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As filed with the Securities and Exchange Commission
on June 30, 1998
Registration No. 811-8140
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM N-1A
AMENDMENT NO. 7 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
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EXPLANATORY NOTE
This Amendment No. 7 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, 1998 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.
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Managed Series Investment Trust
Cross Reference Sheet
Form N-1A Item Number
Part A Prospectus Caption
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
Part B Statement of Additional Information
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
Part C Other Information
24-32 Information required to be included in Part C is set forth under
the appropriate Item, so numbered, in Part C of this Document.
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MANAGED SERIES INVESTMENT TRUST
GROWTH STOCK MASTER PORTFOLIO
SHORT-INTERMEDIATE TERM MASTER PORTFOLIO
PART A
JUNE 30, 1998
Responses to Items 1 through 3 have been omitted pursuant to paragraph 4 of
Instruction F 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
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with a rate of total return that, over a three to five year time horizon,
exceeds that of the S&P 500 Index1 (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 May 1998, the capitalization range for the
S&P Small Cap 600 was from $40 million to $3.7 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
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/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.
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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.
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
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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 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
1998, 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.
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.
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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 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.
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.
OTHER INVESTMENT CONSIDERATIONS -- The Short-Intermediate Term Master Portfolio
may enter into futures transactions, each of which involves risk. The futures
contracts and options on futures contracts that this Master Portfolio may
purchase may be considered derivatives. Certain of the floating- and variable-
rate instruments that this Master Portfolio may purchase also may be considered
derivatives. Derivatives are financial instruments whose values are derived, at
least in part, from the prices of other securities or specified assets, indices
or rates. The Short-Intermediate Term Master Portfolio may use some derivatives
as part of its short-term liquidity holdings and/or as substitutes for
comparable market positions in the underlying securities. Some derivatives may
be more sensitive than direct securities to changes in interest rates or sudden
market moves. Some derivatives also may be susceptible to fluctuations in yield
or value due to their structure or contract terms. The Short-Intermediate Term
Master Portfolio may not use derivatives to create leverage without establishing
adequate "cover" in compliance with SEC leverage rules.
YEAR 2000 -- Many computer software systems in use today cannot distinguish the
Year 2000 from the Year 1900. Most of the services provided to the Master
Portfolios depend on the smooth functioning of computer systems. Any failure to
adapt these systems in time could hamper a Master Portfolio's operations and
services. The Master Portfolios' principal service providers have advised the
Master Portfolios that they are working on necessary changes to their systems
and that they expect their systems to be adapted in time. There can, of course,
be no assurance of success. In addition, because the Year 2000 issue affects
virtually all organizations, the companies or entities in which the Master
Portfolios invest also could be adversely impacted by the Year 2000 issue. The
extent of such impact cannot be predicted.
ITEM 5. MANAGEMENT OF THE MASTER PORTFOLIOS.
INVESTMENT ADVISER AND INVESTMENT SUB-ADVISER -- Barclays Global Fund
Advisors ("BGFA") serves as investment adviser to each Master Portfolio. BGFA is
a direct subsidiary of Barclays Global Investors, N.A. (which in turn is
an indirect subsidiary of Barclays Bank PLC ("Barclays")) and is located at 45
Fremont Street, San Francisco, CA 94105. As of April 30, 1998, BGFA and its
affiliates provide investment advisory services for approximately $575 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.
Wells Fargo & Company, the parent company of Wells Fargo Bank, has signed a
definitive agreement to merge with Norwest Corporation. The proposed merger is
subject to certain regulatory approvals and must be approved by shareholders of
both holding companies. The merger is expected to close in the second half of
1998. The combined company will be called Wells Fargo & Company. Wells Fargo
Bank has advised the Master Portfolios that the merger will not reduce the level
or quality of advisory and other services provided by Wells Fargo Bank to the
Master Portfolios.
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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, 1998, the Growth Stock Master Portfolio and
the Short-Intermediate Term Master Portfolio paid fees at the annual rate of
0.58% and 0.45%, respectively, of their average daily net assets to BGFA for its
services as investment adviser. For the year ended February 28, 1998, 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 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. Jon Hickman assumed primary responsibility as the lead manager of the
Growth Stock Master Portfolio in February, 1998. Mr. Hickman has over sixteen
years' experience in the investment management field. He joined Wells Fargo Bank
in 1986 managing equity and balanced portfolios for individuals and employee
benefit plans. He is a senior member of Wells Fargo Bank's Equity Strategy
Committee. Mr. Hickman has a B.A. and an M.B.A. in finance from Brigham Young
University.
Mr. Thomas Zeifang, also has been responsible for the day-to-day management
of the Growth Stock Master Portfolio since June 1997. 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
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business policy from the William E. Simon School of Business Administration, and
is a Chartered Financial Analyst.
THE SHORT-INTERMEDIATE TERM MASTER PORTFOLIO
Mr. Scott Smith has been co-manager of the portfolio of the
Short-Intermediate Term Master Portfolio since June of 1995. Mr. Smith 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.
Mr. Paul Single assumed responsibility as co-manager for the day-to-day
management of the portfolio of the Short-Intermediate Term Master Portfolio in
February 1998. Mr. Single has managed taxable bond portfolios for over a decade,
and has specific expertise in mortgage-backed securities. Prior to joining Wells
Fargo Bank, in early 1988, he was a senior portfolio manager for Benham Capital
Management Group. Mr. Single received his B.S. from Springfield College.
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 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.
TRANSFER AGENT -- IBT also acts as each Master Portfolio's Transfer and Dividend
Disbursing Agent (the "Transfer Agent").
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
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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, 1998, 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 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.
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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" 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
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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.
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.
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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 Portfolio also may invest in American Depositary
Receipts, European Depositary Receipts, Continental Depositary Receipts, Global
Depositary Receipts, International Depositary Receipts and similar instruments.
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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, 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
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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, 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 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
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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.
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 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-
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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 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
A-5
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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 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-6
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MANAGED SERIES INVESTMENT TRUST
GROWTH STOCK MASTER PORTFOLIO
SHORT-INTERMEDIATE TERM MASTER PORTFOLIO
PART B
JUNE 30, 1998
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, 1998. 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 Managed Series Investment Trust, c/o
Investors Bank & Trust Co., - Transfer Agent, P.O. Box 9130, Mail Code MFD23,
Boston, MA 02117-9130, or by calling 1-888-204-3956. 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
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<S> <C> <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............................................ 11
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..................................................................................... 17
Item 21. Underwriters................................................................................... 18
Item 22. Calculation of Performance Data................................................................ 18
Item 23. Financial Information.......................................................................... 18
Appendix....................................................................................... A-1
Financial Statements........................................................................... F-1
</TABLE>
ITEM 12. GENERAL INFORMATION AND HISTORY.
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.
ITEM 13. INVESTMENT OBJECTIVES AND 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.
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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
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(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 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 securities are traded.
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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.
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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 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 in floating- or
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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 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.
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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.
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
7
<PAGE>
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.)
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. 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.
8
<PAGE>
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.
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.
9
<PAGE>
<TABLE>
<CAPTION>
Principal Occupations
Name, Address and Age Position During Past 5 Years
- ----------------------------------------- --------------------------------- -----------------------------------
<S> <C> <C>
Jack S. Euphrat, 75 Trustee Private Investor.
415 Walsh Road
Atherton, CA 94027
*R. Greg Feltus, 46 Trustee, Executive Vice President
Chairman and of Stephens; 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
Reynolds Station Accounting, Wake Forest
Winston-Salem, NC 27104 University, since 1982
*W. Rodney Hughes, 71 Trustee Private Investor.
31 Dellwood Court
San Rafael, CA 94901
*J. Tucker Morse, 53 Trustee Chairman of Home Account
4 Beaufain 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.
Richard H. Blank, Jr., 41 Chief Vice President of Stephens;
Operating Director of Stephens Sports
Officer, Management Inc.; and Director
Secretary and of Capo Inc.
Treasurer
</TABLE>
10
<PAGE>
COMPENSATION TABLE
For the Fiscal Year Ended February 28, 1998
<TABLE>
<CAPTION>
TOTAL COMPENSATION
AGGREGATE COMPENSATION FROM REGISTRANT
NAME AND POSITION FROM REGISTRANT AND FUND COMPLEX
- ----------------- ---------------------- ------------------
<S> <C> <C>
Jack S. Euphrat $0 $11,250
Trustee
*R. Greg Feltus 0 0
Trustee
Thomas S. Goho 0 11,250
Trustee
*Zoe Ann Hines/1/ 0 0
Trustee
*W. Rodney Hughes 0 11,000
Trustee
Robert M. Joses/2/ 0 1,000
Trustee
*J. Tucker Morse 0 11,000
Trustee
</TABLE>
- ---------------
/1/ Zoe Ann Hines retired as of January 28, 1998.
/2/ Robert M. Joses retired as of December 31, 1997.
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., Stagecoach Trust and
Life & Annuity Trust together form a separate fund complex (the "Wells Fargo
Fund Complex"). Prior to December 15, 1997, the Wells Fargo Fund Complex also
included Overland Express Funds, Inc. and Master Investment Trust. On that
date, Overland Express Funds, Inc. was consolidated with and into Stagecoach
Funds, Inc. and Master Investment Trust was dissolved. 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. 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 June 1, 1998, 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 March 1, 1995 and ended December
31, 1995, the Master Portfolios paid to Wells Fargo Bank the advisory fees
indicated below, without waivers. For the period beginning January 1, 1996 and
ended February 29, 1996 and for the fiscal year ended February 28, 1997 the
Master Portfolios paid to BGFA the advisory fees indicated below, without
waivers:
<TABLE>
<CAPTION> 3/1/95-12/31/95 1/1/96-2/29/96 FYE 2/28/97
FEES PAID FEES PAID FEES PAID
-------------------- ------------------- -----------------
<S> <C> <C> <C>
Growth Stock
Master Portfolio $ 662,204 $ 164,817 $1,334,600
Short-Intermediate Term
Master Portfolio $ 47,460 $ 9,923 $ 58,891
</TABLE>
For the fiscal year ended February 28, 1998, the corresponding Master
Portfolio of each Fund paid to BGFA the advisory fees indicated below and BGFA
waived the indicated amounts:
<TABLE>
<CAPTION>
FYE 2/28/98
MASTER PORTFOLIO FEES PAID FEES WAIVED
- --------------------------------------------- ------------------ ---------------
<S> <C> <C>
Growth Stock Master Portfolio $1,309,435 $45,153
Short-Intermediate Term Master Portfolio $ 50,170 $ - 0 -
</TABLE>
Investment Sub-Adviser. BGFA has engaged Wells Fargo Bank to provide
investment sub-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 fiscal years ended February 28, 1997 and February
28, 1998, BGFA paid to Wells Fargo Bank the sub-advisory fees indicated below,
without waivers:
12
<PAGE>
<TABLE>
<S> <C> <C> <C>
1/1/96-2/29/96 FYE 2/28/97 FYE 2/28/98
FEES PAID FEES PAID FEES PAID
--------------- ----------- -----------
Growth Stock Master Portfolio $ 41,297 $332,700 $337,502
Short-Intermediate Term Master Portfolio $ 2,208 $ 13,020 $ 11,102
</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. BGI did not
receive compensation for its custodial services.
Transfer and Dividend Disbursing Agent. IBT also acts as each Master
Portfolio's Transfer and Dividend Disbursing Agent (the "Transfer Agent"). IBT
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. Prior to
March 2, 1998, Wells Fargo Bank acted as Transfer Agent to 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) 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.
13
<PAGE>
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.
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
14
<PAGE>
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 fiscal years ended February 29, 1996, February
28, 1997 and February 28, 1998, 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 FYE 2/29/96 FYE 2/28/97 FYE 2/28/98
- ------------------------------------------ ----------------- ---------------- -----------------------
<S> <C> <C> <C>
Growth Stock Master Portfolio $355,046 $394,483 $494,115
Short-Intermediate Term Master Portfolio $ 0 $ 0 $ 0
</TABLE>
Securities of Regular Broker/Dealers. As of February 28, 1998, the
corresponding Master Portfolios did not own any securities of their "regular
brokers or dealers" or their parents, as defined in the 1940 Act.
15
<PAGE>
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 Master Portfolios 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
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.
16
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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 or recognized foreign securities or commodities 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
17
<PAGE>
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 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 audited financial statements, including the portfolio of investments, and
independent auditors' report for each of the Master Portfolios for the fiscal
year ended February 28, 1998, 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 1, 1998. The audited financial statements 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.
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<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, 1998 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 1, 1998.
(b) Exhibits:
Exhibit
Number Description
- ------- ---------------------------------------------------------------
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.
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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,
incorporated by reference to Amendment No. 6 to the Registration
Statement, filed June 30, 1997.
9(a) - Co-Administration Agreement with Stephens Inc. and Barclays
Global Investors, N.A., incorporated by reference to Amendment
No. 6 to the Registration Statement, filed June 30, 1997.
9(b) - Sub-Administration Agreement with Investors Bank & Trust Company
and Barclays Global Investors, N.A., incorporated by reference
to Amendment No. 6 to the Registration Statement, filed June 30,
1997.
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
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<PAGE>
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.
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 June 1, 1998, the number of record holders of the Registrant were as
follows :
Title of Class Number of Record Holders
-------------- ------------------------
Growth Stock Master Portfolio 2
Short-Intermediate Term Master Portfolio 2
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. Each of the directors
and executive officers of BGFA will also have
C-3
<PAGE>
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.
Name and Position Principal Business(es) During at
at BGFA Least the Last Two Fiscal Years
- ----------------- ------------------------------------------------------
Frederick L.A. Grauer Director of BGFA and Co-Chairman and Director of BGI
Director 45 Fremont Street, San Francisco, CA 94105
Patricia Dunn Director of BGFA and Co-Chairman and Director of BGI
Director 45 Fremont Street, San Francisco, CA 94105
Lawrence G. Tint Chairman of the Board of Directors of BGFA and
Chairman and Director Chief Executive Officer of BGI
45 Fremont Street, San Francisco, CA 94105
Geoffrey Fletcher Chief Financial Officer of BGFA and BGI since May 1997
Chief Financial Officer 45 Fremont Street, San Francisco, CA 94105
Managing Director and Principal Accounting Officer at
Bankers Trust Company from 1988 - 1997
505 Market Street, San Francisco, CA 94111
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 & Greene
Director 455 Market Street
San Francisco, CA 94105
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Director of Armstrong World Industries, Inc.
5037 Patata Street
South Gate, CA 90280
Director of Eastman Chemical Corporation
12805 Busch Place
Santa Fe Springs, CA 90670
Director of FPL Group, Inc.
700 Universe Blvd.
P.O. Box 14000
North Palm Beach, FL 33408
Michael R. Bowlin Chairman of the Board of Directors, Chief Executive Officer,
Director Chief Operating Officer and President of
Atlantic Richfield Co. (ARCO)
Highway 150
Santa Paula, CA 93060
Edward Carson Chairman of the Board and Chief Executive Officer of
Director First Interstate Bancorp
633 West Fifth Street
Los Angeles, CA 90071
Director of Aztar Corporation
2390 East Camelback Road Suite 400
Phoenix, AZ 85016
Director of Castle & Cook, Inc.
10900 Wilshire Blvd.
Los Angeles, CA 90024
Director of Terra Industries, Inc.
1321 Mount Pisgah Road
Walnut Creek, CA 94596
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
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
1707 I Street
P.O. Box 440
Bakersfield, CA 93302
Trustee of Whittier College
13406 East Philadelphia Ave.
P.O. Box 634
Whittier, CA 90608
Paul Hazen Chairman of the Board of Directors of
Chairman of the Board 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
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Director The Newhall Land and Farming Company
10302 Avenue 7 1-2
Firebaugh, CA 93622
Director of Calmat Co.
501 El Charro Road
Pleasanton, CA 94588
Director of First Interstate Bancorp
633 West Fifth Street
Los Angeles, CA 90071
Ellen Newman President of Ellen Newman Associates
Director 323 Geary Street
Suite 507
San Francisco, CA 94102
Chair (Emeritus) of the Board of Trustees
University of California at San Francisco Foundation
250 Executive Park Blvd.
Suite 2000
San Francisco, CA 94143
Director of the California Chamber of Commerce
1201 K Street 12th Floor
Sacremento, CA 95814
Philip J. Quigley Chairman, President and Chief Executive Officer of
Director Pacific Telesis Group
130 Kearney Street Rm. 3700
San Francisco, CA 94108
Carl E. Reichardt Director of Columbia/HCA Healthcare Corporation
Director One Park Plaza
Nashville, TN 37203
Director of Ford Motor Company
The American Road
Dearborn, MI 48121
Director of Newhall Management Corporation
23823 Valencia Blvd.
Valencia, CA 91355
Director of Pacific Gas and Electric Company
77 Beale Street
San Francisco, CA 94105
Retired Chairman of the Board of Directors
and Chief Executive Officer of Wells Fargo & Company
420 Montgomery Street
San Francisco, CA 94105
Donald B. Rice President and Chief Executive Officer of Teledyne, Inc.
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Director 2049 Century Park East
Los Angeles, CA 90067
Retired Secretary of the Air Force
Director of Vulcan Materials Company
One MetroPlex Drive
Birmingham, AL 35209
Richard J. Stegemeier Chairman (Emeritus) of Unocal Corp
Director 44141 Yucca Avenue
Lancaster, CA 93534
Director of Foundation Health Corporation
166 4th
Fort Irwin, CA 92310
Director of Halliburton Company
3600 Lincoln Plaza
500 North Alcard Street
Dallas, TX 75201
Director of Northrop Grumman Corp.
1840 Century Park East
Los Angeles, CA 90067
Director of Outboard Marine Corporation
100 SeaHorse Drive
Waukegan, IL 60085
Director of Pacific Enterprises
555 West Fifth Street
Suite 2900
Los Angeles, CA 90031
Director of First Interstate Bancorp
633 West Fifth Street
Los Angeles, CA 90071
Susan G. Swenson President and Chief Executive Officer of Cellular One
Director 651 Gateway Blvd.
San Francisco, CA 94080
David M. Tellep Retired Chairman of the Board and Chief Executive Officer of
Director Martin Lockheed Corp
6801 Rockledge Drive
Bethesda, MD 20817
Director of Edison International
and Southern California Edison Company
2244 Walnut Grove Ave.
Rosemead, CA 91770
Director of First Interstate
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
633 West Fifth Street
Los Angeles, CA 90071
Chang-Lin Tien Chancellor of the University of California at Berkeley
Director 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 Life & Annuity Trust, MasterWorks Funds Inc.,
Stagecoach Funds, Inc., Stagecoach Trust, Nations Fund, Inc., Nations Fund
Trust, Nations Fund Portfolios, Inc., Nations LifeGoal Funds, Inc. and Nations
Institutional Reserves, and is the exclusive placement agent for Master
Investment Portfolio and Managed Series Investment Trust, which are registered
open-end management investment companies.
C-9
<PAGE>
(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 29th day of June, 1998.
MANAGED SERIES INVESTMENT TRUST
By /s/ Richard H. Blank, Jr.
-------------------------
(Richard H. Blank, Jr.)
Secretary and Treasurer
(Principal Financial Officer)
Signature Title
--------- -----
* Trustee, Chairman and President
------------------------- (Principal Executive Officer)
(R. Greg Feltus)
/s/ Richard H. Blank, Jr. Secretary and Treasurer
------------------------- (Principal Financial Officer)
(Richard H. Blank, Jr.)
* Trustee
-------------------------
(Jack S. Euphrat)
* Trustee
-------------------------
(Thomas S. Goho)
* Trustee
-------------------------
(W. Rodney Hughes)
* Trustee
-------------------------
(J. Tucker Morse)
*By: /s/ Richard H. Blank, Jr.
-------------------------
Richard H. Blank, Jr.
As Attorney-in-Fact
June 29, 1998
<PAGE>
MANAGED SERIES INVESTMENT TRUST
FILE NO. 811-8140
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
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
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000914609
<NAME> MANAGED SERIES INVESTMENT TRUST
<SERIES>
<NUMBER> 1
<NAME> SHORT-INTERMEDIATE TERM MASTER PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1997
<PERIOD-END> FEB-28-1998
<INVESTMENTS-AT-COST> 10,225,923
<INVESTMENTS-AT-VALUE> 10,355,847
<RECEIVABLES> 145,379
<ASSETS-OTHER> 419,832
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 10,921,058
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 56,322
<TOTAL-LIABILITIES> 56,322
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 1,773
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (334,098)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 129,924
<NET-ASSETS> 10,864,736
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 782,051
<OTHER-INCOME> 0
<EXPENSES-NET> 50,170
<NET-INVESTMENT-INCOME> 731,881
<REALIZED-GAINS-CURRENT> (82,340)
<APPREC-INCREASE-CURRENT> 250,239
<NET-CHANGE-FROM-OPS> 899,780
<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> (2,200,977)
<ACCUMULATED-NII-PRIOR> 1,011,657
<ACCUMULATED-GAINS-PRIOR> (251,758)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 50,170
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 50,170
<AVERAGE-NET-ASSETS> 11,173,398
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 0.00
<EXPENSE-RATIO> 0.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000914609
<NAME> MANAGED SERIES INVESTMENT TRUST
<SERIES>
<NUMBER> 2
<NAME> GROWTH STOCK MASTER PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1997
<PERIOD-END> FEB-28-1998
<INVESTMENTS-AT-COST> 169,897,599
<INVESTMENTS-AT-VALUE> 215,472,327
<RECEIVABLES> 5,026,145
<ASSETS-OTHER> 20,082,413
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 240,580,885
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,532,108
<TOTAL-LIABILITIES> 3,532,108
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (1,808,904)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3,616,237
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 45,574,728
<NET-ASSETS> 237,048,777
<DIVIDEND-INCOME> 334,093
<INTEREST-INCOME> 754,929
<OTHER-INCOME> 0
<EXPENSES-NET> 1,309,435
<NET-INVESTMENT-INCOME> (220,412)
<REALIZED-GAINS-CURRENT> 9,338,412
<APPREC-INCREASE-CURRENT> 35,007,529
<NET-CHANGE-FROM-OPS> 44,125,529
<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> 24,056,288
<ACCUMULATED-NII-PRIOR> 76,475
<ACCUMULATED-GAINS-PRIOR> 32,888,862
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,354,588
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,354,588
<AVERAGE-NET-ASSETS> 226,451,039
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 0.00
<EXPENSE-RATIO> 0.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
