (iii) make loans of portfolio securities in accordance with its
investment policies; and (iv) not invest 25% or more of its total assets (i.e.,
concentrate) in any particular industry, except that the Master Portfolio may
invest
A-6
<PAGE>
25% or more of its assets in U.S. Government obligations. With respect to
paragraph (i), it may be possible that MSIT would own more than 10% of the
outstanding voting securities of an issuer.
A-7
<PAGE>
MANAGED SERIES INVESTMENT TRUST
GROWTH STOCK MASTER PORTFOLIO
SHORT-INTERMEDIATE TERM MASTER PORTFOLIO
PART B
JUNE 30, 1997
ITEM 10. COVER PAGE.
Managed Series Investment Trust ("MSIT") is an open-end, management investment
company. This Part B is not a prospectus and should be read in conjunction with
MSIT's Part A, also dated June 30, 1997. All terms used in this Part B that are
defined in Part A have the meanings assigned in Part A. A copy of Part A may be
obtained without charge by writing Stephens Inc. ("Stephens"), MSIT's sponsor,
co-administrator and distributor, at 111 Center Street, Little Rock, Arkansas
72201, or by calling Stephens at 1-800-643-9691. MSIT's Registration Statement
may be examined at the office of the Securities and Exchange Commission ("SEC")
in Washington, D.C.
ITEM 11. TABLE OF CONTENTS.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Item 12. General Information and History.......................... 1
Item 13. Investment Objective and Policies........................ 1
Item 14. Management of MSIT....................................... 9
Item 15. Control Persons and Principal Holders of Securities...... 12
Item 16. Investment Advisory and Other Services................... 12
Item 17. Brokerage Allocation and Other Practices................. 14
Item 18. Capital Stock and Other Securities....................... 16
Item 19. Purchase, Redemption and Pricing of Securities........... 17
Item 20. Tax Status............................................... 18
Item 21. Underwriters............................................. 18
Item 22. Calculation of Performance Data.......................... 18
Item 23. Financial Information.................................... 19
Appendix................................................. A-1
Financial Statements..................................... F-1
</TABLE>
ITEM 12. GENERAL INFORMATION AND HISTORY.
Not applicable.
ITEM 13. INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES.
By this offering document, MSIT is offering two diversified portfolios, the
Growth Stock Master Portfolio and the Short-Intermediate Term Master Portfolio
(each a "Master Portfolio" and together, the "Master Portfolios").
Organizations and other entities that hold shares of beneficial interest of a
Master Portfolio may be referred to herein as "feeder funds."
Each Master Portfolio's investment objective is set forth in Item 4, "General
Description of Registrant -- Investment Objective," of Part A. There can be no
assurance that the investment objectives of each Master Portfolio will be
achieved. Each Master Portfolios' investment objective is fundamental and
therefore, 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
such Master Portfolios' outstanding voting interests.
Barclays Global Fund Advisors ("BGFA") serves as investment adviser to each
Master Portfolio. Wells Fargo Bank, N.A. ("Wells Fargo Bank") serves as each
Master Portfolio's sub-investment adviser and Stephens Inc. ("Stephens") serves
as placement agent for each Master Portfolio's interests.
1
<PAGE>
INVESTMENT RESTRICTIONS
Each Master Portfolio has adopted investment policies which may be fundamental
or non-fundamental. Fundamental policies 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 Master
Portfolio. Non-fundamental policies may be changed without interestholder
approval by vote of a majority of the trustees of MSIT, at any time.
The Master Portfolios are subject to the following investment restrictions,
all of which are fundamental policies.
Each Master Portfolio may not:
(1) purchase the securities of issuers conducting their principal business
activity in the same industry if, immediately after the purchase and as a result
thereof, the value of such Master Portfolio's investments in that industry would
be 25% or more of the current value of the Master Portfolio's total assets,
provided that there is no limitation with respect to investments in obligations
of the U.S. Government, its agencies or instrumentalities;
(2) purchase or sell real estate or real estate limited partnerships (other
than securities secured by real estate or interests therein or securities issued
by companies that invest in real estate or interests therein);
(3) purchase commodities or commodity contracts (including futures contracts),
except that each Master Portfolio may purchase securities of an issuer which
invests or deals in commodities or commodity contracts;
(4) purchase interests, leases, or limited partnership interests in oil, gas,
or other mineral exploration or development programs;
(5) purchase securities on margin (except for short-term credits necessary for
the clearance of transactions and except for margin payments in connection with
options, futures and options on futures) or make short sales of securities;
(6) underwrite securities of other issuers, except to the extent that the
purchase of permitted investments directly from the issuer thereof or from an
underwriter for an issuer and the later disposition of such securities in
accordance with the Master Portfolio's investment program may be deemed to be an
underwriting;
(7) make investments for the purpose of exercising control or management;
(8) borrow money or issue senior securities as defined in the 1940 Act, except
that each Master Portfolio may borrow from banks up to 10% of the current value
of its net assets for temporary purposes only in order to meet redemptions, and
these borrowings may be secured by the pledge of up to 10% of the current value
of its net assets (but investments may not be purchased while any such
outstanding borrowing in excess of 5% of its net assets exists);
(9) write, purchase or sell puts, calls, straddles, spreads, warrants, options
or any combination thereof, except that the Growth Stock Master Portfolio may
purchase securities with put rights in order to maintain liquidity, and except
that the Growth Stock Master Portfolio may invest up to 5% of its net assets in
warrants in accordance with its investment policies stated below;
(10) purchase securities of any issuer (except securities issued or guaranteed
by the U.S. Government, its agencies and instrumentalities) if, as a result,
with respect to 75% of its total assets, more than 5% of the value of the Master
Portfolio's total assets would be invested in the securities of any one issuer
or, with respect to 100% of its total assets the Master Portfolio's ownership
would be more than 10% of the outstanding voting securities of such issuer; or
2
<PAGE>
(11) make loans, except that each Master Portfolio may purchase or hold debt
instruments or lend its portfolio securities in accordance with its investment
policies, and may enter into repurchase agreements.
Each Master Portfolio is subject to the following non-fundamental policies:
(1) The Master Portfolios may not:
(a) purchase or retain securities of any issuer if the officers or
trustees of MSIT or the investment adviser owning beneficially more than one-
half of one percent (0.5%) of the securities of the issuer together owned
beneficially more than 5% of such securities;
(b) purchase securities of issuers who, with their predecessors, have been
in existence less than three years, unless the securities are fully guaranteed
or insured by the U.S. Government, a state, commonwealth, possession, territory,
the District of Columbia or by an entity in existence at least three years, or
the securities are backed by the assets and revenues of any of the foregoing if,
by reason thereof, the value of its aggregate investments in such securities
will exceed 5% of its total assets;
(2) The Master Portfolios reserve the right to invest up to 15% of the current
value of their net assets in fixed time deposits that are subject to withdrawal
penalties and that have maturities of more than seven days, repurchase
agreements maturing in more than seven days or other illiquid securities.
However, as long as a feeder fund's shares are registered for sale in a state
that imposes a lower limit on the percentage of a fund's assets that may be so
invested, the Master Portfolios will comply with such lower limit. The Short-
Intermediate Term and Growth Stock Master Portfolios presently are limited to
investing 10% of their net assets in such securities under such lower
limitations applicable in several states; and
(3) The Short-Intermediate Term and Growth Stock Master Portfolios may invest
in shares of other open-end, management investment companies, subject to the
limitations of Section 12(d)(1) of the 1940 Act.
ADDITIONAL PERMITTED INVESTMENT ACTIVITIES
Unrated, Downgraded and Below Investment Grade Investments. Each Master
Portfolio may purchase instruments that are not rated if, in the opinion of
Wells Fargo Bank, as sub-investment adviser, such obligations are of investment
quality comparable to other rated investments that are permitted to be purchased
by such Master Portfolio. Each Master Portfolio may purchase unrated instruments
only if they are purchased in accordance with the procedures adopted by MSIT's
Board of Trustees in accordance with Rule 2a-7 under the 1940 Act. After
purchase by a Master Portfolio, a security may cease to be rated or its rating
may be reduced below the minimum required for purchase by such Master Portfolio.
Neither event will require a sale of such security by such Master Portfolio.
However, in no event will such securities exceed 5% of the Master Portfolio's
net assets. To the extent the ratings given by Moody's or S&P may change as a
result of changes in such organizations or their rating systems, each Master
Portfolio will attempt to use comparable ratings as standards for investments in
accordance with the investment policies contained in its Part A and in this Part
B. The ratings of Moody's and S&P are more fully described in the Appendix.
Because each Master Portfolio is not required to sell downgraded securities,
and because the Growth Stock Master Portfolio is permitted to purchase
securities that are rated below investment grade or if unrated are of comparable
quality, each Master Portfolio could hold up to 5% of its net assets in debt
securities rated below "Baa" by Moody's or below "BBB" by S&P or if unrated, low
credit quality (below investment grade) securities. The Master Portfolios may
hold such securities even though only the Growth Stock Master Portfolio is
permitted to purchase such securities.
Although they may offer higher yields than do higher rated securities, low
rated and unrated low credit-quality debt securities generally involve greater
volatility of price and risk of principal and income, including the possibility
of default by, or bankruptcy of, the issuers of the securities. In addition, the
markets in which low rated and unrated low credit quality debt securities are
traded are more limited than those in which higher rated
3
<PAGE>
securities are traded. The existence of limited markets for particular
securities may diminish a Master Portfolio's ability to sell the securities at
fair value either to meet redemption requests or to respond to changes in the
economy or in the financial markets and could adversely affect and cause
fluctuations in the daily net asset value of a Master Portfolio's shares.
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of low rated or
unrated low quality debt securities, especially in a thinly traded market.
Analysis of the creditworthiness of issuers of low rated or unrated low quality
debt securities may be more complex than for issuers of higher rated securities,
and the ability of a Master Portfolio to achieve its investment objective may,
to the extent it holds low rated or unrated low quality debt securities, be more
dependent upon such creditworthiness analysis than would be the case if the
Master Portfolio held exclusively higher rated or higher quality debt
securities.
Low rated or unrated low quality debt securities may be more susceptible to
real or perceived adverse economic and competitive industry conditions than
investment grade securities. The prices of such debt securities have been found
to be less sensitive to interest rate changes than higher rated or higher
quality investments, but more sensitive to adverse economic downturns or
individual corporate developments. A projection of an economic downturn or of a
period of rising interest rates, for example, could cause a decline in low rated
or unrated low quality debt securities prices because the advent of a recession
could dramatically lessen the ability of a highly leveraged company to make
principal and interest payments on its debt securities. If the issuer of the
debt securities defaults, a Master Portfolio may incur additional expenses to
seek recovery.
Letters of Credit. Certain of the debt obligations (including municipal
securities, certificates of participation, commercial paper and other short-term
obligations) which the Master Portfolios may purchase may be backed by an
unconditional and irrevocable letter of credit of a bank, savings and loan
association or insurance company which assumes the obligation for payment of
principal and interest in the event of default by the issuer. Only banks,
savings and loan associations and insurance companies which, in the opinion of
Wells Fargo Bank, as sub-investment adviser, are of comparable quality to
issuers of other permitted investments of each such Master Portfolio may be used
for letter of credit-backed investments.
Pass-Through Obligations. Certain of the debt obligations which the Short-
Intermediate Term Master Portfolio may purchase may be pass-through obligations
that represent an ownership interest in a pool of mortgages and the resultant
cash flow from those mortgages. Payments by homeowners on the loans in the pool
flow through to certificate holders in amounts sufficient to repay principal and
to pay interest at the pass-through rate. The stated maturities of pass-through
obligations may be shortened by unscheduled prepayments of principal on the
underlying mortgages. Therefore, it is not possible to predict accurately the
average maturity of a particular pass-through obligation. Variations in the
maturities of pass-through obligations will affect the yield to the Master
Portfolio. Furthermore, as with any debt obligation, fluctuations in interest
rates will inversely affect the market value of pass-through obligations. The
Master Portfolio may invest in pass-through obligations that are supported by
the full faith and credit of the U.S. Government (such as those issued by the
Government National Mortgage Association) or those that are guaranteed by an
agency or instrumentality of the U.S. Government or government sponsored
enterprise (such as the Federal National Mortgage Association or the Federal
Home Loan Mortgage Corporation) or bonds collateralized by any of the foregoing.
When-Issued Securities. Certain of the securities in which each Master
Portfolio may invest are purchased on a when-issued basis, in which case
delivery and payment normally take place within 45 days after the date of the
commitment to purchase. Each Master Portfolio makes commitments to purchase
securities on a when-issued basis only with the intention of actually acquiring
the securities, but may sell them before the settlement date if it is deemed
advisable. When-issued securities are subject to market fluctuation, and no
income accrues to the purchaser during the period prior to issuance. The
purchase price and the interest rate received on debt securities are fixed at
the time the purchaser enters into the commitment. Purchasing a security on a
when-issued basis can involve a risk that the market price at the time of
delivery may be lower than the agreed-upon purchase price, in which case there
could be an unrealized loss at the time of delivery.
4
<PAGE>
The Short-Intermediate Term Master Portfolio does not currently intend to
invest more than 5% of its assets in when-issued securities during the coming
year. Each Master Portfolio establishes a segregated account in which it
maintains cash or liquid, high-grade debt securities in an amount at least equal
in value to such Master Portfolio's commitments to purchase when-issued
securities. If the value of these assets declines, the Master Portfolios will
place additional liquid assets in the account on a daily basis so that the value
of the assets in the account is equal to the amount of such commitments.
Repurchase Agreements. Each Master Portfolio may engage in a repurchase
agreement with respect to any security in which it is authorized to invest,
although the underlying security may mature in more than thirteen months. The
Master Portfolio may enter into repurchase agreements wherein the seller of a
security to the Master Portfolio agrees to repurchase that security from the
Master Portfolio at a mutually agreed-upon time and price that involves the
acquisition by the Master Portfolio of an underlying debt instrument, subject to
the seller's obligation to repurchase, and the Master Portfolio's obligation to
resell, the instrument at a fixed price usually not more than one week after its
purchase. The Master Portfolio's custodian has custody of, and holds in a
segregated account, securities acquired as collateral by the Master Portfolio
under a repurchase agreement. Repurchase agreements are considered by the staff
of the SEC to be loans by the Master Portfolio. The Master Portfolio may enter
into repurchase agreements only with respect to securities of the type in which
it may invest, including government securities and mortgage-related securities,
regardless of their remaining maturities, and requires that additional
securities be deposited with the custodian if the value of the securities
purchased should decrease below resale price. Wells Fargo Bank monitors on an
ongoing basis the value of the collateral to assure that it always equals or
exceeds the repurchase price. Certain costs may be incurred by the Master
Portfolio in connection with the sale of the underlying securities if the seller
does not repurchase them in accordance with the repurchase agreement. In
addition, if bankruptcy proceedings are commenced with respect to the seller of
the securities, disposition of the securities by the Master Portfolio may be
delayed or limited. While it does not presently appear possible to eliminate
all risks from these transactions (particularly the possibility of a decline in
the market value of the underlying securities, as well as delay and costs to the
Master Portfolio in connection with insolvency proceedings), it is the policy of
the Master Portfolio to limit repurchase agreements to selected creditworthy
securities dealers or domestic banks or other recognized financial institutions.
The Master Portfolio considers on an ongoing basis the creditworthiness of the
institutions with which it enters into repurchase agreements. Repurchase
agreements are considered to be loans by a Master Portfolio under the Investment
Company Act of 1940 (the "1940 Act").
Floating- and Variable-Rate Obligations. Each Master Portfolio may purchase
----------------------------------------
floating- and variable-rate obligations as described in the Prospectus. The
Master Portfolio may purchase floating- and variable-rate demand notes and
bonds, which are obligations ordinarily having stated maturities in excess of
thirteen months, but which 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
the Master Portfolio to invest fluctuating amounts, which may change daily
without penalty, pursuant to direct arrangements between the Master Portfolio,
as lender, and the borrower. The interest rates on these notes fluctuate from
time to time. The issuer of such obligations ordinarily has a corresponding
right, after a given period, to prepay in its discretion the outstanding
principal amount of the obligations plus accrued interest upon a specified
number of days' notice to the holders of such obligations. The interest rate on
a floating-rate demand obligation is based on a known lending rate, such as a
bank's prime rate, and is adjusted automatically each time such rate is
adjusted. The interest rate on a variable-rate demand obligation is adjusted
automatically at specified intervals. Frequently, such obligations are secured
by letters of credit or other credit support arrangements provided by banks.
Because these obligations are direct lending 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, the Master Portfolio'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 the Master Portfolio may
invest in obligations which are not so rated only if Wells Fargo Bank determines
that at the time of investment the obligations are of comparable quality to the
other obligations in which the Master Portfolio may invest. Wells Fargo Bank, on
behalf of the Master Portfolio, considers on an ongoing basis the
creditworthiness of the issuers of the floating- and variable-rate demand
obligations in the Master Portfolio's portfolio. The Master Portfolio will not
invest more than 10% of the value of its total net assets
5
<PAGE>
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.
Loans of Portfolio Securities. Each Master Portfolio may lend securities from
its portfolio to brokers, dealers and financial institutions (but not
individuals) if cash, U.S. Government securities or other high quality debt
obligations equal to at least 100% of the current market value of the securities
loaned (including accrued interest thereon) plus the interest payable to such
Master Portfolio with respect to the loan is maintained with the Master
Portfolio. In determining whether or not to lend a security to a particular
broker, dealer or financial institution, each Master Portfolio's investment
adviser or such-adviser considers all relevant facts and circumstances,
including the size, creditworthiness and reputation of the broker, dealer, or
financial institution. Any loans of portfolio securities are fully
collateralized based on values that are marked to market daily. The Master
Portfolios do not enter into any portfolio security lending arrangements having
a duration longer than one year. Any securities that a Master Portfolio receives
as collateral do not become part of its portfolio at the time of the loan and,
in the event of a default by the borrower, such Master Portfolio will, if
permitted by law, dispose of such collateral except for such part thereof that
is a security in which the Master Portfolio is permitted to invest. During the
time securities are on loan, the borrower will pay the Master Portfolio any
accrued income on those securities, and the Master Portfolio may invest the cash
collateral and earn income or receive an agreed-upon fee from a borrower that
has delivered cash- equivalent collateral. The Master Portfolios will not lend
securities having a value that exceeds one-third of the current value of their
respective total assets. Loans of securities by a Master Portfolio are subject
to termination at such Master Portfolio's or the borrower's option. Each Master
Portfolio may pay reasonable administrative and custodial fees in connection
with a securities loan and may pay a negotiated portion of the interest or fee
earned with respect to the collateral to the borrower or the placing broker.
Borrowers and placing brokers are not permitted to be affiliated, directly or
indirectly, with the Master Portfolios, BGFA, Wells Fargo Bank or Stephens.
Foreign Obligations. Investments in foreign obligations involve certain
considerations that are not typically associated with investing in domestic
obligations. There may be less publicly available information about a foreign
issuer than about a domestic issuer. Foreign issuers also are not generally
subject to uniform accounting, auditing and financial reporting standards or
governmental supervision comparable to those applicable to domestic issuers. In
addition, with respect to certain foreign countries, taxes may be withheld at
the source under foreign income tax laws, and there is a possibility of
expropriation of confiscatory taxation, political or social instability or
diplomatic developments that could adversely affect investments in, the
liquidity of, and the ability to enforce contractual obligations with respect
to, securities of issuers located in those countries. None of the Master
Portfolios may invest 25% or more of its assets in foreign obligations.
Obligations of foreign banks and foreign branches of U.S. banks involve
somewhat different investment risks from those affecting obligations of U.S.
banks, including the possibilities that liquidity could be impaired because of
future political and economic developments, that the obligations may be less
marketable than comparable obligations of U.S. banks, that a foreign
jurisdiction might impose withholding taxes on interest income payable on those
obligations, that foreign deposits may be seized or nationalized, that foreign
governmental restrictions (such as foreign exchange controls) may be adopted
which might adversely affect the payment of principal and interest on those
obligations and that the selection of those obligations may be more difficult
because there may be less publicly available information concerning foreign
banks or the accounting, auditing and financial reporting standards, practices
and requirements applicable to foreign banks may differ from those applicable to
U.S. banks. In that connection, foreign banks are not subject to examination by
any U.S. Government agency or instrumentality.
SECURITIES BACKED BY MORTGAGES -- The Short-Intermediate Term Master Portfolio
may purchase Mortgage-Backed Securities ("MBSs"), which are pass-through
certificates representing interests in a pool of loans secured by mortgages. The
resulting cash flow from those mortgages is used to pay principal and interest
on the certificates. The MBSs in which the Master Portfolio may invest are
issued or guaranteed by the Government National Mortgage Association ("GNMA"),
the Federal National Mortgage Association ("FNMA") or the Federal Home Loan
Mortgage Corporation ("FHLMC"). MBS investors receive monthly payments based on
a pro-rata
6
<PAGE>
share of interest and principal payments (and prepayments) on the underlying
mortgage pool, less GNMA's, FNMA's or FHLMC's fees and any applicable loan
servicing fees.
GNMA guarantees the full and timely payment of principal and interest on GNMA
certificates. The GNMA guarantee is backed by the authority of GNMA to borrow
funds from the U.S. Treasury to meet payment obligations arising from its
guarantee. Since GNMA is a wholly-owned U.S. Government corporation within the
Department of Housing and Urban Development, GNMA guarantees are also general
obligations of the United States and, as such, are backed by the full faith and
credit of the federal government. In contrast, MBSs issued by FNMA include FNMA
Guaranteed Mortgage Pass-Through Certificates ("Fannie Maes") which are solely
the obligations of FNMA and are neither backed by, nor entitled to, the full
faith and credit of the federal government. FHLMC also is a government-sponsored
enterprise whose MBSs are solely obligations of FHLMC. Therefore, FHLMC MBSs are
not guaranteed by the federal government or by a Federal Home Loan Bank and do
not constitute a general obligation of the federal government or any Federal
Home Loan Bank. FHLMC guarantees timely payment of interest and ultimate payment
of principal due under the obligations it issues. However, because FNMA and
FHLMC are government-sponsored enterprises, their securities are generally
considered to be high quality investments that present minimal credit risks.
The mortgages underlying MBSs guaranteed by GNMA are fully insured or
guaranteed by the Federal Housing Administration, the Veterans Administration or
the Farmers Home Administration. Mortgages underlying MBSs issued by FNMA or
FHLMC are typically conventional residential mortgages which are not so insured
or guaranteed, but which conform to specific underwriting, size and maturity
standards.
The Master Portfolio also may invest up to 25% of its total assets in
collateralized mortgage obligations ("CMOs") issued or guaranteed by U.S.
Government instrumentalities (including government-sponsored enterprises) or
collateralized by U.S. Government obligations. In a CMO, a series of bonds or
certificates is issued in multiple classes. Each class is issued at a specified
coupon rate, with a stated maturity or final distribution date. The principal
and interest payments on the underlying mortgages in the collateral pool may be
allocated among the classes of CMOs in several ways. Typically, payments of
principal on the underlying mortgages, including any prepayments, are applied to
the classes in the order of their respective stated maturities or final
distribution dates, so that no payment of principal will be made on CMOs of one
class until all other classes having earlier stated maturities or final
distribution dates have been paid in full.
The Master Portfolio may purchase CMOs that are:
(1) collateralized by fixed rate or adjustable rate mortgages that are
guaranteed, as to payment of principal and interest, by a U.S. Government
agency or instrumentality (including a government-sponsored enterprise);
(2) directly guaranteed, as to payment of principal and interest by the
issuer, which guarantee is collateralized by U.S. Government securities; or
(3) collateralized by MBSs which are issued or guaranteed by the U.S.
Government, its agencies or instrumentalities (including government-sponsored
enterprises).
The coupon rate of one or more CMO classes may reset periodically based on an
index, such as the London Interbank Offered Rate ("LIBOR"). The interest rates
on the mortgages underlying the MBSs and the CMOs in which the Master Portfolio
may invest also may be adjustable. In this case, they generally are readjusted
at intervals of one year or less in response to changes in a predetermined
interest rate index. There are two main categories of indices: those based on
U.S. Treasury securities and those based on certain financial aggregates, such
as a cost-of-funds index or a moving average of mortgage rates. Commonly
utilized indices include the one-year and five-year constant maturity Treasury
note rates, the three-month Treasury bill rate, the 180-day Treasury bill rate,
rates on longer-term Treasury securities, the National Median Cost of Funds, the
one-month, three-month, six-month or one-year LIBOR, a published prime rate, or
commercial paper rates. Certain of these indices follow overall market interest
rates more closely than others.
7
<PAGE>
The range of fluctuation of interest rates on certain adjustable rate
mortgages ("ARMs") may be limited by "caps" or "floors." A "cap" is a ceiling or
maximum interest rate over a mortgage note. A "floor" is a minimum interest rate
under a mortgage note. To the extent that the interest rates on the ARMs
underlying MBSs or CMOs cannot be adjusted in response to interest rate changes
due to the existence of such "caps" or "floors" on interest rate movements, the
MBSs or CMOs are likely to respond to changes in market rates more like fixed
rate securities. In other words, interest rate increases in excess of the caps
can be expected to cause the CMOs or MBSs backed by mortgages that have such
caps to decline in value to a greater extent than would be the case in the
absence of such caps. Conversely, interest rate decreases below the floors can
be expected to cause the CMOs or MBSs backed by mortgages that have such floors
to increase in value to a greater extent than would be the case in the absence
of such floors. The value of MBSs, CMOs and ARMs will fluctuate to the extent
interest rates on the underlying ARMs differ from prevailing market interest
rates during interim periods between interest rate reset dates. Accordingly,
holders of MBSs, CMOs or ARMs could experience some loss (or less gain than
otherwise might be achieved) if they sell these investments before the interest
rates on the underlying mortgages are adjusted to reflect prevailing market
interest rates.
Holders of CMOs and MBSs not only receive scheduled payments of principal and
interest, but also receive additional principal payments representing
prepayments on the underlying mortgages. A certain level of prepayments is
factored into the price of most CMOs, since historical experience shows that a
certain percentage of mortgages will be repaid or refinanced before maturity.
When market interest rates change, however, prepayment behavior changes. When
market interest rates are high, homeowners tend to refinance less, which slows
the rate of prepayments. When market interest rates are low, the rate of
prepayments tends to accelerate. Lower market interest rates are a positive
influence on the value of a CMO, as they are on most fixed-rate investments. At
the same time, however, the risk that an investor will receive more prepayments
than anticipated and must therefore reinvest at lower prevailing market rates is
a negative influence on the CMO's value. The net effect of falling interest
rates on a CMO's price depends on the relationship between interest rates and
CMO prices which, in turn, depends on a number of factors including whether or
not the CMO was trading at a discount or a premium before rates fell. Thus, it
is possible for a move in interest rates to impact different classes of the same
CMO series differently. (See the discussion of multiple classes, above.)
Privately Issued Securities (Rule 144A). The Growth Stock Master Portfolio may
invest in privately issued securities 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. Wells Fargo Bank, as sub-adviser pursuant to guidelines established by the
MSIT's Board of Trustees and subject to the overall supervision of BGFA as
investment adviser, evaluates the liquidity characteristics of each Rule 144A
Security proposed for purchase by the Master Portfolio on a case-by-case basis
and considers the following factors, among others, in its 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). If a
substantial market of qualified institutional investors develops pursuant to
Rule 144A under the 1933 Act, for certain of these securities held by the Master
Portfolio, the Master Portfolio intends to treat such securities as liquid
securities in accordance with the procedures approved by the Board. To the
extent that qualified institutional investors may periodically cease purchasing
Rule 144A securities, the Master Portfolio's investment in such securities may
have the effect of increasing the level of illiquidity in the Master Portfolio
during such period. The Growth Stock Master Portfolio does not intend to invest
more than 5% of its net assets in Rule 144A Securities during the coming year.
Municipal Bonds. The Short-Intermediate Term Master Portfolio may invest in
municipal bonds. The two principal classifications of municipal bonds are
"general obligation" and "revenue" bonds. Municipal bonds are debt obligations
issued to obtain funds for various public purposes, including the construction
of a wide range of public facilities such as bridges, highways, housing,
hospitals, mass transportation, schools, streets, and water and sewer works.
Other purposes for which municipal bonds may be issued include the refunding of
outstanding obligations and obtaining funds for general operating expenses or to
loan to other public institutions and facilities.
8
<PAGE>
Industrial development bonds are a specific type of revenue bond backed by the
credit and security of a private user. Certain types of industrial development
bonds are issued by or on behalf of public authorities to obtain funds to
provide privately-operated housing facilities, sports facilities, convention or
trade show facilities, airport, mass transit, port or parking facilities, air or
water pollution control facilities and certain local facilities for water
supply, gas, electricity, or sewage or solid waste disposal. The Master
Portfolio may not invest 25% or more of its assets in industrial development
bonds. Assessment bonds, wherein a specially created district or project area
levies a tax (generally on its taxable property) to pay for an improvement or
project may be considered a variant of either category. There are, of course,
other variations in the types of municipal bonds, both within a particular
classification and between classifications, depending on numerous factors.
Municipal Notes. Municipal notes include, but are not limited to, tax
anticipation notes ("TANs"), bond anticipation notes ("BANs"), revenue
anticipation notes ("RANs") and construction loan notes. Notes sold as interim
financing in anticipation of collection of taxes, a bond sale or receipt of
other revenues are usually general obligations of the issuer.
TANs. An uncertainty in a municipal issuer's capacity to raise taxes as a
result of a decline in its tax base or a rise in delinquencies could adversely
affect the issuer's ability to meet its obligations on outstanding TANs.
Furthermore, some municipal issuers mix various tax proceeds into a general fund
that is used to meet obligations other than those of the outstanding TANs. Use
of such a general fund to meet various obligations could affect the likelihood
of making payments on TANs.
BANs. The ability of a municipal issuer to meet its obligations on its BANs is
primarily dependent on the issuer's adequate access to the longer term municipal
bond market and the likelihood that the proceeds of such bond sales will be used
to pay the principal of, and interest on, BANs.
RANs. A decline in the receipt of certain revenues, such as anticipated
revenues from another level of government, could adversely affect an issuer's
ability to meet its obligations on outstanding RANs. In addition, the
possibility that the revenues would, when received, be used to meet other
obligations could affect the ability of the issuer to pay the principal of, and
interest on, RANs.
The values of outstanding municipal securities will vary as a result of
changing market evaluations of the ability of their issuers to meet the interest
and principal payments (i.e., credit risk). Such values also will change in
response to changes in the interest rates payable on new issues of municipal
securities (i.e., market risk). Should such interest rates rise, the value of
outstanding securities, including those held by a Master Portfolio, will decline
and (if purchased at par value) they would sell at a discount. If interests
rates fall, the value of outstanding securities will generally increase and (if
purchased at par value) they would sell at a premium. Changes in the value of
municipal securities held by a Master Portfolio arising from these or other
factors will cause changes in the net asset value per share of such Master
Portfolio.
Investments in Warrants. The Growth Stock Master Portfolio may invest up to 5%
of its net assets at the time of purchase in warrants (other than those that
have been acquired in units or attached to other securities), and not more than
2% of its net assets in warrants which are not listed on the New York or
American Stock Exchanges. Warrants represent rights to purchase securities at a
specific price valid for a specific period of time. The prices of warrants do
not necessarily correlate with the prices of the underlying securities. The
Master Portfolio may purchase warrants only on securities in which the Master
Portfolio may invest directly.
Custodial Receipts for Treasury Securities. The Growth Stock Master Portfolio
may purchase participations in trusts that hold U.S. Treasury securities (such
as TIGRs and CATS) or other obligations where the trust participations evidence
ownership in either the future interest payments or the future principal
payments on the obligations. These participations are normally issued at a
discount to their "face value," and can exhibit greater price volatility than
ordinary debt securities because of the way in which their principal and
interest are returned to investors. Investments by the Master Portfolio in such
participations will not exceed 5% of the value of the Master Portfolio's total
assets.
9
<PAGE>
ITEM 14. MANAGEMENT OF MSIT.
The following information supplements and should be read in conjunction with
the Part A section entitled "Management of the Trust." Trustees and Officers of
MSIT, together with information as to their principal occupations during at
least the past five years, are below. The address of each, unless otherwise
indicated, is 111 Center Street, Little Rock, Arkansas 72201. Each Trustee who
is deemed to be an "interested person" of MSIT, as defined in the 1940 Act, is
indicated by an asterisk.
<TABLE>
<CAPTION>
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
Chairman and of Stephens; Manager
President of Financial Services
Group; President of
Stephens Insurance
Services Inc.; Senior
Vice President of
Stephens Sports
Management Inc.; and
President of
Investors Brokerage
Insurance Inc.
Thomas S. Goho, 55 Trustee Associate Professor of Finance,
P.O. Box 7285 Calloway School of Business and
Reynold Station Accounting, Wake Forest
Winston-Salem, NC 27104 University, since 1982
*Zoe Ann Hines, 48 Trustee Senior Vice President of
Stephens and Director of
Brokerage Accounting;
Secretary of Stephens Resource
Management; and Senior Vice
President of Link Investments
Inc.
*W. Rodney Hughes, 70 Trustee Private Investor.
31 Dellwood Court
San Rafael, CA 94901
Robert M. Joses, 79 Trustee Private Investor.
47 Dowitcher Way
San Rafael, CA 94901
*J. Tucker Morse, 52 Trustee Chairman of Home Account
4 Beaufaln Street Network, Inc.; Real Estate
Charleston, SC 29401 Developer; Chairman of
Renaissance Properties Ltd.;
President of Morse Investment
Corporation; and Co-Managing
Partner of Main Street Ventures.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION DURING PAST 5 YEARS
- --------------------- -------- ---------------------
<S> <C> <C>
Richard H. Blank, Jr., 40 Chief Associate of Financial
Operating Services Group of Stephens;
Officer, Director of Stephens Sports
Secretary and Management Inc.; and Director
Treasurer of Capo Inc.
</TABLE>
COMPENSATION TABLE
For the Fiscal Year Ended February 28, 1997
<TABLE>
<CAPTION>
TOTAL COMPENSATION
AGGREGATE COMPENSATION FROM REGISTRANT
NAME AND POSITION FROM REGISTRANT AND FUND COMPLEX
- -------------------- ---------------------- ------------------
<S> <C> <C>
Jack S. Euphrat $0 $9,250
Trustee
*R. Greg Feltus
Trustee 0 0
Thomas S. Goho
Trustee 0 9,250
*Zoe Ann Hines
Trustee 0 0
*W. Rodney Hughes
Trustee 0 8,250
Robert M. Joses
Trustee 0 9,250
*J. Tucker Morse
Trustee 0 8,250
</TABLE>
Trustees of MSIT are compensated annually by all the registrants in the fund
complex for their services as indicated above and also are reimbursed for all
out-of-pocket expenses relating to attendance at board meetings. MSIT,
MasterWorks Funds Inc., and Master Investment Portfolio are considered to be
members of the same fund complex as such term is defined in Form N-1A under the
1940 Act (the "BGFA Fund Complex"). Stagecoach Funds, Inc., Overland Express
Funds, Inc., Stagecoach Trust, Life & Annuity Trust and Master Investment Trust
together form a separate fund complex (the "Wells Fargo Fund Complex"). Each of
the Trustees and the principal officer of MSIT serves in the identical capacity
as directors/trustees and/or officer of each registered open-end management
investment company in both the BGFA and Wells Fargo Fund Complexes, except for
Zoe Ann Hines who, after September 6, 1996, only serves the aforementioned
members of the BGFA Fund Complex. The Trustees are compensated by other
Companies and Trusts within the fund complexes 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 either fund complex.
As of the date of this Part B, Trustees and Officers of MSIT as a group
beneficially owned less than 1% of the outstanding shares of MSIT.
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
As of May 30, 1997, the Growth Stock Fund and Short-Intermediate Term Fund of
MasterWorks, 111 Center Street, Little Rock, Arkansas 72201, owned approximately
99% of the outstanding voting securities of the Growth Stock Master Portfolio
and approximately 99% of the outstanding voting securities of the Short-
Intermediate Master Portfolio, respectively, and each Fund could be considered a
"controlling person" for purposes of the 1940 Act of its corresponding Master
Portfolio.
11
<PAGE>
ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES.
Investment Adviser. The Master Portfolios of MSIT are advised by BGFA pursuant
to separate investment advisory contracts (the "BGFA Advisory Contracts") each
dated January 1, 1996. The BGFA Advisory Contracts provide that BGFA shall
furnish to each Master Portfolio investment guidance and policy direction in
connection with the daily portfolio management of such Master Portfolio.
Pursuant to the BGFA Advisory Contracts, BGFA furnishes to the Board of Trustees
of MSIT periodic reports on the investment strategy and performance of the
Master Portfolios. BGFA has agreed to provide to the Master Portfolios, among
other things, money market security and fixed-income research, analysis and
statistical and economic data and information concerning interest rate and
security market trends, portfolio composition and credit conditions.
Each BGFA Advisory Contract will continue in effect for more than two years
from the date of execution provided the continuance is approved annually (i) by
the holders of a majority of the respective Master Portfolio's outstanding
voting securities or by the Board of Trustees of MSIT and (ii) by a majority of
the Trustees of MSIT who are not parties to the Advisory Contract or "interested
persons" (as defined in the 1940 Act) of any such party. The Advisory Contracts
may be terminated on 60 days' written notice by either party and will terminate
automatically upon assignment (as defined in the 1940 Act).
Advisory Fees Paid. For the period beginning May 26, 1994 (commencement of
operations) and ended February 28, 1995 and the period beginning March 1, 1995
and ended December 31, 1995, the Master Portfolios paid to Wells Fargo Bank the
advisory fees indicated below and Wells Fargo Bank waived the indicated amounts.
For the period beginning January 1, 1996 and ended February 29, 1996, and for
the year ended February 28, 1997, the Master Portfolios paid to BGFA the
advisory fees indicated below, without waivers:
<TABLE>
<CAPTION>
MAY 26, 1994 - MARCH 1, 1995 - JANUARY 1, 1996 - YEAR ENDED
FEBRUARY 28, 1995 DECEMBER 31, 1995 FEBRUARY 29, 1996 FEBRUARY 28, 1997
PAID WAIVED PAID WAIVED PAID PAID
--------- -------- --------- ------ ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Growth Stock Master Portfolio $283,463 $16,451 $662,204 $0 $164,817 $1,334,600
Short-Intermediate Term $ 10,673 $16,510 $ 47,460 $0 $ 9,923 $ 58,891
Master Portfolio
</TABLE>
Sub-Investment Adviser. BGFA has engaged Wells Fargo Bank to provide sub-
investment advisory services to each Master Portfolio pursuant to separate sub-
advisory contracts between each Master Portfolio, BGFA and Wells Fargo Bank
(each, a "Sub-Advisory Contract"). As to each Master Portfolio, the applicable
Sub-Advisory Contract is subject to annual approval by (i) MSIT's Board of
Trustees or (ii) vote of a majority (as defined in the 1940 Act) of the
outstanding securities of such Master Portfolio, provided that in either event
the continuance also is approved by a majority of MSIT's Board of Trustees who
are not interested persons (as defined in the 1940 Act) of the Master Portfolio
or Wells Fargo Bank, by vote cast in person at a meeting called for the purpose
of voting on such approval. As to each Master Portfolio, the Sub-Advisory
Contract is terminable without penalty, on 60 days' written notice, by MSIT's
Board of Trustees or by vote of the holders of a majority of such Master
Portfolio's interests. Each Sub-Advisory Contract terminates automatically upon
assignment (as defined in the 1940 Act).
Sub-Advisory Fees Paid. For the period beginning January 1, 1996 and ended
February 29, 1996, and for the year ended February 28, 1997, BGFA paid to Wells
Fargo Bank the sub-advisory fees indicated below, without waiver:
12
<PAGE>
<TABLE>
<CAPTION>
JANUARY 1, 1996- YEAR ENDED
FEBRUARY 29, 1996 FEBRUARY 28, 1997
FEES PAID FEES PAID
----------------- -----------------
<S> <C> <C>
Growth Stock Master Portfolio $41,297 $332,700
Short-Intermediate Term Master Portfolio $ 2,208 $ 13,020
</TABLE>
Co-Administrators. Stephens and BGI are the Master Portfolio's co-
administrators. Stephens and BGI provide the Master Portfolios with
administration services, including general supervision of the Master Portfolios'
non-investment operations, coordination of the other services provided to the
Master Portfolios, 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 MSIT's trustees and officers. Stephens also
furnishes office space and certain facilities to conduct the Master Portfolios'
business, and compensates the MSIT's trustees, officers and employees who are
affiliated with Stephens. In addition, except as outlined below under
"Expenses", Stephens and BGI will be responsible for paying all expenses
incurred by the Master Portfolios other than the fees payable to BGFA. Stephens
and BGI are not entitled to compensation for providing administration services
to a Master Portfolio. BGI has delegated certain of its duties as co-
administrator to Investors Bank & Trust Company ("IBT"). IBT, as sub-
administrator, is compensated by BGI for performing certain administration
services.
Prior to October 21, 1996, Stephens was the Master Portfolios' sole
administrator and received fees for its services as described in the SAI.
Stephens was not entitled to compensation for providing administration services
to the Master Portfolios so long as Stephens received fees for providing similar
services to a feeder fund of another investment company investing all of its
assets in a Master Portfolio. The Master Portfolios did not pay any
administration fees to Stephens.
Placement Agent. Stephens is the placement agent for the Master
Portfolios. Stephens is a full service broker/dealer and investment advisory
firm located at 111 Center Street, Little Rock, Arkansas 72201. Stephens and its
predecessor have been providing securities and investment services for more than
60 years, including discretionary portfolio management services since 1983.
Stephens currently manages investment portfolios for pension and profit sharing
plans, individual investors, foundations, insurance companies and university
endowments. Stephens does not receive compensation for acting as placement
agent.
Custodian. IBT currently acts as the Master Portfolios' custodian. The
principal business address of IBT is 200 Clarendon Street, Boston, Massachusetts
02116. IBT is not entitled to receive compensation for its custodial services so
long as it is entitled to receive compensation for providing sub-administration
services to the Master Portfolios. Prior to October 21, 1996, Barclays Global
Investors, N.A. ("BGI") acted as the Master Portfolios' custodian. The principal
business address of BGI is 45 Fremont Street, San Francisco, California 94105.
BGI did not receive compensation for its custodial services.
Transfer and Dividend Disbursing Agent. Wells Fargo Bank is each Master
Portfolio's Transfer and Dividend Disbursing Agent (the "Transfer Agent"). The
principle business address of Wells Fargo Bank is 525 Market Street, San
Francisco, California 94105. Wells Fargo Bank is not entitled to receive
compensation for providing such services to MSIT so long as it receives fees for
providing similar services to the funds which invest substantially all of their
assets in the Master Portfolios. To date, the Master Portfolios have not paid
any transfer and dividend disbursing agency fees.
Distribution Plan. MSIT's Board of Trustees has adopted, on behalf of each
Master Portfolio, a "defensive" distribution plan under Section 12(b) of the
1940 Act and Rule 12b-1 thereunder (the "Plan"). The Plan was adopted by a
majority of MSIT's Board of Trustees (including a majority of those Trustees who
are not "interested persons" (as defined in the 1940 Act) of MSIT) on October
10, 1995. The Plan was intended as a precaution designed to address the
possibility that certain ongoing payments by Barclays Bank PLC to Wells Fargo
Bank in connection with the sale of an 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 0.25% of the average daily net assets of each Master
Portfolio on an annual basis)
13
<PAGE>
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. The Master Portfolios do not currently
pay any amounts pursuant to the Plan.
Expenses. Except for extraordinary expenses, brokerage and other expenses
connected with to the execution of portfolio transactions and certain other
expenses which are borne by the Master Portfolios, Stephens and BGI have agreed
to bear all costs of the Master Portfolios' and MSIT's operations.
ITEM 17. BROKERAGE ALLOCATION AND OTHER PRACTICES.
Subject to policies established by MSIT's Board of Trustees and subject to the
overall supervision of BGFA, as investment adviser, Wells Fargo Bank, as sub-
investment adviser, is responsible for the Master Portfolio's portfolio
decisions and the placing of portfolio transactions. In placing orders, it is
the policy of MSIT to obtain the best overall terms available for each Master
Portfolio 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. While Wells Fargo Bank
generally seeks reasonably competitive spreads or commissions, the Master
Portfolios will not necessarily be paying the lowest spread or commission
available. MSIT has no obligation to deal with any dealer or group of dealers in
the execution of transactions in portfolio securities.
Purchase and sale orders of the securities held by the Master Portfolios may
be combined with those of other accounts that Wells Fargo Bank manages, and for
which it has brokerage placement authority, in the interest of seeking the most
favorable overall net results. When Wells Fargo Bank determines that a
particular security should be bought or sold for a Master Portfolio and other
accounts managed by Wells Fargo Bank, Wells Fargo Bank undertakes to allocate
those transactions among the participants equitably.
Purchases and sales of securities by the Short-Intermediate Term Master
Portfolio usually will be principal transactions. Portfolio securities normally
will be purchased or sold from or to dealers serving as market makers for the
securities at a net price. The Master Portfolios also will purchase portfolio
securities in underwritten offerings and may purchase securities directly from
the issuer. Generally, municipal obligations, taxable money market securities,
adjustable rate mortgage securities ("ARMS") and collateralized mortgage
obligations ("CMOs") are traded on a net basis and do not involve brokerage
commissions. The cost of executing a Master Portfolio's portfolio securities
transactions consists primarily of dealer spreads and underwriting commissions.
Under the 1940 Act, persons affiliated with MSIT are prohibited from dealing
with the MSIT as a principal in the purchase and sale of securities unless an
exemptive order allowing such transactions is obtained from the SEC or an
exemption is otherwise available.
The Master Portfolios may purchase municipal obligations from underwriting
syndicates of which Stephens, BGFA or Wells Fargo Bank is a member under certain
conditions in accordance with the provisions of a rule adopted under the 1940
Act and in compliance with procedures adopted by MSIT's Board of Trustees.
In assessing the best overall terms available for any transaction, Wells Fargo
Bank considers factors deemed relevant, including the breadth of the market in
the security, the price of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of the commission, if
any, both for the specific transaction and on a continuing basis. Wells Fargo
Bank may cause a Master Portfolio to pay a broker/dealer which furnishes
brokerage and research services a higher commission than that which might be
charged by another broker/dealer for effecting the same transaction or may give
preference in executing portfolio transaction to dealers that have provided
statistical or other research services to Wells Fargo Bank, provided that Wells
Fargo Bank determines in good faith that the overall commission is reasonable in
relation to the value of the brokerage and research services provided by such
broker/dealer; viewed in terms of either the particular transaction or the
overall responsibilities of Wells Fargo Bank. Such brokerage and research
services might consist of reports and statistics relating to specific companies
or industries, general summaries of groups of stocks or bonds and their
comparative earnings and yields, or broad overviews of the stock, bond, and
government securities markets and the economy.
14
<PAGE>
Supplementary research information so received is in addition to, and not in
lieu of, services required to be performed by Wells Fargo Bank and does not
reduce the advisory fees payable by the Master Portfolios. The Board of Trustees
will periodically review the commissions paid by the Master Portfolios to
consider whether the commissions paid over representative periods of time appear
to be reasonable in relation to the benefits inuring to the Master Portfolios to
consider whether the commissions paid over representative periods of time appear
to be reasonable in relation to the benefits inuring to the Master Portfolios.
It is possible that certain of the supplementary research or other services
received will primarily benefit one or more other investment companies or other
accounts for which investment discretion is exercised. Conversely, a Master
Portfolio may be primary beneficiary of the research or services received as a
result of portfolio transactions effected for such other account or investment
company.
Broker/dealers utilized by Wells Fargo Bank may furnish statistical, research
and other information or services which are deemed by Wells Fargo Bank to be
beneficial to the Master Portfolios' investment programs. Research services
received from brokers supplement Wells Fargo Bank's own research and may include
the following types of information: statistical and background information on
industry groups and individual companies; forecasts and interpretations with
respect to U.S. and foreign economies, securities, markets, specific industry
groups and individual companies, information on political developments;
portfolio management strategies; performance information on securities and
information concerning prices of securities; and information supplied by
specialized services to Wells Fargo Bank and to the Trust's Trustees with
respect to the performance, investment activities and fees and expenses of other
mutual Funds. Such information may be communicated electronically, orally or in
written form.
The outside research assistance is useful to Wells Fargo Bank since the
brokers utilized by Wells Fargo Bank as a group tend to follow a broader
universe of securities and other matters than the staff of Wells Fargo Bank can
follow. In addition, this research provides Wells Fargo Bank with a diverse
perspective on financial markets. Research services which are provided to Wells
Fargo Bank by brokers are available for the benefit of all accounts managed or
advised by Wells Fargo Bank. In some cases, the research services are available
only from the broker providing such services. In other cases, the research
services may be obtainable from alternative sources in return for cash payments.
It is the opinion of Wells Fargo Bank that because the broker research
supplements rather than replaces their research, the receipt of such research
does not tend to decrease their expenses, but tends to improve the quality of
their investment advice. However, to the extent that Wells Fargo Bank would have
purchased any such research services had such services not been provided by
brokers, the expenses of such services to Wells Fargo Bank could be considered
to have been reduced accordingly. Certain research services furnished could be
considered to have been reduced accordingly. Certain research services furnish
by broker/dealers may be useful to Wells Fargo Bank with clients other than the
Master Portfolios. Similarly, any research services received by Wells Fargo Bank
through the placement of portfolio transactions of other clients may be of value
to Wells Fargo Bank in fulfilling its obligations to the Master Portfolios. It
is the opinion of Wells Fargo Bank that this material is beneficial in
supplementing their research and analysis; and therefore, it may benefit the
Master Portfolios by improving the quality of Wells Fargo Bank's investment
advice. The advisory fees paid by the Master Portfolios are not reduced because
Wells Fargo Bank receives such services.
Some broker/dealers may indicate that the provision of research services is
dependent upon the generation of certain specified levels of commissions and
underwriting concessions by Wells Fargo Bank's clients, including the Master
Portfolios.
Brokerage Commissions. For the period from May 26, 1994 (commencement of
operations) until February 28, 1995 and for the fiscal years ended February 29,
1996 and February 28, 1997, the Master Portfolios paid brokerage commissions in
the dollar amounts shown below. None of the brokerage commissions were paid to
affiliated brokers.
<TABLE>
<CAPTION>
MASTER PORTFOLIO 1995 1996 1997
- ---------------- --------- --------- --------
<S> <C> <C> <C>
Growth Stock Master Portfolio $207,258 $355,046 $394,483
Short-Intermediate Term Master Portfolio $ 0 $ 0 $ 0
</TABLE>
15
<PAGE>
Securities of Regular Broker/Dealers. On February 28, 1997, the Master
Portfolios owned securities of their "regular brokers or dealers" or their
parents, as defined in the 1940 Act, as follows:
<TABLE>
<CAPTION>
MASTER PORTFOLIO REGULAR BROKER DEALER AMOUNT
- ---------------- --------------------- ---------------
<S> <C> <C>
Growth Stock Master Portfolio Goldman Sachs & Co. $275,000
Short-Intermediate Term Master
Portfolio N/A 0
</TABLE>
Portfolio Turnover. The portfolio turnover rates for the Short-Intermediate
Term Master Portfolio and the Growth Stock Master Portfolio are generally not
expected to exceed 300% and 200%, respectively. The portfolio turnover rates for
the Short-Intermediate Term Master Portfolio and the Growth Stock Master
Portfolio may result in higher transaction (i.e. principal markup/markdown,
brokerage and other transaction) costs than comparable funds with lower
portfolio turnover rates. The portfolio turnover rate of a Master Portfolio will
not be a limiting factor when BGFA deems portfolio changes appropriate.
ITEM 18. CAPITAL STOCK AND OTHER SECURITIES.
MSIT is a business trust organized under the laws of Delaware on October 28,
1993. In accordance with Delaware law and in connection with the tax treatment
sought by MSIT, MSIT's Declaration of Trust provides that its investors would be
personally responsible for MSIT's liabilities and obligations, but only to the
extent MSIT's property is insufficient to satisfy such liabilities and
obligations. The Declaration of Trust also provides that MSIT shall maintain
appropriate insurance (for example, fidelity bonding and errors and omissions
insurance) for the protection of MSIT, its investors, Trustees, Officers,
employees and agents covering possible tort and other liabilities, and that
investors will be indemnified to the extent they are held liable for a
disproportionate share of MSIT obligations. Thus, the risk of an investor
incurring financial loss on account of investor liability is limited to
circumstances in which both inadequate insurance exists and MSIT itself is
unable to meet its obligations.
The Declaration of Trust further provides that obligations of MSIT are not
binding upon the trustees individually but only upon the property of MSIT and
that the trustees will not be liable for any action or failure to act, but
nothing in the Declaration of Trust protects a trustee against any liability to
which the trustee would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties involved in the
conduct of the trustee's office.
All interests of MSIT have equal voting rights and will be voted in the
aggregate, and not by Portfolio, except where voting by Portfolio is required by
law or where the matter involved only affects one Master Portfolio. For example,
a change in a Master Portfolio's fundamental investment policy would be voted
upon only by interestholders of the Master Portfolios involved. Additionally,
approval of an advisory contract is a matter to be determined separately by a
Master Portfolio. Approval by the interestholders of one Master Portfolio is
effective as to that Master Portfolio whether or not sufficient votes are
received from the interestholders of the other investment portfolios to approve
the proposal as to those investment portfolios. As used in Part A and in this
Part B, the term "majority," when referring to approvals to be obtained from
interestholders of a Master Portfolio, means the vote of the lesser of (i) 67%
of the interests of the Master Portfolio represented at a meeting if the holders
of more than 50% of the outstanding interests of the Master Portfolio are
present in person or by proxy, or (ii) more than 50% of the outstanding
interests of the Master Portfolio. The term "majority," when referring to the
approvals to be obtained from interestholders of MSIT as a whole, means the vote
of the lesser of (i) 67% of MSIT's outstanding interests represented at a
meeting if the holders of more than 50% of MSIT's outstanding interests are
present in person or by proxy, or (ii) more than 50% of MSIT's outstanding
interests. Interestholders are entitled to one vote for each full interest held
and fractional votes for fractional interests held. MSIT may dispense with an
annual meeting of interestholders in any year in which it is not required to
elect trustees under the 1940 Act.
MSIT may enter into a merger or consolidation, or sell all or substantially
all of its assets, if approved by the vote of two-thirds of its investors (with
the vote of each being in proportion to their respective percentages of the
beneficial interests in MSIT), except that if the trustees of MSIT recommend
such sale of assets, the approval by vote of a majority of the investors (with
the vote of each being in proportion to their respective percentages of the
16
<PAGE>
beneficial interests in MSIT) will be sufficient. MSIT may also be terminated
(i) upon liquidation and distribution of its assets, if approved by the vote of
two-thirds of its investors (with the vote of each being in proportion to the
amount of their investment) or (ii) by the trustees of MSIT by written notice to
its investors. In the event of the liquidation or dissolution of the MSIT,
investors are entitled to receive their pro rata share of all assets available
for distribution.
ITEM 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES.
Beneficial interests in MSIT are issued solely in private placement
transactions that do not involve any "public offering" within the meaning of
Section 4(2) of the Securities Act of 1933, as amended (the "1933 Act").
Investments in MSIT may only be made by registered broker/dealers or by
investment companies, insurance company separate accounts, common or commingled
trust funds, group trusts or similar organizations or entities that are
"accredited investors" within the meaning of Regulation D under the 1933 Act.
This registration statement does not constitute an offer to sell, or the
solicitation of an offer to buy, any "security" within the meaning of the 1933
Act.
The net asset value of each Master Portfolio is determined by the custodian on
each day the relevant Master Portfolio is open.
Securities held by a Master Portfolio for which market quotations are
available are valued at latest prices. Securities for which the primary market
is a national securities exchange or the National Association of Securities
Dealers Automated Quotations National Market System are valued at last sale
prices. In the absence of any sale of such securities on the valuation date and
in the case of other securities, including U.S. Government securities but
excluding money market instruments maturing in 60 days or less, the valuations
are based on latest quoted bid prices. Money market instruments maturing in 60
days or less are valued at amortized cost, with cost being the value of the
security on the preceding day (61st day). Futures contracts will be marked to
market daily at their respective settlement prices determined by the relevant
exchange. Options listed on a national exchange are valued at the last sale
price on the exchange on which they are traded at the close of the NYSE, or, in
the absence of any sale on the valuation date, at latest quoted bid prices.
Options not listed on a national exchange are valued at latest quoted bid
prices. Debt securities maturing in 60 days or less are valued at amortized
cost. In all cases, bid prices will be furnished by an independent pricing
service approved by the Board of Trustees. Prices provided by an independent
pricing service may be determined without exclusive reliance on quoted prices
and may take into account appropriate factors such as institutional-size trading
in similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics and other market data. Securities held under a
repurchase agreement will be valued at a price equal to the amount of the cash
investment at the time of valuation on the valuation date. The market value of
the underlying securities shall be determined in accordance with the applicable
procedures, as described above, for the purpose of determining the adequacy of
collateral. All other securities and other assets of the Master Portfolios for
which current market quotations are not readily available are valued at fair
value as determined in good faith by Wells Fargo Bank, as sub-adviser, subject
to the overall supervision and review of BGFA, as adviser, and in accordance
with procedures approved by MSIT's Board of Trustees.
Payment for shares of a Master Portfolio may, at the discretion of the
adviser, be made in the form of securities that are permissible investments for
the Master Portfolio and must meet the investment objective, policies and
limitations of the Master Portfolio as described in the Part A. In connection
with an in-kind securities payment, a Master Portfolio may require, among other
things, that the securities (i) be valued on the day of purchase in accordance
with the pricing methods used by the Master Portfolio; (ii) are accompanied by
satisfactory assurance that the Master Portfolio will have good and marketable
title to such securities received by it; (iii) are not subject to any
restrictions upon resale by the Master Portfolio; (iv) be in proper form for
transfer to the Master Portfolio; and (v) are accompanied by adequate
information concerning the basis and other tax matters relating to the
securities. All dividends, interest, subscription or other rights pertaining to
such securities shall become the property of the Master Portfolio engaged in the
in-kind purchase transaction and must be delivered to such Master Portfolio by
the investor upon receipt from the issuer. Securities acquired through an in-
kind purchase will be acquired for investment and not for immediate resale.
Shares purchased in exchange for securities generally cannot be redeemed until
the transfer has settled.
ITEM 20. TAX STATUS.
MSIT intends to qualify each Master Portfolio as a partnership under the
Internal Revenue Code of 1986, as amended (the "Code"). Accordingly, each
investor in a Master Portfolio will be taxable on its allocable share (as
determined in accordance with the governing instruments of the Master Portfolio)
of a Master Portfolio's taxable income in determining the investor's federal
income tax liability. The determination of such share will be made in accordance
with the Code and regulations promulgated thereunder. A Master Portfolio's
taxable year-end is the last day of December.
Each Master Portfolio's assets, income and distributions are managed in such a
way that a regulated investment company investing in a Master Portfolio will be
able to satisfy the requirements of Subchapter M of the Code, provided that the
regulated investment company invests substantially all of its assets in such
Master Portfolio. Any interest, dividends and gains or losses of a Master
Portfolio, as a partnership, will be deemed to have been "passed
17
<PAGE>
through" to investors in such Master Portfolio. If a Master Portfolio were to
accrue but not distribute any interest, dividends or gains, an investor would be
deemed to have realized and recognized its proportionate share of interest,
dividends or gains without receipt of any corresponding distribution. However, a
Master Portfolio seeks to minimize recognition by investors of interest,
dividends and gains without a corresponding distribution.
Investors' capital accounts will be adjusted on a daily basis to reflect
additional investments or withdrawals and any increase or decrease in net asset
value.
ITEM 21. UNDERWRITERS.
The distributor and exclusive placement agent for MSIT is Stephens, which
receives no additional compensation for serving in this capacity. Registered
broker/dealers and investment companies, insurance company separate accounts,
common and commingled trust funds, group trusts and similar organizations and
entities which constitute accredited investors, as defined in the regulations
adopted under the 1933 Act, may continuously invest in MSIT.
ITEM 22. CALCULATIONS OF PERFORMANCE DATA.
Not applicable.
ITEM 23. FINANCIAL INFORMATION.
KPMG Peat Marwick LLP has been selected as the independent auditors for MSIT.
KPMG Peat Marwick LLP provides audit services, tax return preparation and
assistance and consultation in connection with the review of certain SEC
filings. KPMG Peat Marwick LLP's address is Three Embarcadero Center, San
Francisco, California 94111.
The portfolio of investments, audited financial statements and independent
auditors' report for each of the Master Portfolios for the fiscal year ended
February 28, 1997, are hereby incorporated by reference to the MasterWorks Funds
Inc. (SEC File Nos. 33-54128; 811-7322) Annual Report, as filed with the SEC on
May 2, 1997. The portfolio of investments, audited financial statements and
independent auditors report for each of the Master Portfolios are attached to
all Part Bs delivered to interestholders and prospective interestholders.
18
<PAGE>
APPENDIX
The following is a description of the ratings given by Moody's and S&P to
corporate and municipal bonds, municipal notes, and corporate and municipal
commercial paper.
CORPORATE AND MUNICIPAL BONDS
Moody's: The four highest ratings for corporate and municipal bonds are "Aaa,"
"Aa," "A" and "Baa." Bonds rated Aaa are judged to be of the "best quality" and
carry the smallest amount of investment risk. Bonds rated Aa are of "high
quality by all standards," but margins of protection or other elements make
long-term risks appear somewhat greater than Aaa rated bonds. Bonds rated A
possess many favorable investment attributes and are considered to be upper
medium grade obligations. Bonds rated Baa are considered to be medium grade
obligations; interest payments and principal security appear adequate for the
present, but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds have
speculative characteristics as well. Moody's applies numerical modifiers "1,"
"2" and "3" in each rating category from Aa through Baa in its rating system.
The modifier 1 indicates that the security ranks in the higher end of its
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end.
S&P: The four highest ratings for corporate and municipal bonds are "AAA,"
"AA," "A" and "BBB." Bonds rated AAA have the highest ratings assigned by S&P
and have an extremely strong capacity to pay interest and repay principal. Bonds
rated AA have a "very strong capacity to pay interest and repay principal" and
differ "from the highest rated issued only in small degree." Bonds rated A have
a "strong capacity" to pay interest and repay principal, but are "somewhat more
susceptible" to adverse effects of changes in economic conditions or other
circumstances than bonds in higher rated categories. Bonds rated BBB are
regarded as having an "adequate capacity" to pay interest and repay principal,
but changes in economic conditions or other circumstances are more likely to
lead to a "weakened capacity" to make such repayments. The ratings from AA to
BBB may be modified by the addition of a plus or minus sign to show relative
standing within the category.
MUNICIPAL NOTES
Moody's: The highest ratings for state and municipal short-term obligations
are "MIG 1," "MIG 2," and "MIG 3" (or "VMIG 1," "VMIG 2" and "VMIG 3" in the
case of an issue having a variable rate demand feature). Notes rated MIG 1 or
VMIG 1 are judged to be of the "best quality." Notes rated MIG 2 or VMIG 2 are
of "high quality," with margins of protections "ample although not as large as
in the preceding group." Notes rated MIG 3 or VMIG 3 are of "favorable quality,"
with all security elements accounted for, but lacking the strength of the
preceding grades.
S&P: The "SP-1" rating reflects a "very strong or strong capacity to pay
principal and interest." Notes issued with "overwhelming safety characteristics"
will be rated "SP-1+." The "SP-2" rating reflects a "satisfactory capacity" to
pay principal and interest.
CORPORATE AND MUNICIPAL COMMERCIAL PAPER
Moody's: The highest rating for corporate and municipal commercial paper is
(Prime-1) "P-1." Issuers rated P-1 have a "superior capacity for repayment of
short-term promissory obligations." Issuers rated (Prime- 2) "P-2" "have a
strong capacity for repayment of short-term promissory obligations," but
earnings trends, while sound, will be subject to more variation.
S&P: The A-1 rating for corporate and municipal commercial paper indicates
that the "degree of safety regarding timely payment is either overwhelming or
very strong." Commercial paper with "overwhelming safety characteristics" will
be rated A-1+. Commercial paper with a strong capacity for timely payments on
issues will be rated A-2.
A-1
<PAGE>
CORPORATE NOTES
S&P: The two highest ratings for corporate notes are "SP-1" and "SP-2." The
SP-1 rating reflects a "very strong or strong capacity to pay principal and
interest." Notes issued with "overwhelming safety characteristics" will be rated
SP-1+. The SP-2 rating reflects a "satisfactory capacity" to pay principal and
interest.
A-2
<PAGE>
MANAGED SERIES INVESTMENT TRUST
FILE NO. 811-8140
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
---------------------------------
(a) Financial Statements:
The portfolio of investments, audited financial statements and
independent auditors' report for the fiscal year ended February 28, 1997 for the
Growth Stock and Short-Intermediate Term Master Portfolios are hereby
incorporated by reference to the MasterWorks Funds Inc. Annual Report, as filed
with the SEC on May 2, 1997.
(b) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<C> <S>
1 - Declaration of Trust, incorporated by reference to the
Registration Statement on Form N-1A filed November 8, 1993.
2 - By-Laws, incorporated by reference to the Registration Statement
on Form N-1A filed November 8, 1993.
3 - Not Applicable
4 - Not Applicable.
5(a)(i) - Investment Advisory Contract between BZW Barclays Global Fund
Advisors and the Trust on behalf of the Growth Stock Master
Portfolio, incorporated by reference to Amendment No. 4 to the
Registration Statement, filed January 5, 1996.
(a)(ii) - Investment Advisory Contract between BZW Barclays Global Fund
Advisors and the Trust on behalf of the Short-Intermediate Term
Master Portfolio, incorporated by reference to Amendment No. 4 to
the Registration Statement, filed January 5, 1996.
(a)(iii) - Sub-Advisory Contract by and among BZW Barclays Global Fund
Advisors, Wells Fargo Bank, N.A. and the Trust on behalf of the
Growth Stock Master Portfolio, incorporated by reference to
Amendment No. 4 to the Registration Statement, filed January 5,
1996.
</TABLE>
C-1
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<C> <S>
5(a)(iv) - Sub-Advisory Contract by and among BZW Barclays Global Fund
Advisors, Wells Fargo Bank, N.A. and the Trust on behalf of the
Short-Intermediate Term Master Portfolio, incorporated by
reference to Amendment No. 4 to the Registration Statement, filed
January 5, 1996.
6 - Placement Agent Agreement with Stephens Inc., incorporated by
reference to Amendment No. 5 to the Registration Statement, filed
June 28, 1996.
7 - Not Applicable
8 - Custody Agreement with Investors Bank & Trust Company, filed
herewith.
9(a) - Co-Administration Agreement with Stephens Inc. and Barclays
Global Investors, N.A., filed herewith.
9(b) - Sub-Administration Agreement with Investors Bank & Trust Company
and Barclays Global Investors, N.A.
9(c) - Agency Agreement with Wells Fargo Bank, N.A., incorporated by
reference to Amendment No. 5 to the Registration Statement, filed
June 28, 1996.
10 - Not Applicable
11 - Not Applicable
12 - Not Applicable
13(a) - Investment Letter, incorporated by reference to Amendment No. 2
to the Registration Statement, filed June 27, 1995.
(b) - Investment Letter executed by Stephens Inc., incorporated by
reference to Amendment No. 3 to the Registration Statement on
Form N-1A filed July 19, 1995.
14 - Not Applicable
15 - Not Applicable
16 - Not Applicable
17 - See Exhibit 27
18 - Not Applicable
27.1 - Financial Data Schedule for the Short-Intermediate Term Master
Portfolio, filed herewith.
27.2 - Financial Data Schedule for the Growth Stock Master Portfolio,
filed herewith.
</TABLE>
C-2
<PAGE>
Item 25. Persons Controlled by or under Common Control with Registrant.
-------------------------------------------------------------
No person is controlled by or under common control with Registrant.
Item 26. Number of Holders of Securities.
-------------------------------
As of May 30, 1997, the number of record holders of the Registrant
were as follows:
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
Growth Stock Master Portfolio 2
Short-Intermediate Term Master Portfolio 2
</TABLE>
Item 27. Indemnification.
---------------
Article V of the Registrant's Declaration of Trust limits the liability
and, in certain instances, provides for mandatory indemnification of the
Registrant's trustees, officers, employees, agents and holders of beneficial
interests in the Trust. In addition, the Trustees are empowered under Section
3.9 of the Registrant's Declaration of Trust to obtain such insurance policies
as they deem necessary.
Item 28. Business and Other Connections of Investment Adviser.
----------------------------------------------------
The Growth Stock Master Portfolio and Short-Intermediate Term Master
Portfolio are advised by Barclays Global Fund Advisors ("BGFA"), a wholly-owned
subsidiary of Barclays Global Investors, N.A. ("BGI", formerly, Wells Fargo
Institutional Trust Company). BGFA's business is that of a registered investment
adviser to certain open-end, management investment companies and various other
institutional investors. 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, including acting as investment adviser and/or sub-
adviser to certain open-end management investment companies and various other
institutional investors.
The directors and officers of BGFA consist primarily of persons who
during the past two years have been active in the investment management business
of the former sub-adviser to the Registrant, Wells Fargo Nikko Investment
Advisors ("WFNIA") and, in some cases, the service business of BGI. With the
exception of Irving Cohen, each of the directors and executive officers of BGFA
will also have substantial responsibilities as directors and/or officers of BGI.
To the knowledge of the Registrant, except as set forth below, none of the
directors or executive officers of BGFA is or has been at any time during the
past two fiscal years engaged in any other business, profession, vocation or
employment of a substantial nature.
C-3
<PAGE>
<TABLE>
<CAPTION>
Name and Position Principal Business(es) During at
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 of 1997
Chief Financial Officer 45 Fremont Street, San Francisco, CA 94105
Managing Director and Principal Accounting
Officer of Bankers Trust Company from 1988-1997
505 Market Street, San Francisco, CA 94111
</TABLE>
Wells Fargo Bank, N.A. ("Wells Fargo Bank"), a wholly owned subsidiary of
Wells Fargo & Company, serves as sub-investment adviser to the Master Portfolios
and, prior to January 1, 1996, served as investment adviser to the Trust. Wells
Fargo Bank currently serves as investment adviser or sub-investment adviser to
several other registered open-end management investment companies. Wells Fargo
Bank's business is that of a national banking association with respect to which
it conducts a variety of commercial banking and trust activities.
To the knowledge of Registrant, none of the directors or executive
officers of Wells Fargo Bank, except those set forth below, is or has been at
any time during the past two fiscal years engaged in any other business,
profession, vocation or employment of a substantial nature, except that certain
executive officers also hold various positions with and engage in business for
Wells Fargo & Company. Set forth below are the names and principal businesses
of the directors and executive officers of Wells Fargo Bank who are or during
the past two fiscal years have been engaged in any other business, profession,
vocation or employment of a substantial nature for 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
Director & Greene
455 Market Street
San Francisco, CA 94105
Director of Armstrong World Industries, Inc.
5037 Patata Street
South Gate, CA 90280
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
Name and Position Principal Business(es) and Address(es)
at Wells Fargo Bank During at Least the Last Two Fiscal Years
- ------------------- -----------------------------------------
<S> <C>
Director of 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
Director Officer of First Interstate Bancorp
633 West Fifth Street
Los Angeles, CA 90071
Director of Aztar Corporation
2390 East Camelback Road Suite 400
Phoenix, AZ 85016
Director of Castle & Cook, Inc.
10900 Wilshire Blvd.
Los Angeles, CA 90024
Director of Terra Industries, Inc.
1321 Mount Pisgah Road
Walnut Creek, CA 94596
William S. 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
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
Name and Position Principal Business(es) and Address(es)
at Wells Fargo Bank During at Least the Last Two Fiscal Years
- ------------------- -----------------------------------------
<S> <C>
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 Wells Fargo & Company
of 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
Director of Boise Cascade Corporation
1111 West Jefferson Street
P.O. Box 50
Boise, ID 83728
Director of California Water Service Company
1720 North First Street
San Jose, CA 95112
Director of Enron Corporation
1400 Smith Street
Houston, TX 77002
Director of GenCorp, Inc.
175 Ghent Road
Fairlawn, OH 44333
Director of Homestake Mining Company
650 California Street
San Francisco, CA 94108
Thomas L. Lee Chairman and Chief Executive Officer of
Director The Newhall Land and Farming Company
10302 Avenue 7 1-2
Firebaugh, CA 93622
</TABLE>
C-6
<PAGE>
<TABLE>
<CAPTION>
Name and Position Principal Business(es) and Address(es)
at Wells Fargo Bank During at Least the Last Two Fiscal Years
- ------------------- -----------------------------------------
<S> <C>
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
Sacramento, CA 95814
Philip J. Quigley Chairman, President and Chief Executive Officer
Director of 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
Director Teledyne, Inc.
2049 Century Park East
Los Angeles, CA 90067
Retired Secretary of the Air Force
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
Name and Position Principal Business(es) and Address(es)
at Wells Fargo Bank During at Least the Last Two Fiscal Years
- ------------------- -----------------------------------------
<S> <C>
Director of Vulcan Materials Company
One MetroPlex Drive
Birmingham, AL 35209
Richard J. Stegemeier Chairman (Emeritus) of Unocal Corp
Director 44141 Yucca Avenue
Lancaster, CA 93534
Director of Foundation Health Corporation
166 4th
Fort Irwin, CA 92310
Director of Halliburton Company
3600 Lincoln Plaza
500 North Alcard Street
Dallas, TX 75201
Director of Northrop Grumman Corp.
1840 Century Park East
Los Angeles, CA 90067
Director of Outboard Marine Corporation
100 SeaHorse Drive
Waukegan, IL 60085
Director of Pacific Enterprises
555 West Fifth Street
Suite 2900
Los Angeles, CA 90031
Director of First Interstate Bancorp
633 West Fifth Street
Los Angeles, CA 90071
Susan G. Swenson President and Chief Executive Officer of
Director Cellular One
651 Gateway Blvd.
San Francisco, CA 94080
David M. Tellep Retired Chairman of the Board and Chief
Director Executive Officer of
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
</TABLE>
C-8
<PAGE>
<TABLE>
<CAPTION>
Name and Position Principal Business(es) and Address(es)
at Wells Fargo Bank During at Least the Last Two Fiscal Years
- ------------------- -----------------------------------------
<S> <C>
Chang-Lin Tien Chancellor of the University of California at
Director Berkeley
Berkeley, CA 94720
Director of Raychem Corporation
300 Constitution Drive
Menlo Park, CA 94025
John A. Young President, Chief Executive Officer and Director
Director of Hewlett-Packard Company
3000 Hanover Street
Palo Alto, CA 9434
Director of Chevron Corporation
225 Bush Street
San Francisco, CA 94104
Director of Lucent Technologies
25 John Glenn Drive
Amherst, NY 14228
Director of Novell, Inc.
11300 West Olympic Blvd.
Los Angeles, CA 90064
Director of Shaman Pharmaceuticals Inc.
213 East Grand Ave. South
San Francisco, CA 94080
William F. Zuendt President of Wells Fargo & Company
President 420 Montgomery Street
San Francisco, CA 94105
Director of 3Com Corporation
5400 Bayfront Plaza
P.O. Box 58145
Santa Clara, CA 95052
Director of the California Chamber of Commerce
</TABLE>
Item 29. Principal Underwriters.
----------------------
(a) Stephens Inc., distributor for the Registrant, does not presently act as
investment adviser for any other registered investment companies, but does act
as principal underwriter for Overland Express Funds, Inc., Stagecoach Funds,
Inc., Stagecoach Trust, Life & Annuity 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 Master
Investment Trust, Master Investment Portfolio and Managed Series Investment
Trust, which are registered open-end management investment companies, and has
acted as principal underwriter for the Liberty Term Trust, Inc., Nations
Government Income Term Trust 2003, Inc., Nations
C-9
<PAGE>
Government Income Term Trust 2004, Inc. and Managed Balanced Target Maturity
Fund, Inc., which are closed-end management investment companies.
(b) Information with respect to each director and officer of the
principal underwriter is incorporated by reference to Form ADV and Schedules A
and D filed by Stephens Inc. with the Securities and Exchange Commission
pursuant to The Investment Advisers Act of 1940 (SEC File No. 501-15510).
(c) Not applicable.
Item 30. Location of Accounts and Records.
--------------------------------
(a) The Registrant maintains accounts, books and other documents required by
Section 31(a) of the 1940 Act 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. For the period
prior to October 21, 1996, BGI maintains all Records relating to its services as
custodian at the same address.
(c) Wells Fargo Bank maintains all Records relating to its services as sub-
investment adviser beginning January 1, 1996, its services as investment adviser
and custodian for the period prior to January 1, 1996, and its services as
transfer and dividend disbursing agent at 525 Market Street, San Francisco
California 94105.
(d) Stephens maintains all Records relating to its services as sponsor, co-
administrator and placement agent at 111 Center Street, Little Rock, Arkansas
72201.
(e) IBT maintains all Records relating to its services as sub-
administrator and custodian at 89 South Street, Boston, Massachusetts 02111.
Item 31. Management Services.
-------------------
Other than as set forth under the captions "Item 5. Management of the
Trust" in the Prospectus constituting Part A of this Registration Statement and
"Item 16. Investment Advisory and Other Services" in the Statement of
Additional Information constituting Part B of this Registration Statement,
Registrant is not a party to any management-related service contract.
Item 32. Undertakings.
------------
(a) Not applicable.
(b) Not applicable.
C-10
<PAGE>
(c) Registrant undertakes to hold a special meeting of its
shareholders for the purpose of voting on the question of removal
of a trustee or trustees if requested in writing by the holders
of at least 10% of each Master Portfolio, the outstanding voting
securities of Master Investment Trust and to assist in
communicating with other shareholders as required by Section
16(c) of the Investment Company Act of 1940.
C-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant has duly caused this Amendment to its Registration Statement on Form
N-1A to be signed on its behalf by the undersigned, thereto duly authorized, in
the City of Little Rock, State of Arkansas on the 27th day of June 1997.
MANAGED SERIES INVESTMENT TRUST
By: /s/ Richard H. Blank, Jr.
------------------------------
(Richard H. Blank, Jr.)
Secretary and Treasurer
(Principal Financial Officer)
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
* Trustee, Chairman and President
- --------------------------- (Principal Executive Officer)
(R. Greg Feltus)
/s/Richard H. Blank, Jr. Secretary and Treasurer
- ----------------------------- (Principal Financial Officer)
(Richard H. Blank, Jr.)
*
- ----------------------------- Trustee
(Jack S. Euphrat)
*
- ----------------------------- Trustee
(Thomas S. Goho)
*
- ----------------------------- Trustee
(Zoe Ann Hines)
*
- ----------------------------- Trustee
(W. Rodney Hughes)
*
- ----------------------------- Trustee
(Robert M. Joses)
*
- ----------------------------- Trustee
(J. Tucker Morse)
*By: /s/Richard H. Blank, Jr.
-------------------------
(Richard H. Blank, Jr.)
As Attorney-in-Fact
June 27, 1997
</TABLE>
C-12
<PAGE>
MANAGED SERIES INVESTMENT TRUST
FILE NO. 811-8140
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
EX-27.1 Financial Data Schedule for the Short-Intermediate Term
Master Portfolio
EX-27.2 Financial Data Schedule for the Growth Stock Master Portfolio
EX-99.B8 Custody Agreement with Investors Bank & Trust Company
EX-99.B9(a) Co-Administration Agreement with Stephens Inc. and Barclays
Global Investors, N.A.
EX-99.B9(b) Sub-Administration Agreement with Investors Bank & Trust
Company and Barclays Global Investors, N.A.
EX-99.B19 Powers of Attorney
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
EXHIBIT 27.1
Financial Data Schedule
Short-Intermediate Term Master Portfolio
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> SHORT-INTERMEDIATE TERM MASTER PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-01-1996
<PERIOD-END> FEB-28-1997
<INVESTMENTS-AT-COST> 12,600,942
<INVESTMENTS-AT-VALUE> 12,485,545
<RECEIVABLES> 120,238
<ASSETS-OTHER> 528,440
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 13,134,223
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 68,510
<TOTAL-LIABILITIES> 68,510
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 13,065,713
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 929,838
<OTHER-INCOME> 0
<EXPENSES-NET> 68,679
<NET-INVESTMENT-INCOME> 861,159
<REALIZED-GAINS-CURRENT> (86,579)
<APPREC-INCREASE-CURRENT> (214,524)
<NET-CHANGE-FROM-OPS> 560,056
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (685,346)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 58,891
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 81,326
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
EXHIBIT 27.2
Financial Data Schedule
Growth Stock Master Portfolio
</LEGEND>
<SERIES>
<NUMBER> 2
<NAME> GROWTH STOCK MASTER PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-01-1996
<PERIOD-END> FEB-28-1997
<INVESTMENTS-AT-COST> 202,617,546
<INVESTMENTS-AT-VALUE> 213,184,745
<RECEIVABLES> 747,364
<ASSETS-OTHER> 162,625
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 214,094,734
<PAYABLE-FOR-SECURITIES> 592,875
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 509,370
<TOTAL-LIABILITIES> 1,102,245
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 212,992,489
<DIVIDEND-INCOME> 253,969
<INTEREST-INCOME> 507,985
<OTHER-INCOME> 0
<EXPENSES-NET> 1,318,204
<NET-INVESTMENT-INCOME> (556,250)
<REALIZED-GAINS-CURRENT> 15,318,008
<APPREC-INCREASE-CURRENT> (25,141,741)
<NET-CHANGE-FROM-OPS> (10,379,983)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 34,291,581
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,334,600
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,379,664
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
EXHIBIT 99.B8
CUSTODY AGREEMENT
BETWEEN
MANAGED SERIES INVESTMENT TRUST
AND
INVESTORS BANK & TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Bank Appointed Custodian..............................................
2. Definitions...........................................................
2.1 Authorized Person.............................................
2.2 Board.........................................................
2.3 Security......................................................
2.4 Portfolio Security............................................
2.5 Officer's Certificate.........................................
2.6 Book-Entry System.............................................
2.7 Depository....................................................
2.8 Proper Instructions...........................................
2.9 Foreign Securities............................................
2.10 Performance Calculations......................................
3. Separate Accounts.....................................................
4. Certification as to Authorized Persons................................
5. Custody of Cash.......................................................
5.1 Purchase of Securities........................................
5.2 Redemptions...................................................
5.3 Distributions and Expenses of the Master Portfolios...........
5.4 Payment in Respect of Securities..............................
5.5 Repayment of Loans............................................
5.6 Repayment of Cash.............................................
5.7 Foreign Exchange Transactions.................................
5.8 Other Authorized Payments.....................................
5.9 Termination...................................................
6. Securities............................................................
6.1 Segregation and Registration..................................
6.2 Voting and Proxies............................................
6.3 Corporate Action..............................................
6.4 Book-Entry System.............................................
6.5 Use of a Depository...........................................
6.6 Use of Book-Entry System for Commercial Paper.................
6.7 Use of Immobilization Programs................................
6.8 Eurodollar CDs................................................
6.9 Options and Futures Transactions..............................
6.10 Segregated Account............................................
6.11 Interest Bearing Call or Time Deposits........................
6.12 Transfer of Securities........................................
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
7. Redemptions.........................................................
8. Merger, Dissolution, etc. of the Trust or a Master Portfolio........
9. Actions of the Bank Without Prior Authorization.....................
10. Collections and Defaults............................................
11. Maintenance of Records and Accounting Services......................
12. Master Portfolio Evaluation and Performance Calculation.............
12.1 Master Portfolio Evaluation...................................
12.2 Performance Calculations......................................
13. Concerning the Bank.................................................
13.1 Bank Warranty.................................................
13.2 Standards of Care and Performance of Duties...................
13.3 Agents and Sub-custodians with Respect to Property
of the Master Portfolios held in the United States............
13.4 Duties of the Bank with Respect to Property
Held Outside of the United States.............................
13.5 Insurance.....................................................
13.6 Fees and Expenses of Bank.....................................
13.7 Advances by Bank..............................................
14. Termination.........................................................
15. Confidentiality.....................................................
16. Notices.............................................................
17. Amendments..........................................................
18. Parties.............................................................
19. Governing Law.......................................................
20. Counterparts........................................................
21. Limitations of Liability............................................
22. Single Agreement....................................................
</TABLE>
ii
<PAGE>
CUSTODY AGREEMENT
AGREEMENT made as of this ____ day of October, 1996, between MANAGED
SERIES INVESTMENT TRUST, a Delaware business trust (the "Trust"), and INVESTORS
BANK & TRUST COMPANY (the "Bank" or, at times, "IBT").
The Trust, an open-end management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), on behalf of the
individual Master Portfolios listed on Schedule A hereto, as such Schedule may
be amended from time to time, desires to place and maintain all of the Master
Portfolios' portfolio securities and other assets including cash in the custody
of the Bank, and the Bank has indicated its willingness to so act, subject to
the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:
1. Bank Appointed Custodian. The Trust hereby appoints the Bank as
------------------------
custodian of the Master Portfolios' portfolio securities and cash delivered to
the Bank as hereinafter described, and the Bank agrees to act as such upon the
terms and conditions hereinafter set forth.
2. Definitions. Whenever used herein, the terms listed below will
-----------
have the following meaning:
2.1 Authorized Person. Authorized Person will mean any of the persons
-----------------
duly authorized to give Proper Instructions or otherwise act on behalf of the
Trust and its Master Portfolios by appropriate resolution of the Board of
Trustees of the Trust, and set forth in a certificate as required by Section 4
hereof.
2.2 Board. Board will mean the Trust's Board of Trustees .
-----
2.3 Security. The term security as used herein will have the same
--------
meaning as when such term is used in the Securities Act of 1933, as amended (the
"1933 Act"), including, without limitation, any note, stock, treasury stock,
bond, debenture, evidence of indebtedness, certificate of interest or
participation in any profit sharing agreement, collateral-trust certificate,
preorganization certificate or subscription, transferable share, investment
contract, voting-trust certificate, certificate of deposit for a security,
fractional undivided interest in oil, gas, or other mineral rights, any put,
call, straddle, option, or privilege on any security, certificate of deposit, or
group or index of securities (including any interest therein or based on the
value thereof), or any put, call, straddle, option, or privilege entered into on
a national securities exchange relating to a foreign currency, or, in general,
any interest or instrument commonly known as a "security", or any certificate of
interest or participation in, temporary or interim certificate for, receipt for,
guarantee of, or warrant or right to subscribe to, or option contract to
purchase or sell any of the foregoing, and futures, forward contracts and
options thereon.
1
<PAGE>
2.4 Portfolio Security. Portfolio Security will mean any security
------------------
owned by a Master Portfolio of the Trust.
2.5 Officer's Certificate. Officer's Certificate will mean, unless
---------------------
otherwise indicated, any request, direction, instruction, or certification in
writing signed by an Authorized Person of the Trust.
2.6 Book-Entry System. Book-Entry System shall mean the Federal
-----------------
Reserve-Treasury Department Book Entry System for United States government,
instrumentality and agency securities operated by the Federal Reserve Bank, its
successor(s) and its nominee(s).
2.7 Depository. Depository shall mean The Depository Trust Company
----------
("DTC") and any other clearing agency registered with the Securities and
Exchange Commission under Section 17A of the Securities Exchange Act of 1934, as
amended ("Exchange Act"), and its successor(s) and its nominee(s). The term
"Depository" shall further mean and include any other person authorized to act
as a depository under the 1940 Act, its successor(s) and its nominee(s),
specifically identified in a certified copy of a resolution of the Board.
2.8 Proper Instructions. Proper Instructions shall mean (i)
-------------------
instructions regarding the purchase or sale of Portfolio Securities, and
payments and deliveries in connection therewith, given by an Authorized Person,
such instructions to be given in such form and manner as the Bank and the Trust
shall agree upon from time to time, and (ii) instructions (which may be
continuing instructions) regarding other matters signed or initialed by an
Authorized Person. Oral instructions will be considered Proper Instructions if
the Bank reasonably believes them to have been given by an Authorized Person.
The Trust shall cause all oral instructions to be promptly confirmed in writing
or by facsimile. The Bank shall act upon and comply with any subsequent Proper
Instruction which modifies a prior instruction, and the sole obligation of the
Bank with respect to any follow-up or confirmatory instruction shall be to make
reasonable efforts to detect any discrepancy between the original instruction
and such confirmation and to report such discrepancy to the Trust. The Trust
shall be responsible, at the expense of the applicable Master Portfolio, for
taking any action, including any reprocessing, necessary to correct any such
discrepancy or error, and, to the extent such action requires the Bank to act,
the Trust shall give the Bank specific Proper Instructions as to the action
required. Upon receipt by the Bank of an Officer's Certificate as to the
authorization by the Board accompanied by a detailed description of procedures
approved by the Trust, Proper Instructions may include communication effected
directly between electromechanical or electronic devices provided that the Trust
and the Bank are satisfied that such procedures afford adequate safeguards for a
Master Portfolio's assets.
2.9 Foreign Securities. The term Foreign Securities as used herein
------------------
will have the same meaning as when such term is used in Rule 17f-5 of the 1940
Act.
2.10 Performance Calculations. Performance Calculations as used
------------------------
herein shall include standard performance calculations required pursuant to the
1933 Act, the 1940 Act, and any applicable rules and interpretations of the
staff of the Securities and Exchange Commission, and shall also include other
non-standard performance calculations as shall be agreed upon by both parties to
this Agreement from time to time.
2
<PAGE>
3. Separate Accounts. The Bank will segregate the assets of each Master
-----------------
Portfolio to which this Agreement relates into a separate account for each such
Master Portfolio containing the assets of such Master Portfolio (and all
investment earnings thereon). Unless the context otherwise requires, any
reference in this Agreement to any actions to be taken by the Trust shall be
deemed to refer to the Trust acting on behalf of one or more of its Master
Portfolios, any reference in this Agreement to any assets of the Trust,
including, without limitation, any Portfolio Securities and other assets
including cash and any earnings thereon, shall be deemed to refer only to assets
of the applicable Master Portfolio, any duty or obligation of the Bank hereunder
to the Trust shall be deemed to refer to duties and obligations with respect to
the individual Master Portfolios, and any obligation or liability of the Trust
hereunder shall be binding only with respect to the individual Master Portfolio
and shall be discharged only out of the assets of such Master Portfolio.
4. Certification as to Authorized Persons. The Secretary or an Assistant
--------------------------------------
Secretary of the Trust will at all times maintain on file with the Bank his or
her certification to the Bank, in such form as may be acceptable to the Bank, of
(i) the names and signatures of the Authorized Persons and (ii) the names of the
Board, it being understood that upon the occurrence of any change in the
information set forth in the most recent certification on file (including
without limitation any person named in the most recent certification who is no
longer an Authorized Person as designated therein), the Secretary or an
Assistant Secretary of the Trust, will sign a new or amended certification
setting forth the change of the new, additional or omitted names or signatures.
The Bank will be entitled to rely and act upon any Officer's Certificate given
to it by the Trust that has been signed by Authorized Persons named in the most
recent certification received by the Bank.
5. Custody of Cash. As custodian, the Bank will open and maintain a
---------------
separate account or accounts in the name of each Master Portfolio or in the name
of the Bank, as custodian of the Master Portfolios, and will deposit to the
account of a Master Portfolio all of the cash of the Master Portfolio, except
for cash held by a sub-custodian appointed pursuant to subsections 13.3 or 13.4
hereof, including borrowed funds, delivered to the Bank, subject only to draft
or order by the Bank acting pursuant to the terms of this Agreement. Upon
receipt by the Bank of Proper Instructions (which may be continuing
instructions) or in the case of payments for redemptions and repurchases of
outstanding interests of a Master Portfolio, notification from the Master
Portfolio's transfer agent as provided in Section 7, requesting such payment,
designating the payee or the account or accounts to which the Bank will release
funds for deposit, and stating that it is for a purpose permitted under the
terms of this Section 5, specifying the applicable subsection, the Bank will
make payments of cash held for the accounts of the Master Portfolio, insofar as
funds are available for that purpose, only as permitted in subsections 5.1-5.9
below.
5.1 Purchase of Securities. Upon the purchase of securities for a
----------------------
Master Portfolio, against contemporaneous receipt of such securities by the
Bank, or against delivery of such securities to the Bank, in accordance with
generally accepted settlement practices or customs in the jurisdiction or market
in which the transaction occurs, such securities to be registered in the name of
the Master Portfolio or in the name of, or properly endorsed and in form for
transfer to, the Bank, or a nominee of the Bank, or receipt for the account of
the Bank pursuant to the provisions of Section 6 below, each such payment to be
made at the purchase price shown on a
3
<PAGE>
broker's confirmation (or transaction report in the case of Book Entry Paper) of
purchase of the securities that is received by the Bank before such payment is
made and that has been confirmed in the Proper Instructions also received by the
Bank before such payment is made.
5.2 Redemptions. In such amount as may be necessary for the
-----------
repurchase or redemption of interests of a Master Portfolio offered for
repurchase or redemption in accordance with Section 7 of this Agreement.
5.3 Distributions and Expenses of the Master Portfolios. For the
---------------------------------------------------
payment on the account of a Master Portfolio of dividends or other distributions
to interestholders as may from time to time be declared by the Board, interest,
taxes, investment advisory or administration fees, and, as and to the extent
provided on Schedule B hereto, any fees of the Bank for its services hereunder
and any reimbursement of the expenses and liabilities of the Bank related to
such services with respect to a Master Portfolio of the Trust as provided
pursuant to subsection 13.6 hereunder and on Schedule B hereto.
5.4 Payment in Respect of Securities. For payments in connection with
--------------------------------
the conversion, exchange or surrender of Portfolio Securities or securities
subscribed to by a Master Portfolio held by or to be delivered to the Bank.
5.5 Repayment of Loans. To repay loans of money made to a Master
------------------
Portfolio, but, in the case of final payment, only upon redelivery to the Bank
of any Portfolio Securities pledged or hypothecated therefor and upon surrender
of documents evidencing the loan.
5.6 Repayment of Cash. To repay the cash delivered to a Master
-----------------
Portfolio for the purpose of collateralizing the obligation to return to a
Master Portfolio certificates borrowed from the Master Portfolio representing
Portfolio Securities, but only upon redelivery to the Bank of such borrowed
certificates.
5.7 Foreign Exchange Transactions. For payments in connection with
-----------------------------
foreign exchange contracts or options to purchase and sell foreign currencies
for spot and future delivery ("Foreign Exchange Agreements") that may be entered
into by the Bank on behalf of a Master Portfolio upon the receipt of Proper
Instructions, such Proper Instructions to specify the currency broker or banking
institution (which may be the Bank, or any other sub-custodian or agent
hereunder, acting as principal) with which the contract or option is made, and
the Bank shall have no duty with respect to the selection of such currency
brokers or banking institutions with which a Master Portfolio deals or for their
failure to comply with the terms of any contract or option.
5.8 Other Authorized Payments. For other authorized transactions of a
-------------------------
Master Portfolio, or other obligations of a Master Portfolio incurred for proper
purposes with respect to a Master Portfolio; provided that before making any
such payment, the Bank also will receive Proper Instructions or a certified copy
of a resolution of the Board signed by an Authorized Person (other than the
Person certifying such resolution) and certified by its Secretary or Assistant
Secretary, naming the person or persons to whom such payment is to be made, and
either describing the transaction for which payment is to be made and declaring
it to be an authorized transaction of a Master Portfolio, or specifying the
amount of the obligation for which payment is
4
<PAGE>
to be made, setting forth the purpose for which such obligation was incurred and
declaring such purpose to be a proper corporate purpose.
5.9 Termination. Upon the termination of this Agreement as
-----------
hereinafter set forth pursuant to Section 8 and Section 14 of this Agreement.
6. Securities.
-----------
6.1 Segregation and Registration. Except as otherwise provided
----------------------------
herein, and except for Portfolio Securities to be delivered to any sub-custodian
appointed pursuant to subsections 13.2 or 13.3 hereof, the Bank as custodian,
will receive and hold pursuant to the provisions hereof, in a separate account
or accounts and physically segregated at all times from those of other persons,
any and all Portfolio Securities which may now or hereafter be delivered to it
by or for the account of a Master Portfolio. All such Portfolio Securities will
be held or disposed of by the Bank for, and subject at all times to, the
instructions of the Trust pursuant to the terms of this Agreement. Subject to
the specific provisions herein relating to Portfolio Securities that are not
physically held by the Bank, the Bank will register all Portfolio Securities
(unless otherwise directed by Proper Instructions or an Officer's Certificate),
in the name of a registered nominee of the Bank as defined in the Internal
Revenue Code and any Regulations of the Treasury Department issued thereunder,
and will execute and deliver all such certificates in connection therewith as
may be required by such laws or regulations or under the laws of any state. The
Bank will use its best efforts to the end that the specific Portfolio Securities
held by it hereunder will be at all times identifiable.
The Trust, on behalf of a Master Portfolio, will from time to time
furnish to the Bank appropriate instruments to enable it to hold or deliver in
proper form for transfer, or to register in the name of its registered nominee,
any Portfolio Securities which may from time to time be registered in the name
of a Master Portfolio
6.2 Voting and Proxies. Neither the Bank nor any nominee of the Bank
------------------
will vote any of the Portfolio Securities held hereunder, except in accordance
with Proper Instructions or an officers' Certificate. The Bank will execute and
deliver, or will cause to be executed and delivered, to the Trust or its
designated agent all notices, proxies and proxy soliciting materials with
respect to such Portfolio Securities, but without indicating the manner in which
such proxies are to be voted, such proxy to be executed by the registered holder
of such Portfolio Securities (if registered otherwise than in the name of a
Master Portfolio), in accordance with the Proper Instructions or an Officer's
Certificate.
6.3 Corporate Action. If at any time the Bank is notified that an
----------------
issuer of a Portfolio Security has taken or intends to take a corporate action
(a "Corporate Action") that affects the rights, privileges, powers, preferences,
qualifications or ownership of the Portfolio Security, including, without
limitation, liquidation, consolidation, merger, recapitalization,
reorganization, reclassification, subdivision, combination, stock split or stock
dividend, which Corporate Action requires an affirmative response or action on
the part of the holder of such Portfolio Security (a "Response"), the Bank shall
notify the Trust's designee, Barclays Global Fund Advisors ("BGFA"), promptly of
the Corporate Action, the Response required in
5
<PAGE>
connection with the Corporate Action, and the Bank's deadline for receipt from
the Trust's designee, BGFA, of Proper Instructions regarding the Response (the
"Response Deadline"). Except as provided in subsection 6.3(c) below, the date
specified as the Response Deadline shall not be more than 24 hours prior to the
Response expiration day set by the depository processing such Corporate Action.
The Bank shall forward to the Trust's designee, BGFA, via facsimile and/or
overnight courier all notices, information statements or other materials
relating to the Corporate Action within twenty-four (24) hours of receipt of
such materials by the Bank.
(a) The Bank shall act upon a required Response only after receipt by
the Bank of Proper Instructions from the Trust's designee, BGFA, no later than
4:00 p.m. (Pacific time) on the date specified as the Response Deadline and only
if the Bank (or its agent or sub-custodian hereunder) has actual possession of
all Portfolio Securities (but only if such Portfolio Securities are necessary
for the consummation of the Corporate Action ("Necessary Portfolio
Securities")), consents and other materials no later than 4:00 p.m. (Pacific
time) on the date specified as the Response Deadline. Portfolio Securities in
the possession of a broker or other borrower pursuant to the Bank's securities
lending program shall be deemed to be in the possession of the Bank for the
purposes of this subsection 6.3.
(b) The Bank shall have no duty to act upon a required Response if
Proper Instructions relating to such Response and all Necessary Portfolio
Securities, consents and other materials are not received by and in the
possession of the Bank no later than 4:00 p.m. (Pacific time) on the date
specified as the Response Deadline. Notwithstanding, the Bank may, in its sole
discretion, use its best efforts to act upon a Response for which Proper
Instructions and/or Necessary Portfolio Securities, consents or other materials
are received by the Bank after 4:00 p.m. (Pacific time) on the date specified as
the Response Deadline, it being acknowledged and agreed by the parties that any
undertaking by the Bank to use its best efforts in such circumstances shall in
no way create any duty upon the Bank to complete such Response prior to its
expiration.
(c) In the event that the Trust's designee, BGFA, notifies the Bank
of a Corporate Action requiring a Response and the Bank has received no other
notice of such Corporate Action, the Response Deadline shall be 48 hours prior
to the Response expiration time set by the depository processing such Corporate
Action.
(d) Subsection 13.4(g) of this Agreement shall govern any Corporate
Action involving Foreign Portfolio Securities held by a Selected Foreign Sub-
custodian.
6.4 Book-Entry System. Provided (i) the Bank has received a certified
-----------------
copy of a resolution of the Board specifically approving deposits of a Master
Portfolio assets in the Book-Entry System, and (ii) for any subsequent changes
to such arrangements following such approval, the Board has reviewed and
approved the arrangement and has not delivered an Officers Certificate to the
Bank indicating that the Board has withdrawn its approval:
(a) The Bank may keep Portfolio Securities in the Book-Entry System
provided that such Portfolio Securities are represented in an account
("Account") of the Bank (or
6
<PAGE>
its agent) in such System that shall not include any assets of the Bank (or such
agent) other than assets held as a fiduciary, custodian, or otherwise for
customers:
(b) The records of the Bank (and any such agent) with respect to a
Master Portfolio's participation in the Book-Entry System through the Bank (or
any such agent) will identify by book entry Portfolio Securities that are
included with other securities deposited in the Account and shall at all times
during the regular business hours of the Bank (or such agent) be open for
inspection by duly authorized officers, employees or agents of the Trust. Where
securities are transferred to a Master Portfolio's account, the Bank shall also,
by book entry or otherwise, identify as belonging to the Master Portfolio a
quantity of Portfolio Securities in a fungible bulk of securities (i) registered
in the name of the Bank or its nominee, or (ii) shown on the Bank's account on
the books of the Federal Reserve Bank;
(c) The Bank (or its agent) shall pay for securities purchased for
the account of a Master Portfolio or shall pay cash collateral against the
return of Portfolio Securities loaned by a Master Portfolio upon (i) receipt of
advice from the Book-Entry System that such Securities have been transferred to
the Account, and (ii) the making of an entry on the records of the Bank (or its
agent) to reflect such payment and transfer for the account of the Master
Portfolio. The Bank (or its agent) shall transfer Portfolio Securities sold or
loaned for the account of a Master Portfolio upon:
(i) receipt of advice from the Book-Entry System that payment for
securities sold or payment of the initial cash collateral against the delivery
of Portfolio Securities loaned by the Master Portfolio has been transferred to
the Account: and
(ii) the making of an entry on the records of the Bank (or its agent)
to reflect such transfer and payment for the account of a Master Portfolio.
Copies of all advices from the Book-Entry System of transfers of Portfolio
Securities for the account of a Master Portfolio shall identify the Master
Portfolio, be maintained for the Master Portfolio by the Bank and shall be
provided to the Master Portfolio at its request. The Bank shall send a Master
Portfolio a confirmation, as defined by Rule 17f-4 of the 1940 Act, of any
transfers to or from the account of the Master Portfolio;
(d) The Bank will promptly provide the Trust with any report obtained
by the Bank or its agent on the Book-Entry System's accounting system, internal
accounting control and procedures for safeguarding securities deposited in the
Book-Entry System;
(e) The Bank shall be liable to the Trust and a Master Portfolio for
any loss or damage to the Master Portfolio resulting from use of the Book-Entry
System by reason of any negligent actions or inactions of the Bank or any of its
agents or of any of its or their employees, or from any failure by the Bank or
any such agent to use its best efforts to enforce such rights as it may have
against the Book-Entry System; at the election of the Master Portfolio, it shall
be entitled to be subrogated for the Bank in any claim against the Book-Entry
System or any other person that the Bank or its agent may have as a consequence
of any such loss or damage if and to the extent that the Master Portfolio has
not been made whole for any loss or damage;
7
<PAGE>
6.5 Use of a Depository. Provided (i) the Bank has received a
-------------------
certified copy of a resolution of the Board specifically approving deposits in
DTC or other such Depository and (ii) for any subsequent changes to such
arrangements following such approval, the Board has reviewed and approved the
arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval:
(a) The Bank may use a Depository to hold, receive, exchange,
release, lend, deliver and otherwise deal with Portfolio Securities including
stock dividends, rights and other items of like nature, and to receive and remit
to the Bank on behalf of a Master Portfolio all income and other payments
thereon and to take all steps necessary and proper in connection with the
collection thereof;
(b) Registration of Portfolio Securities may be made in the name
of any nominee or nominees used by such Depository;
(c) Payment for securities purchased and sold may be made through the
clearing medium employed by such Depository for transactions of participants
acting through it. Upon any purchase of Portfolio Securities, payment will be
made only upon delivery of the securities to or for the account of a Master
Portfolio and the Master Portfolio shall pay cash collateral against the return
of Portfolio Securities loaned by the Master Portfolio only upon delivery of the
Securities to or for the account of the Master Portfolio; and upon any sale of
Portfolio Securities, delivery of the Securities will be made only against
payment thereof or, in the event Portfolio Securities are loaned, delivery of
Securities will be made only against receipt of the initial cash collateral to
or for the account of the Master Portfolio: and
(d) The Bank shall be liable to a Master Portfolio for any loss or
damage to a Master Portfolio resulting from use of a Depository by reason of any
negligent actions or inactions of the Bank or its employees or from any failure
by the Bank to use its best efforts to enforce such rights as it may have
against a Depository. In this connection, the Bank shall use its best efforts
to ensure that:
(i) The Depository obtains replacement of any certificated Portfolio
Security deposited with it in the event such Security is lost, destroyed,
wrongfully taken or otherwise not available to be returned to the Bank upon its
request;
(ii) Any proxy materials received by a Depository with respect to
Portfolio Securities deposited with such Depository are forwarded immediately to
the Bank for voting in accordance with subsection 6.2 above;
(iii) Such Depository immediately forwards to the Bank confirmation
of any purchase or sale of Portfolio Securities and of the appropriate book
entry made by such Depository to a Master Portfolio's account;
(iv) Such Depository prepares and delivers to the Bank such records
with respect to the performance of the Bank's obligations and duties hereunder
as may be
8
<PAGE>
necessary for the a Master Portfolio to comply with the recordkeeping
requirements of Section 31(a) of the 1940 Act and Rule 31(a) thereunder; and
(v) Such Depository delivers to the Bank and the Trust all internal
accounting control reports, whether or not audited by an independent public
accountant, as well as such other reports as the Trust may reasonably request in
order to verify the Portfolio Securities held by such Depository.
6.6 Use of Book-Entry System for Commercial Paper. Provided (i) the
---------------------------------------------
Bank has received a certified copy of a resolution of the Board specifically
approving participation in a system maintained by the Bank for the holding of
commercial paper in book-entry form ("Book-Entry Paper") and (ii) for each year
following such approval the Board has received and approved the arrangements,
upon receipt of Proper Instructions and upon receipt of confirmation from an
Issuer (as defined below) that a Master Portfolio has purchased such Issuer's
Book-Entry Paper, the Bank shall issue and hold in book-entry form, on behalf of
the Master Portfolio, commercial paper issued by issuers with whom the Bank has
entered into a book-entry agreement (the "Issuers"). In maintaining its
procedures for Book-Entry Paper, the Bank agrees that:
(a) The Bank will maintain all Book-Entry Paper held by a Master
Portfolio in an account of the Bank that includes only assets held by it for
customers;
(b) The records of the Bank with respect to a Master Portfolio's
purchase of Book-Entry Paper through the Bank will identify, by book-entry,
commercial paper belonging to the Master Portfolio that is included in the Book-
Entry Paper System and shall at all times during the regular business hours of
the Bank be open for inspection by duly authorized officers, employees or agents
of the Trust;
(c) The Bank shall pay for Book-Entry Paper purchased for the account
of a Master Portfolio upon contemporaneous (i) receipt of advice from the Issuer
that such sale of Book-Entry Paper has been effected, and (ii) the making of an
entry on the records of the Bank to reflect such payment and transfer for the
account of the Master Portfolio;
(d) The Bank shall cancel such Book-Entry Paper obligation upon the
maturity thereof upon contemporaneous (i) receipt of advice that payment for
such Book-Entry Paper has been transferred to the Master Portfolio, and (ii) the
making of an entry on the records of the Bank to reflect such payment for the
account of the Master Portfolio;
(e) The Bank shall transmit to the Trust a transaction journal
confirming each transaction in Book-Entry Paper for the account of a Master
Portfolio on the next business day following the transaction: and
(f) The Bank will send to the Trust such reports on its system of
internal accounting control with respect to Book-Entry Paper as the Trust may
reasonably request from time to time.
6.7 Use of Immobilization Programs. Provided (i) the Bank has
------------------------------
received a certified copy of a resolution of the Board specifically approving
the maintenance of Portfolio
9
<PAGE>
Securities in an immobilization program operated by a bank which meets the
requirements of Section 26(a)(1) of the 1940 Act, and (ii) for each year
following such approval the Board has reviewed and approved the arrangement and
has not delivered an Officer's Certificate to the Bank indicating that the Board
has withdrawn its approval, the Bank shall enter into such immobilization
program with such bank acting as a sub-custodian hereunder.
6.8 Eurodollar CDs. Any Portfolio Securities that are Eurodollar CDs
--------------
may be physically held by the European branch of the U.S. banking institution
that is the issuer of such Eurodollar CD (a "European Branch"), provided that
such Portfolio Securities are identified on the books of the Bank as belonging
to a Master Portfolio and that the books of the Bank identify the European
Branch holding such Portfolio Securities. Notwithstanding any other provision
of this Agreement to the contrary, except as stated in the first sentence of
this subsection 6.8, the Bank shall be under no other duty with respect to such
Eurodollar CDs belonging to a Master Portfolio, and the Bank shall have no
liability to the Master Portfolio or its interestholders with respect to the
actions, inactions, whether negligent or otherwise of such European Branch in
connection with such Eurodollar CDs, except for any loss or damage to the Master
Portfolio resulting from the Bank's own negligent actions or inactions or lack
of reasonable care in the performance of its duties hereunder.
6.9 Options and Futures Transactions.
---------------------------------
(a) Puts and Calls Traded on Securities Exchanges, NASDAQ or Over-
the Counter.
(i) The Bank shall take action as to put options ("puts") and call
options ("calls") purchased or sold (written) by a Master Portfolio regarding
escrow or other arrangements in accordance with the provisions of any agreement
entered into upon receipt of Proper Instructions between the Bank, any broker-
dealer registered under the Exchange Act and a member of the National
Association of Securities Dealers, Inc. (the "NASD"), and, if necessary, the
Trust, on behalf of the Master Portfolio, relating to the compliance with the
rules of the Options Clearing Corporation and of any registered national
securities exchange, or of any similar organization or organizations.
(ii) Unless another agreement requires it to do so, the Bank shall be
under no duty or obligation to see that a Master Portfolio has deposited or is
maintaining adequate margin, if required, with any broker in connection with any
option, nor shall the Bank be under duty or obligation to present such option to
the broker for exercise unless it receives Proper Instructions from the Trust.
The Bank shall have no responsibility for the legality of any put or call
purchased or sold on behalf of a Master Portfolio, the propriety of any such
purchase or sale, or the adequacy of any collateral delivered to a broker in
connection with an option or deposited to or withdrawn from a Segregated Account
(as defined in subsection 6.10 below). The Bank specifically, but not by way of
limitation, shall not be under any duty or obligation to: (1) periodically check
or notify a Master Portfolio that the amount of such collateral held by a broker
or held in a Segregated Account is sufficient to protect such broker or the
Master Portfolio against any loss; (2) effect the return of any collateral
delivered to a broker; or (3) advise the
10
<PAGE>
Master Portfolio that any option it holds, has or is about to expire. Such
duties or obligations shall be the sole responsibility of a Trust.
(b) Puts, Calls and Futures Traded on Commodities Exchanges
(i) The Bank shall take action, upon receipt of Proper Instructions,
as to puts, calls and futures contracts ("futures") purchased or sold by a
Master Portfolio in accordance with the provisions of any agreement among the
Trust, on behalf of a Master Portfolio, the Bank and a Futures Commission
Merchant registered under the Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading Commission and/or any Contract
Market, or any similar organization(s), regarding account deposits in connection
with transactions by the Master Portfolio.
(ii) The responsibilities and liabilities of the Bank as to futures,
puts and calls traded on commodities exchanges, any Futures Commission Merchant
account and the Segregated Account shall be limited as set forth in subparagraph
(a)(ii) of this subsection 6.9 as if such subparagraph referred to Futures
Commission Merchants rather than brokers, and futures and puts and calls thereon
instead of options.
6.10 Segregated Account. The Bank shall upon receipt of Proper
------------------
Instructions establish and maintain a Segregated Account or Accounts for and on
behalf of a Master Portfolio, into which Account or Accounts may be transferred
upon receipt of Proper Instructions, cash and/or Portfolio Securities.
(a) Cash and/or Portfolio Securities may be transferred into a
Segregated Account in the following circumstances, upon receipt of Proper
Instructions:
(i) in accordance with the provisions of any agreement among the
Trust, on behalf of a Master Portfolio, the Bank and a broker-dealer registered
under the Exchange Act and a member of the NASD or any Futures Commission
Merchant registered under the Commodity Exchange Act, relating to compliance
with the rules of the Options Clearing Corporation and of any registered
national securities exchange or the Commodity Futures Trading Commission or any
registered Contract Market, or of any similar organizations regarding escrow or
other arrangements in connection with transactions by a Master Portfolio;
(ii) for the purpose of segregating cash or Securities in connection
with options purchased or written by a Master Portfolio or commodity futures
purchased or written by a Master Portfolio;
(iii) for the deposit of liquid assets, such as cash, U.S. Government
obligations or other high-grade debt obligations, having a market value (marked-
to-market on a daily basis) at all times equal to not less than the aggregate
purchase price due on the settlement dates of all a Master Portfolio's then
outstanding forward commitment or "when-issued agreements relating to the
purchase of Portfolio Securities and all a Master Portfolio's then outstanding
commitments under any reverse repurchase agreements entered into with broker-
dealer firms;
11
<PAGE>
(iv) for the purposes of compliance by a Master Portfolio with the
procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange Commission
relating to the maintenance of Segregated Accounts by registered investment
companies;
(v) for other proper corporate purposes, but only, in the case of
this clause (v), upon receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Board, or of the Executive Committee,
signed by an officer of the Trust and certified by the Secretary or an Assistant
Secretary, setting forth the purpose(s) of such Segregated Account and declaring
such purpose(s) to be a proper corporate purpose(s).
(b) assets may be withdrawn from the Segregated Account pursuant
to Proper Instructions only:
(i) with respect to assets deposited in accordance with the
provisions of any agreements referenced in (a)(i) or (a)(ii) above, in
accordance with the provisions of such agreements;
(ii ) with respect to assets deposited pursuant to (a)(iii) or
(a)(iv) above, for sale or delivery to meet a Master Portfolio's obligations
under outstanding forward-commitment, delayed-settlement or when-issued
agreements for the purchase of Portfolio Securities and under reverse repurchase
agreements;
(iii) for exchange for other liquid assets of equal or greater
value deposited in the Segregated Account;
(iv) to the extent that a Master Portfolio's outstanding forward-
commitment or when-issued agreements for the purchase of portfolio securities or
any reverse repurchase agreements are sold to other parties or the Master
Portfolio's obligations thereunder are met from assets of the Master Portfolio
other than those in the Segregated Account;
(v) for delivery upon settlement of a forward-commitment, delayed-
settlement or when-issued agreement for the sale of Portfolio Securities: or
(vi) with respect to assets deposited pursuant to (a)(v) above, in
accordance with the purposes of such account as set forth in Proper
Instructions.
6.11 Interest Bearing Call or Time Deposits. The Bank shall, upon
--------------------------------------
receipt of Proper Instructions relating to the purchase by a Master Portfolio of
interest-bearing fixed-term and call deposits, transfer cash, by wire or
otherwise, in such amounts and to such bank(s) as shall be indicated in such
Proper Instructions. The Bank shall include in its records with respect to the
assets of a Master Portfolio appropriate notation as to the amount of each such
deposit, the banking institution with which such deposit is made (the "Deposit
Bank"), and shall retain such forms of advice or receipt evidencing the deposit,
if any, as may be forwarded to the Bank by the Deposit Bank. Such deposits
shall be deemed Portfolio Securities of a Master Portfolio and the
responsibility of the Bank therefore shall be the same as and no greater than
the Bank's responsibility in respect of other Portfolio Securities of the Master
Portfolio.
12
<PAGE>
6.12 Transfer of Securities. The Bank will transfer, exchange,
----------------------
deliver or release Portfolio Securities held by it hereunder, insofar as such
Securities are available for such purpose, provided that before making any
transfer, exchange, delivery or release under this Section, the Bank will
receive Proper Instructions requesting such transfer, exchange or delivery
stating that it is for a purpose permitted under the terms of this subsection
6.12, specifying the applicable subsection, or describing the purpose of the
transaction with sufficient particularity to permit the Bank to ascertain the
applicable subsection, only:
(a) upon sales of Portfolio Securities for the account of a Master
Portfolio, against contemporaneous receipt by the Bank of payment therefor in
full, or against payment to the Bank in accordance with generally accepted
settlement practices and customs in the jurisdiction or market in which the
transaction occurs, each such payment to be in the amount of the sale price
shown in a broker's confirmation of sale of the Portfolio Securities received by
the Bank before such payment is made, as confirmed in the Proper Instructions
received by the Bank before such payment is made;
(b) in exchange for, or upon conversion into, other securities alone
or other securities and cash pursuant to any plan of merger, consolidation,
reorganization, share split-up, change in par value, recapitalization or
readjustment or otherwise, upon exercise of subscription, purchase or sale or
other similar rights represented by such Portfolio Securities, or for the
purpose of tendering shares in the event of a tender offer therefor, provided
however that in the event of an offer of exchange, tender offer, or other
exercise of rights requiring the physical tender or delivery of Portfolio
Securities, the Bank shall have no liability for failure to so tender in a
timely manner unless such Proper Instructions are received by the Bank at least
two business days prior to the date required for tender, and unless the Bank (or
its agent or sub-custodian hereunder) has actual possession of such Portfolio
Security at least two business days prior to the date of tender
(c) upon conversion of Portfolio Securities pursuant to their
terms into other securities;
(d) for the purpose of redeeming in kind interests of a Master
Portfolio upon authorization from the Master Portfolio;
(e) in the case of option contracts owned by a Master Portfolio,
for presentation to the endorsing broker;
(f) when such Portfolio Securities are called, redeemed or retired
or otherwise become payable;
(g) for the purpose of effectuating the pledge of Portfolio
Securities held by the Bank in order to collateralize loans made to a Master
Portfolio by any bank, including the Bank; provided, however, that such
Securities will be released only upon payment to the Bank for the account of the
Master Portfolio of the moneys borrowed, except that in cases where additional
collateral is required to secure a borrowing already made, and such fact is made
to appear in the Proper Instructions, further Portfolio Securities may be
released for that purpose
13
<PAGE>
without any such payment. In the event that any such pledged Portfolio
Securities are held by the Bank, they will be so held for the account of the
lender, and after notice to the Master Portfolio from the lender in accordance
with the normal procedures of the lender, that an event of deficiency or default
on the loan has occurred, the Bank may deliver such pledged Portfolio Securities
to or for the account of the lender,
(h) for the purpose of releasing certificates representing Portfolio
Securities, against contemporaneous receipt by the Bank of the fair market value
of such security, as set forth in the Proper Instructions received by the Bank
before such payment is made;
(i) for the purpose of delivering Portfolio Securities lent by a
Master Portfolio to a bank or broker dealer, but only against receipt in
accordance with street delivery custom except as otherwise provided herein, of
adequate collateral as agreed upon from time to time by the Master Portfolio and
the Bank, and upon receipt of payment in connection with any repurchase
agreement relating to such Securities entered into by the Master Portfolio;
(j) for other authorized transactions of a Master Portfolio or for
other proper corporate purposes; provided that before making such transfer, the
Bank will also receive a certified copy of resolutions of the Board, signed by
an authorized officer of the Trust (other than the officer certifying such
resolution) and certified by its Secretary or an Assistant Secretary, specifying
the Portfolio Securities to be delivered, setting forth the transaction in or
purpose for which such delivery is to be made, declaring such transaction to be
an authorized transaction of the Master Portfolio or such purpose to be a proper
corporate purpose, and naming the person or persons to whom delivery of such
Securities shall be made; and
(k) upon termination of this Agreement as hereinafter set forth
pursuant to Section 8 and Section 14 of this Agreement.
As to any deliveries made by the Bank pursuant to subsections (a), (b),
(c), (e), (f), (g), (h) and (i) securities or cash receivable in exchange
therefor shall be delivered to the Bank.
7. Redemptions. In the case of payment of assets of a Master Portfolio
-----------
held by the Bank in connection with redemptions and repurchases by the Master
Portfolio of outstanding interests, the Bank will rely on notification by the
Trust's transfer agent of receipt of a request for redemption before such
payment is made. Payment shall be made in accordance with the Amended and
Restated Declaration of Trust (the "Trust Declaration") and By-Laws of the
Trust, from assets available for said purpose.
8. Merger Dissolution etc. of the Trust or a Master Portfolio. In the case
----------------------------------------------------------
of the following transactions, not in the ordinary course of business, namely,
the merger of a Master Portfolio into or the consolidation of the Trust with
another investment company, the sale by the Trust of all, or substantially all,
of the assets of one or more Master Portfolios to another investment company, or
the liquidation or dissolution of a Master Portfolio and distribution of its
assets, the Bank will deliver the Portfolio Securities held by it under this
Agreement and disburse cash only upon the order of the Trust, on behalf of such
Master Portfolio(s) set forth in an Officer's Certificate, accompanied by a
certified copy of a resolution of the Board authorizing any
14
<PAGE>
of the foregoing transactions. Upon completion of such delivery and disbursement
and the payment of the fees, disbursements and expenses of the Bank, this
Agreement will terminate with respect to such Master Portfolio or Trust, as
applicable.
9. Actions of the Bank Without Prior Authorization. Notwithstanding
-----------------------------------------------
anything herein to the contrary, unless and until the Bank receives an Officer's
Certificate to the contrary, it will without prior authorization or instruction
of the Trust or the transfer agent:
(a) Endorse for collection and collect on behalf of and in the name
of a Master Portfolio all checks, drafts, or other negotiable or transferable
instruments or other orders for the payment of money received by it for the
account of the Master Portfolio and hold for the account of the Master Portfolio
all income, dividends, interest and other payments or distributions of cash with
respect to the Portfolio Securities held thereunder;
(b) Present for payment all coupons and other income items held by it
for the account of a Master Portfolio that call for payment upon presentation
and hold the cash received by it upon such payment for the account of the Master
Portfolio;
(c) Receive and hold for the account of a Master Portfolio all
securities received as a distribution on Portfolio Securities as a result of a
stock dividend, share split-up, reorganization, recapitalization, merger,
consolidation, readjustment, distribution of rights and similar securities
issued with respect to any Portfolio Securities held by it hereunder.
(d) execute as agent on behalf of a Master Portfolio all necessary
ownership and other certificates and affidavits required by the Internal Revenue
Code or the regulations of the Treasury Department issued thereunder, or by the
laws of any state, now or hereafter in effect, inserting a Master Portfolio's
name on such certificates as the owner of the securities covered thereby, to the
extent it may lawfully do so and as may be required to obtain payment in respect
thereof. The Bank will execute and deliver such certificates in connection with
Portfolio Securities delivered to it or by it under this Agreement as may be
required under the provisions of the Internal Revenue Code and any Regulations
of the Treasury Department issued thereunder, or under the laws of any State;
(e) present for payment all Portfolio Securities that are called,
redeemed, retired or otherwise become payable, and hold cash received by it upon
payment for the account of a Master Portfolio; and
(f) exchange interim receipts or temporary securities for
definitive securities.
10. Collections and Defaults. The Bank will use all reasonable efforts to
------------------------
collect any funds that may to its knowledge become collectible arising from
Portfolio Securities, including dividends, interest and other income, and to
transmit to the Trust, on behalf of a Master Portfolio, notice actually received
by the Bank of any call for redemption, offer of exchange, right of
subscription, reorganization or other proceedings affecting such Portfolio
Securities. If Portfolio Securities upon which such income is payable are in
default or payment is refused after due demand or presentation, the Bank will
notify the Trust, on behalf of a Master Portfolio, in writing
15
<PAGE>
of any default or refusal to pay within two business days from the day on which
it receives knowledge of such default or refusal. In addition, the Bank will
send the Trust a written report once each month showing any income on any
Portfolio Security held by Bank on behalf of a Master Portfolio that is more
than ten days overdue on the date of such report.
11. Maintenance of Records and Accounting Services. The Bank will
----------------------------------------------
maintain records with respect to transactions for which the Bank is responsible
pursuant to the terns and conditions of this Agreement, and in compliance with
the applicable rules and regulations of the 1940 Act and will furnish the Trust
daily with a statement of condition of each Master Portfolio. The Bank will
furnish to the Trust at the end of every month, and at the close of each quarter
of the Trust's fiscal year, a list of the Portfolio Securities and the aggregate
amount of cash held by Bank on behalf of each Master Portfolio. The books and
records of the Bank pertaining to its actions under this Agreement and reports
by the Bank or its independent accountants concerning its accounting system,
procedures for safeguarding securities and internal accounting controls will be
open to inspection and audit at reasonable times by officers of or auditors
employed by the Trust and will be preserved by the Bank in the manner and in
accordance with the applicable rules and regulations under the 1940 Act.
The Bank shall perform the fund accounting services listed on Schedule
C hereto and shall keep the books of account and render statements or copies
from time to time as reasonably requested by the Treasurer or any executive
officer of the Trust.
The Bank shall assist generally in the preparation of reports to
shareholders and others, audits of accounts, and other ministerial matters of
like nature.
12. Master Portfolio Evaluation and Performance Calculations.
---------------------------------------------------------
12.1 Master Portfolio Evaluation. The Bank shall compute and, unless
---------------------------
otherwise directed by the Board, determine as of the close of regular trading on
the New York Stock Exchange on each day on which said Exchange is open for
unrestricted trading and as of such other days, or hours, if any, as may be
authorized by the Board, the net asset value and the offering price of an
interest of each Master Portfolio, such determination to be made in accordance
with the provisions of the Trust Declaration and By-Laws and Registration
Statement of the Trust relating to the Master Portfolios, as it may from time to
time be amended, and any applicable resolutions of the Board at the time in
force and applicable; and promptly to notify the Trust, any applicable exchange,
the NASD or such other persons as the Trust may request of the results of such
computation and determination. In computing the net asset value hereunder, the
Bank may rely in good faith upon information that the Bank reasonably believes
to be accurate and reliable furnished to it by any Authorized Person in respect
of (i) the manner of accrual of the liabilities of each Master Portfolio and in
respect of liabilities of a Master Portfolio not appearing on its books of
account kept by the Bank, (ii) reserves, if any, authorized by the Board or that
no such reserves have been authorized, (iii) the source of the quotations to be
used in computing the net asset value, (iv) the value to be assigned to any
security for which no price quotations are available, and (v) the method of
computation of the offering price on the basis of the net asset value of the
interests, and the Bank shall not be responsible for any loss occasioned by its
16
<PAGE>
reasonable and good faith reliance on any quotations received from a source
pursuant to (iii) above.
12.2. Performance Calculations. The Bank will compute the performance
------------------------
results of each Master Portfolio (the "Performance Calculations") in accordance
with applicable provisions of the 1933 Act and 1940 Act and the rules under such
Acts related to the computations to be undertaken by the Bank pursuant to this
Agreement, as promulgated by the Securities and Exchange Commission, as such
provisions and or rules may be amended from time to time, and any published
interpretations of or general conventions accepted by the staff of the
Securities and Exchange Commission with respect to such rules or the subject
matter thereof ("Subsequent Staff Positions"), subject to the Registration
Statement, as amended from time to time, and the terms set forth below:
(a) The Bank shall compute the Performance Calculations for each
Master Portfolio for the stated periods of time as shall be mutually agreed
upon, and communicate in a timely manner the result of such computation to the
Trust.
(b) In performing the Performance Calculations, the Bank will derive
from the records it generates and maintains for each Master Portfolio pursuant
Section 11 hereof, the data necessary for the computation. The Bank shall have
no responsibility to review, confirm, or otherwise assume any duty or liability
with respect to the accuracy or correctness of any such data supplied to it by
the Trust, any of the its designated agents or any of its designated third-party
providers.
(c) At the request of the Bank, the Trust shall provide, and the Bank
shall be entitled to rely on, written standards and guidelines to be followed by
the Bank in interpreting and applying the computation methods pursuant to the
rules or any Subsequent Staff Positions as they specifically apply to a Master
Portfolio, provided that the Bank shall be responsible for general knowledge of
such rules and any Subsequent Staff Positions. In the event that the
computation methods in a rule or the Subsequent Staff Positions or the
application to a Master Portfolio of a standard or guideline is not free from
doubt or in the event there is any question of interpretation as to the
characterization of a particular security or any aspect of a security or a
payment with respect thereto (e.g., original issue discount, participating debt
security, income or return of capital, etc.) or otherwise or as to any other
element of the computation that is pertinent to the Master Portfolio, the Trust
or its designated agent, BGFA, shall have the full responsibility for making the
determination of how the security, or payment, is to be treated for purposes of
the computation and how the computation is to be made and shall inform the Bank
thereof on a timely basis. The Bank shall have no responsibility to make
independent determinations with respect to any item that is covered by this
Section, and the Bank shall not be responsible for its computations made in
accordance with such determinations so long as such computations are
mathematically correct.
(d) The Trust shall keep the Bank informed of all publicly available
information, and of any non-public advice or information, obtained by the Trust
from its independent auditors or by its personnel or the personnel of its
investment adviser, related to the computations to be undertaken by the Bank
pursuant to this Agreement, and the Bank shall not be deemed to have
17
<PAGE>
knowledge of such information (except as contained in the Registration
Statement) unless it has been furnished to the Bank in writing; provided that
the Bank shall be charged with knowledge of any material changes to the 1933
Act, the 1940 Act, and any related rules under such acts related to the
computations to be undertaken by the Bank pursuant to this Agreement without
specific notice from the Trust.
13. Concerning the Bank.
--------------------
13.1 Bank Warranty. The Bank warrants that it has and will maintain
-------------
at least the minimum qualifications required by Section 17(f)(1) of the 1940 Act
to act as custodian of the Portfolio Securities and other assets including cash
of the Trust's Master Portfolios.
13.2 Standard of Care and Performance of Duties.
-------------------------------------------
(a) The Bank agrees to use reasonable care with regard to its
obligations under this Agreement and the safekeeping of property of the Master
Portfolios. In performing its duties hereunder and any other duties listed on
the Schedules hereto, the Bank will be entitled to receive and act upon the
advice of independent counsel of its own selection, which may be counsel for the
Trust, and the Bank will be without liability for any action taken or thing
done, or omitted to be done, so long as the Bank's actions or inactions are
without negligence and in accordance with this Agreement in good faith in
conformity with such advice. The Bank shall be liable to, and shall indemnify
and hold harmless the Trust from and against any loss which shall occur as the
result of the failure of the Bank or a sub-custodian (other than a foreign
securities depository or clearing agency and except as provided in subsections
6.8, 13.2 and 13.3(i) hereof) to exercise reasonable care with respect to their
respective obligations under this Agreement and the safekeeping of such
property. Subject to the foregoing, the Bank will not be responsible for any
act, omission, default or for the solvency of any foreign securities depository
or clearing agency utilized in connection with the provision of services under
this Agreement.
(b) In the performance of its duties hereunder, the Bank will be
protected and not be liable, and will be indemnified and held harmless for any
action taken or omitted to be taken by it with reasonable care and in good faith
reliance upon the terms of this Agreement, any Officer's Certificate, Proper
Instructions, resolution of the Board, facsimile, telegram, notice, request,
certificate or other instrument reasonably believed by the Bank to be genuine
and for any other loss to the Fund except in the case of its negligent actions
or inactions or lack of good faith or reasonable care in the performance of its
obligations or duties hereunder.
(c) The Bank will be under no duty or obligation to inquire into
and will not be liable for:
(i) the validity of the issue of any Portfolio Securities purchased
by or for a Master Portfolio, the legality of the purchases thereof or the
propriety of the price incurred therefor;
(ii) the legality of any sale of any Portfolio Securities by or for
the Master Portfolio or the propriety of the amount for which the same are sold;
18
<PAGE>
(iii) the legality of an issue or sale of any interests of a Master
Portfolio or the sufficiency of the amount to be received therefor;
(iv) the legality of the repurchase of any interests of a Master
Portfolio or the propriety of the amount to be paid therefor;
(v) the legality of the declaration of any dividend by a Master
Portfolio or the legality of the distribution of any Portfolio Securities as
payment in kind of such dividend; and
(vi) any property or moneys of a Master Portfolio unless and until
received by it, and any such property or moneys delivered or paid by it pursuant
to the terms hereof.
(d) Moreover, the Bank will not be under any duty or obligation to
ascertain whether any Portfolio Securities at any time delivered to or held by
it for the account of a Master Portfolio are such as may properly be held by the
Master Portfolio under the provisions of its Trust Declaration, By-Laws, any
federal or state statutes or any rule or regulation of any governmental agency.
(e) Notwithstanding anything in this Agreement to the contrary, in no
event shall the Bank be liable hereunder or to any third party:
(i) for any losses or damages of any kind resulting from acts of God,
earthquakes, fires, floods, storms or other disturbances of nature, epidemics,
strikes, riots, nationalization, expropriation, currency restrictions, acts of
war, civil war or terrorism, insurrection, nuclear fusion, fission or radiation,
the interruption, loss or malfunction of utilities, transportation, or computers
(hardware or software) and computer facilities, the unavailability of energy
sources and other similar happenings or events, except as results from the
Bank's own negligence, provided that the Bank shall make all reasonable efforts,
whenever necessary, to use data processing back-up facilities provided by
Electronic Data Systems, Inc.; or
(ii) for special, punitive or consequential damages arising from the
provision of services hereunder, even if the Bank has been advised of the
possibility of such damages; provided, however, that the parties specifically
acknowledge and agree that damages, if any, incurred by the Trust, its Master
Portfolios or its agents (including, but not limited to, BGFA or the Trust's
transfer or shareholder servicing agents) on account of late or incorrect net
asset values and related information provided to the Trust, its Master
Portfolios, its agents or other third parties as may be agreed in writing by BGI
and IBT from time to time, are not to be considered special, punitive or
consequential damages for purposes of this subsection 13.2(e)(ii).
(f) The Bank shall supply BGI with such daily information regarding
the cash and securities positions and activity of each Master Portfolio as the
Bank and BGI shall from time to time agree.
(g) The Bank need not maintain any insurance for the exclusive
benefit of the Trust, but hereby warrants that as of the date of this Agreement
it is maintaining a bankers
19
<PAGE>
Blanket Bond and hereby agrees to notify the Trust in the event that such bond
is canceled or otherwise lapses.
13.3 Agents and Sub-custodians with Respect to Property of the Master
----------------------------------------------------------------
Portfolios Held in the United States. The Bank may employ agents in the
- ------------------------------------
performance of its duties hereunder and shall be responsible for the acts and
omissions of such agents as if performed by the Bank hereunder. Without
limiting the foregoing, certain duties of the Bank hereunder may be performed by
one or more affiliates of the Bank.
Upon receipt of Proper Instructions, the Bank may employ sub-custodians,
provided that any such sub-custodian meets at least the minimum qualifications
required by Section 17(f)(1) of the 1940 Act to act as a custodian of a Master
Portfolio's assets with respect to property of the Master Portfolio held in the
United States. The Bank shall have no liability to the Trust or any other
person by reason of any act or omission of any sub-custodian and the Trust shall
indemnify the Bank and hold it harmless from and against any and all actions,
suits and claims, arising directly or indirectly out of the performance of any
sub-custodian. Upon request of the Bank, the Trust shall assume the entire
defense of any action, suit, or claim subject to the foregoing indemnity. All
fees and expenses of any sub-custodian shall be paid in accordance with Schedule
B hereto.
13.4 Duties of the Bank with Respect to Property of the Master
---------------------------------------------------------
Portfolio Held Outside of the United States.
- --------------------------------------------
(a) Appointment of Foreign Sub-custodians. The Trust hereby
-------------------------------------
authorizes and instructs the Bank to employ as sub-custodians for the Trust's
Portfolio Securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories designated by
the Board (each, a "Selected Foreign Sub-custodian"). Upon receipt of Proper
Instructions, together with a certified resolution of the Trust's Board of
Trustees, the Bank and the Trust may agree to designate additional foreign
banking institutions and foreign securities depositories to act as Selected
Foreign Sub-custodians hereunder. Upon receipt of Proper Instructions, the
Trust may instruct the Bank to cease the employment of any one or more such
Selected Foreign Sub-custodians for maintaining custody of a Master Portfolio's
assets, and the Bank shall so cease to employ such sub-custodian as soon as
alternate custodial arrangements have been implemented.
(b) Foreign Securities Depositories. Except as may otherwise be
-------------------------------
agreed upon in writing by the Bank and the Trust, assets of a Master Portfolio
shall be maintained in foreign securities depositories only through arrangements
implemented by the foreign banking institutions serving as Selected Foreign Sub-
custodians pursuant to the terms hereof. Where possible, such arrangements
shall include entry into agreements containing the provisions set forth in
subparagraph (d) hereof. Notwithstanding the foregoing, except as may otherwise
be agreed upon in writing by the Bank and the Trust, the Trust authorizes the
deposit in Euro-Clear, the securities clearance and depository facilities
operated by Morgan Guaranty Trust Company of New York in Brussels, Belgium, of
Foreign Securities eligible for deposit therein and to utilize such securities
depository in connection with settlements of purchases and sales of securities
and
20
<PAGE>
deliveries and returns of securities, until notified to the contrary pursuant to
subparagraph (a) hereunder.
(c) Segregation of Securities. The Bank shall identify on its books
-------------------------
as belonging to a Master Portfolio the Foreign Securities held by each Selected
Foreign Sub-custodian. Each agreement pursuant to which the Bank employs a
foreign banking institution shall require that such institution establish a
custody account for the Bank and hold in that account, Foreign Securities and
other assets of the Master Portfolios, and, in the event that such institution
deposits Foreign Securities in a foreign securities depository, that it shall
identify on its books as belonging to the Bank the securities so deposited.
(d) Agreements with Foreign Banking Institutions. Each of the
--------------------------------------------
agreements pursuant to which a foreign banking institution holds assets of the
Trust's Master Portfolios (each, a "Foreign Sub-custodian Agreement") shall be
substantially in the form previously made available to the Trust and shall
provide that: (a) such assets will not be subject to any right, charge, security
interest, lien or claim of any kind in favor of the foreign banking institution
or its creditors or agent, except a claim of payment for their safe custody or
administration (including, without limitation, any fees or taxes payable upon
transfers or reregistration of securities); (b) beneficial ownership of such
assets will be freely transferable without the payment of money or value other
than for custody or administration (including, without limitation, any fees or
taxes payable upon transfers or reregistration of securities); (c) adequate
records will be maintained identifying the assets as belonging to the Bank; (d)
officers of or auditors employed by, or other representatives of the Bank,
including to the extent permitted under applicable law, the independent auditors
for the Trust, will be given access to the books and records of the foreign
banking institution relating to its actions under its agreement with the Bank;
and (e) assets of a Master Portfolio held by the Selected Foreign Sub-custodian
will be subject only to the instructions of the Bank or its agents.
(e) Access of Independent Auditors of the Trust. Upon request of the
-------------------------------------------
Trust, the Bank will use its best efforts to arrange for the Trust's independent
auditors to be afforded access to the books and records of any foreign banking
institution employed as a Selected Foreign Sub-custodian insofar as such books
and records relate to the performance of such foreign banking institution under
its Foreign Sub-custodian Agreement.
(f) Reports by the Bank. The Bank will supply to the Trust from time
-------------------
to time, as mutually agreed upon, statements in respect of the securities and
other assets of a Master Portfolio held by Selected Foreign Sub-custodians,
including but not limited to an identification of entities having possession of
the Foreign Portfolio Securities and other assets of the Master Portfolio.
(g) Transactions in Foreign Custody Accounts. Transactions with
----------------------------------------
respect to the assets of a Master Portfolio held by a Selected Foreign Sub-
custodian shall be effected pursuant to Proper Instructions from the Trust to
the Bank and shall be effected in accordance with the applicable Foreign Sub-
custodian Agreement. If at any time any Foreign Portfolio Securities shall be
registered in the name of the nominee of the Selected Foreign Sub-custodian,
21
<PAGE>
the Trust agrees to hold any such nominee harmless from any liability by reason
of the registration of such securities in the name of such nominee.
Notwithstanding any provision of this Agreement to the contrary, settlement
and payment for Foreign Securities received for the account of a Master
Portfolio and delivery of Foreign Securities maintained for the account of a
Master Portfolio may be effected in accordance with the customary established
securities trading or securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs, including, without
limitation, delivering securities to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such purchaser
or dealer.
In connection with any action to be taken with respect to the Foreign
Securities held hereunder, including, without limitation, the exercise of any
voting rights, subscription rights, redemption rights, exchange rights,
conversion rights or tender rights, or any other action in connection with any
other right, interest or privilege with respect to such Securities
(collectively, the "Rights"), the Bank shall promptly transmit to the Trust or
its investment adviser such information in connection therewith as is made
available to the Bank by the Foreign Sub-custodian, and the Bank shall promptly
forward to the applicable Foreign Sub-custodian any instructions, forms or
certifications with respect to such Rights, and any instructions relating to the
actions to be taken in connection therewith, as the Bank shall receive pursuant
to Proper Instructions. The Bank agrees to use its best efforts to obtain and
forward to the Trust or its designated agent, BGFA, information regarding Rights
with respect to Foreign Securities held hereunder. Notwithstanding the
foregoing, the Bank shall have no further duty or obligation with respect to
such Rights, including, without limitation, the determination of whether a
Master Portfolio is entitled to participate in such Rights under applicable U.S.
and foreign laws, or the determination of whether any action proposed to be
taken with respect to such Rights by the Master Portfolio or by the applicable
Foreign Sub-custodian will comply with all applicable terms and conditions of
any such Rights or any applicable laws or regulations, or market practices
within the market in which such action is to be taken or omitted.
(h) Liability of Selected Foreign Sub-custodians. Each Foreign Sub-
--------------------------------------------
custodian Agreement with a foreign banking institution shall require the
institution to exercise reasonable care in the performance of its duties and to
indemnify, and hold harmless, the Bank and Trust from and against certain
losses, damages, costs, expenses, liabilities or claims arising out of or in
connection with the institution's performance of such obligations, all as set
forth in the applicable Foreign Sub-custodian Agreement. The Trust acknowledges
that the Bank, as a participant in Euroclear, is subject to the Terms and
Conditions Governing the Euroclear System, a copy of which has been made
available to the Trust. The Trust acknowledges that pursuant to such Terms and
Conditions, Morgan Guaranty Brussels shall have the sole right to exercise or
assert any and all rights or claims in respect of actions or omissions of, or
the bankruptcy or insolvency of, any other depository, clearance system or
custodian utilized by Euroclear in connection with a Master Portfolio's
Portfolio Securities and other assets.
(i) Liability of Bank. The Bank shall have no more or less
-----------------
responsibility or liability on account of the acts or omissions of any Selected
Foreign Sub-custodian employed
22
<PAGE>
hereunder than any such Selected Foreign Sub-custodian has to the Bank and,
without limiting the foregoing, the Bank shall not be liable for any loss,
damage, cost, expense, liability or claim resulting from nationalization,
expropriation, currency restrictions, or acts of war or terrorism, political
risk (including, but not limited to, exchange control restrictions,
confiscation, insurrection, civil strife or armed hostilities) other losses due
to Acts of God, nuclear incident or any loss where the Selected Foreign Sub-
custodian has otherwise exercised reasonable care.
(j) Monitoring Responsibilities. The Bank shall furnish annually to
---------------------------
the Trust, information concerning the Selected Foreign Sub-custodians employed
hereunder for use by the Trust's Board or its designated agent in evaluating
such Selected Foreign Sub-custodians to ensure compliance with the requirements
of Rule 17f-5 of the 1940 Act. In addition, the Bank will promptly inform the
Trust in the event that the Bank is notified by a Selected Foreign Sub-custodian
that there appears to be a substantial likelihood that its shareholders' equity
will decline below $200 million (U.S. dollars or the equivalent thereof) or that
its shareholders' equity has declined below $200 million (in each case computed
in accordance with generally accepted U.S. accounting principles) or any other
capital adequacy test applicable to it by exemptive order, or if the Bank has
actual knowledge of any material loss of the assets of a Master Portfolio held
by a Foreign Sub-custodian.
(k) Tax Law. The Bank shall have no liability for any obligations
-------
now or hereafter imposed on the Trust, or its Master Portfolios, or the Bank as
custodian of the Trust by the tax laws of any jurisdiction. The sole
responsibility of the Bank with regard to such taxes shall be to use reasonable
efforts to assist the Trust with respect to the withholding and payment by the
Trust of such taxes and with respect to any claim for exemption or refund under
the tax law of jurisdictions for which the Trust is entitled to such exemptions
or refunds.
13.5 Insurance. The Bank shall use the same care with respect to the
---------
safekeeping of Portfolio Securities and cash of the Trust's Master Portfolios
held by it as it uses in respect of its own similar property but need not
maintain any special insurance for the benefit of the Trust.
13.6. Fees and Expenses of Bank. The Trust, on behalf of a Master
-------------------------
Portfolio, will pay or reimburse the Bank from time to time for any transfer
taxes payable upon transfer of Portfolio Securities made hereunder. All
necessary proper disbursements, expenses and charges made or incurred by the
Bank in the performance of this Agreement (including any duties listed on
Schedule C hereto) including any indemnities for any loss, liabilities or
expense to the Bank as provided above shall be paid in accordance with Schedule
B hereto, provided that the Bank shall not be entitled to compensation and/or
reimbursement for services and/or expenses and liabilities by the Trust, with
respect to the Master Portfolios, hereunder so long as the Bank is entitled to
receive compensation and reimbursements from Barclays Global Investors, N.A.
("BGI") for providing sub-administration services to the Trust on behalf of the
Master Portfolios. If the Bank no longer is entitled to receive such
compensation and reimbursements from BGI, the Bank shall be entitled hereunder
to such compensation or fees and reimbursements at such rate and at such times
as it may from time to time negotiate with the Trust, and such Schedule B shall
be amended accordingly.
23
<PAGE>
13.7 Advances by Bank. The Bank may, in its sole discretion, advance
----------------
funds on behalf of a Master Portfolio to make any payment permitted by this
Agreement upon receipt of any proper authorization required by this Agreement
for such payments. Should such a payment or payments, with advanced funds,
result in an overdraft (due to insufficiencies of a Master Portfolio's account
with the Bank, or for any other reason) this Agreement deems any such overdraft
or related indebtedness, a loan made by the Bank to the Master Portfolio payable
on demand and bearing interest at the current rate charged by the Bank for such
loans unless the Master Portfolio shall provide the Bank with agreed upon
compensating balances. The Trust agrees that the Bank shall have a continuing
lien and security interest to the extent of any overdraft or indebtedness, in
and to any property at any time held by it for a Master Portfolio's benefit or
in which the Master Portfolio has an interest and which is then in the Bank's
possession or control (or in the possession or control of any third party acting
on the Bank's behalf). The Trust authorizes the Bank, in its sole discretion,
at any time to charge any overdraft or indebtedness, together with interest due
thereon against any balance of account standing to the credit of a Master
Portfolio on the Bank's books.
14. Termination.
------------
(a) This Agreement shall be effective for an initial term of two (2)
years commencing upon the date hereof (the "Initial Term") unless earlier
terminated as provided in subsection (b) below. Thereafter, the Agreement may
be terminated at any time, without penalty upon sixty (60) days' written notice
delivered by either party to the other by means of registered mail, and upon the
expiration of such sixty (60) days, this Agreement will terminate; provided,
however, that the effective date of such termination may be postponed to a date
not more than ninety (90) days from the date of delivery of such notice (i) by
the Bank in order to prepare for the transfer by the Bank of all of the assets
of the Master Portfolios held hereunder, or (ii) by the Trust in order to give
it an opportunity to make suitable arrangements for a successor custodian. At
any time after the termination of this Agreement, the Bank agrees to make
available to the Trust, at its request, the records maintained by the Bank
relating to the performance of its duties as custodian and to preserve such
records for the periods prescribed in Rule 31a-2 under the 1940 Act.
(b) Notwithstanding subsection (a) above, either party hereto may
terminate this Agreement at any time prior to the expiration of the Initial Term
in the event that the other party violates any material provision of this
Agreement, provided that the violating party does not cure such violation within
ninety (90) days of receipt of written notice from the non -violating party of
such violation.
(c) Notwithstanding subsection (a) above, the Trust may terminate
this Agreement at any time prior to the expiration of the Initial Term in the
event that (i) the Board of Trustees determines that the performance of the Bank
does not meet the reasonable satisfaction (considered in light of industry
standards) of the Board of Trustees, provided that the Bank does not cure such
unsatisfactory performance within ninety (90) days of receipt of written notice
specifying such unsatisfactory performance; or (ii) if the Bank becomes the
subject of any state or federal bankruptcy proceeding that is not dismissed
within sixty (60) days of the initiation of such proceeding.
24
<PAGE>
(d) In the event of the termination of this Agreement, the Bank will
immediately upon receipt or transmittal, as the case may be, of notice of
termination, commence and prosecute diligently to completion the transfer of all
cash and the delivery of all Portfolio Securities duly endorsed and all records
maintained under Section 11 to the successor custodian when appointed by the
Trust. The obligation of the Bank to deliver and transfer over the assets of
the Trust's Master Portfolios held by the Bank directly to such successor
custodian will commence as soon as such successor is appointed and will continue
until completed as aforesaid. If the Trust does not select a successor
custodian within ninety (90) days from the date of delivery of notice of
termination the Bank may, subject to the provisions of subsection 14(c), deliver
the Portfolio Securities and cash of the Trust's Master Portfolio held by the
Bank to a bank or trust company of its own selection that meets the requirements
of Section 17(f)(1) of the 1940 Act and has a reported capital, surplus and
undivided profits aggregating not less than $2,000,000, to be held as the
property of the Trust's Master Portfolios under terms similar to those on which
they were held by the Bank, whereupon such bank or trust company so selected by
the Bank will become the successor custodian of such assets of the Trust's
Master Portfolios with the same effect as though selected by the Board.
(e) Prior to the expiration of ninety (90) days after notice of
termination has been given, the Trust may furnish the Bank with an order of the
Trust advising that a successor custodian cannot be found willing and able to
act upon reasonable and customary terms and that there has been submitted to the
Master Portfolio's interestholders the question of whether a Master Portfolio
will be liquidated or will function without a custodian for the assets of the
Master Portfolio. In that event the Bank will deliver the Portfolio Securities
and cash of the Trust's Master Portfolios, subject as aforesaid, in accordance
with one of such alternatives that may be approved by the requisite vote of
shareholders, upon receipt by the Bank of a copy of the minutes of the meeting
of shareholders at which action was taken, certified by the Trust's Secretary
and an opinion of counsel to the Trust in form and content satisfactory to the
Bank.
15. Confidentiality. Both parties hereto agree than any non-public
---------------
information obtained hereunder concerning the other party is confidential and
may not be disclosed to any other person without the consent of the other party,
except as may be required by applicable law or at the request of a governmental
agency. The parties further agree that a breach of this provision would
irreparably damage the other party and accordingly agree that each of them is
entitled, in addition to all other remedies at law or in equity and without bond
or other security, to an injunction or injunctions to prevent breaches of this
provision.
16. Notices. Any notice or other instrument in writing authorized or
-------
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and delivered, via registered U.S.
Mail or facsimile with written confirmation via registered U.S. Mail, to it at
its office at the address set forth below; namely:
(a) In the case of notices sent to the Trust or a Master Portfolio
to:
Managed Series Investment Trust
111 Center Street
Little Rock, AR 72201
25
<PAGE>
Attention: Richard H. Blank, Jr.
With a copy to:
Barclays Global Investors
45 Fremont Street
San Francisco, CA 94105
Attention: Legal Department
(b) In the case of notices sent to the Bank to:
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
Attention: Andrew Nesvet
With a copy to: John E. Henry
or at such other place as such party may from time to time designate in
writing.
17. Amendments. This Agreement may not be altered or amended, except by
----------
an instrument in writing, executed by both parties, and in the case of the
Trust, such alteration or amendment will be authorized and approved by its
Board.
18. Parties. This Agreement will be binding upon and shall inure to the
-------
benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement will not be assignable by the Trust
without the written consent of the Bank or by the Bank without the written
consent of the Trust, authorized and approved by its Board; and provided further
that termination proceedings pursuant to Section 14 hereof will not be deemed to
be an assignment within the meaning of this provision.
19. Governing Law. This Agreement and all performance hereunder will be
-------------
governed by the laws of the Commonwealth of Massachusetts.
20. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
21. Limitation of Liability. The Trust and the Bank agree that the
-----------------------
Trust's obligations under this Agreement shall not be binding upon any Trustee,
interestholder, officer, employee or agent of the Trust individually but are
binding only upon the assets and property of the appropriate Master Portfolio.
22. Single Agreement. This Agreement (including any exhibits, appendices
----------------
and schedules hereto) constitutes the entire agreement between the Bank and the
Trust as to the
26
<PAGE>
subject matter hereof and supersedes any and all agreements, representations and
warranties, written or oral, regarding such subject matter made prior to the
time at which this Agreement has been executed and delivered between the Bank
and the Trust.
23. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
27
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first written above.
Managed Series Investment Trust
By:/s/Richard H. Blank, Jr.
-------------------------------
Name: Richard H. Blank, Jr.
Title: Chief Operating Officer
Investors Bank & Trust Company
By: /s/Robert D. Mancuso
-------------------------
Name: Robert D. Mancuso
Title: Managing Director
Investors Bank & Trust Company
By: /s/John E. Henry
------------------------
Name: John E. Henry
Title: General Counsel
28
<PAGE>
SCHEDULE A
----------
CUSTODY AGREEMENT
MANAGED SERIES INVESTMENT TRUST
LIST OF MASTER PORTFOLIOS
-------------------------
Growth Stock Master Portfolio
Short-Intermediate Term Master Portfolio
Dated: October 21, 1996
A-1
<PAGE>
SCHEDULE B
----------
CUSTODY AGREEMENT
MANAGED SERIES INVESTMENT TRUST
IBT shall not be entitled to separate compensation from MSIT for
providing custody and fund accounting services to MSIT's Master Portfolios
pursuant to this Agreement so long as IBT is entitled to receive fees and
related expenses from BGI, pursuant to the Sub-administration Agreement between
BGI and IBT, for providing such custody and fund accounting services to MSIT's
Master Portfolios. If IBT is no longer entitled to receive such fees and
expenses under such Sub-administration Agreement, then IBT shall be entitled to
receive compensation from MSIT as IBT may from time to time negotiate with MSIT,
and this Schedule B shall be amended accordingly.
B-1
<PAGE>
SCHEDULE C
----------
CUSTODY AGREEMENT
MANAGED SERIES INVESTMENT TRUST
FUND ACCOUNTING DUTIES
----------------------
I. A. Journals containing an itemized daily record in detail of all
purchases and sales of securities, all receipts and disbursements of cash and
all other debits and credits, as required by subsection (b)(1) of rule 31a-1
under the 1940 Act (the "Rule");
B. General and auxiliary ledgers reflecting all asset, liability,
reserve, capital, income and expense accounts, including interest accrued and
interest received, as required by subsection (b)(2)(i) of the Rule;
C. Separate ledger accounts required by subsection (b) (2) (ii) and
(iii) of the Rule; and
D. A monthly trial balance of all ledger accounts (except shareholder
accounts) as required by subsection (b)(8) of the Rule.
II. All such books and records shall be the property of the Trust, and IBT
agrees to make such books and records available for inspection by the Trust or
by the Securities and Exchange Commission at reasonable times and otherwise to
keep confidential all records and other information relative to the Trust;
except when requested to divulge such information by duly constituted
authorities or court process, or when requested by the Trust.
III. In addition to the maintenance of the books and records specified
above, IBT shall perform the following accounting services daily for each Master
Portfolio;
A. Calculate the net asset value per interest;
B. Calculate changes in net asset value;
C-1
<PAGE>
C. Calculate the per share dividend distribution rates:
D. Calculate dividends and any capital-gain distributions;
E. Calculate performance figures, including any yield or total return
and other performance figures, as appropriate;
F. Provide the following reports:
1. a current security position report;
2. a summary report of transactions and pending maturities
(including the principal cost, and accrued interest on each
portfolio security in maturity date order); and
3. a current cash position report (including cash available from
portfolio sales and maturities and sales of a Master Portfolio's
interests less cash needed for redemptions and settlement of
portfolio purchases);
G. Such other similar services with respect to a Master Portfolio as
may be reasonably requested by the Trust.
IV. IBT shall forward the information contained in Section III of this
Schedule to third-party service providers reasonably requested by the Trust, the
Co-Administrators or BGFA.
C-2
<PAGE>
EXHIBIT 99.B9(a)
CO-ADMINISTRATION AGREEMENT
MANAGED SERIES INVESTMENT TRUST
111 Center Street
Little Rock, Arkansas 72201
October 21 1996
Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
Barclays Global Investors, N.A.
45 Fremont Street
San Francisco, CA 94105
Ladies and Gentlemen:
This will confirm the agreement among Managed Series Investment Trust (the
"Trust") on behalf of its Master Portfolios listed in the attached Appendix A;
as such Appendix may be amended from time to time (each, a "Master Portfolio"
and, collectively, the "Master Portfolios"), Barclays Global Investors, N.A.
("BGI") and Stephens Inc. ("Stephens", together with BGI, the "Co-
administrators") as follows:
1. The Trust is a registered open-end, management investment company. The
Trust engages in the business of investing and reinvesting the assets of each
Master Portfolio in the manner and in accordance with the applicable investment
objective, policies and restrictions specified in the Trust's currently
effective Registration Statement, as amended from time to time (the
"Registration Statement"), filed by the Trust under the Investment Company Act
of 1940 (the "Act"). Copies of the Registration Statement, as most recently
amended, have been furnished to the Co-administrators. Any amendments to the
Registration Statement shall be furnished to the Co-administrators promptly.
2. The Trust is engaging the Co-administrators to provide, or cause to be
provided, the administrative services specified elsewhere in this agreement,
subject to the overall supervision of the Trust's Board of Trustees. Pursuant
to advisory contracts between the Trust and Barclays Global Fund Advisors (the
"Adviser") on behalf of each Master Portfolio, the Trust has engaged the Adviser
to manage the investing and reinvesting of the assets of the Master Portfolios
and to provide advisory services as specified in such advisory contracts.
1
<PAGE>
3. The Co-administrators agree, at their expense, to supervise the
administrative operations and undertake to provide, or cause to be provided, the
services described on Appendix B, as such Appendix may be amended from time to
time by the mutual consent of the parties, the provision of, and liability
thereto, for certain of such services to be allocated on such Appendix, in
connection with the operations of the Trust and the Master Portfolios, and take
all reasonable action in the performance of their obligations under this
agreement to assure that the necessary information is made available to other
service providers, as such may be required by the Trust from time to time; and
to provide all other administrative services reasonably necessary for the
operation of the Master Portfolios, other than those services that are to be
provided by the Adviser pursuant to the advisory contracts and by the Trust's
transfer and dividend disbursing agent and custodian.
4. Except as provided in the advisory contracts on behalf of each of the
Trust's Master Portfolios and in this agreement, and only for so long as the Co-
administrators are entitled to compensation for providing co-administration
services to a feeder fund that invests substantially all of its assets in a
corresponding Master Portfolio, the Co-administrators agree to bear such feeder
fund's pro rata portion of the costs of the operations of such Master Portfolio,
including, but not limited to, its pro rata portion of the compensation of the
Trust's trustees who are not affiliated with the Adviser, the Co-administrators
or any of their affiliates; governmental fees; interest charges; taxes; fees and
expenses of its independent auditors, legal counsel (other than in connection
with litigation), transfer agent and dividend disbursing agent; fees paid to
shareholder servicing and other special purpose agents; expenses of preparing
and printing any Parts A or B, interestholders' reports, notices, proxy
statements and reports to regulatory agencies; travel expenses of trustees of
the Trust in connection with their attendance at Board and other meetings
relating to the Trust; office supplies; premiums for fidelity bonds and errors
and omissions and/or officers and trustees liability insurance; trade
association membership dues; fees and expenses of any custodian and fund
accountant, including those for keeping books and accounts and calculating the
net asset value per interest of the Master Portfolios; expenses of
interestholders' meetings; expenses relating to the issuance, registration,
qualification and redemption of interests of the Master Portfolios; any pricing
services; and organizational expenses. Notwithstanding anything to the
contrary, the Co-administrators shall not be required to bear any portion of
brokerage fees payable to the Adviser under its advisory contracts with the
Trust and other expenses connected with the execution of portfolio securities
transactions, litigation expenses, taxes (including income, excise, transfer and
withholding taxes) or cost or expense that a majority of the disinterested
trustees of the Trust deems to be an extraordinary expense. Expenses
attributable to one or more, but not all, of the Master Portfolios shall be
charged against the assets of the relevant Master Portfolios. General expenses
of the Trust shall be allocated among the Master Portfolios in a manner
proportionate to the net assets of each Master Portfolio, on a transactional
basis or on such other basis as the Board of Trustees deems equitable.
2
<PAGE>
5. Each Co-administrator shall exercise reasonable care and shall give the
Trust the benefit of the Co-administrator's best judgment and efforts in
rendering services under this agreement. As an inducement to the Co-
administrators' undertaking to render services hereunder, the Trust agrees that
a Co-administrator shall not be liable under this agreement for any mistake in
judgment or in any other event whatsoever except for lack of good faith,
provided that nothing in this agreement shall be deemed to protect or purport to
protect the Co-administrator against any liability to the Trust or its
interestholders to which the Co-administrator would otherwise be subject by
reason of willful misfeasance, bad faith or negligence in the performance of the
Co-administrators' duties under this agreement or by reason of reckless
disregard of its obligations and duties hereunder.
6. The Co-administrators shall not be entitled to compensation for
providing administrative services to a Master Portfolio so long as the Co-
administrators are entitled to receive fees for providing similar services to a
feeder fund of another registered investment company that invests all of its
assets in the Master Portfolio.
7. This agreement shall become effective on its execution date.
Thereafter, this agreement shall continue with respect to a Master Portfolio for
successive annual periods only so long as the continuance is specifically
approved at least annually (a) by the vote of a majority of the Master
Portfolio's outstanding voting securities (as defined in the Act) or by the
Trust's Board of Trustees and (b) by the vote, cast in person at a meeting
called for the purpose, of a majority of the Trust's trustees who are not
parties to this contract or "interested persons" (as defined in the Act) of any
such party. This contract may be terminated at any time by the Trust without
the payment of any penalty, by a vote of a majority of the Master Portfolio's
outstanding voting securities (as defined in the Act) or by a vote of a majority
of the Trust's entire Board of Trustee's on 60 days' written notice to the Co-
administrators, or by the Co-administrators on 60 days' written notice to the
Trust. This contract shall terminate automatically in the event of its
assignment (as defined in the Act).
8. Except to the extent necessary to perform the Co-administrators'
obligations under this agreement, nothing herein shall be deemed to limit or
restrict the right of the Co-administrators, or any affiliate of the Co-
administrators, or any employee of the Co-administrators, to engage in any other
business or to devote time and attention to the management or other aspects of
any other business, whether of a similar or dissimilar nature, or to render
services of any kind to any other corporation, firm, individual or association.
9. This agreement shall be governed by and construed in accordance with
the laws of the State of Arkansas.
10. The Trust hereby agrees and acknowledges that each Co-administrator
may allocate or further delegate responsibility for any or all of the services
to be provided hereunder, as listed on Appendix B hereto, between each Co-
administrator; provided that
3
<PAGE>
the Co-administrators shall have joint and several liability for the provision
of the services under this agreement, except that BGI or Stephens each agree to
assume sole responsibility, and related liability thereto, for providing the
duties and services identified as the sole responsibility of BGI or Stephens on
such Appendix B; and, further provided that each Co-administrator agrees to
remain fully liable to the Trust for the provision of any service that such Co-
administrator delegates to another entity.
12. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
4
<PAGE>
If the foregoing correctly sets forth the agreement between the Trust and
the Co-administrators, please so indicate by signing and returning to the Trust
the enclosed copy hereof.
Very truly yours,
MANAGED SERIES INVESTMENT TRUST
on behalf of Growth Stock Master Portfolio and
Short-Intermediate Term Master Portfolio
By: /s/Richard H. Blank, Jr.
-------------------------
Name: Richard H. Blank, Jr.
Title: Chief Operating Officer,
Secretary and Treasurer
ACCEPTED as of the date
set forth above:
BARCLAYS GLOBAL INVESTORS, N.A.
By: /s/Donald Luskin
----------------
Name: Donald Luskin
Title: Managing Director
By: /s/Matthew Shelton
-------------------
Name: Matthew Shelton
Title Principal
STEPHENS INC.
By:/s/Richard H. Blank, Jr.
------------------------
Name: Richard H. Blank, Jr.
Title: Vice President
5
<PAGE>
Appendix A
Managed Series Investment Trust
-------------------------------
Growth Stock Master Portfolio
Short-Intermediate Term Master Portfolio
Dated: October 21, 1996
A-1
<PAGE>
APPENDIX B
MANAGED SERIES INVESTMENT TRUST
-------------------------------
LIST OF ADMINISTRATIVE SERVICES
-------------------------------
STEPHENS INC.
- -------------
(1) Review agenda and assemble Board materials for quarterly Board meetings;
prepare supporting information when necessary; prepare minutes of Board
and committee meetings.
(2) Review and approve Board material.
(3) Provide expense budgets.
(4) Monitor actual expenses and update budgets/expense accruals as necessary.
(5) Review and authorize filing of Forms N-SAR.
(6) Maintain records of sales and file appropriate registrations and
renewals, sales information and other required material for Blue Sky
purposes.
(7) Review and provide advice to the distributor and the Trust on behalf of
the Master Portfolios and investment adviser regarding sales literature
and marketing plans to assure regulatory compliance.
BARCLAYS GLOBAL INVESTORS
- -------------------------
(8) Continuously monitor portfolio activity and related functions in
conjunction with all applicable regulatory requirements. Take corrective
action as necessary.
(9) Identify the services to which the Funds report performance information.
Provide information as requested on performance questionnaires.
(10) Prepare appropriate management letter and coordinate production of
Management Discussion and Analysis, with respect to the preparation and
printing of shareholder reports.
(11) Coordinate review and approval by portfolio managers of portfolio
listings to be included in financial statements, with respect to the
preparation and printing of shareholder reports.
B-1
<PAGE>
(12) Prepare selected portfolio and financial information for inclusion in
Board material.
(13) Assist in presentation to Board as desired by Fund Officer(s).
(14) Calculate total return information and other statistical information
including undistributed income and capital gains with respect to
condensed financial information for review by management.
(15) Perform tests of specific portfolio activities against compliance
checklists designed from the provisions of the Masters' and Money Market
Fund's current Prospectus and SAI.
(16) Calculate dividend amounts available for distribution.
(17) Coordinate review of dividend amounts by management and auditors.
(18) Notify fund accounting and transfer agent of authorized dividends rates.
(19) Prepare responses to various performance questionnaires; coordinate as
necessary, and submit responses to the appropriate agency;
(20) Prepare Forms N-SAR for filing; obtain any necessary supporting
documents; file with the SEC via EDGAR.
(21) Draft semi-annual and annual shareholder reports and coordinate auditor
and management review.
(22) Coordinate printing of reports and EDGAR conversion with outside printer
and filing with the SEC via EDGAR.
(23) Provide information for Financial Highlights and expense tables.
(24) Continuously monitor portfolio activity regarding diversification in
conjunction with IRS requirements for registered investment companies.
(25) Continuously monitor portfolio activity regarding "short short" income
and qualifying income in conjunction with IRS requirements for
registered investment companies.
B-2
<PAGE>
STEPHENS INC. AND BARCLAYS GLOBAL INVESTORS
- -------------------------------------------
(26) Prepare, or assist in the preparation, and file with the SEC and state
securities regulators, if applicable, registration statements, notices,
reports, and other material required to be filed under applicable laws.
(27) Review financial information and take any necessary action.
(28) Develop and implement procedures for monitoring compliance with
regulatory requirements and compliance with each Master Portfolio's
investment objective, policies and restrictions as established by the
Trust's Board, perform compliance testing and approve resolution of
compliance issues.
(29) Approve dividend rates; obtain Board approval when required.
(30) Determine allocation of invoices among funds. Authorize and send to
fund accountants for payment of expenses.
(31) Coordinate activities of other vendors as necessary.
(32) Provide appropriate responses to Forms N-SAR.
(33) Provide marketing input of shareholder report style and graphics.
(34) Review and approve entire shareholder report.
(35) Review drafts and coordinate review process of Forms N-1A updates and
prospectus supplements.
(36) Coordinate printing, EDGAR conversion, and filing with the SEC with
outside printers of Forms N-1A.
(37) Maintain and preserve the corporate records of the Company, including
each Master Portfolio.
(38) Make appropriate representations in conjunction with audit.
(39) Review diversification test results and corrective actions taken, with
respect to qualifications as a registered investment company.
(40) Approve tax positions taken regarding qualification as a registered
investment company.
(41) Review "short short" income and qualifying income test results and
corrective actions taken, with respect to qualifications as a registered
investment company.
B-3
<PAGE>
(42) Approve tax positions taken regarding "short short" income and
qualifying income, with respect to qualifications as a registered
investment company.
(43) Approve tax accounting positions to be taken.
(44) Approve distributions
(45) Review tax returns and coordinate signature thereof with a Fund Officer.
Approved: October 21, 1996
Signed: /s/Donald Luskin Signed: /s/Richard H. Blank, Jr.
---------------- ------------------------
By: Donald Luskin By: Richard H. Blank, Jr
Managing Director Vice President
Barclays Global Stephens, Inc.
Investors, N.A.
Signed: /s/Matthew Shelton
------------------
By: Matthew Shelton
Principal
Barclays Global Investors, N.A.
Signed: /s/Richard H. Blank, Jr.
------------------------
By: Richard H. Blank, Jr., Chief Operating Officer
Managed Series Investment Trust
B-4
<PAGE>
EXHIBIT 99.B9(b)
SUB-ADMINISTRATION AGREEMENT
October 21, 1996
Investors Bank & Trust Company
89 South Street
Boston, MA 02111
Ladies and Gentlemen:
This will confirm the agreement between Investors Bank & Trust Company
("IBT" or, at times, the "Sub-administrator") and Barclays Global Investors,
N.A. ("BGI" or, at times, the "Co-administrator") with respect to Master
Investment Portfolio ("MIP"), on behalf of its Master Portfolios, Managed Series
Investment Trust ("MSI Trust"), on behalf of its Master Portfolios, and
MasterWorks Funds Inc. ("MasterWorks"), on behalf of its Funds, listed in the
attached Appendix A, as such Appendix may be amended from time to time (the
"Master Portfolios" and Funds are, collectively, the "Portfolios"), as follows:
1. (a) MIP is a registered open-end, management investment company
consisting of a number of operating investment portfolios in accordance with
MIP's Amended and Restated Declaration of Trust (the "MIP Declaration"). MIP
engages in the business of investing and reinvesting the assets of each Master
Portfolio in the manner and in accordance with the applicable investment
objective, policies and restrictions specified in MIP's currently effective
Registration Statement, as amended from time to time (the "Registration
Statement"), filed under the Investment Company Act of 1940 (the "Act"). MIP
has retained BGI and Stephens Inc. as co-administrators pursuant to a co-
administration agreement. Copies of MIP's agreements with all service
providers, the MIP Declaration, its By-Laws and most recent amendment to its
Registration Statement have been furnished to the Sub-administrator.
(b) MSI Trust is a registered open-end, management investment
company consisting of a number of operating investment portfolios in accordance
with MSI Trust's Declaration of Trust (the " MSI Trust Declaration"). MSI Trust
engages in the business of investing and reinvesting the assets of each Master
Portfolio in the manner and in accordance with the applicable investment
objective, policies and restrictions specified in MSI Trust's currently
effective Registration Statement, as amended from time to time, filed under the
Act. MSI Trust has retained BGI and Stephens Inc. as co-administrators pursuant
to a co-administration agreement. Copies of MSI Trust's agreements with all
service providers, the MSI Trust Declaration, its By-Laws and most recent
amendment to its Registration Statement have been furnished to the Sub-
administrator.
1
<PAGE>
(c) MasterWorks is a registered open-end, management investment company
consisting of a number of operating investment portfolios in accordance with
MasterWorks' Articles of Incorporation (the "Articles"). MasterWorks engages in
the business of investing and reinvesting the assets of each Fund in the manner
and in accordance with the applicable investment objective, policies and
restrictions specified in MasterWorks' currently effective Registration
Statement, as amended from time to time, filed under the Act and the Securities
Act of 1933. MasterWorks has retained BGI and Stephens Inc. as co-
administrators pursuant to a co-administration agreement. Copies of
MasterWorks' agreements with all service providers, MasterWorks' Articles, its
By-Laws and most recent amendment to its Registration Statement and prospectuses
and statements of additional information thereto have been furnished to the Sub-
administrator.
(d) Any amendments to MIP's, MSI Trust's or MasterWorks' documents
listed above shall be furnished to the Sub-administrator promptly.
2. BGI is engaging the Sub-administrator to provide certain administrative
services specified on Appendix B hereto, subject to the supervision of BGI and
the overall supervision of the applicable Board of Trustees/Directors of MIP,
MSI Trust or MasterWorks. Pursuant to advisory contracts between MIP, MSI Trust
or MasterWorks, respectively, and Barclays Global Fund Advisors (the "Adviser")
on behalf of each Master Portfolio or Fund, as applicable, the Adviser has been
engaged to manage the investing and reinvesting of the assets of each Master
Portfolio or Fund and to provide advisory services as specified in such advisory
contracts.
3. The Sub-administrator agrees to provide the administrative services, as
described on Appendix B hereto, as such Appendix may be amended from time to
time by the consent of the parties to this Agreement, in connection with the
operations of MIP, MSI Trust and MasterWorks and the Master Portfolios and
Funds, and to take all reasonable action in the performance of its obligations
under this Agreement to assure that the necessary information is made available
to other service providers, as such may be required by BGI from time to time.
4. (a) For the services to be rendered and the facilities to be furnished
by the Sub-administrator to BGI and/or MIP, MSI Trust, or MasterWorks, BGI
agrees to compensate the Sub-administrator in accordance with the fee schedule
attached as Appendix C to this Agreement. BGI also agrees to reimburse the Sub-
administrator for its out-of-pocket disbursements connected with the services
provided hereunder and for other expenses, which, with BGI's prior written
approval, the Sub-administrator shall be entitled to bill separately. The
compensation rates to be paid to the Sub-administrator hereunder shall not be
increased for a period of three (3) years from the effective date of this
Agreement.
(b) The Sub-administrator agrees that MIP, MSI Trust and MasterWorks
and their Master Portfolios and Funds shall have no obligation to
compensate the Sub-
2
<PAGE>
administrator for services provided or facilities furnished under, or
expenses incurred in connection with, this Agreement.
(c) The Sub-administrator shall have no obligation to pay for any
expenses incurred by MIP, MSI Trust and MasterWorks or their Master
Portfolios or Funds.
(d) The Sub-administrator and BGI each agree to exercise reasonable care
in performing its duties under this Agreement, and each party agrees to be
liable to the other party for direct damages resulting from a failure to
exercise reasonable care in performing such duties.
5. (a) BGI agrees to hold harmless and indemnify the Sub-administrator, its
directors, officers, employees and agents (the "Sub-administrator
Indemnitees") against and from any and all losses, expenses or liabilities
incurred by or claims or actions asserted against any Sub-administrator
Indemnitee to the extent resulting from (i) a violation or alleged
violation by BGI of any law, rule or regulation, (ii) a material violation
or alleged material violation by BGI of any provision of this Agreement,
(iii) any failure of BGI to exercise reasonable care in rendering services
hereunder, or (iv) any erroneous or incomplete information provided by or
through BGI to the Sub-administrator in connection with the Sub-
administrator's performance of its duties hereunder, such indemnification
to include any reasonable counsel fees and expenses incurred in connection
with investigating and/or defending such claims or actions.
(b) The Sub-administrator may apply to BGI at any time for instructions
and may consult counsel for BGI, or its own counsel, and with auditors and
other experts with respect to any matter arising in connection with its
duties hereunder, and the Sub-administrator shall not be liable or
accountable for any action reasonably taken or omitted by it in good faith
in accordance with such instruction, or with the opinion of such counsel,
auditors, or other experts. The Sub-administrator shall not be liable for
any action reasonably taken or omitted by it in good faith reliance upon
any document, certificate or instrument that it reasonably believes to be
genuine and to be signed or presented by the proper person(s). The Sub-
administrator shall not be held to have notice of any change of authority
of any officers, employees or agents of MIP, MSI Trust or MasterWorks or
their Master Portfolios or Funds until the Sub-administrator has received
written notice thereof from BGI.
(c) The Sub-administrator agrees to hold harmless and indemnify BGI,
MIP, MSI Trust and MasterWorks and their Master Portfolios and Funds,
including any principals, directors or trustees, officers, and employees
(the "BGI Indemnitees") against and from any and all losses, expenses or
liabilities incurred by or claims or actions asserted against any BGI
Indemnitee to the extent resulting from a
3
<PAGE>
violation or alleged violation by the Sub-administrator of any law, rule or
regulation or material violation or alleged material violation by the Sub-
administrator of any provision of this Agreement, or any failure of the
Sub-administrator to exercise reasonable care in rendering services
hereunder, such indemnification to include any reasonable counsel fees and
expenses incurred in connection with investigating of defending such claims
or actions.
(d) In the event that the Sub-administrator is unable to perform, or is
delayed in performing, its obligations under the terms of this Agreement
because of acts of God, strikes, legal constraint, government actions, war,
emergency conditions, interruption of electrical power or other utilities,
equipment or transmission failure or damage reasonably beyond its control
or other causes reasonably beyond its control, the Sub-administrator shall
not be liable to BGI for any damages resulting from such failure to
perform, delay in performance, or otherwise from such causes, provided that
the Sub-administrator shall make all reasonable efforts, whenever
necessary, to use data processing back-up facilities provided by Electronic
Data Systems, Inc.
(e) In no event shall the Sub-administrator be liable for special,
incidental, or consequential damages, even if advised in advance of the
possibility of such damages.
(f) In no event shall either BGI or the Sub-administrator be liable to
the other party for actions taken or omitted or information provided that
is based upon information originally provided by such other party.
6. The term of this Agreement shall be two (2) years commencing upon the
date hereof (the "Initial Term"), unless earlier terminated as provided herein.
After the expiration of the Initial Term, this Agreement shall automatically
renew for successive one-year terms (each a "Renewal Term") unless notice of
non-renewal is delivered by the non-renewing party to the other party no later
than sixty (60) days prior to the expiration of the Initial Term or any Renewal
Term, as the case may be.
(a) Either party hereto may terminate this Agreement prior to the
expiration of the Initial Term in the event the other party violates any
material provision of this Agreement, provided that the violating party
does not cure such violation within ninety (90) days of receipt of written
notice from the non-violating party of such violation.
(b) BGI may terminate this Agreement prior to the expiration of the
Initial Term in the event (i) the Board of Trustees/Directors of MIP, MSI
Trust or MasterWorks determines that the performance of the Sub-
Administrator does not meet the reasonable satisfaction (considered in
light of industry standards) of the Board of Trustees/Directors, provided
that the Sub-Administrator does not cure
4
<PAGE>
such unsatisfactory performance within ninety (90) days of receipt of
written notice specifying such unsatisfactory performance; or (ii) if the
Sub-administrator becomes the subject of any state or federal bankruptcy
proceeding which is not dismissed within sixty (60) days of the initiation
of such proceeding.
(c) Either party may terminate this Agreement during any Renewal Term
upon sixty (60) days written notice to the other party. Any termination
pursuant to this paragraph 6(b) shall be effective upon expiration of such
sixty (60) days, provided, however, that the effective date of such
termination may be postponed, at the request of BGI, to a date not more
than ninety (90) days after delivery of the written notice in order to give
BGI an opportunity to make suitable arrangements for a successor Sub-
administrator.
(d) At any time after the termination of this Agreement, BGI may, upon
written request, have reasonable access to the records of Sub-administrator
relating to its performance of its duties as Sub-administrator.
(e) BGI may terminate this Agreement if the Co-administration
Agreement between BGI and MIP, MSI Trust or MasterWorks is terminated and
no successor agreement between BGI and MIP, MSI Trust or MasterWorks for
the provision of administrative services is subsequently executed within 90
days after the termination of the Co-administration Agreement.
(f) Section 5 hereof shall survive any termination of this Agreement.
7. (a) Any notice or other instrument authorized or required by this
Agreement to be given in writing to BGI or the Sub-administrator shall be
sufficiently given if addressed to that party and received by it at its office
set forth below or at such other place as it may from time to time designate in
writing.
To BGI: Barclays Global Investors, N.A.
45 Fremont Street, 17th Floor
San Francisco, CA 94105
Attention: Legal Group
To the Sub-administrator: Investors Bank & Trust Company
89 South Street
Boston, MA 02111
Attention: Andrew Nesvet
With a copy to: John E. Henry, Esq.
(b) This Agreement shall extend to and shall be binding upon the
parties hereto and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable without the written
consent of the other party.
5
<PAGE>
8. This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts.
9. BGI and the Sub-administrator agree that each party may disclose the
existence of this Agreement to third parties; provided that each agrees to keep
confidential all proprietary data, software, processes, information, and
documentation related to this Agreement, except as may be necessary to perform
obligations under this Agreement or otherwise as may be agreed to, from time to
time, in writing by the parties.
10. Neither the Sub-administrator nor any of its employees or agents are
authorized to make any representation concerning the interests of MIP, MSI
Trust, MasterWorks or their Master Portfolios or Funds without prior written
consent, except those contained in the then current Registration Statement or
applicable prospectuses and statements of additional information, copies of
which will be supplied to the Sub-administrator as described above; and the Sub-
administrator shall have no authority under this Agreement to act as agent for
MIP, MSI Trust, or MasterWorks or their Master Portfolios or Funds or for BGI,
except where necessary to perform specific services under this Agreement.
11. This Agreement may be amended only by a written instrument executed by
both BGI and the Sub-administrator.
12. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
6
<PAGE>
If the foregoing correctly sets forth the agreement between BGI and the
Sub-administrator, please so indicate by signing and returning to BGI the
enclosed copy hereof.
Very truly yours,
BARCLAYS GLOBAL INVESTORS, N.A.,
By: /s/Donald Luskin
--------------------------------------
Name: Donald Luskin
Title: Vice Chairman
By: /s/Matthew Shelton
--------------------------------------
Name: Matthew Shelton
Title: Principal
ACCEPTED as of the date
set forth above:
INVESTORS BANK & TRUST
By: /s/Robert D. Mancuso
-------------------------------------
Name: Robert D. Mancuso,
Title: Managing Director
By: /s/John E. Henry
---------------------------------------
Name: John E. Henry,
Title: General Counsel
7
<PAGE>
Appendix A
Master Investment Portfolio
---------------------------
LifePath 2000 Master Portfolio
LifePath 2010 Master Portfolio
LifePath 2020 Master Portfolio
LifePath 2030 Master Portfolio
LifePath 2040 Master Portfolio
Asset Allocation Master Portfolio
Bond Index Master Portfolio
S & P 500 Index Master Portfolio
U.S. Treasury Allocation Master Portfolio
Managed Series Investment Trust
-------------------------------
Growth Stock Master Portfolio
Short-Intermediate Term Master Portfolio
MasterWorks Funds, Inc.
-----------------------
LifePath 2000 Fund
LifePath 2010 Fund
LifePath 2020 Fund
LifePath 2030 Fund
LifePath 2040 Fund
Asset Allocation Fund
Bond Index Fund
Growth Stock Fund
Money Market Fund
S&P 500 Index Fund
Short-Intermediate Term Fund
U.S. Treasury Allocation Fund
Dated : October 21, 1996
A-1
<PAGE>
APPENDIX B
LIST OF ADMINISTRATIVE SERVICES
-------------------------------
(1) Prepare selected portfolio and financial information for inclusion in Board
material
(2) Assist in presentation to Board as desired by Fund Officer(s);
(3) Calculate total return information and other statistical information
including undistributed income and capital gains with respect to condensed
financial information for review by management;
(4) Perform tests of specific portfolio activities against compliance
checklists designed from the provisions of the Masters' and Money Market
Fund's current Prospectus and SAI;
(5) Calculate dividend amounts available for distribution;
(6) Coordinate review of dividend amounts by management and auditors;
(7) Notify fund accounting and transfer agent of authorized dividends rates;
(8) Prepare responses to various performance questionnaires; coordinate as
necessary, and submit responses to the appropriate agency;
(9) Prepare Forms N-SAR for filing; obtain any necessary supporting documents;
file with the SEC via EDGAR;
(10) Draft semi-annual and annual shareholder reports and coordinate auditor and
management review;
(11) Coordinate printing of reports and EDGAR conversion with outside printer
and filing with the SEC via EDGAR;
(12) Provide information for Financial Highlights and expense tables;
(13) Coordinate the preparation of required reports and confirmations for audit
packages with IBT fund accounting.
(14) Assist in resolution of audit issues.
(15) Perform diversification testing pursuant to the Internal Revenue Code of
1986, as amended (the "Tax Code") -- preliminary at each month end, final
at quarter end, and as may otherwise be necessary. Follow-up on any issues
until Tax Code qualification issues are resolved.
B-1
<PAGE>
(16) Perform short-short income and qualifying income tests monthly or more
frequently, as test results dictate, with respect to qualification as a
regulated investment company under the Tax Code.
(17) Identify book-tax accounting differences with auditors and management.
(18) Track required information relating to accounting differences and determine
appropriate allocations to feeders.
(19) Follow appropriate Tax Code treatment for all passive foreign investment
company ("PFIC") lots identified by BGI.
Approved: October 21, 1996
Signed: /s/Donald Luskin Signed: /s/Robert D. Macuso
----------------------- -----------------------------
By: Donald Luskin, Vice Chairman By: Robert D. Mancuso, Managing Director
Barclays Global Investors, N.A. Investors Bank & Trust
Signed: /s/Matthew Shelton Signed: /s/John E. Henry
------------------------ --------------------------------
By: Matthew Shelton, Principal By: John E. Henry, General Counsel
Barclays Global Investors, N.A. Investors Bank & Trust
B-2
<PAGE>
Appendix C
FEE SCHEDULE
------------
CUSTODY, FUND ACCOUNTING & CALCULATION OF N.A.V.
A. Fund Accounting and Calculation of N.A.V
----------------------------------------
The following annual fee will be charged for each Master Portfolio of MIP and
MSI Trust and stand-alone Fund of MasterWorks for which IBT serves as fund
accountant. This fee does not include domestic or global custody or
transaction costs.
<TABLE>
<CAPTION>
Annual Fee
----------
<S> <C>
Domestic Funds $25,000
International/Foreign Funds $40,000
Per Feeder Annual Charge $12,000
</TABLE>
B. Domestic Custody and Transactions**
-----------------------------------
In addition to the transaction charges below, there will be a basis point
charge on all domestic assets that IBT is custodian as follows:
FOR ALL ASSETS .67 BASIS POINT
<TABLE>
<CAPTION>
TRANSACTIONS CHARGES
- ------------ -------
<S> <C>
* DTC $ 4
* Fed Book Entry $ 5
* Physical Securities 35
* Options and Futures 18
* GNMA Securities 40
* Principal Paydown 5
* Foreign Currency 18***
* Cross Border 50
* Outgoing Wires 7
* Incoming Wires 5
</TABLE>
C-1
<PAGE>
**Trade information will be sent to IBT electronically. If the trades are not
sent electronically, the price per trade for DTC and Fed Book items will
increase to $12 per trade.
***There are no transaction charges for F/X contracts executed by IBT.
C. Global Custody:
---------------
. Incremental basis point and transaction fees will be charged for all
foreign assets for which IBT serves as custodian. The asset based fees and
transaction fees vary by country, based upon the attached global custody fee
schedule. Local duties, script fees, registration, exchange fees, and other
market charges are out-of-pocket.
. IBT will require international assets to be held within its international
custody network.
MUTUAL FUND ADMINISTRATION
A. Mutual Fund Administration
--------------------------
. The following basis point fees are based on all assets for which IBT
serves as Administrator. This fee does not include preparation of tax returns
and provisions.
<TABLE>
<CAPTION>
Annual Fee
----------
<S> <C>
First $1 billion of assets $2.75 Basis Points
Assets in excess of $1 billion 1.0 Basis Point
</TABLE>
. For any new funds beyond the existing 1 stand-alone fund, 11 master
portfolios and 11 feeder funds there will be a minimum fee as described below.
<TABLE>
<S> <C>
First 6 months $10,000
Next 6 months $12,500
Each Year thereafter $35,000
</TABLE>
This minimum fee includes 1 master portfolios and 1 feeder fund or stand-
alone fund. Each additional feeder will be charged a yearly minimum fee
of $7,500.
C-2
<PAGE>
The minimum fees will apply until the basis point fee above exceeds the
minimum charge.
MISCELLANEOUS
A. Out-of-Pocket
-------------
. These charges consist of:
- Printing, Delivery & Postage
- Board Meeting Attendance
- Extraordinary Travel Expenses
- InvestView
- Legal Expenses
- Customized Systems Development/Reporting
- Pricing & Verification Services (Per day/issue; Bonds $.50, Stocks $.03)
- Int'l stocks and bonds $.40; Int'l corporate actions $3.00 per
month/issue.
B. Domestic Balance Credit
-----------------------
. IBT allows use of balance credit against fees (excluding out-of-pocket
charges) for fund balances arising out of the custody relationship. The credit
is based on collected balances reduced by balances required to support the
activity charges of the accounts. The monthly earnings allowance is equal to
75% of the 90-day T-bill rate.
C. Securities Lending, Foreign Exchange & Cash Management
------------------------------------------------------
. This proposal is based upon IBT performing securities lending, foreign
exchange and cash management for the portfolios. Securities Lending revenue is
split between a master portfolio or a fund and IBT on a 60/40% basis; 60% going
to the master portfolio or fund.
D. Payment
-------
. An invoice with respect to the above fees will be sent to BGI and will be
payable within ten (10) business days after the invoice is received.
E. Systems
-------
. The details of any systems work will be determined after a thorough
business analysis. System's work will be billed on a time and material basis.
C-3
<PAGE>
F. Legal & Audit Expertise
-----------------------
. IBT will rely on the outside counsel to MIP, MSI Trust and MasterWorks
and auditors for opinions on any structural changes to the master portfolios or
funds.
* This fee schedule is valid for the time frames described in the individual
contracts.
C-4
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------
COUNTRY BP CHARGE TRADE CHARGE
- -----------------------------------------------------------
<S> <C> <C>
Argentina 22.00 $ 75.00
Australia 5.00 $ 60.00
Austria 7.00 $ 60.00
Bangladesh 41.00 $150.00
Belgium 7.00 $ 60.00
Bharain 41.00 $140.00
Botswana 50.00 $175.00
Brazil** 29.00 $ 80.00
Canada 5.00 $ 30.00
Chile*** 45.00 $100.00
China 20.00 $ 75.00
Colombia** 45.00 $140.00
Cyprus 50.00 $150.00
Czech Republic 20.00 $ 75.00
Denmark 5.00 $ 60.00
Ecuador 45.00 $100.00
Egypt 41.00 $100.00
Euroclear-Eurobonds 5.00 $ 20.00
Euroclear Non-Eurobond Issues 5.00 $ 60.00
Finland 7.00 $ 70.00
France 5.00 $ 60.00
France Debt 5.00 $ 60.00
Germany 5.00 $ 30.00
Ghana 50.00 $200.00
Greece 45.00 $130.00
Hong Kong 10.00 $ 65.00
Hungary 50.00 $200.00
India**** 50.00 .50BP
Indonesia 13.00 $ 65.00
Ireland 7.00 $ 60.00
Israel 50.00 $150.00
Italy Debt 5.00 $ 50.00
Italy Equity 5.00 $ 50.00
Japan 5.00 $ 30.00
Jordan 41.00 $120.00
Kenya 50.00 $200.00
Korea 13.00 $ 65.00
Lebanon 41.00 $140.00
Luxembourg 7.00 $ 60.00
Malaysia 10.00 $ 70.00
Mauritius 41.00 $140.00
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------
COUNTRY BP CHARGE TRADE CHARGE
- ---------------------------------------------------
<S> <C> <C>
Mexico 10.00 $ 40.00
Morocco 40.00 $150.00
Namibia 50.00 $200.00
Netherlands 5.00 $ 40.00
New Zealand 5.00 $ 60.00
Norway 7.00 $ 90.00
Oman 41.00 $140.00
Pakistan 41.00 $140.00
Peru 50.00 $150.00
Philippines 13.00 $ 65.00
Poland 50.00 $150.00
Poland T Bills 29.00 $110.00
Portugal 20.00 $125.00
Russia Equities 41.00 $250.00
Russia Min Fins 35.00 $140.00
Singapore 10.00 $ 65.00
Slovakia 20.00 $ 75.00
South Africa 7.00 $ 40.00
Spain Eq & Corp. Debt 7.00 $ 60.00
Spain Gvt Debt 5.00 $ 60.00
Sri Lanka 13.00 $ 65.00
Swaziland 50.00 $200.00
Sweden 5.00 $ 40.00
Sweden Debt 5.00 $ 40.00
Switzerland 5.00 $ 60.00
Taiwan 13.00 $ 65.00
Thailand 10.00 $ 65.00
Turkey 41.00 $140.00
UK 5.00 $ 50.00
Uruguay 50.00 $150.00
Venezuela** 45.00 $140.00
Zambia 50.00 $200.00
Zimbabwe 50.00 $175.00
</TABLE>
C-6
<PAGE>
*Bonds billed at Residual Value
**Local Administrator Fees included in Custody fee
***20 BP Local Administration Charge Applied to Trades
****Trades billed at 50 BP
Out-of-Pocket Charges are passed through as actuals in all markets
Dated: October 21, 1996
C-7
<PAGE>
EXHIBIT 99.B19
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Marco E. Adelfio, Richard H. Blank, Jr., R. Greg Feltus and Robert M.
Kurucza, and each of them, his true and lawful attorney-in-fact and agent (each,
an "Attorney-in Fact") with full power of substitution and resubstitution, for
him and in his name, place and stead, in any and all capacities, (i) to execute
the Registration Statement of each of MasterWorks Funds Inc., Managed Series
Investment Trust and Master Investment Portfolio, (each, a "Company") and any or
all amendments (including post-effective amendments) thereto and to file the
same, with any and all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission and any state securities
commissions or authorities, and (ii) to execute any and all federal or state
regulatory filings, including all applications with regulatory authorities,
state charter or organizational documents and any amendments or supplements
thereto, to be executed by, on behalf of, or for the benefit of, a Company. The
undersigned hereby grants to each Attorney-in-Fact full power and authority to
do and perform each and every act and thing contemplated above, as fully and to
all intents and purposes as he might or could do in person, and hereby ratifies
and confirms all that said Attorney-in-Fact may lawfully do or cause to be done
by virtue hereof.
Dated: October 24, 1996 /s/ Jack S. Euphrat
----------------------------
Jack S. Euphrat
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Marco E. Adelfio, Richard H. Blank, Jr. and Robert M. Kurucza, and each
of them, his true and lawful attorney-in-fact and agent (each, an "Attorney-in
Fact") with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, (i) to execute the
Registration Statement of each of MasterWorks Funds Inc., Managed Series
Investment Trust and Master Investment Portfolio, (each, a "Company") and any or
all amendments (including post-effective amendments) thereto and to file the
same, with any and all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission and any state securities
commissions or authorities, and (ii) to execute any and all federal or state
regulatory filings, including all applications with regulatory authorities,
state charter or organizational documents and any amendments or supplements
thereto, to be executed by, on behalf of, or for the benefit of, a Company. The
undersigned hereby grants to each Attorney-in-Fact full power and authority to
do and perform each and every act and thing contemplated above, as fully and to
all intents and purposes as he might or could do in person, and hereby ratifies
and confirms all that said Attorney-in-Fact may lawfully do or cause to be done
by virtue hereof.
Dated: October 24, 1996 /s/ R. Greg Feltus
-----------------------------
R. Greg Feltus
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Marco E. Adelfio, Richard H. Blank, Jr., R. Greg Feltus and Robert M.
Kurucza, and each of them, his true and lawful attorney-in-fact and agent (each,
an "Attorney-in Fact") with full power of substitution and resubstitution, for
him and in his name, place and stead, in any and all capacities, (i) to execute
the Registration Statement of each of MasterWorks Funds Inc., Managed Series
Investment Trust and Master Investment Portfolio, (each, a "Company") and any or
all amendments (including post-effective amendments) thereto and to file the
same, with any and all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission and any state securities
commissions or authorities, and (ii) to execute any and all federal or state
regulatory filings, including all applications with regulatory authorities,
state charter or organizational documents and any amendments or supplements
thereto, to be executed by, on behalf of, or for the benefit of, a Company. The
undersigned hereby grants to each Attorney-in-Fact full power and authority to
do and perform each and every act and thing contemplated above, as fully and to
all intents and purposes as he might or could do in person, and hereby ratifies
and confirms all that said Attorney-in-Fact may lawfully do or cause to be done
by virtue hereof.
Dated: October 24, 1996 /s/ Thomas S. Goho
-----------------------------
Thomas S. Goho
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Marco E. Adelfio, Richard H. Blank, Jr., R. Greg Feltus and Robert M.
Kurucza, and each of them, his true and lawful attorney-in-fact and agent (each,
an "Attorney-in Fact") with full power of substitution and resubstitution, for
him and in his name, place and stead, in any and all capacities, (i) to execute
the Registration Statement of each of MasterWorks Funds Inc., Managed Series
Investment Trust and Master Investment Portfolio, (each, a "Company") and any or
all amendments (including post-effective amendments) thereto and to file the
same, with any and all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission and any state securities
commissions or authorities, and (ii) to execute any and all federal or state
regulatory filings, including all applications with regulatory authorities,
state charter or organizational documents and any amendments or supplements
thereto, to be executed by, on behalf of, or for the benefit of, a Company. The
undersigned hereby grants to each Attorney-in-Fact full power and authority to
do and perform each and every act and thing contemplated above, as fully and to
all intents and purposes as he might or could do in person, and hereby ratifies
and confirms all that said Attorney-in-Fact may lawfully do or cause to be done
by virtue hereof.
Dated: October 24, 1996 /s/ Zoe Ann Hines
-----------------------------
Zoe Ann Hines
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Marco E. Adelfio, Richard H. Blank, Jr., R. Greg Feltus and Robert M.
Kurucza, and each of them, his true and lawful attorney-in-fact and agent (each,
an "Attorney-in Fact") with full power of substitution and resubstitution, for
him and in his name, place and stead, in any and all capacities, (i) to execute
the Registration Statement of each of MasterWorks Funds Inc., Managed Series
Investment Trust and Master Investment Portfolio, (each, a "Company") and any or
all amendments (including post-effective amendments) thereto and to file the
same, with any and all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission and any state securities
commissions or authorities, and (ii) to execute any and all federal or state
regulatory filings, including all applications with regulatory authorities,
state charter or organizational documents and any amendments or supplements
thereto, to be executed by, on behalf of, or for the benefit of, a Company. The
undersigned hereby grants to each Attorney-in-Fact full power and authority to
do and perform each and every act and thing contemplated above, as fully and to
all intents and purposes as he might or could do in person, and hereby ratifies
and confirms all that said Attorney-in-Fact may lawfully do or cause to be done
by virtue hereof.
Dated: October 24, 1996 /s/ W. Rodney Hughes
-----------------------------
W. Rodney Hughes
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Marco E. Adelfio, Richard H. Blank, Jr., R. Greg Feltus and Robert M.
Kurucza, and each of them, his true and lawful attorney-in-fact and agent (each,
an "Attorney-in Fact") with full power of substitution and resubstitution, for
him and in his name, place and stead, in any and all capacities, (i) to execute
the Registration Statement of each of MasterWorks Funds Inc., Managed Series
Investment Trust and Master Investment Portfolio, (each, a "Company") and any or
all amendments (including post-effective amendments) thereto and to file the
same, with any and all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission and any state securities
commissions or authorities, and (ii) to execute any and all federal or state
regulatory filings, including all applications with regulatory authorities,
state charter or organizational documents and any amendments or supplements
thereto, to be executed by, on behalf of, or for the benefit of, a Company. The
undersigned hereby grants to each Attorney-in-Fact full power and authority to
do and perform each and every act and thing contemplated above, as fully and to
all intents and purposes as he might or could do in person, and hereby ratifies
and confirms all that said Attorney-in-Fact may lawfully do or cause to be done
by virtue hereof.
Dated: October 24, 1996 /s/ Robert M. Joses
----------------------------
Robert M. Joses
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Marco E. Adelfio, Richard H. Blank, Jr., R. Greg Feltus and Robert M.
Kurucza, and each of them, his true and lawful attorney-in-fact and agent (each,
an "Attorney-in Fact") with full power of substitution and resubstitution, for
him and in his name, place and stead, in any and all capacities, (i) to execute
the Registration Statement of each of MasterWorks Funds Inc., Managed Series
Investment Trust and Master Investment Portfolio, (each, a "Company") and any or
all amendments (including post-effective amendments) thereto and to file the
same, with any and all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission and any state securities
commissions or authorities, and (ii) to execute any and all federal or state
regulatory filings, including all applications with regulatory authorities,
state charter or organizational documents and any amendments or supplements
thereto, to be executed by, on behalf of, or for the benefit of, a Company. The
undersigned hereby grants to each Attorney-in-Fact full power and authority to
do and perform each and every act and thing contemplated above, as fully and to
all intents and purposes as he might or could do in person, and hereby ratifies
and confirms all that said Attorney-in-Fact may lawfully do or cause to be done
by virtue hereof.
Dated: October 24, 1996 /s/ J. Tucker Morse
-----------------------------
J. Tucker Morse
