As filed with the Securities and Exchange Commission
on September 30, 1999
Registration No. 811-8162
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM N-1A
AMENDMENT NO. 11 TO THE
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
MASTER INVESTMENT PORTFOLIO
(Exact Name of Registrant as Specified in Charter)
111 Center Street, Little Rock, Arkansas 72201
(Address of Principal Executive Offices, including Zip Code)
---------------------------------------
Registrant's Telephone Number, including Area Code:
(800) 643-9691
Richard H. Blank, Jr.
c/o Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
(Name and Address of Agent for Service)
With a copy to:
Robert M. Kurucza, Esq.
Marco E. Adelfio, Esq.
Morrison & Foerster LLP
2000 Pennsylvania Avenue, N.W., Suite 5500
Washington, D.C. 20006-1812
<PAGE>
EXPLANATORY NOTE
This Amendment No. 11 to the Registration Statement of Master Investment
Portfolio (the "Trust") is being filed to add the new International Index Master
Portfolio to the Trust.
This Amendment has been filed by the Registrant pursuant to Section 8(b) of the
Investment Company Act of 1940. However, beneficial interests in the Registrant
are not being registered under the Securities Act of 1933 (the "1933 Act")
because such interests will be issued solely in private placement transactions
that do not involve any "public offering" within the meaning of Section 4(2) of
the 1933 Act. Investments in the Registrant may only be made by registered
broker/dealers or by investment companies, insurance company separate accounts,
common commingled trust funds, group trusts or similar organizations or entities
that are "accredited investors" within the meaning of Regulation D under the
1933 Act. This Registration Statement does not constitute an offer to sell, or
the solicitation of an offer to buy, any beneficial interest in the Registrant.
<PAGE>
Master Investment Portfolio
Cross Reference Sheet
<TABLE>
<CAPTION>
Form N-1A Item Number
<S> <C>
Part A Prospectus Caption
4 Investment Objectives, Principal Investment Strategies and Related Risks
6 Management, Organization and Capital Structure
7 Shareholder Information
8 Distribution Arrangements
Part B Statement of Additional Information
10 Cover Page and Table of Contents
11 Trust History
12 Description of the Master Portfolios and Their Investments and Risks
13 Management of the Trust
14 Control Persons and Principal Holders of Securities
15 Investment Advisory and Other Services
16 Brokerage Allocation and Other Practices
17 Capital Stock and Other Securities
18 Purchase, Redemption and Pricing of Interests
19 Taxation of the Trust
20 Underwriters
21 Calculation of Performance Data
22 Financial Statements
Part C Other Information
23-30 Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of this Document.
</TABLE>
<PAGE>
MASTER INVESTMENT PORTFOLIO
INTERNATIONAL INDEX MASTER PORTFOLIO
PART A
September 30, 1999
Responses to Items 1 through 3 have been omitted pursuant to Instruction B(2)(b)
of the General Instructions to Form N-1A.
Item 4. Investment objectives, principal strategies and related risks.
General. Master Investment Portfolio ("MIP") is an open-end, management
investment company, organized on October 21, 1993 as a business trust under the
laws of the State of Delaware. MIP is a "series fund," which is a mutual fund
divided into separate portfolios. By this offering document, MIP is offering one
of its diversified portfolios - the International Index Master Portfolio (the
"Master Portfolio"). The Master Portfolio is treated as a separate entity for
certain matters under the Investment Company Act of 1940, as amended (the "1940
Act"), and for other purposes an interestholder of the Master Portfolio is not
deemed to be an interestholder of any other portfolio of MIP. As described
below, for certain matters MIP interestholders vote together as a group; as to
others they vote separately by portfolio. MIP currently offers twelve other
portfolios pursuant to other offering documents. From time to time, other
portfolios may be established and sold pursuant to other offering documents.
***[Beneficial interests in the Master Portfolio are issued solely in
private placement transactions which do not involve any "public offering" within
the meaning of Regulation D under the Securities Act of 1933, as amended (the
"1933 Act"). Investments in the Master Portfolio may be made only by investment
companies or certain other entities which 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. Investment companies or other
entities that hold shares of beneficial interest in the Master Portfolio are
sometimes referred to herein as "feeder funds."]***
INVESTMENT OBJECTIVE
o The International Index Master Portfolio seeks to match as closely as
practicable, before fees and expenses, the performance of an international
portfolio of common stocks represented by the Morgan Stanley Capital
International Europe, Australia, Far East Free Index (the "EAFE Free Index," or
the "Index").1
The Master Portfolio's investment objective can be changed by MIP's
Board of Trustees without interestholder approval. The objective and policies of
the Master Portfolio determines the types of portfolio securities in which it
invests, the degree of risk to which it is subject and, ultimately, its
performance. There can be no assurance that the Master Portfolio's investment
objective will be achieved.
PRINCIPAL STRATEGIES
o The International Index Master Portfolio seeks to match the total return
performance of foreign stock markets by investing in common stocks included in
the EAFE Free Index. The EAFE Free Index is a capitalization-weighted index that
currently includes stocks of companies located in 15 European countries
(Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, the
Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United
Kingdom), Australia, New Zealand, Hong Kong, Japan, Malaysia and Singapore. The
EAFE Free Index broadly represents the performance of foreign stock markets. The
weightings of stocks in the EAFE Free Index are based on each stock's relative
total market capitalization; that is, its market price per share times the
number of shares outstanding. The Master Portfolio invests in a representative
sample of these securities. Securities are selected for investment by the Master
Portfolio in accordance with their capitalization, industry sector and
valuation, among other factors.
- --------
1 Morgan Stanley Capital International Inc. ("MSCI") does not sponsor the Master
Portfolio, nor is it affiliated in any way with Barclays Global Fund Advisers or
the Master Portfolio. "Morgan Stanley Capital International Europe, Australia,
Far East Free Index(R)," "EAFE Free Index(R)," and "EAFE(R)," are trademarks of
MSCI. The Master Portfolio is not sponsored, endorsed, sold or promoted by the
EAFE Free Index, and neither MSCI nor the EAFE Free Index make any
representation or warranty, express or implied, regarding the advisability of
investing in the Master Portfolio.
<PAGE>
No attempt is made to manage the portfolio of the Master Portfolio
using economic, financial and market analysis. The Master Portfolio is managed
by determining which securities are to be purchased or sold to match, to the
extent feasible, the capitalization range and returns of the EAFE Free Index.
Under normal market conditions, at least 90% of the value of the Master
Portfolio's total assets is invested in securities comprising the EAFE Free
Index. The Master Portfolio attempts to achieve, in both rising and falling
markets, a correlation of at least 95% between the total return of its net
assets before expenses and the total return of the EAFE Free Index. The Master
Portfolio's ability to match its investment performance to the investment
performance of the EAFE Free Index may be affected by, among other things: the
Master Portfolio's expenses; the amount of cash and cash equivalents held by the
Master Portfolio; the manner in which the total return of the EAFE Free Index is
calculated; the size of the Master Portfolio's investment portfolio; and the
timing, frequency and size of interestholder purchases and redemptions. The
Master Portfolio uses cash flows from interestholder purchase and redemption
activity to maintain, to the extent feasible, the similarity of its
capitalization range and returns to those of the securities comprising the EAFE
Free Index. Barclays Global Fund Advisors ("BGFA") regularly monitors the Master
Portfolio's correlation to the EAFE Free Index and adjusts the Master
Portfolio's portfolio to the extent necessary. Inclusion of a security in the
EAFE Free Index in no way implies an opinion by MSCI as to its attractiveness as
an investment.
BGFA may use statistical sampling techniques to attempt to replicate
the returns of the EAFE Free Index using a smaller number of securities.
Statistical sampling techniques attempt to match the investment characteristics
of the index and the fund by taking into account such factors as capitalization,
industry exposures, dividend yield, price/earnings ratio, price/book ratio,
earnings growth, country weightings and the effect of foreign taxes. The
sampling techniques utilized by the Master Portfolio are designed to allow the
Master Portfolio to substantially duplicate the investment performance of the
EAFE Free Index. However, the Master Portfolio is not expected to track the EAFE
Free Index with the same degree of accuracy that complete replication of such
Index would provide. In addition, at times, the portfolio composition of the
Master Portfolio may be altered (or "rebalanced") to reflect changes in the
characteristics of the EAFE Free Index.
In seeking to match the performance of the EAFE Free Index, the Master
Portfolio also may engage in futures and options transactions and other
derivative securities transactions and lend its portfolio securities, each of
which involves risk. The Master Portfolio attempts to be fully invested at all
times in securities comprising the EAFE Free Index and in futures contracts and
options on futures contracts, although the Master Portfolio may invest up to 10%
of its assets in high-quality money market instruments to provide liquidity. The
Master Portfolio may invest up to 15% of the value of its net assets in illiquid
securities, including repurchase agreements providing for settlement in more
than seven days. See Item 12, "Description of the Master Portfolio and Its
Investments and Risks -- Investment Restrictions," in Part B.
RISK CONSIDERATIONS
General -- The value of the Master Portfolio's interests is neither insured nor
guaranteed, is not fixed and should be expected to fluctuate.
Equity Securities -- The stock investments of the Master Portfolio 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.
International stock market tends to be cyclical, with periods when stock prices
generally rise and periods when prices generally decline. In addition, many of
the companies whose securities comprise the EAFE Free Index are small to medium
size companies which, historically, have been more susceptible to market
fluctuations than securities of larger capitalization companies.
Foreign Investment Risk -- The Master Portfolio invests substantially all of its
assets in foreign securities. This means the Master Portfolio can be affected by
the risks of foreign investing, including changes in currency exchange rates and
the costs of converting currencies; foreign government controls on foreign
investment; repatriation of capital, and currency and exchange; foreign taxes;
inadequate supervision and regulation of some foreign markets; volatility from
lack of liquidity; different settlement practices or delayed settlements in some
markets; difficulty in obtaining complete and accurate information about foreign
companies; less strict accounting, auditing and financial reporting standards
than those in the U.S.; political, economic and social instability; and
difficulty enforcing legal rights outside the U.S.
In addition, many foreign countries are less prepared than the United States to
properly process and calculate information related to dates from and after
January 1, 2000, which could result in difficulty pricing foreign investments
and failure by foreign issuers to pay timely dividends, interest or principal.
All of these factors can make foreign investments, especially those in emerging
markets, more volatile and potentially less liquid than U.S. investments.
Issuer-Specific Changes -- Changes in the financial condition of an issuer,
changes in specific economic or political conditions that affect a particular
type of security or issuer, and changes in general economic or political
conditions can affect the value of an issuer's securities.
Small Company Investing -- The value of securities of smaller, less well-known
issuers can be more volatile than that of larger issuers and can react
differently to issuer, political, market and economic developments than the
market as a whole and other types of stocks.
Smaller issuers can have more limited product lines, markets and financial
resources.
Other Investment Considerations -- The Master Portfolio may enter into
transactions in futures contracts and options on futures contracts, each of
which involves risk. The futures contracts and options on futures contracts that
the Master Portfolio may purchase 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 Master
Portfolio intends to use futures contracts and options as part of its short-term
liquidity holdings and/or 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.
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
Portfolio depend on the smooth functioning of computer systems. Any failure to
adapt these systems in time could hamper the Master Portfolio's operations and
services. The Master Portfolio's principal service providers have advised the
Master Portfolio 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
Portfolio invests also could be adversely impacted by the Year 2000 issue,
especially foreign entities, which may be less prepared for Year 2000. The
extent of such impact cannot be predicted.
In response to market, economic, political or other conditions, BGFA may
temporarily use a different investment strategy for defensive purposes. If BGFA
does so, different factors could affect a fund's performance and the fund may
not achieve its investment objective.
Item 5. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE.
The response to Item 5 has been omitted pursuant to paragraph B(2)(b)
of the General Instructions to Form N-1A.
ITEM 6. MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE.
INVESTMENT ADVISER -- BGFA serves as investment adviser to the Master Portfolio.
BGFA is a direct subsidiary of Barclays Global Investors, N.A. (which, in turn,
is an indirect subsidiary of Barclays Bank PLC) and is located at 45 Fremont
Street, San Francisco, CA 94105. As of December 31, 1998, BGFA and its
affiliates provided investment advisory services for approximately $615 billion
of assets.
BGFA provides the Master Portfolio with investment guidance and policy
direction in connection with the daily portfolio management of the Master
Portfolio, subject to the supervision of MIP's Board of Trustees and in
conformity with Delaware law and the stated policies of the Master Portfolio.
BGFA furnishes to MIP's Board of Trustees periodic reports on the investment
strategy and performance of the Master Portfolio.
As compensation for its advisory services, BGFA is entitled to receive
fees at an annual rate of 0.15% of the first $1 billion, and 0.10% thereafter,
of the Master Portfolio's average daily net assets. From time to time, BGFA may
waive such fees in whole or in part. Any such waiver will reduce the expenses of
the Master Portfolio and, accordingly, have a favorable impact on its
performance.
BGFA makes no attempt to apply economic, financial or market analysis
when managing the Master Portfolio. BGFA selects securities because they will
help the Master Portfolio achieve returns corresponding to the EAFE Free Index
returns. This process reflects BGFA's commitment to an objective and consistent
investment management structure.
Purchase and sale orders for portfolio securities of the Master
Portfolio may be combined with those of other accounts that BGFA manages or
advises, and for which it has brokerage placement authority, in the interest of
seeking the most favorable overall net results. When BGFA, subject to the
supervision of, and the overall authority of MIP's Board of Trustees, determines
that a particular security should be bought or sold for the Master Portfolio and
other accounts managed by BGFA, it undertakes to allocate those transactions
among the participants equitably.
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 MIP that
in making its investment decisions it does not obtain or use material inside
information in its possession.
Morrison & Foerster LLP, counsel to MIP and special counsel to BGFA,
has advised MIP and BGFA that BGFA and its affiliates may perform the services
contemplated by the BGFA 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.
ITEM 7. SHAREHOLDER INFORMATION.
PRICING OF INTERESTS
Interests in the Master Portfolio are sold on a continuous basis at
the net asset value per unit of beneficial interest ("NAV") next determined
after an order in proper form is received by the transfer agent. We calculate
NAV at the end of each business day (a "Business Day"). A Business Day is any
day that the New York Stock Exchange (NYSE) is open. A Business Day ends at the
close of regular trading on the New York Stock Exchange (NYSE), usually at 1:00
p.m. (Pacific time). If the NYSE closes early, the Business Day ends as of the
time the NYSE closes. The NYSE is closed on weekends and on the following
holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day (observed), Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
NAV is computed by dividing the value of the Master Portfolio's net
assets (i.e., the value of its assets less liabilities) by the total number of
interests outstanding in the Master Portfolio. The Master Portfolio's
investments are valued based on the total market value of all of the securities
it holds. The prices reported on stock exchanges and securities markets around
the world are usually used to value securities in the Master Portfolio. If
prices are not readily available, the price of a security will be based on its
fair market value determined in good faith by the investment adviser pursuant to
guidelines approved by MIP's Board of Trustees. International markets may be
open on days when U.S. markets are closed, and the value of foreign securities
owned by the portfolio could change on days when beneficial interests may not be
purchased or redeemed. For further information regarding the methods employed in
valuing each Master Portfolio's investments, see Item 18, "Purchase, Redemption
and Pricing of Interests" in Part B.
PURCHASE OF INTERESTS
Beneficial interests in the Master Portfolio are issued solely in
private placement transactions which do not involve any "public offering" within
the meaning of Section 4(2) of the 1933 Act. Investments in the Master Portfolio
may be made only by investment companies or certain other entities which are
"accredited investors" within the meaning of Regulation D under the Securities
Act of 1933, as amended.
REDEMPTION OR REPURCHASE
An investor in MIP may redeem all or any portion of its investment on
any Business Day at the net asset value next determined after a redemption
request in proper form is furnished by the investor to Investors Bank & Trust
Company ("IBT") as the Master Portfolio's transfer agent. When a request is
received in proper form, MIP will redeem the interest at the next determined net
asset value.
The Master Portfolio will make payment for all interests redeemed
within three days after receipt by IBT of a redemption request in proper form,
except as provided by the rules of the Securities and Exchange Commission. MIP
reserves the right to pay redemption proceeds, in whole or in part, by
distributing portfolio securities in lieu of cash if, in the opinion of
management, it is advisable to do so. Interests in the Master Portfolio may not
be transferred.
The right of any investor to receive payment with respect to any
redemption may be suspended or the payment of the withdrawal proceeds postponed
during any period in which the New York Stock Exchange is closed (other than
weekends or holidays) or trading on such Exchange is restricted, or, to the
extent otherwise permitted by the 1940 Act, if an emergency exists.
DIVIDENDS AND DISTRIBUTIONS
The net investment income of the 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 the Master Portfolio. Net investment income for a
Saturday, Sunday or Holiday 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 the Master Portfolio. All of the net investment income of the Master
Portfolio so determined is allocated pro rata among the investors in the Master
Portfolio at the time of such determination.
Distributions, if any, paid by the Master Portfolio
will be reinvested in the investor's interest in the Master Portfolio at net
asset value and credited to the investor's account on the payment date.
TAXES
MIP believes that the Master Portfolio will qualify as a non-publicly traded
partnership for federal income tax purposes. MIP therefore believes that the
Master Portfolio will not be subject to any federal income tax on its income and
gains (if any). However, each investor in the Master Portfolio will be taxed on
its distributive share of the Master Portfolio's taxable income in determining
its federal income tax liability. As a non-publicly traded partnership, the
Master Portfolio will be deemed to have "passed through" to interestholders any
interests, dividends, gains or losses. The determination of such share will be
made in accordance with the Internal Revenue Code of 1986, as amended (the
"Code"), and regulations promulgated thereunder.
It is intended that the Master Portfolio's assets, income and distributions will
be managed in such a way that a regulated investment company investing in the
Master Portfolio may satisfy the requirements of Subchapter M of the Code by
holding substantially all of its assets through the Master Portfolio.
ITEM 8. DISTRIBUTION ARRANGEMENTS.
MIP is registered as an open-end management investment company under
the 1940 Act. MIP was organized as a business trust under the laws of the State
of Delaware. Investors in MIP are each liable for all obligations of MIP.
However, the risk of an investor incurring financial loss on account of such
liability is limited to circumstances in which both inadequate insurance existed
and itself was unable to meet its obligations.
The Board of Trustees has authorized several series of which thirteen are
active. All consideration received by MIP for interests in one of the series and
all assets in which such consideration is invested will belong to that series
(subject only to the rights of creditors of MIP) and will be subject to the
liabilities related thereto. The income attributable to, and the expenses of,
one series are treated separately from those of the other series. From time to
time, MIP may create new series without shareholder approval.
The business and affairs of MIP are managed under the
direction of its Board of Trustees. The office of MIP is located at 111
Center Street, Little Rock, Arkansas 72201.
MASTER/FEEDER STRUCTURE
The Master Portfolio is a "master" fund in a "master/feeder" structure. A
non-accredited investor does not directly purchase an interest in the Master
Portfolio, but instead purchases shares in a corresponding "feeder" fund which
invests all of its assets in the Master Portfolio. Other investors may also be
permitted to invest in the Master Portfolio. All other investors will invest in
the Master Portfolio on the same terms and conditions as the feeder funds,
although there may be different administrative and other expenses. Therefore,
the feeder funds may have different returns than other investors of the Master
Portfolio.
ITEM 9. FINANCIAL HIGHLIGHTS.
The response to Item 9 has been omitted pursuant to paragraph B(2)(b)
of the General Instructions to Form N-1A.
<PAGE>
MASTER INVESTMENT PORTFOLIO
INTERNATIONAL INDEX MASTER PORTFOLIO
PART B -- STATEMENT OF ADDITIONAL INFORMATION
September 30, 1999
ITEM 10. COVER PAGE AND TABLE OF CONTENTS.
Master Investment Portfolio ("MIP," or the "Trust") is an open-end,
management investment company. MIP is a "series fund," which is a mutual fund
divided into separate portfolios. This Part B is not a prospectus and should be
read in conjunction with MIP's Part A, also dated September 30, 1999. 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 Master
Investment Portfolio, c/o Investors Bank & Trust Co., -- Transfer Agent, P.O.
Box 9130, Mail Code MFD23, Boston, MA 02117-9130, or by calling 1-800-204-3956.
MIP's Registration Statement may be examined at the office of the Securities and
Exchange Commission ("SEC") in Washington, D.C.
TABLE OF CONTENTS
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<S> <C>
Page
Trust History...................................................................................... 1
Description of the Master Portfolio and Its Investments and Risks ................................. 2
Management of the Trust............................................................................ 13
Control Persons and Principal Holders of Securities................................................ 14
Investment Advisory and Other Services ............................................................ 14
Brokerage Allocation and Other Practices........................................................... 15
Capital Stock and Other Securities................................................................. 16
Purchase, Redemption and Pricing of Shares......................................................... 16
Taxation of the Trust ............................................................................. 17
Underwriters....................................................................................... 17
Calculation of Performance Data ................................................................... 18
Financial Statements............................................................................... 18
Appendix........................................................................................... A-1
</TABLE>
ITEM 11. TRUST HISTORY.
MIP is an open-end, management investment company, organized on October
21, 1993 as a business trust under the laws of the State of Delaware. MIP is a
"series fund," which is a mutual fund divided into separate portfolios. By this
offering document, MIP is offering one of its diversified portfolios - the
International Index Master Portfolio (the "Master Portfolio"). The Master
Portfolio is treated as a separate entity for certain matters under the
Investment Company Act of 1940, as amended (the "1940 Act"), and for other
purposes and an interestholder of the Master Portfolio is not deemed to be an
interestholder of any other portfolio of MIP. As described below, for certain
matters MIP interestholders vote together as a group; as to others they vote
separately by portfolio. MIP currently offers twelve other portfolios pursuant
to other offering documents. From time to time, other portfolios may be
established and sold pursuant to other offering documents.
Beneficial interests in the Master Portfolio are issued solely in
private placement transactions which do not involve any "public offering" within
the meaning of Regulation D under the Securities Act of 1933, as amended (the
"1933 Act"). Investments in the Master Portfolio may be made only by investment
companies or certain other entities which are "accredited investors" within the
meaning of Regulation D under the 1933 Act. Investment companies that hold
shares of beneficial interest ("interests") in the Master Portfolio are
sometimes referred to herein as "feeder funds."
ITEM 12. DESCRIPTION OF THE MASTER PORTFOLIO AND ITS INVESTMENTS AND RISKS.
The following information supplements and should be read in conjunction
with Item 4 in Part A.
Investment Objectives. The Master Portfolio's investment objective is
set forth in Item 4, "Investment Objectives, Principal Strategies and Related
Risks -- Investment Objectives," of Part A. The Master Portfolio's investment
objective can be changed by MIP's Board of Trustees without interestholder
approval. The objective and policies of the Master Portfolio determines the
types of portfolio securities in which it invests, the degree of risk to which
it is subject and, ultimately, its performance. There can be no assurance that
the investment objectives of the Master Portfolio will be achieved.
Investment Restrictions
Fundamental Investment Restrictions. The Master Portfolio has adopted the
following investment restrictions as fundamental policies. These restrictions
cannot be changed, as to the Master Portfolio, without approval by the holders
of a majority (as defined in the 1940 Act) of the Master Portfolio's outstanding
voting securities. The Master Portfolio may not:
(1) Invest more than 5% of its assets in the obligations of any single
issuer, except that up to 25% of the value of its total assets may be invested,
and securities issued or guaranteed by the U.S. Government, or its agencies or
instrumentalities may be purchased, without regard to any such limitation. This
limitation does not apply to foreign currency transactions including without
limitation forward currency contracts.
(2) Hold more than 10% of the outstanding voting securities of any
single issuer. This Investment Restriction applies only with respect to 75% of
its total assets.
(3) Invest in commodities, except that the Master Portfolio may
purchase and sell (i.e., write) options, forward contracts, futures contracts,
including those relating to indexes, and options on futures contracts or
indexes.
(4) Purchase, hold or deal in real estate, or oil, gas or other mineral
leases or exploration or development programs, but the Master Portfolio may
purchase and sell securities that are secured by real estate or issued by
companies that invest or deal in real estate.
(5) Borrow money, except to the extent permitted under the 1940 Act,
provided that the Master Portfolio may borrow up to 20% 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 20% of the current value
of its net assets. For purposes of this investment restriction, the Master
Portfolio's entry into options, forward contracts, futures contracts, including
those relating to indexes, and options on futures contracts or indexes shall not
constitute borrowing to the extent certain segregated accounts are established
and maintained by the Master Portfolio.
(6) Make loans to others, except through the purchase of debt
obligations and the entry into repurchase agreements. However, the Master
Portfolio may lend its portfolio securities in an amount not to exceed one-third
of the value of its total assets. Any loans of portfolio securities will be made
according to guidelines established by the Securities and Exchange Commission
and MIP's Board of Trustees.
(7) Act as an underwriter of securities of other issuers, except to the
extent the Master Portfolio may be deemed an underwriter under the 1933 Act, as
amended, by virtue of disposing of portfolio securities.
(8) Invest 25% or more of its total assets in the securities of issuers
in any particular industry or group of closely related industries except that
there shall be no limitation with respect to investments in (i) obligations of
the U.S. Government, its agencies or instrumentalities; (ii) any industry in
which the EAFE Free Index becomes concentrated to the same degree during the
same period, the Master Portfolio will be concentrated as specified above only
to the extent the percentage of its assets invested in those categories of
investments is sufficiently large that 25% or more of its total assets would be
invested in a single industry.
(9) Issue any senior security (as such term is defined in Section 18(f)
of the 1940 Act), except to the extent the activities permitted in Investment
Restriction Nos. 3 and 5 may be deemed to give rise to a senior security.
Non-Fundamental Investment Restrictions. The Master Portfolio has adopted the
following investment restrictions as non-fundamental policies. These
restrictions may be changed without shareholder approval by vote of a majority
of the Trustees of MIP, at any time. The Master Portfolio is subject to the
following investment restrictions, all of which are non-fundamental policies.
(1) The Master Portfolio may invest in shares of other open-end management
investment companies, subject to the limitations of Section 12(d)(1) of the 1940
Act. Under the 1940 Act, the Master Portfolio's investment in such securities
currently is limited, subject to certain exceptions, to (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. Other investment companies in
which the Master Portfolio invests can be expected to charge fees for operating
expenses, such as investment advisory and administration fees, that would be in
addition to those charged by the Master Portfolio.
(2) The Master Portfolio may not invest more than 15% of its net assets in
illiquid securities. For this purpose, illiquid securities include, among
others, (a) securities that are illiquid by virtue of the absence of a readily
available market or legal or contractual restrictions on resale, (b) fixed time
deposits that are subject to withdrawal penalties and that have maturities of
more than seven days, and (c) repurchase agreements not terminable within seven
days.
(3) .....The Master Portfolio may lend securities from its portfolio to
brokers, dealers and financial institutions, in amounts not to exceed (in the
aggregate) one-third of the Master Portfolio's total assets. Any such loans of
portfolio securities will be fully collateralized based on values that are
marked to market daily. The Master Portfolio will not enter into any portfolio
security lending arrangement having a duration of longer than one year.
Portfolio Securities
Floating- and Variable-Rate Obligations.
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 BGFA determines that at the
time of investment the obligations are of comparable quality to the other
obligations in which the Master Portfolio may invest. BGFA, 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 variable-rate demand obligations
whose demand feature is not exercisable within seven days. Such obligations may
be treated as liquid, provided that an active secondary market exists.
Foreign Currency Futures Contracts.
In General. A foreign currency futures contract is an agreement between
two parties for the future delivery of a specified currency at a specified time
and at a specified price. A "sale" of a futures contract means the contractual
obligation to deliver the currency at a specified price on a specified date, or
to make the cash settlement called for by the contract. Futures contracts have
been designed by exchanges which have been designated "contract markets" by the
Commodity Futures Trading Commission ("CFTC") and must be executed through a
brokerage firm, known as a futures commission merchant, which is a member of the
relevant contract market. Futures contracts trade on these markets, and the
exchanges, through their clearing organizations, guarantee that the contracts
will be performed as between the clearing members of the exchange.
While futures contracts based on currencies do provide for the delivery
and acceptance of a particular currency, such deliveries and acceptances are
very seldom made. Generally, a futures contract is terminated by entering into
an offsetting transaction. The Master Portfolio will incur brokerage fees when
it purchases and sells futures contracts. At the time such a purchase or sale is
made, the Master Portfolio must provide cash or money market securities as a
deposit known as "margin." The initial deposit required will vary, but may be as
low as 2% or less of a contract's face value. Daily thereafter, the futures
contract is valued through a process known as "marking to market," and the
Master Portfolio may receive or be required to pay "variation margin" as the
futures contract becomes more or less valuable.
Purchase and Sale of Currency Futures Contracts. In order to hedge its
portfolio and to protect it against possible variations in foreign exchange
rates pending the settlement of securities transactions, the Master Portfolio
may buy or sell currency futures contracts. If a fall in exchange rates for a
particular currency is anticipated, the Master Portfolio may sell a currency
futures contract as a hedge. If it is anticipated that exchange rates will rise,
the Master Portfolio may purchase a currency futures contract to protect against
an increase in the price of securities denominated in a particular currency the
Master Portfolio intends to purchase. These futures contracts will be used only
as a hedge against anticipated currency rate changes.
A currency futures contract sale creates an obligation by the Master
Portfolio, as seller, to deliver the amount of currency called for in the
contract at a specified futures time for a special price. A currency futures
contract purchase creates an obligation by the Master Portfolio, as purchaser,
to take delivery of an amount of currency at a specified future time at a
specified price. Although the terms of currency futures contracts specify actual
delivery or receipt, in most instances the contracts are closed out before the
settlement date without the making or taking of delivery of the currency.
Closing out of a currency futures contract is effected by entering into an
offsetting purchase or sale transaction.
In connection with transactions in foreign currency futures, the Master
Portfolio will be required to deposit as "initial margin" an amount of cash or
short-term government securities equal to from 5% to 8% of the contract amount.
Thereafter, subsequent payments (referred to as "variation margin") are made to
and from the broker to reflect changes in the value of the futures contract.
Risk Factors Associated with Futures Transactions. The effective use of
futures strategies depends on, among other things, the Master Portfolio's
ability to terminate futures positions at times when BGFA deems it desirable to
do so. Although the Master Portfolio will not enter into a futures position
unless BGFA believes that a liquid secondary market exists for such future,
there is no assurance that the Master Portfolio will be able to effect closing
transactions at any particular time or at an acceptable price. The Master
Portfolio generally expects that its futures transactions will be conducted on
recognized U.S. and foreign securities and commodity exchanges.
Futures markets can be highly volatile and transactions of this type
carry a high risk of loss. Moreover, a relatively small adverse market movement
with respect to these transactions may result not only in loss of the original
investment but also in unquantifiable further loss exceeding any margin
deposited.
The use of futures involves the risk of imperfect correlation between
movements in futures prices and movements in the price of currencies which are
the subject of the hedge. The successful use of futures strategies also depends
on the ability of BGFA to correctly forecast interest rate movements, currency
rate movements and general stock market price movements.
In addition to the foregoing risk factors, the following sets forth
certain information regarding the potential risks associated with the Master
Portfolio's futures transactions.
Risk of Imperfect Correlation. The Master Portfolio's ability
effectively to hedge currency risk through transactions in foreign currency
futures depends on the degree to which movements in the value of the currency
underlying such hedging instrument correlate with movements in the value of the
relevant securities held by the Master Portfolio. If the values of the
securities being hedged do not move in the same amount or direction as the
underlying currency, the hedging strategy for the Master Portfolio might not be
successful and the Master Portfolio could sustain losses on its hedging
transactions which would not be offset by gains on its portfolio. It is also
possible that there may be a negative correlation between the currency
underlying a futures contract and the portfolio securities being hedged, which
could result in losses both on the hedging transaction and the portfolio
securities. In such instances, the Master Portfolio's overall return could be
less than if the hedging transactions had not been undertaken.
Under certain extreme market conditions, it is possible that the Master
Portfolio will not be able to establish hedging positions, or that any hedging
strategy adopted will be insufficient to completely protect the Master
Portfolio.
The Master Portfolio will purchase or sell futures contracts only if,
in BGFA's judgment, there is expected to be a sufficient degree of correlation
between movements in the value of such instruments and changes in the value of
the relevant portion of the Master Portfolio's portfolio for the hedge to be
effective. There can be no assurance that BGFA's judgment will be accurate.
Potential Lack of a Liquid Secondary Market. The ordinary spreads
between prices in the cash and futures markets, due to differences in the
natures of those markets, are subject to distortions. First, all participants in
the futures market are subject to initial deposit and variation margin
requirements. This could require the Master Portfolio to post additional cash or
cash equivalents as the value of the position fluctuates. Further, rather than
meeting additional variation margin requirements, investors may close futures
contracts through offsetting transactions which could distort the normal
relationship between the cash and futures markets. Second, the liquidity of the
futures market may be lacking. Prior to exercise or expiration, a futures
position may be terminated only by entering into a closing purchase or sale
transaction, which requires a secondary market on the exchange on which the
position was originally established. While the Master Portfolio will establish a
futures position only if there appears to be a liquid secondary market therefor,
there can be no assurance that such a market will exist for any particular
futures contract at any specific time. In such event, it may not be possible to
close out a position held by the Master Portfolio, which could require the
Master Portfolio to purchase or sell the instrument underlying the position,
make or receive a cash settlement, or meet ongoing variation margin
requirements. The inability to close out futures positions also could have an
adverse impact on the Master Portfolio's ability effectively to hedge its
securities, or the relevant portion thereof.
The liquidity of a secondary market in a futures contract may be
adversely affected by "daily price fluctuation limits" established by the
exchanges, which limit the amount of fluctuation in the price of a contract
during a single trading day and prohibit trading beyond such limits once they
have been reached. The trading of futures contracts also is subject to the risk
of trading halts, suspensions, exchange or clearing house equipment failures,
government intervention, insolvency of the brokerage firm or clearing house or
other disruptions of normal trading activity, which could at times make it
difficult or impossible to liquidate existing positions or to recover excess
variation margin payments.
Trading and Position Limits. Each contract market on which futures
contracts are traded has established a number of limitations governing the
maximum number of positions which may be held by a trader, whether acting alone
or in concert with others. "Shares" means the equal proportionate transferable
units of interest into which the beneficial interest of each Series or Class is
divided from time to time (including whole Shares and fractions of Shares). BGFA
does not believe that these trading and position limits will have an adverse
impact on the hedging strategies regarding the Master Portfolio's investments.
Regulations on the Use of Futures Contracts. Regulations of the CFTC
require that the Master Portfolio enter into transactions in futures contracts
for hedging purposes only, in order to assure that it is not deemed to be a
"commodity pool" under such regulations. In particular, CFTC regulations require
that all short futures positions be entered into for the purpose of hedging the
value of investment securities held by the Master Portfolio, and that all long
futures positions either constitute bona fide hedging transactions, as defined
in such regulations, or have a total value not in excess of an amount determined
by reference to certain cash and securities positions maintained for the Master
Portfolio, and accrued profits on such positions. In addition, the Master
Portfolio may not purchase or sell such instruments if, immediately thereafter,
the sum of the amount of initial margin deposits on its existing futures
positions and premiums paid for options on futures contracts would exceed 5% of
the market value of the Master Portfolio's total assets.
When the Master Portfolio purchases a futures contract, an amount of
cash or cash equivalents or high quality debt securities will be segregated with
the Master Portfolio's custodian so that the amount so segregated, plus the
initial deposit and variation margin held in the account of its broker, will at
all times equal the value of the futures contract, thereby insuring that the use
of such futures is unleveraged.
The Master Portfolio's ability to engage in the hedging transactions
described herein may be limited by the policies and concerns of various Federal
and state regulatory agencies. Such policies may be changed by vote of the Board
of Trustees.
BGFA uses a variety of internal risk management procedures to ensure
that derivatives use is consistent with the Master Portfolio's investment
objective, does not expose the Master Portfolio to undue risk and is closely
monitored. These procedures include providing periodic reports to the Board of
Trustees concerning the use of derivatives.
Foreign Obligations and Securities.
The foreign securities in which the Master Portfolio may invest include
common stocks, preferred stocks, warrants, convertible securities and other
securities of issuers organized under the laws of countries other than the
United States. Such securities also include equity interests in foreign
investment funds or trusts, real estate investment trust securities and any
other equity or equity-related investment whether denominated in foreign
currencies or U.S. dollars.
The 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.
For temporary defensive purposes, the Master Portfolio may invest in
fixed income securities of non-U.S. governmental and private issuers. Such
investments may include bonds, notes, debentures and other similar debt
securities, including convertible securities.
Investments in foreign obligations involve certain considerations that
are not typically associated with investing in domestic securities. There may be
less publicly available information about a foreign issuer than about a domestic
issuer. Foreign issuers also are not generally subject to the same accounting,
auditing and financial reporting standards or governmental supervision as
domestic issuers. In addition, with respect to certain foreign countries, taxes
may be withheld at the source under foreign tax laws, and there is a possibility
of expropriation or confiscatory taxation, political, social and monetary
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.
From time to time, investments in other investment companies may be the
most effective available means by which the Master Portfolio may invest in
securities of issuers in certain countries. Investment in such investment
companies may involve the payment of management expenses and, in connection with
some purchases, sales loads, and payment of substantial premiums above the value
of such companies' portfolio securities. At the same time, the Master Portfolio
would continue to pay its own management fees and other expenses.
Investment income on certain foreign securities in which the Master
Portfolio may invest may be subject to foreign withholding or other taxes that
could reduce the return on these securities. Tax treaties between the United
States and foreign countries, however, may reduce or eliminate the amount of
foreign taxes to which the Master Portfolio would be subject.
The Master Portfolio's investments in foreign securities involve
currency risks. The U.S. dollar value of a foreign security tends to decrease
when the value of the U.S. dollar rises against the foreign currency in which
the security is denominated, and tends to increase when the value of the U.S.
dollar falls against such currency. To attempt to minimize risks to the Master
Portfolio from adverse changes in the relationship between the U.S. dollar and
foreign currencies, the Master Portfolio may engage in foreign currency
transactions on a spot (i.e., cash) basis and may purchase or sell forward
foreign currency exchange contracts ("forward contracts"). The Master Portfolio
may also purchase and sell foreign currency futures contracts (see "Purchase and
Sale of Currency Futures Contracts"). A forward contract is an obligation to
purchase or sell a specific currency for an agreed price at a future date that
is individually negotiated and privately traded by currency traders and their
customers.
Forward contracts establish an exchange rate at a future date. These
contracts are transferable in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. A forward
contract generally has no deposit requirement, and is traded at a net price
without commission. The Master Portfolio will direct its custodian, to the
extent required by applicable regulations, to segregate high grade liquid assets
in an amount at least equal to its obligations under each forward contract.
Neither spot transactions nor forward contracts eliminate fluctuations in the
prices of the Master Portfolio's portfolio securities or in foreign exchange
rates, or prevent loss if the prices of these securities should decline.
The Master Portfolio may enter into a forward contract, for example,
when it enters into a contract for the purchase or sale of a security
denominated in a foreign currency in order to "lock in" the U.S. dollar price of
the security (a "transaction hedge"). In addition, when BGFA believes that a
foreign currency may suffer a substantial decline against the U.S. dollar, it
may enter into a forward sale contract to sell an amount of that foreign
currency approximating the value of some or all of the Master Portfolio's
securities denominated in such foreign currency, or when BGFA believes that the
U.S. dollar may suffer a substantial decline against the foreign currency, it
may enter into a forward purchase contract to buy that foreign currency for a
fixed dollar amount (a "position hedge").
The Master Portfolio may, in the alternative, enter into a forward
contract to sell a different foreign currency for a fixed U.S. dollar amount
where BGFA believes that the U.S. dollar value of the currency to be sold
pursuant to the forward contract will fall whenever there is a decline in the
U.S. dollar value of the currency in which the portfolio securities are
denominated (a "cross-hedge").
Foreign currency hedging transactions are an attempt to protect the
Master Portfolio against changes in foreign currency exchange rates between the
trade and settlement dates of specific securities transactions or changes in
foreign currency exchange rates that would adversely affect a portfolio position
or an anticipated portfolio position. Although these transactions tend to
minimize the risk of loss due to a decline in the value of the hedged currency,
at the same time they tend to limit any potential gain that might be realized
should the value of the hedged currency increase. The precise matching of the
forward contract amount and the value of the securities involved will not
generally be possible because the future value of these securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered into and date
it matures.
The Master Portfolio's custodian will, to the extent required by
applicable regulations, segregate cash, U.S. Government securities or other
high-quality debt securities having a value equal to the aggregate amount of the
Master Portfolio's commitments under forward contracts entered into with respect
to position hedges and cross-hedges. If the value of the segregated securities
declines, additional cash or securities will be segregated on a daily basis so
that the value of the segregated securities will equal the amount of the Master
Portfolio's commitments with respect to such contracts.
The cost to the Master Portfolio of engaging in currency transactions
varies with factors such as the currency involved, the length of the contract
period and the market conditions then prevailing. Because transactions in
currency exchange usually are conducted on a principal basis, no fees or
commissions are involved. BGFA considers on an ongoing basis the
creditworthiness of the institutions with which the Master Portfolio enters into
foreign currency transactions. The use of forward currency exchange contracts
does not eliminate fluctuations in the underlying prices of the securities, but
it does establish a rate of exchange that can be achieved in the future. If a
devaluation generally is anticipated, the Master Portfolio may not be able to
contract to sell the currency at a price above the devaluation level it
anticipates.
Forward Commitments, When-Issued Purchases and Delayed-Delivery
Transactions.
The Master Portfolio may purchase or sell securities on a when-issued
or delayed-delivery basis and make contracts to purchase or sell securities for
a fixed price at a future date beyond customary settlement time. Securities
purchased or sold on a when-issued, delayed-delivery or forward commitment basis
involve a risk of loss if the value of the security to be purchased declines, or
the value of the security to be sold increases, before the settlement date.
Although the Master Portfolio will generally purchase securities with the
intention of acquiring them, the 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. Securities purchased
on a when-issued or forward commitment basis may expose the Master Portfolio to
risk because they may experience such fluctuations prior to their actual
delivery. Purchasing securities on a when-issued or forward commitment basis can
involve the additional risk that the yield available in the market when the
delivery takes place actually may be higher than that obtained in the
transaction itself.
The Master Portfolio will segregate cash, U.S. Government obligations
or other high-quality debt instruments in an amount at least equal in value to
the Master Portfolio's commitments to purchase when-issued securities. If the
value of these assets declines, the Master Portfolio will segregate additional
liquid assets on a daily basis so that the value of the segregated assets is
equal to the amount of such commitments.
Future Developments.
The Master Portfolio may take advantage of opportunities in the area of
options and futures contracts and options on futures contracts and any other
derivative investments which are not presently contemplated for use by the
Master Portfolio or which are not currently available but which may be
developed, to the extent such opportunities are both consistent with the Master
Portfolio's investment objective and legally permissible for the Master
Portfolio. Before entering into such transactions or making any such investment,
the Master Portfolio will provide appropriate disclosure in its prospectus.
Hedging and Related Strategies.
The Master Portfolio may attempt to protect the U.S. dollar equivalent
value of one or more of its investments (hedge) by purchasing and selling
foreign currency futures contracts and by purchasing and selling currencies on a
spot (i.e., cash) or forward basis. Foreign currency futures contracts are
bilateral agreements pursuant to which one party agrees to make, and the other
party agrees to accept, delivery of a specified type of currency at a specified
future time and at a specified price. Although such futures contracts by their
terms call for actual delivery or acceptance of currency, in most cases the
contracts are closed out before the settlement date without the making or taking
of delivery. A forward currency contract involves an obligation to purchase or
sell a specific currency at a specified future date, which may be any fixed
number of days from the contract date agreed upon by the parties, at a price set
at the time the contract is entered into.
The Master Portfolio may enter into forward currency contracts for the
purchase or sale of a specified currency at a specified future date either with
respect to specific transactions or with respect to portfolio positions. For
example, the Master Portfolio may enter into a forward currency contract to sell
an amount of a foreign currency approximating the value of some or all of the
Master Portfolio's securities denominated in such currency. The Master Portfolio
may use forward contracts in one currency or a basket of currencies to hedge
against fluctuations in the value of another currency when BGFA anticipates
there will be a correlation between the two and may use forward currency
contracts to shift the Master Portfolio's exposure to foreign currency
fluctuations from one country to another. The purpose of entering into these
contracts is to minimize the risk to the Master Portfolio from adverse changes
in the relationship between the U.S. dollar and foreign currencies.
BGFA might not employ any of the strategies described above, and there
can be no assurance that any strategy used will succeed. If BGFA incorrectly
forecasts exchange rates, market values or other economic factors in utilizing a
strategy for the Master Portfolio, the Master Portfolio might have been in a
better position had it not hedged at all. The use of these strategies involves
certain special risks, including (1) the fact that skills needed to use hedging
instruments are different from those needed to select the Master Portfolio's
securities, (2) possible imperfect correlation, or even no correlation, between
price movements of hedging instruments and price movements of the investments
being hedged, (3) the fact that, while hedging strategies can reduce the risk of
loss, they can also reduce the opportunity for gain, or even result in losses,
by offsetting favorable price movements in hedged investments and (4) the
possible inability of the Master Portfolio to purchase or sell a portfolio
security at a time that otherwise would be favorable for it to do so, or the
possible need for the Master Portfolio to sell a portfolio security at a
disadvantageous time, due to the need for the Master Portfolio to maintain
"cover" or to segregate securities in connection with hedging transactions and
the possible inability of the Master Portfolio to close out or to liquidate its
hedged position.
New financial products and risk management techniques continue to be
developed. The Master Portfolio may use these instruments and techniques to the
extent consistent with its investment objectives and regulatory and tax
considerations.
Illiquid Securities.
The 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.
Investment Company Securities.
The Master Portfolio may invest in securities issued by other open-end,
management investment companies to the extent permitted under the 1940 Act. As a
general matter, under the 1940 Act, investment in such securities is limited to:
(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 with respect to all such
companies 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 interests of exchange-listed
closed-end funds to the extent permitted under the 1940 Act.
Loans of Portfolio Securities.
The 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, BGFA 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 Portfolio does not enter into
any portfolio security lending arrangements having a duration longer than one
year. Any securities that the 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, the 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 Portfolio will not lend securities having a
value that exceeds one-third of the current value of their respective total
assets. Loans of securities by the Master Portfolio are subject to termination
at the Master Portfolio's or the borrower's option. The 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 Portfolio, BGFA or Stephens.
Privately Issued Securities.
The Master Portfolio may invest in privately issued securities,
including those which may be resold only in accordance with Rule 144A under the
Securities Act of 1933 ("Rule 144A Securities"). Rule 144A Securities are
restricted securities that are not publicly traded. Accordingly, the liquidity
of the market for specific Rule 144A Securities may vary. Delay or difficulty in
selling such securities may result in a loss to the Master Portfolio. Privately
issued or Rule 144A securities that are determined by BGFA to be "illiquid" are
subject to the Master Portfolio's policy of not investing more than 15% of its
net assets in illiquid securities. BGFA, under guidelines approved by Board of
Trustees of MIP, will evaluate the liquidity characteristics of each Rule 144A
Security proposed for purchase by the Master Portfolio on a case-by-case basis
and will consider the following factors, among others, in their evaluation: (1)
the frequency of trades and quotes for the Rule 144A Security; (2) the number of
dealers willing to purchase or sell the Rule 144A Security and the number of
other potential purchasers; (3) dealer undertakings to make a market in the Rule
144A Security; and (4) the nature of the Rule 144A Security and the nature of
the marketplace trades (e.g., the time needed to dispose of the Rule 144A
Security, the method of soliciting offers and the mechanics of transfer).
Short-Term Instruments and Temporary Investments.
The Master Portfolio 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 interestholder purchases or redemptions or
when "defensive" strategies are appropriate. The instruments in which the Master
Portfolio 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; (iv) non-convertible corporate debt
securities (e.g., bonds and debentures) with remaining maturities at the date of
purchase of not more than one year that are rated at least "Aa" by Moody's or
"AA" by S&P; (v) repurchase agreements; and (vi) short-term, U.S.
dollar-denominated obligations of foreign banks (including U.S. branches) that,
at the time of investment have more than $10 billion, or the equivalent in other
currencies, in total assets and in the opinion of BGFA are of comparable quality
to obligations of U.S. banks which may be purchased by the Master Portfolio.
Bank Obligations. The 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 the 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.
Domestic commercial banks organized under Federal law are supervised
and examined by the Comptroller of the Currency and are required to be members
of the Federal Reserve System and to have their deposits insured by the Federal
Deposit Insurance Corporation (the "FDIC"). Domestic banks organized under state
law are supervised and examined by state banking authorities but are members of
the Federal Reserve System only if they elect to join. In addition, state banks
whose certificates of deposit ("CDs") may be purchased by the Master Portfolio
are insured by the FDIC (although such insurance may not be of material benefit
to the Master Portfolio, depending on the principal amount of the CDs of each
bank held by the Master Portfolio) and are subject to Federal examination and to
a substantial body of Federal law and regulation. As a result of Federal or
state laws and regulations, domestic branches of domestic banks whose CDs may be
purchased by the Master Portfolio generally are required, among other things, to
maintain specified levels of reserves, are limited in the amounts which they can
loan to a single borrower and are subject to other regulation designed to
promote financial soundness. However, not all of such laws and regulations apply
to the foreign branches of domestic banks.
Obligations of foreign branches of domestic banks, foreign subsidiaries
of domestic banks and domestic and foreign branches of foreign banks, such as
CDs and time deposits ("TDs"), may be general obligations of the parent banks in
addition to the issuing branch, or may be limited by the terms of a specific
obligation and governmental regulation. Such obligations are subject to
different risks than are those of domestic banks. These risks include foreign
economic and political developments, foreign governmental restrictions that may
adversely affect payment of principal and interest on the obligations, foreign
exchange controls and foreign withholding and other taxes on interest income.
These foreign branches and subsidiaries are not necessarily subject to the same
or similar regulatory requirements that apply to domestic banks, such as
mandatory reserve requirements, loan limitations, and accounting, auditing and
financial record keeping requirements. In addition, less information may be
publicly available about a foreign branch of a domestic bank or about a foreign
bank than about a domestic bank.
Obligations of United States branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation or by Federal or state regulation
as well as governmental action in the country in which the foreign bank has its
head office. A domestic branch of a foreign bank with assets in excess of $1
billion may be subject to reserve requirements imposed by the Federal Reserve
System or by the state in which the branch is located if the branch is licensed
in that state.
In addition, Federal branches licensed by the Comptroller of the
Currency and branches licensed by certain states ("State Branches") may be
required to: (1) pledge to the regulator, by depositing assets with a designated
bank within the state, a certain percentage of their assets as fixed from time
to time by the appropriate regulatory authority; and (2) maintain assets within
the state in an amount equal to a specified percentage of the aggregate amount
of liabilities of the foreign bank payable at or through all of its agencies or
branches within the state. The deposits of Federal and State Branches generally
must be insured by the FDIC if such branches take deposits of less than
$100,000.
In view of the foregoing factors associated with the purchase of CDs
and TDs issued by foreign branches of domestic banks, by foreign subsidiaries of
domestic banks, by foreign branches of foreign banks or by domestic branches of
foreign banks, BGFA carefully evaluates such investments on a case-by-case
basis.
The Master Portfolio may purchase CDs issued by banks, savings and loan
associations and similar thrift institutions with less than $1 billion in
assets, which are members of the FDIC, provided such Master Portfolio purchases
any such CD in a principal amount of not more than $100,000, which amount would
be fully insured by the Bank Insurance Fund or the Savings Association Insurance
Fund administered by the FDIC. Interest payments on such a CD are not insured by
the FDIC. No Master Portfolio will own more than one such CD per such issuer.
Commercial Paper and Short-Term Corporate Debt Instruments. The 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. BGFA
and/or sub-adviser to the Master Portfolio monitors on an ongoing basis the
ability of an issuer of a demand instrument to pay principal and interest on
demand.
The 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. The 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.
BGFA and/or sub-adviser to the 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.
U.S. Government Obligations. The Master Portfolio 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.
Repurchase Agreements. The 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. BGFA monitors on an ongoing basis
the value of the collateral to assure that it always equals or exceeds the
repurchase price. Certain costs may be incurred by 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.
ITEM 13. MANAGEMENT OF THE TRUST.
The Trustees and Principal Officer of MIP, together with information as
to their principal business occupations during at least the last five years, are
shown below. The address of each, unless otherwise indicated, is 111 Center
Street, Little Rock, Arkansas 72201. Each Trustee who is deemed to be an
"interested person" of MIP, as defined in the 1940 Act, is indicated by an
asterisk.
<TABLE>
<S> <C> <C>
Principal Occupations
Name, Address and Age Position During Past 5 Years
--------------------- -------- -----------------------
Jack S. Euphrat, 77 Trustee Private Investor.
415 Walsh Road
Atherton, CA 94027
*R. Greg Feltus, 48 Trustee, Chairman and Executive Vice President of
President Stephens; President of Stephens
Insurance Services Inc.; Senior
Vice President of Stephens
Sports Management Inc.; and
President of Investors
Brokerage Insurance Inc.
W. Rodney Hughes, 73 Trustee Private Investor.
31 Dellwood Court
San Rafael, CA 94901
Richard H. Blank, Jr., 42 Chief Operating Vice President of Stephens;
Officer, Secretary and Director of Stephens Sports
Treasurer Management Inc.; and Director
of Capo Inc.
</TABLE>
<TABLE>
<CAPTION>
Compensation Table
For the Fiscal Year Ended February 28, 1999
<S> <C> <C>
Total Compensation
Aggregate Compensation from Registrant
Name and Position from Registrant and Fund Complex
Jack S. Euphrat $ 0 $5,000
Trustee
*R. Greg Feltus $ 0 $ 0
Trustee
Thomas S. Goho $ 0 $5,000
Trustee
W. Rodney Hughes $ 0 $4,500
Trustee
*J. Tucker Morse $ 0 $4,500
Trustee
</TABLE>
Trustees of MIP are compensated annually by MIP and by all the
registrants in the fund complex for their services as indicated above and also
are reimbursed for all out-of-pocket expenses relating to attendance at board
meetings. MIP and Barclays Global Investors Funds, Inc. ("BGIF"), formerly known
as MasterWorks Funds Inc., are considered to be members of the same fund complex
as such term is defined in Form N-1A under the 1940 Act. The Trustees are
compensated by BGIF and MIP for their services as Directors/Trustees to the
company and Trust. Currently the Trustees do not receive any retirement benefits
or deferred compensation from MIP or BGIF.
ITEM 14. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
As of September 28, 1999, no interestholder was known by the Trust to
own 5% or more of the outstanding voting securities of the Master Portfolio. As
such, no person could be considered a "controlling person" of the Master
Portfolio for purposes of the 1940 Act.
ITEM 15. INVESTMENT ADVISORY AND OTHER SERVICES.
The following information supplements and should be read in conjunction
with Item 6 in Part A.
Investment Adviser. BGFA provides investment advisory services to the
Master Portfolio pursuant to an Investment Advisory Contract ("BGFA Advisory
Contract") with MIP. As to the Master Portfolio, the BGFA Advisory Contract is
subject to annual approval by (i) MIP's Board of Trustees or (ii) vote of a
majority (as defined in the 1940 Act) of the outstanding voting securities of
the Master Portfolio, provided that in either event the continuance also is
approved by a majority of MIP's Board of Trustees who are not "interested
persons" (as defined in the 1940 Act) of MIP or BGFA, by vote cast in person at
a meeting called for the purpose of voting on such approval. As to the Master
Portfolio, the BGFA Advisory Contract is terminable without penalty, on 60 days'
written notice, by either party. The BGFA Advisory Contract will terminate
automatically, as to the Master Portfolio, in the event of its assignment (as
defined in the 1940 Act).
Advisory Fees. BGFA is entitled to receive monthly fees at the annual
rate of 0.15% of the first $1 billion, and 0.10% thereafter, of the average
daily net assets of the Master Portfolio 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 the Master Portfolio and, accordingly,
have a favorable impact on its performance.
Co-Administrators. Stephens and BGI are the Master Portfolio's
co-administrators. Stephens and BGI provide the Master Portfolio with
administrative services, including general supervision of the Master Portfolio's
non-investment operations, coordination of the other services provided to the
Master Portfolio, 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 MIP's trustees and officers. Stephens also
furnishes office space and certain facilities to conduct the Master Portfolio's
business, and compensates MIP'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 Portfolio other than the fees payable to BGFA. Stephens
and BGI are entitled to receive monthly compensation for providing
administration services to the Master Portfolio at the annual rate of 0.10% of
the first $1 billion, and 0.07% thereafter, of the average daily net assets of
the 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.
Placement Agent. Stephens is the placement agent for the Master
Portfolio. 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
to the Master Portfolio.
Custodian. IBT currently acts as the Master Portfolio's custodian. The
principal business address of IBT is 200 Clarendon Street, Boston, Massachusetts
02111. 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 Portfolio.
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 MIP so
long as it receives fees for providing similar services to the funds which
invest substantially all of their assets in the Master Portfolio.
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 Portfolio, Stephens and BGI have
agreed to bear all costs of the Master Portfolio's and MIP's operations.
Expenses attributable only to the Master Portfolio shall be charged only against
the assets of the Master Portfolio. General expenses of MIP shall be allocated
among its portfolios in a manner proportionate to the net assets of each, on a
transactional basis or on such other basis as the Board of Trustees deems
equitable.
ITEM 16. BROKERAGE ALLOCATION AND OTHER PRACTICES.
General. BGFA assumes general supervision over placing orders on behalf
of the Master Portfolio for the purchase or sale of portfolio securities.
Allocation of brokerage transactions, including their frequency, is made in the
best judgment of BGFA and in a manner deemed fair and reasonable to
interestholders. In executing portfolio transactions and selecting brokers or
dealers, BGFA seeks to obtain the best overall terms available for the Master
Portfolio. In assessing the best overall terms available for any transaction,
BGFA considers factors deemed relevant, including the breadth of the market in
the security, the price of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of the commission, if
any, both for the specific transaction and on a continuing basis. The primary
consideration is prompt execution of orders at the most favorable net price.
Certain of the brokers or dealers with whom the Master Portfolio may transact
business offer commission rebates to the Master Portfolio. BGFA considers such
rebates in assessing the best overall terms available for any transaction. The
overall reasonableness of brokerage commissions paid is evaluated by BGFA based
upon its knowledge of available information as to the general level of
commissions paid by other institutional investors for comparable services.
Brokers also are selected because of their ability to handle special executions
such as are involved in large block trades or broad distributions, provided the
primary consideration is met. Portfolio turnover may vary from year to year, as
well as within a year. High turnover rates over 100% are likely to result in
comparatively greater brokerage expenses.
ITEM 17. CAPITAL STOCK AND OTHER SECURITIES.
Pursuant to MIP's Declaration of Trust, the Trustees are authorized to
issue shares of beneficial interests in the Master Portfolio. Investors in the
Master Portfolio are entitled to participate pro rata in distributions of
taxable income, loss, gain and credit of such Master Portfolio. Upon liquidation
or dissolution of a Master Portfolio, investors are entitled to share pro rata
in the Master Portfolio's net assets available for distribution to its
investors. Investments in a Master Portfolio have no preference, pre-exemptive,
conversion or similar rights and are fully paid and non-assessable, except as
set forth below. Investments in the Master Portfolio may not be transferred. No
certificates are issued.
Each investor is entitled to vote, with respect to matters affecting
MIP's portfolio, in proportion to the amount of its investment in MIP. Investors
in MIP do not have cumulative voting rights, and investors holding more than 50%
of the aggregate beneficial interest in MIP may elect all of the Trustees of MIP
if they choose to do so and in such event the other investors in MIP would not
be able to elect any Trustee. MIP is not required to hold annual meetings of
investors but MIP may hold special meetings of investors when in the judgment of
MIP's Trustees it is necessary or desirable to submit matters for an investor
vote.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted under the provisions of the 1940 Act or applicable state law or
otherwise to the holders of the outstanding voting securities of an investment
company, such as MIP, will not be deemed to have been effectively acted upon
unless approved by the holders of a majority of the outstanding shares of each
Master Portfolio affected by such matter. Rule 18f-2 further provides that a
Master Portfolio shall be deemed to be affected by a matter unless it is clear
that the interests of such Master Portfolio in the matter are identical or that
the matter does not affect any interest of such Master Portfolio. However, the
Rule exempts the selection of independent accountants and the election of
Trustees from the separate voting requirements of the Rule.
ITEM 18. PURCHASE, REDEMPTION AND PRICING OF SECURITIES.
The following information supplements and should be read in conjunction
with Item 7 in Part A.
Purchase of Securities. Beneficial interests in the Master Portfolio
are issued solely in private placement transactions which do not involve any
"public offering" within the meaning of Section 4(2) of the 1933 Act.
Investments in the Master Portfolio may only be made by investment companies or
certain other entities which 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.
Payment for shares of the 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, the 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.
Suspension of Redemptions. The right of redemption of Master Portfolio
shares may be suspended or the date of payment postponed (a) during any period
when the New York Stock Exchange is closed (other than customary weekend and
holiday closings), (b) when trading in the markets the Master Portfolio
ordinarily utilizes is restricted, or when an emergency exists as determined by
the Securities and Exchange Commission so that disposal of the Master
Portfolio's investments or determination of its net asset value is not
reasonably practicable, or (c) for such other periods as the Securities and
Exchange Commission by order may permit to protect the Master Portfolio's
interestholders.
Pricing of Securities. The securities of the Master Portfolio,
including covered call options written by the Master Portfolio, are valued as
discussed below. Domestic securities are valued at the last sale price on the
domestic securities or commodities exchange or national securities market on
which such securities primarily are traded. Securities not listed on a domestic
exchange or national securities market, or securities in which there were no
transactions, are valued at the most recent bid prices. Portfolio securities
which are traded primarily on foreign securities or commodities exchanges
generally are valued at the preceding closing values of such securities on their
respective exchanges, except that when an occurrence subsequent to the time a
value was so established is likely to have changed such value, then the fair
value of those securities is determined by BGFA in accordance with guidelines
approved by MIP's Board of Trustees. Short-term investments are carried at
amortized cost, which approximates value. Any securities or other assets for
which recent market quotations are not readily available are valued at fair
value as determined in good faith by BGFA in accordance with such guidelines
approved by MIP's Board of Trustees.
Restricted securities, as well as securities or other assets for which
market quotations are not readily available, or are not valued by a pricing
service approved by MIP's Board of Trustees, are valued at fair value as
determined in good faith by BGFA in accordance with guidelines approved by MIP's
Board of Trustees. BGFA and MIP's Board of Trustees periodically review the
method of valuation. In making its good faith valuation of restricted
securities, BGFA generally takes the following factors into consideration:
restricted securities which are, or are convertible into, securities of the same
class of securities for which a public market exists usually will be valued at
market value less the same percentage discount at which purchased. This discount
is revised periodically if it is believed that the discount no longer reflects
the value of the restricted securities. Restricted securities not of the same
class as securities for which a public market exists usually are valued
initially at cost. Any subsequent adjustment from cost is based upon
considerations deemed relevant by MIP's Board of Trustees or its delegates.
New York Stock Exchange Closings. The holidays on which the New York
Stock Exchange is closed currently are: 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.
ITEM 19. TAXATION OF THE TRUST.
MIP is organized as a business trust under Delaware law. Under MIP's
current classification for federal income tax purposes, it is intended that the
Master Portfolio will be treated as a non-publicly traded partnership for such
purposes and, therefore, the Master Portfolio will not be subject to any federal
income tax. However, each investor in the Master Portfolio will be taxable on
its share (as determined in accordance with the governing instruments of MIP) of
the Master Portfolio's taxable income and capital gain 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.
The Master Portfolio's taxable year-end is the last day of December.
Although the Master Portfolio will not be subject to federal income tax, it will
file appropriate federal income tax returns.
The Master Portfolio's assets, income and distributions will be managed in
such a way that an investor in the Master Portfolio may satisfy the requirements
of Subchapter M of the Code, by holding substantially all of its assets through
the Master Portfolio. Investors are advised to consult their own tax advisors as
to the tax consequences of an investment in the Master Portfolio.
ITEM 20. UNDERWRITERS.
The exclusive placement agent for MIP is Stephens, which receives no
compensation for serving in this capacity. Registered broker/dealers and
investment companies, insurance company separate accounts, common and commingled
trust funds, group trust and similar organizations and entities which constitute
accredited investors, as defined in the regulations adopted under the 1933 Act,
may continuously invest in a Master Portfolio of MIP.
ITEM 21. CALCULATION OF PERFORMANCE DATA.
Not applicable.
ITEM 22. FINANCIAL STATEMENTS.
KPMG LLP provides audit services, tax services and assistance and
consultation in connection with the review of certain SEC filings. KPMG LLP's
address is Three Embarcadero Center, San Francisco, California 94111. Such
auditors expressed an unqualified opinion on the financial statements of MIP.
<PAGE>
APPENDIX
Description of certain ratings assigned by Standard & Poor's
Corporation ("S&P"), Moody's Investors Service, Inc. ("Moody's"), Fitch
Investors Service, Inc. ("Fitch"), Duff & Phelps, Inc. ("Duff") and IBCA Inc.
and IBCA Limited ("IBCA"):
S&P
Bond Ratings
"AAA"
Bonds rated AAA have the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
"AA"
Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
"A"
Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in higher
rated categories.
"BBB"
Bonds rated "BBB" are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
S&P's letter ratings may be modified by the addition of a plus (+) or
minus (-) sign designation, which is used to show relative standing within the
major rating categories, except in the AAA (Prime Grade) category.
Commercial Paper Rating
The designation A-1 by S&P indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are denoted with a
plus sign (+) designation. Capacity for timely payment on issues with an A-2
designation is strong. However, the relative degree of safety is not as high as
for issues designated A-1.
Moody's
Bond Ratings
"Aaa"
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
"Aa"
Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what generally are known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
"A"
Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
"Baa"
Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Moody's applies the numerical modifiers "1", "2" and "3" to show
relative standing within the major rating categories, except in the "Aaa"
category. The modifier "1" indicates a ranking for the security in the higher
end of a rating category; the modifier "2" indicates a mid-range ranking; and
the modifier "3" indicates a ranking in the lower end of a rating category.
Commercial Paper Rating
The rating ("P-1") Prime-1 is the highest commercial paper rating
assigned by Moody's. Issuers of "P-1" paper must have a superior capacity for
repayment of short-term promissory obligations, and ordinarily will be evidenced
by leading market positions in well established industries, high rates of return
on funds employed, conservative capitalization structures with moderate reliance
on debt and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation, and well established access
to a range of financial markets and assured sources of alternate liquidity.
Issuers (or relating supporting institutions) rated ("P-2") Prime-2
have a strong capacity for repayment of short-term promissory obligations. This
ordinarily will be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
Fitch
Bond Ratings
The ratings represent Fitch's assessment of the issuer's ability to
meet the obligations of a specific debt issue or class of debt. The ratings take
into consideration special features of the issue, its relationship to other
obligations of the issuer, the current financial condition and operative
performance of the issuer and of any guarantor, as well as the political and
economic environment that might affect the issuer's future financial strength
and credit quality.
"AAA"
Bonds rated "AAA" are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
"AA"
Bonds rated "AA" are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated "AAA". Because bonds
rated in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short- term debt of these issuers is generally
rated "F-1+".
"A"
Bonds rated "A" are considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
"BBB"
Bonds rated "BBB" are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to have an adverse impact on these
bonds and, therefore, impair timely payment. The likelihood that the ratings of
these bonds will fall below investment grade is higher than for bonds with
higher ratings.
Plus (+) and minus (-) signs are used with a rating symbol to indicate
the relative position of a credit within the rating category.
Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
Although the credit analysis is similar to Fitch's bond rating
analysis, the short-term rating places greater emphasis than bond ratings on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.
"F-1+"
Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
"F-1"
Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F-1+.
"F-2"
Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payments, but the margin of safety is not as
great as the F-1+ and F-1 categories.
Duff
Bond Ratings
"AAA"
Bonds rated AAA are considered highest credit quality. The risk factors
are negligible, being only slightly more than for risk-free U.S. Treasury debt.
"AA"
Bonds rated AA are considered high credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to time because of
economic conditions.
"A"
Bonds rated A have protection factors which are average but adequate.
However, risk factors are more variable and greater in periods of economic
stress.
"BBB"
Bonds rated BBB are considered to have below average protection factors
but still considered sufficient for prudent investment. Considerable variability
in risk during economic cycles.
Plus (+) and minus (-) signs are used with a rating symbol (except AAA)
to indicate the relative position of a credit within the rating category.
Commercial Paper Rating
The rating "Duff-1" is the highest commercial paper rating assigned by
Duff. Paper rated Duff-1 is regarded as having very high certainty of timely
payment with excellent liquidity factors which are supported by ample asset
protection. Risk factors are minor. Paper rated "Duff-2" is regarded as having
good certainty of timely payment, good access to capital markets and sound
liquidity factors and company fundamentals. Risk factors are small.
IBCA
Bond and Long-Term Ratings
Obligations rated AAA by IBCA have the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial,
such that adverse changes in business, economic or financial conditions are
unlikely to increase investment risk significantly. Obligations for which there
is a very low expectation of investment risk are rated AA by IBCA. Capacity for
timely repayment of principal and interest is substantial. Adverse changes in
business, economic or financial conditions may increase investment risk albeit
not very significantly.
Commercial Paper and Short-Term Ratings
The designation A1 by IBCA indicates that the obligation is supported
by a very strong capacity for timely repayment. Those obligations rated A1+ are
supported by the highest capacity for timely repayment. Obligations rated A2 are
supported by a strong capacity for timely repayment, although such capacity may
be susceptible to adverse changes in business, economic or financial conditions.
International and U.S. Bank Ratings
An IBCA bank rating represents IBCA's current assessment of the
strength of the bank and whether such bank would receive support should it
experience difficulties. In its assessment of a bank, IBCA uses a dual rating
system comprised of Legal Ratings and Individual Ratings. In addition, IBCA
assigns banks Long- and Short-Term Ratings as used in the corporate ratings
discussed above. Legal Ratings, which range in gradation from 1 through 5,
address the question of whether the bank would receive support provided by
central banks or shareholders if it experienced difficulties, and such ratings
are considered by IBCA to be a prime factor in its assessment of credit risk.
Individual Ratings, which range in gradations from A through E, represent IBCA's
assessment of a bank's economic merits and address the question of how the bank
would be viewed if it were entirely independent and could not rely on support
from state authorities or its owners.
<PAGE>
MASTER INVESTMENT PORTFOLIO
File No. 811-8162
PART C
OTHER INFORMATION
Item 23. Exhibits
Exhibit
Number Description
1(a) - Amended and Restated Declaration of Trust, incorporated by
reference to the Registration Statement on Form N-1A, filed November 15, 1993,
and August 31, 1998.
1(b) - Certificate of Trust, incorporated by reference to the
Registration Statement on Form N-1A, filed November 15, 1993, and August 31,
1998.
1(c ) - Amendment to the Amended and Restated Agreement and Declaration
of Trust, incorporated by reference to the Registration Statement on Form N-1A,
filed August 31, 1998.
1(d) - Certificate of Amendment to the Certificate of Trust,
incorporated by reference to the Registration Statement on Form N-1A, filed
September 9, 1998.
2 -By-Laws, incorporated by reference to the Registration Statement
on Form N-1A filed November 15, 1993.
3 -Not Applicable.
4(a) - Investment Advisory Contract by and among BZW Barclays Global
Fund Advisors and Master Investment Portfolio dated January 1, 1996, on behalf
of the LifePath 2000 Master Portfolio, incorporated by reference to Amendment
No. 3 to the Registration Statement, filed January 5, 1996.
4(b) - Investment Advisory Contract by and among BZW Barclays Global
Fund Advisors and Master Investment Portfolio dated January 1, 1996, on behalf
of the LifePath 2010 Master Portfolio, incorporated by reference to Amendment
No. 3 to the Registration Statement, filed January 5, 1996.
4(c) - Investment Advisory Contract by and among BZW Barclays Global
Fund Advisors and Master Investment Portfolio dated January 1, 1996, on behalf
of the LifePath 2020 Master Portfolio, incorporated by reference to Amendment
No. 3 to the Registration Statement, filed January 5, 1996.
4(d) - Investment Advisory Contract by and among BZW Barclays Global
Fund Advisors and Master Investment Portfolio dated January 1, 1996, on behalf
of the LifePath 2030 Master Portfolio, incorporated by reference to Amendment
No. 3 to the Registration Statement, filed January 5, 1996.
4(e) - Investment Advisory Contract by and among BZW Barclays Global
Fund Advisors and Master Investment Portfolio dated January 1, 1996, on behalf
of the LifePath 2040 Master Portfolio, incorporated by reference to Amendment
No. 3 to the Registration Statement, filed January 5, 1996.
4(f) - Investment Advisory Contract by and among BZW Barclays Global
Fund Advisors and Master Investment Portfolio dated January 1, 1996, on behalf
of the Bond Index Master Portfolio, incorporated by reference to Amendment No. 3
to the Registration Statement, filed January 5, 1996.
4(g) - Investment Advisory Contract by and among BZW Barclays Global
Fund Advisors and Master Investment Portfolio dated January 1, 1996, on behalf
of the Asset Allocation Master Portfolio, incorporated by reference to Amendment
No. 3 to the Registration Statement, filed January 5, 1996.
4(h) - Investment Advisory Contract by and among BZW Barclays Global
Fund Advisors and Master Investment Portfolio dated January 1, 1996, on behalf
of the S&P 500 Index Master Portfolio, incorporated by reference to Amendment
No. 3 to the Registration Statement, filed January 5, 1996.
4(i) - Investment Advisory Contract by and among BZW Barclays Global
Fund Advisors and Master Investment Portfolio dated January 1, 1996, on behalf
of the U.S. Treasury Allocation Master Portfolio, incorporated by reference to
Amendment No. 3 to the Registration Statement, filed January 5, 1996.
4(j) - Investment Advisory Contract by and among Barclays Global Fund
Advisors and Master Investment Portfolio dated June 11, 1998, on behalf of the
Money Market Master Portfolio, incorporated by reference to Amendment No. 9 to
the Registration Statement, filed February 22, 1999.
4(k) - Investment Advisory Contract by and among Barclays Global Fund
Advisors and Master Investment Portfolio dated October 28, 1998, on behalf of
the Extended Index Master Portfolio, incorporated by reference to Amendment No.
9 to the Registration Statement, filed February 22, 1999.
4(l) - Investment Advisory Contract by and among Barclays Global Fund
Advisors and Master Investment Portfolio dated October 28, 1998, on behalf of
the U.S. Equity Index Master Portfolio, incorporated by reference to Amendment
No. 9 to the Registration Statement, filed February 22, 1999.
4(m) - Investment Advisory Contract by and among Barclays Global Fund
Advisors and Master Investment Portfolio dated September 27, 1999, on behalf of
the International Index Master Portfolio, filed herewith.
5 - Placement Agency Agreement with Stephens Inc. dated February 25, 1994
on behalf of each Master Portfolio, filed herewith.
7 - Custody Agreement with Investors Bank & Trust, N.A. dated October
21, 1996 on behalf of each Master Portfolio, filed herewith.
8(a) -Co-Administration Agreement with Stephens Inc. and Barclays Global
Investors, N.A. dated October 21, 1996 on behalf of each Master Portfolio,
filed herewith.
8(b) - Sub-Administration Agreement with Investors Bank & Trust and
Barclays Global Investors, N.A. dated October 21, 1996 on behalf of each Master
Portfolio, incorporated by reference to Amendment No. 9 to the Registration
Statement, filed February 22, 1999.
8(c) - Third Party Feeder Fund Agreement with Massmutual Institutional
Funds and Massachusetts Mutual Life Insurance Company dated February 27, 1998,
incorporated by reference to Amendment No. 6 to the Registration Statement,
filed June 30, 1998.
8(d) - Third Party Feeder Fund Agreement by and among Strong Equity
Funds, Inc., Strong Funds Distributors, Inc. and Master Investment Portfolio
dated April 25, 1997, incorporated by reference to Amendment No. 7 to the
Registration Statement, filed August 31, 1998.
8(e) - Third Party Feeder Fund Agreement by and among Hewitt Series
Funds, Hewitt Services LLC and Master Investment Portfolio dated September 1,
1998, incorporated by reference to Amendment No. 10 of the Registration
Statement, filed June 30, 1999.
8(f) - Third Party Feeder Fund Agreement by and among Diversified
Investors Stock Index Fund, Diversified Investors Securities Corporation and
Master Investment Portfolio dated March 1, 1999, incorporated by reference to
Amendment No. 10 of the Registration Statement, filed June 30, 1999.
8(g) - Third Party Feeder Fund Agreement by and among E*Trade Funds,
E*Trade Securities and Master Investment Portfolio dated February 3, 1999,
incorporated by reference to Amendment No. 10 of the Registration Statement,
filed June 30, 1999.
8(h) - Third Party Feeder Fund Agreement by and among Vantagepoint
Funds, ICMA - RC Services, LLC and Master Investment Portfolio dated March 1,
1999, incorporated by reference to Amendment No. 10 of the Registration
Statement, filed June 30, 1999.
8(i) - Third Party Feeder Fund Agreement by and among INTRUST SERIES
TRUST, BISYS Fund Services, BISYS Fund Services, Inc., INTRUST Bank, N.A.,
Investors Bank & Trust Company and Master Investment Portfolio dated December
21, 1998, incorporated by reference to Amendment No. 10 of the Registration
Statement, filed June 30, 1999.
9 -Not Applicable.
10 -Not Applicable
11 -Not Applicable.
12 -Not Applicable.
13 - Distribution Plan on behalf of the LifePath Master Portfolios,
incorporated by reference to Amendment No. 3 to the Registration Statement,
filed January 5, 1996.
14 - Financial Data Schedules for the fiscal period ended February 28,
1999, incorporated by reference to the Form N-SAR, filed on April 28, 1999.
15 -Not Applicable
19 - Powers of Attorney for Jack S. Euphrat, R. Greg Feltus and W. Rodney
Hughes, incorporated by reference to Amendment No. 5 to the Registration
Statement, filed June 30, 1997.
Item 24. Persons Controlled by or Under Common Control with Registrant
No person is controlled by or under common control with the
Registrant.
Item 25. Indemnification
Reference is made to Article IX of the Registrant's Declaration of
Trust. The application of these provisions is limited by Article 10 of the
Registrant's By-Laws and by the following undertaking set forth in the rules
promulgated by the Securities and Exchange Commission:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in such Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a trustee, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in such Act and will
be governed by the final adjudication of such issue.
Item 26. (a) Business and Other Connections of Investment Adviser
The Master Portfolios are advised by Barclays Global Fund
Advisors ("BGFA"), a wholly-owned subsidiary of Barclays Global Investors, N.A.
("BGI"). BGFA's business is that of a registered investment 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 substantial
responsibilities as directors and/or officers of BGI. To the knowledge of the
Registrant, except as set forth below, none of the directors or executive
officers of BGFA is or has been at any time during the past two fiscal years
engaged in any other business, profession, vocation or employment of a
substantial nature.
<TABLE>
<CAPTION>
Name and Position Principal Business(es) During at
at BGFA Least the Last Two Fiscal Years
<S> <C>
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 45 Fremont Street, San
Francisco, CA 94105 Managing Director and
Principal Accounting Officer at Bankers
Trust Company from 1988 - 1997 505 Market
Street, San Francisco, CA 94111
</TABLE>
Item 27. Principal Underwriters
(a) Stephens Inc., placement agent 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,
Barclays Global Investors 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, all of which are registered
open-end management investment companies.
(b) Information with respect to each director and officer of the
principal underwriter is incorporated by reference to Form ADV and Schedules A
and D filed by Stephens Inc. with the Securities and Exchange Commission
pursuant to the Investment Advisors Act of 1940 (File No. 501-15510).
(c) Not Applicable
Item 28. Location of Accounts and Records
(a) The Registrant maintains accounts, books and other documents
required by Section 31(a) of the Investment Company Act of 1940 and the rules
thereunder (collectively, "Records") at the offices of Stephens Inc., 111 Center
Street, Little Rock, Arkansas 72201.
(b) BGFA and BGI maintain all Records relating to their services
as adviser and co-administrator, respectively, at 45 Fremont Street, San
Francisco, California 94105.
(c) Stephens maintains all Records relating to its services as
sponsor, co- administrator and distributor 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 29. Management Services
Other than as set forth under the captions "Item 6, Management,
Organization and Capital Structure" in Part A of this Registration Statement,
and "Item 13, Management of the Trust" and "Item 15, Investment Advisory and
Other Services" in Part B of this Registration Statement, Registrant is not a
party to any management-related service contract.
Item 30. Undertakings
Not applicable.
<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 28th day of
Septeber, 1999.
MASTER INVESTMENT PORTFOLIO
By /s/ Richard H. Blank, Jr._
(Richard H. Blank, Jr.)
Secretary and Treasurer
(Principal Financial Officer)
<TABLE>
<CAPTION>
Signature Title
<S> <C>
* Trustee, Chairman and President
(R. Greg Feltus) (Principal Executive Officer)
/s/ Richard H. Blank, Jr. Secretary and Treasurer
(Richard H. Blank, Jr.) (Principal Financial Officer)
* Trustee
(Jack S. Euphrat)
* Trustee
(W. Rodney Hughes)
*By: /s/ Richard H. Blank, Jr.
Richard H. Blank, Jr.
As Attorney-in-Fact
September 28, 1999
</TABLE>
<PAGE>
MASTER INVESTMENT PORTFOLIO
File No. 811-8162
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
<S> <C>
EX-99.B4(m) o Investment Advisory Contract for the International Index Master Portfolio
EX-99.B5 o Placement Agency Agreement
EX-99.B7 o Custody Agreement
EX-99.B8(a) o Co-Administration Agreement
</TABLE>
INVESTMENT ADVISORY CONTRACT
MASTER INVESTMENT PORTFOLIO
111 Center Street
Little Rock, Arkansas 72201
September 27, 1999
Barclays Global Fund Advisors
45 Fremont Street
San Francisco, California 94105
Dear Sirs:
This will confirm the agreement between Master Investment Portfolio
(the "Trust") on behalf of the International Index Master Portfolio (the "Master
Portfolio") and Barclays Global Fund Advisors (the "Adviser") as follows:
1. The Trust is a registered open-end management investment company currently
consisting of thirteen investment portfolios, but which may from time to time
consist of a greater or lesser number of investment portfolios (the "Master
Portfolios"). The International Index Master Portfolio is one of the thirteen
Master Portfolios. The Trust proposes to engage in the business of investing and
reinvesting the assets of the Master Portfolio in the manner and in accordance
with the investment objective and restrictions specified in the Trust's
Registration Statement, as amended from time to time (the "Registration
Statement"), filed by the Trust under the Investment Company Act of 1940 (the
"Act"). Copies of the Registration Statement have been furnished to the Adviser.
Any amendments to the Registration Statement shall be furnished to the Adviser
promptly.
2. The Trust is engaging the Adviser to manage the investing and reinvesting of
the Master Portfolio's assets and to provide the advisory services specified
elsewhere in this contract to the Master Portfolio, subject to the overall
supervision of the Board of Trustees of the Trust.
3. (a) The Adviser shall make investments for the account of the Master
Portfolio in accordance with the Adviser's best judgment and consistent with the
investment objective and restrictions set forth in the Trust's Registration
Statement, the Act and the provisions of the Internal Revenue Code of 1986
relating to regulated investment companies, subject to policy decisions adopted
by the Trust's Board of Trustees. The Adviser shall advise the Trust's officers
and Board of Trustees, at such times as the Trust's Board of Trustees may
specify, of investments made for the Master Portfolio and shall, when requested
by the Trust's officers or Board of Trustees, supply the reasons for making
particular investments.
(b) The Adviser shall provide to the Trust investment guidance
and policy direction in connection with its daily management of the Master
Portfolio's assets, including oral and written research, analysis, advice,
statistical and economic data and information and judgments, and shall furnish
to the Trust's Board of Trustees periodic reports on the investment strategy and
performance of the Master Portfolio and such additional reports and information
as the Trust's Board of Trustees and officers shall reasonably request.
(c) The Adviser shall pay the costs of printing and distributing
all materials relating to the Master Portfolio prepared by it, or prepared at
its request, other than such costs relating to proxy statements, Part As,
reports for holders of beneficial interests of the Master Portfolio
("Interestholders") and other materials distributed to existing or prospective
Interestholders on behalf of the Master Portfolio.
(d) The Adviser shall, at its expense, employ or associate with
itself such persons as the Adviser believes appropriate to assist it in
performing its obligations under this contract.
4. The Trust understands that the Adviser, in rendering its services to the
Master Portfolio hereunder, may delegate certain advisory responsibilities
hereunder to a sub-adviser (the "Sub-Adviser"), provided that the Adviser shall
continue to supervise and monitor the performance of the duties delegated to the
Sub-Adviser and provided that any such delegation will not relieve the Adviser
of its duties and obligations under this contract. The Adviser will not seek to
amend any such Sub-Advisory Contract to materially alter the obligations of the
parties unless the Adviser gives the Trust at least 60 days' prior written
notice thereof.
5. The Adviser shall give the Trust and the Master Portfolio the benefit of the
Adviser's best judgment and efforts in rendering services under this contract.
As an inducement to the Adviser's undertaking to render these services, the
Trust agrees that the Adviser shall not be liable under this contract for any
mistake in judgment or in any other event whatsoever except for lack of good
faith, provided that nothing in this contract shall be deemed to protect or
purport to protect the Adviser against any liability to the Trust or its
Interestholders to which the Adviser would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of the
Adviser's duties under this contract or by reason of reckless disregard of its
obligations and duties hereunder.
6. In consideration of the services to be rendered by the Adviser under this
contract, the Trust shall pay the Adviser a monthly fee on the first business
day of each month, at the annual rate of 0.15% of the first $1 billion, and
0.10% thereafter, of the average daily value (as determined on each day that
such value is determined for the Master Portfolio at the time set forth in the
Registration Statement for determining net asset value per share) of the Master
Portfolio's net assets during the preceding month. If the fee payable to the
Adviser pursuant to this paragraph 6 begins to accrue after the beginning of any
month or if this contract terminates before the end of any month, the fee for
the period from the effective date to the end of that month or from the
beginning of that month to the termination date, respectively, shall be prorated
according to the proportion that the period bears to the full month in which the
effectiveness or termination occurs. For purposes of calculating each such
monthly fee, the value of the Master Portfolio's net assets shall be computed in
the manner specified in the Registration Statement and the Trust's Agreement and
Declaration of Trust for the computation of the value of the Master Portfolio's
net assets in connection with the determination of the net asset value of Master
Portfolio interests.
7. If in any fiscal year the aggregate expenses of the Master Portfolio
(including fees pursuant to this contract, but excluding interest, taxes,
brokerage and, with the prior written consent of the necessary state securities
commissions, extraordinary expenses) exceed the expense limitation of any state
having jurisdiction over the Master Portfolio, the Trust may deduct from the
fees to be paid hereunder, or the Adviser will bear, such excess expense to the
extent required by state law. The Adviser's obligation pursuant hereto will be
limited to the amount of the Adviser's fees hereunder. For purposes of computing
the excess, if any, over the most restrictive applicable expense limitation, the
value of the Master Portfolio's net assets shall be computed in the manner
specified in the last sentence of paragraph 6, and any reimbursements required
to be made by the Adviser shall be made once a year promptly after the end of
the Master Portfolio's fiscal year.
8. This contract shall become effective on its execution date and shall
thereafter continue in effect for a period of more than two years from the date
hereof only so long as the continuance is specifically approved at least
annually (a) by the vote a majority of the Master Portfolio's outstanding voting
securities (as defined in the Act) or by the Trust's Board of Trustees and (b)
by the vote, cast in person at a meeting called for the purpose, of a majority
of the Trust's trustees who are not parties to this contract or "interested
persons" (as defined in the Act) of any such party. This contract may be
terminated at any time by the Trust without the payment of any penalty, by a
vote of a majority of the Master Portfolio's outstanding voting securities (as
defined in the Act) or by a vote of a majority of the Trust's entire Board of
Trustee's on 60 days' written notice to the Adviser or by the Adviser on 60
days' written notice to the Trust. This contract shall terminate automatically
in the event of its assignment (as defined in the Act).
9. Except to the extent necessary to perform the Adviser's obligations under
this contract, nothing herein shall be deemed to limit or restrict the right of
the Adviser, or any affiliate of the Adviser, or any employee of the Adviser, to
engage in any other business or to devote time and attention to the management
or other aspects of any other business, whether of a similar or dissimilar
nature, or to render services of any kind to any other corporation, firm,
individual or association.
10. This contract shall be governed by and construed in accordance with the laws
of the State of California.
11. This contract has been executed on behalf of the Trust by the undersigned
officer of the Trust in his capacity as an officer of the Trust. The obligations
of this contract shall only be binding upon the assets and property of the
Master Portfolio, as provided for in the Trust's Agreement and Declaration of
Trust, and shall not be binding upon any Trustee, officer or Interestholder of
the Trust or Master Portfolio individually.
If the foregoing correctly sets forth the agreement between the
Trust and the Adviser, please so indicate by signing and returning to the Trust
the enclosed copy hereof.
Very truly yours,
MASTER INVESTMENT PORTFOLIO
on behalf of the International Index Master Portfolio
_/s/_Richard_H._Blank___
Richard H. Blank, Jr.
Chief Operating Officer
ACCEPTED as of the date set forth above:
BARCLAYS GLOBAL FUND ADVISORS
By: __/s/_Julia LeSage______
Name: ______Julia LeSage_____
Title: ______Principal_____
By: ___/s/__Lee Kranefuss___
Name: ________Lee Kranefuss___
Title:_____Managing Director_____
PLACEMENT AGENCY AGREEMENT
MASTER INVESTMENT PORTFOLIO
111 Center Street
Little Rock, Arkansas 72201
February 25, 1994
Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
Dear Sirs:
This is to confirm that, in consideration of the agreements
hereinafter contained, the undersigned, Master Investment Portfolio, a Delaware
business trust (the "Master Portfolio") consisting of the portfolios named on
Schedule 1 hereto, as such Schedule may be revised from time to time (each, a
"Master Series"), has agreed that you shall be, for the period of this
Agreement, the exclusive placement agent for shares of beneficial interest of
each Master Series.
1. You will act as agent for the private placement of shares of
each Master Series covered by, and in accordance with, the registration
statement and prospectus then in effect under the Investment Company Act of
1940, as amended, and will transmit promptly any orders received by you for
purchase or redemption of shares of a Master Series to the Transfer and Dividend
Disbursing Agent for the Master Portfolio of which the Master Portfolio has
notified you in writing. All orders from you shall be subject to acceptance and
confirmation by the Master Portfolio.
2. You shall act as exclusive placement agent for each Master
Series' shares in compliance with all applicable laws, rules and regulations,
including, without limitation, all rules and regulations made or adopted
pursuant to the Investment Company Act of 1940, as amended, by the Securities
and Exchange Commission or any securities association registered under the
Securities Exchange Act of 1934, as amended.
3. Whenever in their judgment such action is warranted by market,
economic or political conditions, or by abnormal circumstances of any kind, the
Master Portfolio's officers may decline to accept any orders for, or make any
sales of, any of the Master Series' shares until such time as they deem it
advisable to accept such orders and to make such sales and the Master Portfolio
shall advise you promptly of such determination.
4. Ownership of Master Series shares sold hereunder shall be
registered in such names and denominations as are specified in writing to the
Master Portfolio or to its agent designated for the purpose. No certificates for
shares of the Master Series will be issued.
5. The Master Portfolio agrees to pay all expenses in connection
with maintaining facilities for the issue and transfer of the Master Series'
shares and for supplying information, prices and other data to be furnished by
the Master Portfolio hereunder, and all expenses in connection with preparing
and printing the Master Portfolio's prospectuses and statements of additional
information for regulatory purposes and for distribution to shareholders;
provided, however, that nothing contained herein shall be deemed to require the
Master Portfolio to pay any of the costs of advertising the sale of the Master
Series' shares. You shall pay all other expenses incurred by you in connection
with the sale of the Master Series' shares as contemplated in this agreement.
6. All shares offered for sale and sold by you shall be offered
for sale and sold by you to investors at the price per share (the "offering
price," which is the net asset value per share) specified and determined as
provided in the prospectus relating to the offering of relevant Master Series'
shares for sale. If the offering price is not an exact multiple of one cent, it
shall be adjusted to the nearest full cent. The Master Portfolio shall determine
and furnish promptly to you a statement of the offering price at least once on
each day on which the prospectus states the Master Portfolio is required to
determine the relevant Master Series' net asset value for the purpose of pricing
purchase orders. Each offering price shall become effective at the time and
shall remain in effect during the period specified in the statement. Each such
statement shall show the basis of its computation. For purposes of establishing
the offering price, the Master Portfolio shall consider a purchase order to have
been presented to it at the time it was originally entered by you for
transmission to it, provided the original purchase order and your fulfilling
order to the Master Portfolio are appropriately time stamped or evidenced to
show the time of original entry and that your fulfilling order to the Master
Portfolio is received by the Master Portfolio within a time deemed by it to be
reasonable after the purchase order was originally entered. Purchases of shares
shall be made for full and fractional shares, carried to the third decimal
place.
7. The Master Portfolio shall furnish you from time to time, for
use in connection with the sale of the Master Series' shares, such information
with respect to the Master Portfolio and the Master Series' shares as you may
reasonably request, all of which shall be signed by one or more of the Master
Portfolio's duly authorized officers; and the Master Portfolio warrants that the
statements contained in any such information, when so signed by the Master
Portfolio's officers, shall be true and correct. The Master Portfolio also shall
furnish you with copies of its reports to shareholders and such additional
information regarding a Master Series' financial condition as you may reasonably
request from time to time.
8. The Master Portfolio represents to you that all registration
statements and prospectuses filed by the Master Portfolio with the Securities
and Exchange Commission under the Investment Company Act of 1940, as amended,
with respect to the Master Series' shares have been carefully prepared in
conformity with the requirements of said Act and rules and regulations of the
Securities and Exchange Commission thereunder. As used in this agreement the
terms "registration statement" and "prospectus" shall mean any registration
statement and prospectus, including the statement of additional information
incorporated by reference therein, filed with the Securities and Exchange
Commission and any amendments and supplements thereto which at any time shall
have been filed with said Commission. The Master Portfolio represents and
warrants to you that any registration statement and prospectus, when such
registration statement becomes effective, will contain all statements required
to be stated therein in conformity with said Act and the rules and regulations
of said Commission; that all statements of fact contained in any such
registration statement and prospectus will be true and correct when such
registration statement becomes effective; and that neither any registration
statement nor any prospectus when such registration statement becomes effective
will include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading. The Master Portfolio may but shall not be obligated to propose
from time to time such amendment or amendments to any registration statement and
such supplement or supplements to any prospectus as, in the light of future
developments, may, in the opinion of the Master Portfolio's counsel, be
necessary or advisable. If the Master Portfolio shall not propose such amendment
or amendments and/or supplement or supplements within fifteen days after receipt
by the Master Portfolio of a written request from you to do so, you may, at your
option, terminate this agreement or decline to make offers of the Master Series'
securities until such amendments are made. The Master Portfolio shall not file
any amendment to any registration statement or supplement to any prospectus
without giving you reasonable notice thereof in advance; provided, however, that
nothing contained in this agreement shall in any way limit the Master
Portfolio's right to file at any time such amendments to any registration
statement and/or supplements to any prospectus, of whatever character, as the
Master Portfolio may deem advisable, such right being in all respects absolute
and unconditional.
9. The Master Portfolio authorizes you to use any prospectus in
the form furnished to you from time to time, in connection with the sale of the
Master Series' shares. The Master Portfolio agrees to indemnify, defend and hold
you, your several officers and directors, and any person who controls you within
the meaning of Section 15 of the Securities Act of 1933, as amended, free and
harmless from and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which you,
your officers and directors, or any such controlling person, may incur under the
Securities Act of 1933, as amended, or under common law or otherwise, arising
out of or based upon any untrue statement, or alleged untrue statement, of a
material fact contained in any registration statement or any prospectus or
arising out of or based upon any omission, or alleged omission, to state a
material fact required to be stated in either any registration statement or any
prospectus or necessary to make the statements in either thereof not misleading;
provided, however, that the Master Portfolio's agreement to indemnify you, your
officers or directors, and any such controlling person shall not be deemed to
cover any claims, demands, liabilities or expenses arising out of any untrue
statement or alleged untrue statement or omission or alleged omission made in
any registration statement or prospectus in reliance upon and in conformity with
written information furnished to the Master Portfolio by you specifically for
use in the preparation thereof. The Master Portfolio's agreement to indemnify
you, your officers and directors, and any such controlling person, as aforesaid,
is expressly conditioned upon the Master Portfolio's being notified of any
action brought against you, your officers or directors, or any such controlling
person, such notification to be given by letter or by telegram addressed to the
Master Portfolio at its office in San Francisco, California within ten days
after the summons or other first legal process shall have been served. The
failure so to notify the Master Portfolio of any such action shall not relieve
the Master Portfolio from any liability which the Master Portfolio may have to
the person against whom such action is brought by reason of any such untrue, or
alleged untrue, statement or omission, or alleged omission, otherwise than on
account of the Master Portfolio's indemnity agreement contained in this
paragraph 9. The Master Portfolio will be entitled to assume the defense of any
suit brought to enforce any such claim, demand or liability, but, in such case,
such defense shall be conducted by counsel of good standing chosen by the Master
Portfolio and approved by you. In the event the Master Portfolio elects to
assume the defense of any such suit and retain counsel of good standing approved
by you, the defendant or defendants in such suit shall bear the fees and
expenses of any additional counsel retained by any of them; but in case the
Master Portfolio does not elect to assume the defense of any such suit, or in
case you do not approve of counsel chosen by the Master Portfolio, the Master
Portfolio will reimburse you, your officers and directors, or the controlling
person or persons named as defendant or defendants in such suit, for the fees
and expenses of any counsel retained by you or them. The Master Portfolio's
indemnification agreement contained in this paragraph 9 and the Master
Portfolio's representations and warranties in this agreement shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of you, your officers and directors, or any controlling person, and
shall survive the delivery of any of the Master Series' shares. This agreement
of indemnity will inure exclusively to your benefit, to the benefit of your
several officers and directors, and their respective estates, and to the benefit
of any controlling persons and their successors. The Master Portfolio agrees
promptly to notify you of the commencement of any litigation or proceedings
against the Master Portfolio or any of its officers or Trustees in connection
with the issue and sale of any of the Master Series' shares.
10. You agree to indemnify, defend and hold the Master Portfolio,
its several officers and Trustees, and any person who controls the Master
Portfolio within the meaning of Section 15 of the Securities Act of 1933, as
amended, free and harmless from and against any and all claims, demands,
liabilities and expenses (including the cost of investigating or defending such
claims, demands or liabilities and any counsel fees incurred in connection
therewith) which the Master Portfolio, its officers or Trustees, or any such
controlling person, may incur under the Securities Act of 1933, as amended, or
under common law or otherwise, but only to the extent that such liability or
expense incurred by the Master Portfolio, its officers or Trustees, or such
controlling person resulting from such claims or demands, shall arise out of or
be based upon (a) any untrue, or alleged untrue, statement of a material fact
contained in information furnished in writing by you to the Master Portfolio
specifically for use in the Master Portfolio's registration statement and used
in the answers to any of the items of the registration statement or in the
corresponding statements made in the prospectus, or shall arise out of or be
based upon any omission, or alleged omission, to state a material fact in
connection with such information furnished in writing by you to the Master
Portfolio and required to be stated in such answers or necessary to make such
information not misleading or (b) any act or omission or alleged act or omission
on your part as the Master Portfolio's agent that has not been expressly
authorized by the Master Portfolio in writing. Your agreement to indemnify the
Master Portfolio, its officers and Trustees, and any such controlling person, as
aforesaid, is expressly conditioned upon your being notified of any action
brought against the Master Portfolio, its officers or Trustees, or any such
controlling person, such notification to be given by letter or telegram
addressed to you at your principal office in Little Rock, Arkansas within ten
days after the summons or other first legal process shall have been served. You
shall have the right to control the defense of such action, with counsel of your
own choosing, satisfactory to the Master Portfolio, if such action is based
solely upon such alleged misstatement or omission on your part, and in any other
event the Master Portfolio, its officers or Trustees or such controlling person
shall each have the right to participate in the defense or preparation of the
defense of any such action. The failure so to notify you of any such action
shall not relieve you from any liability which you may have to the Master
Portfolio, its officers or Trustees, or to such controlling person by reason of
any such untrue, or alleged untrue, statement or omission, or alleged omission,
otherwise than on account of your indemnity agreement contained in this
paragraph 10.
11. None of the Master Series' shares shall be offered by either
you or the Master Portfolio under any of the provisions of this agreement and no
orders for the purchase or sale of such shares hereunder shall be accepted by
the Master Portfolio if and so long as the effectiveness of the registration
statement then in effect or any necessary amendments thereto shall be suspended
under any of the provisions of the Investment Company Act of 1940, as amended;
provided, however, that nothing contained in this paragraph 11 shall in any way
restrict or have an application to or bearing upon the Master Portfolio's
obligation to repurchase any of the Master Series' shares from any shareholder
in accordance with the provisions of the Master Portfolio's prospectus or
Declaration of Trust.
12. The Master Portfolio agrees to advise you immediately in
writing:
(a) of any request by the Securities and Exchange Commission for
amendments to the registration statement or prospectus then in effect or
for additional information;
(b) in the event of the issuance by the Securities and Exchange
Commission of any stop order suspending the effectiveness of the
registration statement or prospectus then in effect or the initiation of
any proceeding for that purpose;
(c) of the happening of any event which makes untrue any statement
of a material fact made in the registration statement or prospectus then
in effect or which requires the making of a change in such registration
statement or prospectus in order to make the statements therein not
misleading; and
(d) of all actions of the Securities and Exchange Commission with
respect to any amendments to any registration statement or prospectus
which may from time to time be filed with the Securities and Exchange
Commission.
13. Insofar as they concern the Master Portfolio, the Master
Portfolio shall comply with all applicable laws, rules and regulations,
including, without limiting the generality of the foregoing, all rules or
regulations made or adopted pursuant to the Securities Act of 1933, as amended,
the Investment Company Act of 1940, as amended, or by any securities association
registered under the Securities Exchange Act of 1934, as amended.
14. You may, if you desire and at your own cost and expense,
appoint or employ agents to assist you in carrying out your obligations under
this agreement, but no such appointment or employment shall relieve you of any
of your responsibilities or obligations to the Master Portfolio under this
agreement.
15. As to each Master Series, subject to the provisions of
Paragraph 8, this agreement shall continue until the date set forth opposite
such Master Series' name on Schedule 1 hereto (the "Reapproval Date"), and
thereafter shall continue automatically for successive annual periods ending on
the day of each year set forth opposite such Master Series' name on Schedule 1
hereto (the "Reapproval Day"), provided such continuance is specifically
approved at least annually by (i) the Master Portfolio's Board of Trustees or
(ii) vote of a majority (as defined in the Investment Company Act of 1940, as
amended) of the Master Portfolio's outstanding voting securities, provided that
in either event its continuance also is approved by a majority of the Master
Portfolio's trustees who are not "interested persons" (as defined in said Act)
of any party to this agreement, by vote cast in person at a meeting called for
the purpose of voting on such approval. This agreement is terminable without
penalty, on 60 days' notice, by vote of holders of a majority of the Master
Portfolio's shares, and, as to each Master Series, by the Master Portfolio's
Board of Trustees or by you. This agreement also will terminate automatically,
as to the relevant Master Series, in the event of its assignment (as defined in
said Act).
16. This agreement has been executed on behalf of the Master
Portfolio by the undersigned officer of the Master Portfolio in his capacity as
an officer of the Master Portfolio. The obligations of this agreement shall only
be binding upon the assets and property of the relevant Master Series, as
provided for in the Master Portfolio's Agreement and Declaration of Trust, and
shall not be binding upon any Trustee, officer or shareholder of the Master
Portfolio or Master Series individually.
Please confirm that the foregoing is in accordance with your
understanding and indicate your acceptance hereof by signing below, whereupon it
shall become a binding agreement between us.
Very truly yours,
MASTER INVESTMENT PORTFOLIO
By: /s/ Richard H. Blank, Jr.
Name: Richard H. Blank, Jr.
Title: Chief Operating Officer
ACCEPTED:
STEPHENS INC.
By: /s/ Richard H. Blank, Jr.
Name: Richard H. Blank, Jr.
Title: Vice President
<PAGE>
SCHEDULE 1
Name of Master Series
LifePath 2000 Master Series
LifePath 2010 Master Series
LifePath 2020 Master Series
LifePath 2030 Master Series
LifePath 2040 Master Series
Asset Allocation Master Series
Bond Index Master Series
Money Market Master Series
S & P 500 Index Master Series
U.S. Treasury Allocation Master Series
Extended Index Master Series
U.S. Equity Index Master Series
International Index Master Series
Dated: February 25, 1998
Approved as amended: October 28, 1998 to include the Extended
Index and U.S. Equity Index Master Series
Approved as amended: July 28, 1999 to include the International Index
Master Series
<PAGE>
CUSTODY AGREEMENT
between
MASTER INVESTMENT PORTFOLIO
and
INVESTORS BANK & TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. Bank Appointed Custodian.........................................................................
2. Definitions......................................................................................
2.1 Authorized Person.....................................................................
2.2 Board.................................................................................
2.3 Security..............................................................................
2.4 Portfolio Security....................................................................
2.5 Officer's Certificate.................................................................
2.6 Book-Entry System.....................................................................
2.7 Depository............................................................................
2.8 Proper Instructions...................................................................
2.9 Foreign Securities....................................................................
2.8 Performance Calculations .............................................................
3. Separate Accounts................................................................................
4. Certification as to Authorized Persons...........................................................
5. Custody of Cash..................................................................................
5.1 Purchase of Securities................................................................
5.2 Redemptions...........................................................................
5.3 Distributions and Expenses of the Master Portfolios...................................
5.4 Payment in Respect of Securities......................................................
5.5 Repayment of Loans....................................................................
5.6 Repayment of Cash
5.7 Foreign Exchange Transactions.........................................................
5.8 Other Authorized Payments.............................................................
5.9 Termination...........................................................................
6. Securities
6.1 Segregation and Registration..........................................................
6.2 Voting and Proxies....................................................................
6.3 Corporate Action......................................................................
6.4 Book-Entry System.....................................................................
6.5 Use of a Depository...................................................................
6.6 Use of Book-Entry System for Commercial Paper.........................................
6.7 Use of Immobilization Programs........................................................
6.8 Eurodollar CDs........................................................................
6.9 Options and Futures Transactions......................................................
6.10 Segregated Account....................................................................
6.11 Interest Bearing Call or Time Deposits................................................
6.12 Transfer of Securities
7. Redemptions......................................................................................
8. Merger, Dissolution, etc. of the Trust or a Master Portfolio.....................................
9. Actions of the Bank Without Prior Authorization..................................................
10. Collections and Defaults.........................................................................
11. Maintenance of Records and Accounting Services..................................................
12. Master Portfolio Evaluation and Performance Calculation..........................................
12.1 Master Portfolio Evaluation...........................................................
12.2 Performance Calculation...............................................................
13. Concerning the Bank..............................................................................
13.1 Bank Warranty.........................................................................
13.2 Standards of Care and Performance of Duties...........................................
13.3 Agents and Sub-custodians with Respect to Property
of the Master Portfolios Held in the United States....................................
13.4 Duties of the Bank with Respect to Property
Held Outside of the United States
13.5 Insurance.............................................................................
13.6 Fees and Expenses of Bank.............................................................
13.7 Advances by Bank......................................................................
14. Termination......................................................................................
15. Confidentiality..................................................................................
16. Notices..........................................................................................
17. Amendments.......................................................................................
18. Parties..........................................................................................
19. Governing Law....................................................................................
20. Counterparts.....................................................................................
21. Limitations of Liability.........................................................................
22. Single Agreement.................................................................................
</TABLE>
<PAGE>
CUSTODY AGREEMENT
..................AGREEMENT made as of this 21st day of October, 1996, between
MASTER INVESTMENT PORTFOLIO, a Delaware business trust (the "Trust"), and
INVESTORS BANK & TRUST COMPANY (the "Bank" or, at times, "IBT").
The Trust, an open-end management investment company registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), on behalf of
the individual Master Portfolios listed on Schedule A hereto, as such Schedule
may be amended from time to time, desires to place and maintain all of the
Master Portfolios' portfolio securities and other assets including cash in the
custody of the Bank, and the Bank has indicated its willingness to so act,
subject to the terms and conditions of this Agreement.
.........NOW, THEREFORE, in consideration of the premises and of the
mutual agreements contained herein, the parties hereto agree as follows:
1. Bank Appointed Custodian. The Trust hereby appoints the Bank as
custodian of the Master Portfolios' portfolio securities and cash delivered to
the Bank as hereinafter described, and the Bank agrees to act as such upon the
terms and conditions hereinafter set forth.
2. Definitions. Whenever used herein, the terms listed below will
have the following meanings:
2.1 Authorized Person. Authorized Person will mean any of the
persons duly authorized to give Proper Instructions or otherwise act on behalf
of the Trust and its Master Portfolios by appropriate resolution of the Board of
Trustees of the Trust, and set forth in a certificate as required by Section 4
hereof.
2.2 Board. Board will mean the Trust's Board of Trustees .
2.3 Security. The term security as used herein will have the
same meaning as when such term is used in the Securities Act of 1933, as amended
(the "1933 Act"), including, without limitation, any note, stock, treasury
stock, bond, debenture, evidence of indebtedness, certificate of interest or
participation in any profit sharing agreement, collateral-trust certificate,
preorganization certificate or subscription, transferable share, investment
contract, voting-trust certificate, certificate of deposit for a security,
fractional undivided interest in oil, gas, or other mineral rights, any put,
call, straddle, option, or privilege on any security, certificate of deposit, or
group or index of securities (including any interest therein or based on the
value thereof), or any put, call, straddle, option, or privilege entered into on
a national securities exchange relating to a foreign currency, or, in general,
any interest or instrument commonly known as a "security", or any certificate of
interest or participation in, temporary or interim certificate for, receipt for,
guarantee of, or warrant or right to subscribe to, or option contract to
purchase or sell any of the foregoing, and futures, forward contracts and
options thereon.
2.4 Portfolio Security. Portfolio Security will mean any
security owned by a Master Portfolio of the Trust.
------------------
2.5 Officer's Certificate. Officer's Certificate will mean,
unless otherwise indicated, any request, direction, instruction, or
certification in writing signed by an Authorized Person of the Trust.
2.6 Book-Entry System. Book-Entry System shall mean the Federal
Reserve-Treasury Department Book Entry System for United States government,
instrumentality and agency securities operated by the Federal Reserve Bank, its
successor(s) and its nominee(s).
2.7 Depository. Depository shall mean The Depository Trust
Company ("DTC") and any other clearing agency registered with the Securities and
Exchange Commission under Section 17A of the Securities Exchange Act of 1934, as
amended ("Exchange Act"), and its successor(s) and its nominee(s). The term
"Depository" shall further mean and include any other person authorized to act
as a depository under the 1940 Act, its successor(s) and its nominee(s),
specifically identified in a certified copy of a resolution of the Board.
2.8 Proper Instructions. Proper Instructions shall mean (i)
instructions regarding the purchase or sale of Portfolio Securities, and
payments and deliveries in connection therewith, given by an Authorized Person,
such instructions to be given in such form and manner as the Bank and the Trust
shall agree upon from time to time, and (ii) instructions (which may be
continuing instructions) regarding other matters signed or initialed by an
Authorized Person. Oral instructions will be considered Proper Instructions if
the Bank reasonably believes them to have been given by an Authorized Person.
The Trust shall cause all oral instructions to be promptly confirmed in writing
or by facsimile. The Bank shall act upon and comply with any subsequent Proper
Instruction which modifies a prior instruction, and the sole obligation of the
Bank with respect to any follow-up or confirmatory instruction shall be to make
reasonable efforts to detect any discrepancy between the original instruction
and such confirmation and to report such discrepancy to the Trust. The Trust
shall be responsible, at the expense of the applicable Master Portfolio, for
taking any action, including any reprocessing, necessary to correct any such
discrepancy or error, and, to the extent such action requires the Bank to act,
the Trust shall give the Bank specific Proper Instructions as to the action
required. Upon receipt by the Bank of an Officer's Certificate as to the
authorization by the Board accompanied by a detailed description of procedures
approved by the Trust, Proper Instructions may include communication effected
directly between electromechanical or electronic devices provided that the Trust
and the Bank are satisfied that such procedures afford adequate safeguards for a
Master Portfolio's assets.
2.9 Foreign Securities. The term Foreign Securities as used
herein will have the same meaning as when such term is used in Rule 17f-5 of the
1940 Act.
2.10 Performance Calculations. Performance Calculations as used
herein shall include standard performance calculations required pursuant to the
1933 Act, the 1940 Act, and any applicable rules and interpretations of the
staff of the Securities and Exchange Commission , and shall also include other
non-standard performance calculations as shall be agreed upon by both parties to
this Agreement from time to time.
3. Separate Accounts. The Bank will segregate the assets of each Master
Portfolio to which this Agreement relates into a separate account for each such
Master Portfolio containing the assets of such Master Portfolio (and all
investment earnings thereon). Unless the context otherwise requires, any
reference in this Agreement to any actions to be taken by the Trust shall be
deemed to refer to the Trust acting on behalf of one or more of its Master
Portfolios, any reference in this Agreement to any assets of the Trust,
including, without limitation, any Portfolio Securities and other assets
including cash and any earnings thereon, shall be deemed to refer only to assets
of the applicable Master Portfolio, any duty or obligation of the Bank hereunder
to the Trust shall be deemed to refer to duties and obligations with respect to
the individual Master Portfolios, and any obligation or liability of the Trust
hereunder shall be binding only with respect to the individual Master Portfolio
and shall be discharged only out of the assets of such Master Portfolio.
4. Certification as to Authorized Persons. The Secretary or an
Assistant Secretary of the Trust will at all times maintain on file with the
Bank his or her certification to the Bank, in such form as may be acceptable to
the Bank, of (i) the names and signatures of the Authorized Persons and (ii) the
names of the Board, it being understood that upon the occurrence of any change
in the information set forth in the most recent certification on file (including
without limitation any person named in the most recent certification who is no
longer an Authorized Person as designated therein), the Secretary or an
Assistant Secretary of the Trust, will sign a new or amended certification
setting forth the change of the new, additional or omitted names or signatures.
The Bank will be entitled to rely and act upon any Officer's Certificate given
to it by the Trust that has been signed by Authorized Persons named in the most
recent certification received by the Bank.
5. Custody of Cash. As custodian, the Bank will open and maintain a
separate account or accounts in the name of each Master Portfolio or in the name
of the Bank, as custodian of the Master Portfolios, and will deposit to the
account of a Master Portfolio all of the cash of the Master Portfolio, except
for cash held by a sub-custodian appointed pursuant to subsections 13.3 or 13.4
hereof, including borrowed funds, delivered to the Bank, subject only to draft
or order by the Bank acting pursuant to the terms of this Agreement. Upon
receipt by the Bank of Proper Instructions (which may be continuing
instructions) or in the case of payments for redemptions and repurchases of
outstanding interests of a Master Portfolio, notification from the Master
Portfolio's transfer agent as provided in Section 7, requesting such payment,
designating the payee or the account or accounts to which the Bank will release
funds for deposit, and stating that it is for a purpose permitted under the
terms of this Section 5, specifying the applicable subsection, the Bank will
make payments of cash held for the accounts of the Master Portfolio, insofar as
funds are available for that purpose, only as permitted in subsections 5.1-5.9
below.
5.1 Purchase of Securities. Upon the purchase of securities for
a Master Portfolio, against contemporaneous receipt of such securities by the
Bank, or against delivery of such securities to the Bank, in accordance with
generally accepted settlement practices or customs in the jurisdiction or market
in which the transaction occurs, such securities to be registered in the name of
the Master Portfolio or in the name of, or properly endorsed and in form for
transfer to, the Bank, or a nominee of the Bank, or receipt for the account of
the Bank pursuant to the provisions of Section 6 below, each such payment to be
made at the purchase price shown on a broker's confirmation (or transaction
report in the case of Book Entry Paper) of purchase of the securities that is
received by the Bank before such payment is made and that has been confirmed in
the Proper Instructions also received by the Bank before such payment is made.
5.2 Redemptions. In such amount as may be necessary for the
repurchase or redemption of interests of a Master Portfolio offered for
repurchase or redemption in accordance with Section 7 of this Agreement.
5.3 Distributions and Expenses of the Master Portfolios. For the
payment on the account of a Master Portfolio of dividends or other distributions
to interestholders as may from time to time be declared by the Board, interest,
taxes, investment advisory or administration fees, and, as and to the extent
provided on Schedule B hereto, any fees of the Bank for its services hereunder
and any reimbursement of the expenses and liabilities of the Bank related to
such services with respect to a Master Portfolio of the Trust as provided
pursuant to subsection 13.6 hereunder and on Schedule B hereto.
5.4 Payment in Respect of Securities. For payments in connection
with the conversion, exchange or surrender of Portfolio Securities or securities
subscribed to by a Master Portfolio held by or to be delivered to the Bank.
5.5 Repayment of Loans. To repay loans of money made to a Master
Portfolio, but, in the case of final payment, only upon redelivery to the Bank
of any Portfolio Securities pledged or hypothecated therefor and upon surrender
of documents evidencing the loan.
5.6 Repayment of Cash. To repay the cash delivered to a Master
Portfolio for the purpose of collateralizing the obligation to return to a
Master Portfolio certificates borrowed from the Master Portfolio representing
Portfolio Securities, but only upon redelivery to the Bank of such borrowed
certificates.
5.7 Foreign Exchange Transactions. For payments in connection
with foreign exchange contracts or options to purchase and sell foreign
currencies for spot and future delivery ("Foreign Exchange Agreements") that may
be entered into by the Bank on behalf of a Master Portfolio upon the receipt of
Proper Instructions, such Proper Instructions to specify the currency broker or
banking institution (which may be the Bank, or any other sub-custodian or agent
hereunder, acting as principal) with which the contract or option is made, and
the Bank shall have no duty with respect to the selection of such currency
brokers or banking institutions with which a Master Portfolio deals or for their
failure to comply with the terms of any contract or option.
5.8 Other Authorized Payments. For other authorized transactions
of a Master Portfolio, or other obligations of a Master Portfolio incurred for
proper purposes with respect to a Master Portfolio; provided that before making
any such payment, the Bank also will receive Proper Instructions or a certified
copy of a resolution of the Board signed by an Authorized Person (other than the
Person certifying such resolution) and certified by its Secretary or Assistant
Secretary, naming the person or persons to whom such payment is to be made, and
either describing the transaction for which payment is to be made and declaring
it to be an authorized transaction of a Master Portfolio, or specifying the
amount of the obligation for which payment is to be made, setting forth the
purpose for which such obligation was incurred and declaring such purpose to be
a proper corporate purpose.
5.9 Termination. Upon the termination of this Agreement as
hereinafter set forth pursuant to Section 8 and Section 14 of this Agreement.
6. Securities.
6.1 Segregation and Registration. Except as otherwise provided
herein, and except for Portfolio Securities to be delivered to any sub-custodian
appointed pursuant to subsections 13.2 or 13.3 hereof, the Bank as custodian,
will receive and hold pursuant to the provisions hereof, in a separate account
or accounts and physically segregated at all times from those of other persons,
any and all Portfolio Securities which may now or hereafter be delivered to it
by or for the account of a Master Portfolio. All such Portfolio Securities will
be held or disposed of by the Bank for, and subject at all times to, the
instructions of the Trust pursuant to the terms of this Agreement. Subject to
the specific provisions herein relating to Portfolio Securities that are not
physically held by the Bank, the Bank will register all Portfolio Securities
(unless otherwise directed by Proper Instructions or an Officer's Certificate),
in the name of a registered nominee of the Bank as defined in the Internal
Revenue Code and any Regulations of the Treasury Department issued thereunder,
and will execute and deliver all such certificates in connection therewith as
may be required by such laws or regulations or under the laws of any state. The
Bank will use its best efforts to the end that the specific Portfolio Securities
held by it hereunder will be at all times identifiable.
The Trust, on behalf of a Master Portfolio, will from time to
time furnish to the Bank appropriate instruments to enable it to hold or deliver
in proper form for transfer, or to register in the name of its registered
nominee, any Portfolio Securities which may from time to time be registered in
the name of a Master Portfolio
6.2 Voting and Proxies. Neither the Bank nor any nominee of the
Bank will vote any of the Portfolio Securities held hereunder, except in
accordance with Proper Instructions or an officers' Certificate. The Bank will
execute and deliver, or will cause to be executed and delivered, to the Trust or
its designated agent all notices, proxies and proxy soliciting materials with
respect to such Portfolio Securities, but without indicating the manner in which
such proxies are to be voted, such proxy to be executed by the registered holder
of such Portfolio Securities (if registered otherwise than in the name of a
Master Portfolio), in accordance with the Proper Instructions or an Officer's
Certificate.
6.3 Corporate Action. If at any time the Bank is notified that
an issuer of a Portfolio Security has taken or intends to take a corporate
action (a "Corporate Action") that affects the rights, privileges, powers,
preferences, qualifications or ownership of the Portfolio Security, including,
without limitation, liquidation, consolidation, merger, recapitalization,
reorganization, reclassification, subdivision, combination, stock split or stock
dividend, which Corporate Action requires an affirmative response or action on
the part of the holder of such Portfolio Security (a "Response"), the Bank shall
notify the Trust's designee, Barclays Global Fund Advisors ("BGFA"), promptly of
the Corporate Action, the Response required in connection with the Corporate
Action, and the Bank's deadline for receipt from the Trust's designee, BGFA, of
Proper Instructions regarding the Response (the "Response Deadline"). Except as
provided in subsection 6.3(c) below, the date specified as the Response Deadline
shall not be more than 24 hours prior to the Response expiration day set by the
depository processing such Corporate Action. The Bank shall forward to the
Trust's designee, BGFA, via facsimile and/or overnight courier all notices,
information statements or other materials relating to the Corporate Action
within twenty-four (24) hours of receipt of such materials by the Bank.
(a) The Bank shall act upon a required Response only
after receipt by the Bank of Proper Instructions from the
Trust's designee, BGFA, no later than 4:00 p.m. (Pacific time) on the date
specified as the Response Deadline and only if the Bank (or its agent or
sub-custodian hereunder) has actual possession of all Portfolio Securities (but
only if such Portfolio Securities are necessary for the consummation of the
Corporate Action ("Necessary Portfolio Securities")), consents and other
materials no later than 4:00 p.m. (Pacific time) on the date specified as the
Response Deadline. Portfolio Securities in the possession of a broker or other
borrower pursuant to the Bank's securities lending program shall be deemed to be
in the possession of the Bank for the purposes of this subsection 6.3.
(b) The Bank shall have no duty to act upon a required
Response if Proper Instructions relating to such
Response and all Necessary Portfolio Securities, consents and other materials
are not received by and in the possession of the Bank no later than 4:00 p.m.
(Pacific time) on the date specified as the Response Deadline. Notwithstanding,
the Bank may, in its sole discretion, use its best efforts to act upon a
Response for which Proper Instructions and/or Necessary Portfolio Securities,
consents or other materials are received by the Bank after 4:00 p.m. (Pacific
time) on the date specified as the Response Deadline, it being acknowledged and
agreed by the parties that any undertaking by the Bank to use its best efforts
in such circumstances shall in no way create any duty upon the Bank to complete
such Response prior to its expiration.
(c) In the event that the Trust's designee, BGFA,
notifies the Bank of a Corporate Action requiring a Response
and the Bank has received no other notice of such Corporate Action, the Response
Deadline shall be 48 hours prior to the Response expiration time set by the
depository processing such Corporate Action.
(d) Subsection 13.4(g) of this Agreement shall govern
any Corporate Action involving Foreign Portfolio
Securities held by a Selected Foreign Sub-custodian.
6.4 Book-Entry System. Provided (i) the Bank has received a
certified copy of a resolution of the Board specifically approving deposits of a
Master Portfolio assets in the Book-Entry System, and (ii) for any subsequent
changes to such arrangements following such approval, the Board has reviewed and
approved the arrangement and has not delivered an Officers Certificate to the
Bank indicating that the Board has withdrawn its approval:
(a) The Bank may keep Portfolio Securities in the Book-Entry System
provided that such Portfolio Securities are represented in an account
("Account") of the Bank (or its agent) in such System that shall not
include any assets of the Bank (or such agent) other than assets held
as a fiduciary, custodian, or otherwise for customers:
(b) The records of the Bank (and any such agent) with respect to a
Master Portfolio's participation in the Book-Entry System through the
Bank (or any such agent) will identify by book entry Portfolio
Securities that are included with other securities deposited in the
Account and shall at all times during the regular business hours of
the Bank (or such agent) be open for inspection by duly authorized
officers, employees or agents of the Trust. Where securities are
transferred to a Master Portfolio's account, the Bank shall also, by
book entry or otherwise, identify as belonging to the Master Portfolio
a quantity of Portfolio Securities in a fungible bulk of securities
(i) registered in the name of the Bank or its nominee, or (ii) shown
on the Bank's account on the books of the Federal Reserve Bank;
(c) The Bank (or its agent) shall pay for securities purchased for the
account of a Master Portfolio or shall pay cash collateral against the
return of Portfolio Securities loaned by a Master Portfolio upon (i)
receipt of advice from the Book-Entry System that such Securities have
been transferred to the Account, and (ii) the making of an entry on
the records of the Bank (or its agent) to reflect such payment and
transfer for the account of the Master Portfolio. The Bank (or its
agent) shall transfer Portfolio Securities sold or loaned for the
account of a Master Portfolio upon:
(i) receipt of advice from the Book-Entry System that payment for
securities sold or payment of the initial cash collateral against the
delivery of Portfolio Securities loaned by the Master Portfolio has been
transferred to the Account: and
(ii) the making of an entry on the records of the Bank (or its agent)
to reflect such transfer and payment for the account of a Master Portfolio.
Copies of all advices from the Book-Entry System of transfers of Portfolio
Securities for the account of a Master Portfolio shall identify the Master
Portfolio, be maintained for the Master Portfolio by the Bank and shall be
provided to the Master Portfolio at its request. The Bank shall send a
Master Portfolio a confirmation, as defined by Rule 17f-4 of the 1940 Act,
of any transfers to or from the account of the Master Portfolio;
(d) The Bank will promptly provide the Trust with any report obtained
by the Bank or its agent on the Book-Entry System's accounting system,
internal accounting control and procedures for safeguarding securities
deposited in the Book-Entry System;
(e) The Bank shall be liable to the Trust and a Master Portfolio for
any loss or damage to the Master Portfolio resulting from use of the
Book-Entry System by reason of any negligent actions or inactions of
the Bank or any of its agents or of any of its or their employees, or
from any failure by the Bank or any such agent to use its best efforts
to enforce such rights as it may have against the Book-Entry System;
at the election of the Master Portfolio, it shall be entitled to be
subrogated for the Bank in any claim against the Book-Entry System or
any other person that the Bank or its agent may have as a consequence
of any such loss or damage if and to the extent that the Master
Portfolio has not been made whole for any loss or damage;
6.5 Use of a Depository. Provided (i) the Bank has received a
certified copy of a resolution of the Board specifically approving deposits in
DTC or other such Depository and (ii) for any subsequent changes to such
arrangements following such approval, the Board has reviewed and approved the
arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval:
(a) The Bank may use a Depository to hold, receive, exchange, release,
lend, deliver and otherwise deal with Portfolio Securities including
stock dividends, rights and other items of like nature, and to receive
and remit to the Bank on behalf of a Master Portfolio all income and
other payments thereon and to take all steps necessary and proper in
connection with the collection thereof;
(b) Registration of Portfolio Securities may be made in the name of
any nominee or nominees used by such Depository;
(c) Payment for securities purchased and sold may be made through the
clearing medium employed by such Depository for transactions of
participants acting through it. Upon any purchase of Portfolio
Securities, payment will be made only upon delivery of the securities
to or for the account of a Master Portfolio and the Master Portfolio
shall pay cash collateral against the return of Portfolio Securities
loaned by the Master Portfolio only upon delivery of the Securities to
or for the account of the Master Portfolio; and upon any sale of
Portfolio Securities, delivery of the Securities will be made only
against payment thereof or, in the event Portfolio Securities are
loaned, delivery of Securities will be made only against receipt of
the initial cash collateral to or for the account of the Master
Portfolio: and
(d) The Bank shall be liable to a Master Portfolio for any loss or
damage to a Master Portfolio resulting from use of a Depository by
reason of any negligent actions or inactions of the Bank or its
employees or from any failure by the Bank to use its best efforts to
enforce such rights as it may have against a Depository. In this
connection, the Bank shall use its best efforts to ensure that:
(i) The Depository obtains replacement of any certificated Portfolio
Security deposited with it in the event such Security is lost, destroyed,
wrongfully taken or otherwise not available to be returned to the Bank upon
its request;
(ii) Any proxy materials received by a Depository with respect to
Portfolio Securities deposited with such Depository are forwarded
immediately to the Bank for voting in accordance with subsection 6.2 above;
(iii) Such Depository immediately forwards to the Bank confirmation of
any purchase or sale of Portfolio Securities and of the appropriate book
entry made by such Depository to a Master Portfolio's account;
(iv) Such Depository prepares and delivers to the Bank such records
with respect to the performance of the Bank's obligations and duties
hereunder as may be necessary for a Master Portfolio to comply with the
recordkeeping requirements of Section 31(a) of the 1940 Act and Rule 31(a)
thereunder; and
(v) Such Depository delivers to the Bank and the Trust all internal
accounting control reports, whether or not audited by an independent public
accountant, as well as such other reports as the Trust may reasonably
request in order to verify the Portfolio Securities held by such
Depository.
6.6 Use of Book-Entry System for Commercial Paper. Provided (i)
the Bank has received a certified copy of a resolution of the Board specifically
approving participation in a system maintained by the Bank for the holding of
commercial paper in book-entry form ("Book-Entry Paper") and (ii) for each year
following such approval the Board has received and approved the arrangements,
upon receipt of Proper Instructions and upon receipt of confirmation from an
Issuer (as defined below) that a Master Portfolio has purchased such Issuer's
Book-Entry Paper, the Bank shall issue and hold in book-entry form, on behalf of
the Master Portfolio, commercial paper issued by issuers with whom the Bank has
entered into a book-entry agreement (the "Issuers"). In maintaining its
procedures for Book-Entry Paper, the Bank agrees that:
(a) The Bank will maintain all Book-Entry Paper held by a Master
Portfolio in an account of the Bank that includes only assets held by
it for customers;
(b) The records of the Bank with respect to a Master Portfolio's
purchase of Book-Entry Paper through the Bank will identify, by
book-entry, commercial paper belonging to the Master Portfolio that is
included in the Book-Entry Paper System and shall at all times during
the regular business hours of the Bank be open for inspection by duly
authorized officers, employees or agents of the Trust;
(c) The Bank shall pay for Book-Entry Paper purchased for the account
of a Master Portfolio upon contemporaneous (i) receipt of advice from
the Issuer that such sale of Book-Entry Paper has been effected, and
(ii) the making of an entry on the records of the Bank to reflect such
payment and transfer for the account of the Master Portfolio;
(d) The Bank shall cancel such Book-Entry Paper obligation upon the
maturity thereof upon contemporaneous (i) receipt of advice that
payment for such Book-Entry Paper has been transferred to the Master
Portfolio, and (ii) the making of an entry on the records of the Bank
to reflect such payment for the account of the Master Portfolio;
(e) The Bank shall transmit to the Trust a transaction journal
confirming each transaction in Book-Entry Paper for the account of a
Master Portfolio on the next business day following the transaction:
and
(f) The Bank will send to the Trust such reports on its system of
internal accounting control with respect to Book-Entry Paper as the
Trust may reasonably request from time to time.
6.7 Use of Immobilization Programs. Provided (i) the Bank has
received a certified copy of a resolution of the Board specifically approving
the maintenance of Portfolio Securities in an immobilization program operated by
a bank which meets the requirements of Section 26(a)(1) of the 1940 Act, and
(ii) for each year following such approval the Board has reviewed and approved
the arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval, the Bank shall enter into
such immobilization program with such bank acting as a sub-custodian hereunder.
6.8 Eurodollar CDs. Any Portfolio Securities that are Eurodollar
CDs may be physically held by the European branch of the U.S. banking
institution that is the issuer of such Eurodollar CD (a "European Branch"),
provided that such Portfolio Securities are identified on the books of the Bank
as belonging to a Master Portfolio and that the books of the Bank identify the
European Branch holding such Portfolio Securities. Notwithstanding any other
provision of this Agreement to the contrary, except as stated in the first
sentence of this subsection 6.8, the Bank shall be under no other duty with
respect to such Eurodollar CDs belonging to a Master Portfolio, and the Bank
shall have no liability to the Master Portfolio or its interestholders with
respect to the actions, inactions, whether negligent or otherwise of such
European Branch in connection with such Eurodollar CDs, except for any loss or
damage to the Master Portfolio resulting from the Bank's own negligent actions
or inactions or lack of reasonable care in the performance of its duties
hereunder.
6.9 Options and Futures Transactions.
(a) Puts and Calls Traded on Securities Exchanges, NASDAQ or Over-the Counter.
(i) The Bank shall take action as to put options ("puts") and call
options ("calls") purchased or sold (written) by a Master Portfolio
regarding escrow or other arrangements in accordance with the provisions of
any agreement entered into upon receipt of Proper Instructions between the
Bank, any broker-dealer registered under the Exchange Act and a member of
the National Association of Securities Dealers, Inc. (the "NASD"), and, if
necessary, the Trust, on behalf of the Master Portfolio, relating to the
compliance with the rules of the Options Clearing Corporation and of any
registered national securities exchange, or of any similar organization or
organizations.
(ii) Unless another agreement requires it to do so, the Bank shall be
under no duty or obligation to see that a Master Portfolio has deposited or
is maintaining adequate margin, if required, with any broker in connection
with any option, nor shall the Bank be under duty or obligation to present
such option to the broker for exercise unless it receives Proper
Instructions from the Trust. The Bank shall have no responsibility for the
legality of any put or call purchased or sold on behalf of a Master
Portfolio, the propriety of any such purchase or sale, or the adequacy of
any collateral delivered to a broker in connection with an option or
deposited to or withdrawn from a Segregated Account (as defined in
subsection 6.10 below). The Bank specifically, but not by way of
limitation, shall not be under any duty or obligation to: (1) periodically
check or notify a Master Portfolio that the amount of such collateral held
by a broker or held in a Segregated Account is sufficient to protect such
broker or the Master Portfolio against any loss; (2) effect the return of
any collateral delivered to a broker; or (3) advise the Master Portfolio
that any option it holds, has or is about to expire. Such duties or
obligations shall be the sole responsibility of a Trust.
(b) Puts, Calls and Futures Traded on Commodities Exchanges
(i) The Bank shall take action, upon receipt of Proper Instructions,
as to puts, calls and futures contracts ("futures") purchased or sold by a
Master Portfolio in accordance with the provisions of any agreement among
the Trust, on behalf of a Master Portfolio, the Bank and a Futures
Commission Merchant registered under the Commodity Exchange Act, relating
to compliance with the rules of the Commodity Futures Trading Commission
and/or any Contract Market, or any similar organization(s), regarding
account deposits in connection with transactions by the Master Portfolio.
(ii) The responsibilities and liabilities of the Bank as to futures,
puts and calls traded on commodities exchanges, any Futures Commission
Merchant account and the Segregated Account shall be limited as set forth
in subparagraph (a)(ii) of this subsection 6.9 as if such subparagraph
referred to Futures Commission Merchants rather than brokers, and futures
and puts and calls thereon instead of options.
6.10 Segregated Account. The Bank shall upon receipt of Proper
Instructions establish and maintain a Segregated Account or Accounts for and on
behalf of a Master Portfolio, into which Account or Accounts may be transferred
upon receipt of Proper Instructions, cash and/or Portfolio Securities.
(a) Cash and/or Portfolio Securities may be transferred into a
Segregated Account in the following circumstances, upon receipt of
Proper Instructions:
(i) in accordance with the provisions of any agreement among the
Trust, on behalf of a Master Portfolio, the Bank and a broker-dealer
registered under the Exchange Act and a member of the NASD or any Futures
Commission Merchant registered under the Commodity Exchange Act, relating
to compliance with the rules of the Options Clearing Corporation and of any
registered national securities exchange or the Commodity Futures Trading
Commission or any registered Contract Market, or of any similar
organizations regarding escrow or other arrangements in connection with
transactions by a Master Portfolio;
(ii) for the purpose of segregating cash or Securities in connection
with options purchased or written by a Master Portfolio or commodity
futures purchased or written by a Master Portfolio;
(iii) for the deposit of liquid assets, such as cash, U.S. Government
obligations or other high-grade debt obligations, having a market value
(marked-to-market on a daily basis) at all times equal to not less than the
aggregate purchase price due on the settlement dates of all a Master
Portfolio's then outstanding forward commitment or "when-issued agreements
relating to the purchase of Portfolio Securities and all a Master
Portfolio's then outstanding commitments under any reverse repurchase
agreements entered into with broker-dealer firms;
(iv) for the purposes of compliance by a Master Portfolio with the
procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange Commission
relating to the maintenance of Segregated Accounts by registered investment
companies;
(v) for other proper corporate purposes, but only, in the case of this
clause (v), upon receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Board, or of the Executive Committee,
signed by an officer of the Trust and certified by the Secretary or an
Assistant Secretary, setting forth the purpose(s) of such Segregated
Account and declaring such purpose(s) to be a proper corporate purpose(s).
(b) assets may be withdrawn from the Segregated Account pursuant to
Proper Instructions only:
(i) with respect to assets deposited in accordance with the provisions
of any agreements referenced in (a)(i) or (a)(ii) above, in accordance with
the provisions of such agreements;
(ii ) with respect to assets deposited pursuant to (a)(iii) or (a)(iv)
above, for sale or delivery to meet a Master Portfolio's obligations under
outstanding forward-commitment, delayed-settlement or when-issued
agreements for the purchase of Portfolio Securities and under reverse
repurchase agreements;
(iii) for exchange for other liquid assets of equal or greater value
deposited in the Segregated Account;
(iv) to the extent that a Master Portfolio's outstanding forward-
commitment or when-issued agreements for the purchase of portfolio
securities or any reverse repurchase agreements are sold to other parties
or the Master Portfolio's obligations thereunder are met from assets of the
Master Portfolio other than those in the Segregated Account;
(v) for delivery upon settlement of a forward-commitment,
delayed-settlement or when-issued agreement for the sale of Portfolio
Securities: or
(vi) with respect to assets deposited pursuant to (a)(v) above, in
accordance with the purposes of such account as set forth in Proper
Instructions.
6.11 Interest Bearing Call or Time Deposits. The Bank shall,
upon receipt of Proper Instructions relating to the purchase by a Master
Portfolio of interest-bearing fixed-term and call deposits, transfer cash, by
wire or otherwise, in such amounts and to such bank(s) as shall be indicated in
such Proper Instructions. The Bank shall include in its records with respect to
the assets of a Master Portfolio appropriate notation as to the amount of each
such deposit, the banking institution with which such deposit is made (the
"Deposit Bank"), and shall retain such forms of advice or receipt evidencing the
deposit, if any, as may be forwarded to the Bank by the Deposit Bank. Such
deposits shall be deemed Portfolio Securities of a Master Portfolio and the
responsibility of the Bank therefore shall be the same as and no greater than
the Bank's responsibility in respect of other Portfolio Securities of the Master
Portfolio.
6.12 Transfer of Securities. The Bank will transfer, exchange,
deliver or release Portfolio Securities held by it hereunder, insofar as such
Securities are available for such purpose, provided that before making any
transfer, exchange, delivery or release under this Section, the Bank will
receive Proper Instructions requesting such transfer, exchange or delivery
stating that it is for a purpose permitted under the terms of this subsection
6.12, specifying the applicable subsection, or describing the purpose of the
transaction with sufficient particularity to permit the Bank to ascertain the
applicable subsection, only:
(a) upon sales of Portfolio Securities for the account of a Master
Portfolio, against contemporaneous receipt by the Bank of payment
therefor in full, or against payment to the Bank in accordance with
generally accepted settlement practices and customs in the
jurisdiction or market in which the transaction occurs, each such
payment to be in the amount of the sale price shown in a broker's
confirmation of sale of the Portfolio Securities received by the Bank
before such payment is made, as confirmed in the Proper Instructions
received by the Bank before such payment is made;
(b) in exchange for, or upon conversion into, other securities alone
or other securities and cash pursuant to any plan of merger,
consolidation, reorganization, share split-up, change in par value,
recapitalization or readjustment or otherwise, upon exercise of
subscription, purchase or sale or other similar rights represented by
such Portfolio Securities, or for the purpose of tendering shares in
the event of a tender offer therefor, provided however that in the
event of an offer of exchange, tender offer, or other exercise of
rights requiring the physical tender or delivery of Portfolio
Securities, the Bank shall have no liability for failure to so tender
in a timely manner unless such Proper Instructions are received by the
Bank at least two business days prior to the date required for tender,
and unless the Bank (or its agent or sub-custodian hereunder) has
actual possession of such Portfolio Security at least two business
days prior to the date of tender
(c) upon conversion of Portfolio Securities pursuant to their terms
into other securities;
(d) for the purpose of redeeming in kind interests of a Master
Portfolio upon authorization from the Master Portfolio;
(e) in the case of option contracts owned by a Master Portfolio, for
presentation to the endorsing broker;
(f) when such Portfolio Securities are called, redeemed or retired or
otherwise become payable;
(g) for the purpose of effectuating the pledge of Portfolio Securities
held by the Bank in order to collateralize loans made to a Master
Portfolio by any bank, including the Bank; provided, however, that
such Securities will be released only upon payment to the Bank for the
account of the Master Portfolio of the moneys borrowed, except that in
cases where additional collateral is required to secure a borrowing
already made, and such fact is made to appear in the Proper
Instructions, further Portfolio Securities may be released for that
purpose without any such payment. In the event that any such pledged
Portfolio Securities are held by the Bank, they will be so held for
the account of the lender, and after notice to the Master Portfolio
from the lender in accordance with the normal procedures of the
lender, that an event of deficiency or default on the loan has
occurred, the Bank may deliver such pledged Portfolio Securities to or
for the account of the lender,
(h) for the purpose of releasing certificates representing Portfolio
Securities, against contemporaneous receipt by the Bank of the fair
market value of such security, as set forth in the Proper Instructions
received by the Bank before such payment is made;
(i) for the purpose of delivering Portfolio Securities lent by a
Master Portfolio to a bank or broker dealer, but only against receipt
in accordance with street delivery custom except as otherwise provided
herein, of adequate collateral as agreed upon from time to time by the
Master Portfolio and the Bank, and upon receipt of payment in
connection with any repurchase agreement relating to such Securities
entered into by the Master Portfolio;
(j) for other authorized transactions of a Master Portfolio or for
other proper corporate purposes; provided that before making such
transfer, the Bank will also receive a certified copy of resolutions
of the Board, signed by an authorized officer of the Trust (other than
the officer certifying such resolution) and certified by its Secretary
or an Assistant Secretary, specifying the Portfolio Securities to be
delivered, setting forth the transaction in or purpose for which such
delivery is to be made, declaring such transaction to be an authorized
transaction of the Master Portfolio or such purpose to be a proper
corporate purpose, and naming the person or persons to whom delivery
of such Securities shall be made; and
(k) upon termination of this Agreement as hereinafter set forth
pursuant to Section 8 and Section 14 of this Agreement.
As to any deliveries made by the Bank pursuant to subsections (a), (b),
(c), (e), (f), (g), (h) and (i) securities or cash receivable in exchange
therefor shall be delivered to the Bank.
7. Redemptions. In the case of payment of assets of a Master Portfolio
held by the Bank in connection with redemptions and repurchases by the Master
Portfolio of outstanding interests, the Bank will rely on notification by the
Trust's transfer agent of receipt of a request for redemption before such
payment is made. Payment shall be made in accordance with the Amended and
Restated Declaration of Trust (the "Trust Declaration") and By-Laws of the
Trust, from assets available for said purpose.
8. Merger, Dissolution. etc. of the Trust or a Master Portfolio. In the
case of the following transactions, not in the ordinary course of business,
namely, the merger of a Master Portfolio into or the consolidation of the Trust
with another investment company, the sale by the Trust of all, or substantially
all, of the assets of one or more Master Portfolios to another investment
company, or the liquidation or dissolution of a Master Portfolio and
distribution of its assets, the Bank will deliver the Portfolio Securities held
by it under this Agreement and disburse cash only upon the order of the Trust,
on behalf of such Master Portfolio(s) set forth in an Officer's Certificate,
accompanied by a certified copy of a resolution of the Board authorizing any of
the foregoing transactions. Upon completion of such delivery and disbursement
and the payment of the fees, disbursements and expenses of the Bank, this
Agreement will terminate with respect to such Master Portfolio or Trust, as
applicable.
9. Actions of the Bank Without Prior Authorization. Notwithstanding
anything herein to the contrary, unless and until the Bank receives an Officer's
Certificate to the contrary, it will without prior authorization or instruction
of the Trust or the transfer agent:
(a) Endorse for collection and collect on behalf of and in the name of
a Master Portfolio all checks, drafts, or other negotiable or
transferable instruments or other orders for the payment of money
received by it for the account of the Master Portfolio and hold for
the account of the Master Portfolio all income, dividends, interest
and other payments or distributions of cash with respect to the
Portfolio Securities held thereunder;
(b) Present for payment all coupons and other income items held by it
for the account of a Master Portfolio that call for payment upon
presentation and hold the cash received by it upon such payment for
the account of the Master Portfolio;
(c) Receive and hold for the account of a Master Portfolio all
securities received as a distribution on Portfolio Securities as a
result of a stock dividend, share split-up, reorganization,
recapitalization, merger, consolidation, readjustment, distribution of
rights and similar securities issued with respect to any Portfolio
Securities held by it hereunder.
(d) execute as agent on behalf of a Master Portfolio all necessary
ownership and other certificates and affidavits required by the
Internal Revenue Code or the regulations of the Treasury Department
issued thereunder, or by the laws of any state, now or hereafter in
effect, inserting a Master Portfolio's name on such certificates as
the owner of the securities covered thereby, to the extent it may
lawfully do so and as may be required to obtain payment in respect
thereof. The Bank will execute and deliver such certificates in
connection with Portfolio Securities delivered to it or by it under
this Agreement as may be required under the provisions of the Internal
Revenue Code and any Regulations of the Treasury Department issued
thereunder, or under the laws of any State;
(e) present for payment all Portfolio Securities that are called,
redeemed, retired or otherwise become payable, and hold cash received
by it upon payment for the account of a Master Portfolio; and
(f) exchange interim receipts or temporary securities for definitive
securities.
10. Collections and Defaults. The Bank will use all reasonable efforts
to collect any funds that may to its knowledge become collectible arising from
Portfolio Securities, including dividends, interest and other income, and to
transmit to the Trust, on behalf of a Master Portfolio, notice actually received
by the Bank of any call for redemption, offer of exchange, right of
subscription, reorganization or other proceedings affecting such Portfolio
Securities. If Portfolio Securities upon which such income is payable are in
default or payment is refused after due demand or presentation, the Bank will
notify the Trust, on behalf of a Master Portfolio, in writing of any default or
refusal to pay within two business days from the day on which it receives
knowledge of such default or refusal. In addition, the Bank will send the Trust
a written report once each month showing any income on any Portfolio Security
held by Bank on behalf of a Master Portfolio that is more than ten days overdue
on the date of such report.
11. Maintenance of Records and Accounting Services. The Bank will
maintain records with respect to transactions for which the Bank is responsible
pursuant to the terms and conditions of this Agreement, and in compliance with
the applicable rules and regulations of the 1940 Act and will furnish the Trust
daily with a statement of condition of each Master Portfolio. The Bank will
furnish to the Trust at the end of every month, and at the close of each quarter
of the Trust's fiscal year, a list of the Portfolio Securities and the aggregate
amount of cash held by Bank on behalf of each Master Portfolio. The books and
records of the Bank pertaining to its actions under this Agreement and reports
by the Bank or its independent accountants concerning its accounting system,
procedures for safeguarding securities and internal accounting controls will be
open to inspection and audit at reasonable times by officers of or auditors
employed by the Trust and will be preserved by the Bank in the manner and in
accordance with the applicable rules and regulations under the 1940 Act.
The Bank shall perform the fund accounting services listed on
Schedule C hereto and shall keep the books of account and render statements or
copies from time to time as reasonably requested by the Treasurer or any
executive officer of the Trust.
The Bank shall assist generally in the preparation of reports
to shareholders and others, audits of accounts, and other ministerial matters of
like nature.
12. Master Portfolio Evaluation and Performance Calculations.
12.1 Master Portfolio Evaluation. The Bank shall compute and,
unless otherwise directed by the Board, determine as of the close of regular
trading on the New York Stock Exchange on each day on which said Exchange is
open for unrestricted trading and as of such other days, or hours, if any, as
may be authorized by the Board, the net asset value and the offering price of an
interest of each Master Portfolio, such determination to be made in accordance
with the provisions of the Trust Declaration and By-Laws and Registration
Statement of the Trust relating to the Master Portfolios, as it may from time to
time be amended, and any applicable resolutions of the Board at the time in
force and applicable; and promptly to notify the Trust, any applicable exchange,
the NASD or such other persons as the Trust may request of the results of such
computation and determination. In computing the net asset value hereunder, the
Bank may rely in good faith upon information that the Bank reasonably believes
to be accurate and reliable furnished to it by any Authorized Person in respect
of (i) the manner of accrual of the liabilities of each Master Portfolio and in
respect of liabilities of a Master Portfolio not appearing on its books of
account kept by the Bank, (ii) reserves, if any, authorized by the Board or that
no such reserves have been authorized, (iii) the source of the quotations to be
used in computing the net asset value, (iv) the value to be assigned to any
security for which no price quotations are available, and (v) the method of
computation of the offering price on the basis of the net asset value of the
interests, and the Bank shall not be responsible for any loss occasioned by its
reasonable and good faith reliance on any quotations received from a source
pursuant to (iii) above.
12.2. Performance Calculations. The Bank will compute the
performance results of each Master Portfolio (the "Performance Calculations") in
accordance with applicable provisions of the 1933 Act and 1940 Act and the rules
under such Acts related to the computations to be undertaken by the Bank
pursuant to this Agreement, as promulgated by the Securities and Exchange
Commission, as such provisions and or rules may be amended from time to time,
and any published interpretations of or general conventions accepted by the
staff of the Securities and Exchange Commission with respect to such rules or
the subject matter thereof ("Subsequent Staff Positions"), subject to the
Registration Statement, as amended from time to time, and the terms set forth
below:
(a) The Bank shall compute the Performance Calculations for each
Master Portfolio for the stated periods of time as shall be mutually
agreed upon, and communicate in a timely manner the result of such
computation to the Trust.
(b) In performing the Performance Calculations, the Bank will derive
from the records it generates and maintains for each Master Portfolio
pursuant Section 11 hereof, the data necessary for the computation.
The Bank shall have no responsibility to review, confirm, or otherwise
assume any duty or liability with respect to the accuracy or
correctness of any such data supplied to it by the Trust, any of the
its designated agents or any of its designated third-party providers.
(c) At the request of the Bank, the Trust shall provide, and the Bank
shall be entitled to rely on, written standards and guidelines to be
followed by the Bank in interpreting and applying the computation
methods pursuant to the rules or any Subsequent Staff Positions as
they specifically apply to a Master Portfolio, provided that the Bank
shall be responsible for general knowledge of such rules and any
Subsequent Staff Positions. In the event that the computation methods
in a rule or the Subsequent Staff Positions or the application to a
Master Portfolio of a standard or guideline is not free from doubt or
in the event there is any question of interpretation as to the
characterization of a particular security or any aspect of a security
or a payment with respect thereto (e.g., original issue discount,
participating debt security, income or return of capital, etc.) or
otherwise or as to any other element of the computation that is
pertinent to the Master Portfolio, the Trust or its designated agent,
BGFA, shall have the full responsibility for making the determination
of how the security, or payment, is to be treated for purposes of the
computation and how the computation is to be made and shall inform the
Bank thereof on a timely basis. The Bank shall have no responsibility
to make independent determinations with respect to any item that is
covered by this Section, and the Bank shall not be responsible for its
computations made in accordance with such determinations so long as
such computations are mathematically correct.
(d) The Trust shall keep the Bank informed of all publicly available
information, and of any non-public advice or information, obtained by
the Trust from its independent auditors or by its personnel or the
personnel of its investment adviser, related to the computations to be
undertaken by the Bank pursuant to this Agreement, and the Bank shall
not be deemed to have knowledge of such information (except as
contained in the Registration Statement) unless it has been furnished
to the Bank in writing.; provided that the Bank shall be charged with
knowledge of any material changes to the 1933 Act, the 1940 Act, and
any related rules under such acts related to the computations to be
undertaken by the Bank pursuant to this Agreement without specific
notice from the Trust.
13. Concerning the Bank.
13.1 Bank Warranty. The Bank warrants that it has and will
maintain at least the minimum qualifications required by Section 17(f)(1) of the
1940 Act to act as custodian of the Portfolio Securities and other assets
including cash of the Trust's Master Portfolios.
13.2 Standard of Care and Performance of Duties.
(a) The Bank agrees to use reasonable care with regard to its
obligations under this Agreement and the safekeeping of property of
the Master Portfolios. In performing its duties hereunder and any
other duties listed on the Schedules hereto, the Bank will be entitled
to receive and act upon the advice of independent counsel of its own
selection, which may be counsel for the Trust, and the Bank will be
without liability for any action taken or thing done, or omitted to be
done, so long as the Bank's actions or inactions are without
negligence and in accordance with this Agreement in good faith in
conformity with such advice. The Bank shall be liable to, and shall
indemnify and hold harmless the Trust from and against any loss which
shall occur as the result of the failure of the Bank or a
sub-custodian (other than a foreign securities depository or clearing
agency and except as provided in subsections 6.8, 13.2 and 13.3(i)
hereof) to exercise reasonable care with respect to their respective
obligations under this Agreement and the safekeeping of such property.
Subject to the foregoing, the Bank will not be responsible for any
act, omission, default or for the solvency of any foreign securities
depository or clearing agency utilized in connection with the
provision of services under this Agreement.
(b) In the performance of its duties hereunder, the Bank will be
protected and not be liable, and will be indemnified and held harmless
for any action taken or omitted to be taken by it with reasonable care
and in good faith reliance upon the terms of this Agreement, any
Officer's Certificate, Proper Instructions, resolution of the Board,
facsimile, telegram, notice, request, certificate or other instrument
reasonably believed by the Bank to be genuine and for any other loss
to the Fund except in the case of its negligent actions or inactions
or lack of good faith or reasonable care in the performance of its
obligations or duties hereunder.
(c) The Bank will be under no duty or obligation to inquire into and
will not be liable for:
(i) the validity of the issue of any Portfolio Securities purchased by
or for a Master Portfolio, the legality of the purchases thereof or the
propriety of the price incurred therefor;
(ii) the legality of any sale of any Portfolio Securities by or for
the Master Portfolio or the propriety of the amount for which the same are
sold;
(iii) the legality of an issue or sale of any interests of a Master
Portfolio or the sufficiency of the amount to be received therefor;
(iv) the legality of the repurchase of any interests of a Master
Portfolio or the propriety of the amount to be paid therefor;
(v) the legality of the declaration of any dividend by a Master
Portfolio or the legality of the distribution of any Portfolio Securities
as payment in kind of such dividend; and
(vi) any property or moneys of a Master Portfolio unless and until
received by it, and any such property or moneys delivered or paid by it
pursuant to the terms hereof.
(d) Moreover, the Bank will not be under any duty or obligation to
ascertain whether any Portfolio Securities at any time delivered to or
held by it for the account of a Master Portfolio are such as may
properly be held by the Master Portfolio under the provisions of its
Trust Declaration, By-Laws, any federal or state statutes or any rule
or regulation of any governmental agency.
(e) Notwithstanding anything in this Agreement to the contrary, in no
event shall the Bank be liable hereunder or to any third party:
(i) for any losses or damages of any kind resulting from acts of God,
earthquakes, fires, floods, storms or other disturbances of nature,
epidemics, strikes, riots, nationalization, expropriation, currency
restrictions, acts of war, civil war or terrorism, insurrection, nuclear
fusion, fission or radiation, the interruption, loss or malfunction of
utilities, transportation, or computers (hardware or software) and computer
facilities, the unavailability of energy sources and other similar
happenings or events, except as results from the Bank's own negligence,
provided that the Bank shall make all reasonable efforts, whenever
necessary, to use data processing back-up facilities provided by Electronic
Data Systems, Inc.; or
(ii) for special, punitive or consequential damages arising from the
provision of services hereunder, even if the Bank has been advised of the
possibility of such damages; provided, however, that the parties
specifically acknowledge and agree that damages, if any, incurred by the
Trust, its Master Portfolios or its agents (including, but not limited to,
BGFA or the Trust's transfer or shareholder servicing agents) on account of
late or incorrect net asset values and related information provided to the
Trust, its Master Portfolios, its agents or other third parties as may be
agreed in writing by BGI and IBT from time to time, are not to be
considered special, punitive or consequential damages for purposes of this
subsection 13.2(e)(ii).
(f) The Bank shall supply BGI with such daily information regarding
the cash and securities positions and activity of each Master
Portfolio as the Bank and BGI shall from time to time agree.
(g) The Bank need not maintain any insurance for the exclusive benefit
of the Trust, but hereby warrants that as of the date of this
Agreement it is maintaining a bankers Blanket Bond and hereby agrees
to notify the Trust in the event that such bond is canceled or
otherwise lapses.
13.3 Agents and Sub-custodians with Respect to Property of the
Master Portfolios Held in the United States. The Bank may employ agents in the
performance of its duties hereunder and shall be responsible for the acts and
omissions of such agents as if performed by the Bank hereunder. Without limiting
the foregoing, certain duties of the Bank hereunder may be performed by one or
more affiliates of the Bank.
Upon receipt of Proper Instructions, the Bank may employ
sub-custodians, provided that any such sub-custodian meets at least the minimum
qualifications required by Section 17(f)(1) of the 1940 Act to act as a
custodian of a Master Portfolio's assets with respect to property of the Master
Portfolio held in the United States. The Bank shall have no liability to the
Trust or any other person by reason of any act or omission of any sub-custodian
and the Trust shall indemnify the Bank and hold it harmless from and against any
and all actions, suits and claims, arising directly or indirectly out of the
performance of any sub-custodian. Upon request of the Bank, the Trust shall
assume the entire defense of any action, suit, or claim subject to the foregoing
indemnity. All fees and expenses of any sub-custodian shall be paid in
accordance with Schedule B hereto.
13.4 Duties of the Bank with Respect to Property of the Master Portfolio Held
Outside of the United States.
(a) Appointment of Foreign Sub-custodians. The Trust hereby authorizes
and instructs the Bank to employ as sub-custodians for the Trust's
Portfolio Securities and other assets maintained outside the United
States the foreign banking institutions and foreign securities
depositories designated by the Board (each, a "Selected Foreign
Sub-custodian"). Upon receipt of Proper Instructions, together with a
certified resolution of the Trust's Board of Trustees, the Bank and
the Trust may agree to designate additional foreign banking
institutions and foreign securities depositories to act as Selected
Foreign Sub-custodians hereunder. Upon receipt of Proper Instructions,
the Trust may instruct the Bank to cease the employment of any one or
more such Selected Foreign Sub-custodians for maintaining custody of a
Master Portfolio's assets, and the Bank shall so cease to employ such
sub-custodian as soon as alternate custodial arrangements have been
implemented.
(b) Foreign Securities Depositories. Except as may otherwise be agreed
upon in writing by the Bank and the Trust, assets of a Master
Portfolio shall be maintained in foreign securities depositories only
through arrangements implemented by the foreign banking institutions
serving as Selected Foreign Sub-custodians pursuant to the terms
hereof. Where possible, such arrangements shall include entry into
agreements containing the provisions set forth in subparagraph (d)
hereof. Notwithstanding the foregoing, except as may otherwise be
agreed upon in writing by the Bank and the Trust, the Trust authorizes
the deposit in Euro-Clear, the securities clearance and depository
facilities operated by Morgan Guaranty Trust Company of New York in
Brussels, Belgium, of Foreign Securities eligible for deposit therein
and to utilize such securities depository in connection with
settlements of purchases and sales of securities and deliveries and
returns of securities, until notified to the contrary pursuant to
subparagraph (a) hereunder.
(c) Segregation of Securities. The Bank shall identify on its books as
belonging to a Master Portfolio the Foreign Securities held by each
Selected Foreign Sub-custodian. Each agreement pursuant to which the
Bank employs a foreign banking institution shall require that such
institution establish a custody account for the Bank and hold in that
account, Foreign Securities and other assets of the Master Portfolios,
and, in the event that such institution deposits Foreign Securities in
a foreign securities depository, that it shall identify on its books
as belonging to the Bank the securities so deposited.
(d) Agreements with Foreign Banking Institutions. Each of the
agreements pursuant to which a foreign banking institution holds
assets of the Trust's Master Portfolios (each, a "Foreign
Sub-custodian Agreement") shall be substantially in the form
previously made available to the Trust and shall provide that: (a)
such assets will not be subject to any right, charge, security
interest, lien or claim of any kind in favor of the foreign banking
institution or its creditors or agent, except a claim of payment for
their safe custody or administration (including, without limitation,
any fees or taxes payable upon transfers or reregistration of
securities); (b) beneficial ownership of such assets will be freely
transferable without the payment of money or value other than for
custody or administration (including, without limitation, any fees or
taxes payable upon transfers or reregistration of securities); (c)
adequate records will be maintained identifying the assets as
belonging to the Bank; (d) officers of or auditors employed by, or
other representatives of the Bank, including to the extent permitted
under applicable law, the independent auditors for the Trust, will be
given access to the books and records of the foreign banking
institution relating to its actions under its agreement with the Bank;
and (e) assets of a Master Portfolio held by the Selected Foreign
Sub-custodian will be subject only to the instructions of the Bank or
its agents.
(e) Access of Independent Auditors of the Trust. Upon request of the
Trust, the Bank will use its best efforts to arrange for the Trust's
independent auditors to be afforded access to the books and records of
any foreign banking institution employed as a Selected Foreign
Sub-custodian insofar as such books and records relate to the
performance of such foreign banking institution under its Foreign
Sub-custodian Agreement.
(f) Reports by the Bank. The Bank will supply to the Trust from time
to time, as mutually agreed upon, statements in respect of the
securities and other assets of a Master Portfolio held by Selected
Foreign Sub-custodians, including but not limited to an identification
of entities having possession of the Foreign Portfolio Securities and
other assets of the Master Portfolio.
(g) Transactions in Foreign Custody Accounts. Transactions with
respect to the assets of a Master Portfolio held by a Selected Foreign
Sub-custodian shall be effected pursuant to Proper Instructions from
the Trust to the Bank and shall be effected in accordance with the
applicable Foreign Sub-custodian Agreement. If at any time any Foreign
Portfolio Securities shall be registered in the name of the nominee of
the Selected Foreign Sub-custodian, the Trust agrees to hold any such
nominee harmless from any liability by reason of the registration of
such securities in the name of such nominee.
Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for Foreign Securities received for the account of a
Master Portfolio and delivery of Foreign Securities maintained for the account
of a Master Portfolio may be effected in accordance with the customary
established securities trading or securities processing practices and procedures
in the jurisdiction or market in which the transaction occurs, including,
without limitation, delivering securities to the purchaser thereof or to a
dealer therefor (or an agent for such purchaser or dealer) against a receipt
with the expectation of receiving later payment for such securities from such
purchaser or dealer.
In connection with any action to be taken with respect to the Foreign
Securities held hereunder, including, without limitation, the exercise of any
voting rights, subscription rights, redemption rights, exchange rights,
conversion rights or tender rights, or any other action in connection with any
other right, interest or privilege with respect to such Securities
(collectively, the "Rights"), the Bank shall promptly transmit to the Trust or
its investment adviser such information in connection therewith as is made
available to the Bank by the Foreign Sub-custodian, and the Bank shall promptly
forward to the applicable Foreign Sub-custodian any instructions, forms or
certifications with respect to such Rights, and any instructions relating to the
actions to be taken in connection therewith, as the Bank shall receive pursuant
to Proper Instructions. The Bank agrees to use its best efforts to obtain and
forward to the Trust or its designated agent, BGFA, information regarding Rights
with respect to Foreign Securities held hereunder. Notwithstanding the
foregoing, the Bank shall have no further duty or obligation with respect to
such Rights, including, without limitation, the determination of whether a
Master Portfolio is entitled to participate in such Rights under applicable U.S.
and foreign laws, or the determination of whether any action proposed to be
taken with respect to such Rights by the Master Portfolio or by the applicable
Foreign Sub-custodian will comply with all applicable terms and conditions of
any such Rights or any applicable laws or regulations, or market practices
within the market in which such action is to be taken or omitted.
(h) Liability of Selected Foreign Sub-custodians. Each Foreign
Sub-custodian Agreement with a foreign banking institution shall
require the institution to exercise reasonable care in the performance
of its duties and to indemnify, and hold harmless, the Bank and Trust
from and against certain losses, damages, costs, expenses, liabilities
or claims arising out of or in connection with the institution's
performance of such obligations, all as set forth in the applicable
Foreign Sub-custodian Agreement. The Trust acknowledges that the Bank,
as a participant in Euroclear, is subject to the Terms and Conditions
Governing the Euroclear System, a copy of which has been made
available to the Trust. The Trust acknowledges that pursuant to such
Terms and Conditions, Morgan Guaranty Brussels shall have the sole
right to exercise or assert any and all rights or claims in respect of
actions or omissions of, or the bankruptcy or insolvency of, any other
depository, clearance system or custodian utilized by Euroclear in
connection with a Master Portfolio's Portfolio Securities and other
assets.
(i) Liability of Bank. The Bank shall have no more or less
responsibility or liability on account of the acts or omissions of any
Selected Foreign Sub-custodian employed hereunder than any such
Selected Foreign Sub-custodian has to the Bank and, without limiting
the foregoing, the Bank shall not be liable for any loss, damage,
cost, expense, liability or claim resulting from nationalization,
expropriation, currency restrictions, or acts of war or terrorism,
political risk (including, but not limited to, exchange control
restrictions, confiscation, insurrection, civil strife or armed
hostilities) other losses due to Acts of God, nuclear incident or any
loss where the Selected Foreign Sub-custodian has otherwise exercised
reasonable care.
(j) Monitoring Responsibilities. The Bank shall furnish annually to
the Trust, information concerning the Selected Foreign Sub-custodians
employed hereunder for use by the Trust's Board or its designated
agent in evaluating such Selected Foreign Sub-custodians to ensure
compliance with the requirements of Rule 17f-5 of the 1940 Act. In
addition, the Bank will promptly inform the Trust in the event that
the Bank is notified by a Selected Foreign Sub-custodian that there
appears to be a substantial likelihood that its shareholders' equity
will decline below $200 million (U.S. dollars or the equivalent
thereof) or that its shareholders' equity has declined below $200
million (in each case computed in accordance with generally accepted
U.S. accounting principles) or any other capital adequacy test
applicable to it by exemptive order, or if the Bank has actual
knowledge of any material loss of the assets of a Master Portfolio
held by a Foreign Sub-custodian.
(k) Tax Law. The Bank shall have no liability for any obligations now
or hereafter imposed on the Trust, or its Master Portfolios, or the
Bank as custodian of the Trust by the tax laws of any jurisdiction.
The sole responsibility of the Bank with regard to such taxes shall be
to use reasonable efforts to assist the Trust with respect to the
withholding and payment by the Trust of such taxes and with respect to
any claim for exemption or refund under the tax law of jurisdictions
for which the Trust is entitled to such exemptions or refunds.
13.5 Insurance. The Bank shall use the same care with respect to
the safekeeping of Portfolio Securities and cash of the Trust's Master
Portfolios held by it as it uses in respect of its own similar property but need
not maintain any special insurance for the benefit of the Trust.
13.6. Fees and Expenses of Bank. The Trust, on behalf of a
Master Portfolio, will pay or reimburse the Bank from time to time for any
transfer taxes payable upon transfer of Portfolio Securities made hereunder. All
necessary proper disbursements, expenses and charges made or incurred by the
Bank in the performance of this Agreement (including any duties listed on
Schedule C hereto) including any indemnities for any loss, liabilities or
expense to the Bank as provided above shall be paid in accordance with Schedule
B hereto, provided that the Bank shall not be entitled to compensation and/or
reimbursement for services and/or expenses and liabilities by the Trust, with
respect to the Master Portfolios (with the exception of the Extended Index and
U.S. Equity Index Master Portfolios), hereunder so long as the Bank is entitled
to receive compensation and reimbursements from Barclays Global Investors, N.A.
("BGI") for providing sub-administration services to the Trust on behalf of the
Master Portfolios. If the Bank no longer is entitled to receive such
compensation and reimbursements from BGI, the Bank shall be entitled hereunder
to such compensation or fees and reimbursements at such rate and at such times
as it may from time to time negotiate with the Trust, and such Schedule B shall
be amended accordingly.
13.7 Advances by Bank. The Bank may, in its sole discretion,
advance funds on behalf of a Master Portfolio to make any payment permitted by
this Agreement upon receipt of any proper authorization required by this
Agreement for such payments. Should such a payment or payments, with advanced
funds, result in an overdraft (due to insufficiencies of a Master Portfolio's
account with the Bank, or for any other reason) this Agreement deems any such
overdraft or related indebtedness, a loan made by the Bank to the Master
Portfolio payable on demand and bearing interest at the current rate charged by
the Bank for such loans unless the Master Portfolio shall provide the Bank with
agreed upon compensating balances. The Trust agrees that the Bank shall have a
continuing lien and security interest to the extent of any overdraft or
indebtedness, in and to any property at any time held by it for a Master
Portfolio's benefit or in which the Master Portfolio has an interest and which
is then in the Bank's possession or control (or in the possession or control of
any third party acting on the Bank's behalf). The Trust authorizes the Bank, in
its sole discretion, at any time to charge any overdraft or indebtedness,
together with interest due thereon against any balance of account standing to
the credit of a Master Portfolio on the Bank's books.
14. Termination.
(a) This Agreement shall be effective for an initial term of two (2)
years commencing upon the date hereof (the "Initial Term") unless
earlier terminated as provided in subsection (b) below. Thereafter,
the Agreement may be terminated at any time, without penalty upon
sixty (60) days' written notice delivered by either party to the other
by means of registered mail, and upon the expiration of such sixty
(60) days, this Agreement will terminate; provided, however, that the
effective date of such termination may be postponed to a date not more
than ninety (90) days from the date of delivery of such notice (i) by
the Bank in order to prepare for the transfer by the Bank of all of
the assets of the Master Portfolios held hereunder, or (ii) by the
Trust in order to give it an opportunity to make suitable arrangements
for a successor custodian. At any time after the termination of this
Agreement, the Bank agrees to make available to the Trust, at its
request, the records maintained by the Bank relating to the
performance of its duties as custodian and to preserve such records
for the periods prescribed in Rule 31a-2 under the 1940 Act.
(b) Notwithstanding subsection (a) above, either party hereto may
terminate this Agreement at any time prior to the expiration of the
Initial Term in the event that the other party violates any material
provision of this Agreement, provided that the violating party does
not cure such violation within ninety (90) days of receipt of written
notice from the non -violating party of such violation.
(c) Notwithstanding subsection (a) above, the Trust may terminate this
Agreement at any time prior to the expiration of the Initial Term in
the event that (i) the Board of Trustees determines that the
performance of the Bank does not meet the reasonable satisfaction
(considered in light of industry standards) of the Board of Trustees,
provided that the Bank does not cure such unsatisfactory performance
within ninety (90) days of receipt of written notice specifying such
unsatisfactory performance; or (ii) if the Bank becomes the subject of
any state or federal bankruptcy proceeding that is not dismissed
within sixty (60) days of the initiation of such proceeding.
(d) In the event of the termination of this Agreement, the Bank will
immediately upon receipt or transmittal, as the case may be, of notice
of termination, commence and prosecute diligently to completion the
transfer of all cash and the delivery of all Portfolio Securities duly
endorsed and all records maintained under Section 11 to the successor
custodian when appointed by the Trust. The obligation of the Bank to
deliver and transfer over the assets of the Trust's Master Portfolios
held by the Bank directly to such successor custodian will commence as
soon as such successor is appointed and will continue until completed
as aforesaid. If the Trust does not select a successor custodian
within ninety (90) days from the date of delivery of notice of
termination the Bank may, subject to the provisions of subsection
14(c), deliver the Portfolio Securities and cash of the Trust's Master
Portfolio held by the Bank to a bank or trust company of its own
selection that meets the requirements of Section 17(f)(1) of the 1940
Act and has a reported capital, surplus and undivided profits
aggregating not less than $2,000,000, to be held as the property of
the Trust's Master Portfolios under terms similar to those on which
they were held by the Bank, whereupon such bank or trust company so
selected by the Bank will become the successor custodian of such
assets of the Trust's Master Portfolios with the same effect as though
selected by the Board.
(e) Prior to the expiration of ninety (90) days after notice of
termination has been given, the Trust may furnish the Bank with an
order of the Trust advising that a successor custodian cannot be found
willing and able to act upon reasonable and customary terms and that
there has been submitted to the Master Portfolio's interestholders the
question of whether a Master Portfolio will be liquidated or will
function without a custodian for the assets of the Master Portfolio.
In that event the Bank will deliver the Portfolio Securities and cash
of the Trust's Master Portfolios, subject as aforesaid, in accordance
with one of such alternatives that may be approved by the requisite
vote of shareholders, upon receipt by the Bank of a copy of the
minutes of the meeting of shareholders at which action was taken,
certified by the Trust's Secretary and an opinion of counsel to the
Trust in form and content satisfactory to the Bank.
15. Confidentiality. Both parties hereto agree than any non-public
information obtained hereunder concerning the other party is confidential and
may not be disclosed to any other person without the consent of the other party,
except as may be required by applicable law or at the request of a governmental
agency. The parties further agree that a breach of this provision would
irreparably damage the other party and accordingly agree that each of them is
entitled, in addition to all other remedies at law or in equity and without bond
or other security, to an injunction or injunctions to prevent breaches of this
provision.
16. Notices. Any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and delivered, via registered U.S.
Mail or facsimile with written confirmation via registered U.S. Mail, to it at
its office at the address set forth below; namely:
(a) In the case of notices sent to the Trust or a Master
Portfolio to:
Master Investment Portfolio
111 Center Street
Little Rock, AR 72201
Attention: Richard H. Blank, Jr.
With a copy to:
Barclays Global Investors
45 Fremont Street
San Francisco, CA 94105
Attention: Legal Department
(b) In the case of notices sent to the Bank to:
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
Attention: Andrew Nesvet
With a copy to: John E. Henry
or at such other place as such party may from time to time designate in
writing.
17. Amendments. This Agreement may not be altered or amended, except by
an instrument in writing, executed by both parties, and in the case of the
Trust, such alteration or amendment will be authorized and approved by its
Board.
18. Parties. This Agreement will be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement will not be assignable by the Trust
without the written consent of the Bank or by the Bank without the written
consent of the Trust, authorized and approved by its Board; and provided further
that termination proceedings pursuant to Section 14 hereof will not be deemed to
be an assignment within the meaning of this provision.
19. Governing Law. This Agreement and all performance hereunder will be
governed by the laws of the Commonwealth of Massachusetts.
20. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
21. Limitation of Liability. The Trust and the Bank agree that the
Trust's obligations under this Agreement shall not be binding upon any Trustee,
interestholder, officer, employee or agent of the Trust individually but are
binding only upon the assets and property of the appropriate Master Portfolio.
22. Single Agreement. This Agreement (including any exhibits,
appendices and schedules hereto) constitutes the entire agreement between the
Bank and the Trust as to the subject matter hereof and supersedes any and all
agreements, representations and warranties, written or oral, regarding such
subject matter made prior to the time at which this Agreement has been executed
and delivered between the Bank and the Trust.
23. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the day and year first written above.
Master Investment Portfolio
By: /s/ Richard H. Blank, Jr.
Name: Richard H. Blank, Jr.
Title: Chief Operating Officer
Investors Bank & Trust Company
By: /s/ Robert D. Mancuso
Name: Robert D. Mancuso
Title: Managing Director
Investors Bank & Trust Company
By: /s/ John E. Henry
Name: John E. Henry
Title: General Counsel
<PAGE>
Schedule A
Custody Agreement
Master Investment Portfolio
List of Master Portfolios
LifePath 2000 Master Portfolio
LifePath 2010 Master Portfolio
LifePath 2020 Master Portfolio
LifePath 2030 Master Portfolio
LifePath 2040 Master Portfolio
Asset Allocation Master Portfolio
Bond Index Master Portfolio
Money Market Master Portfolio
S & P 500 Index Master Portfolio
U.S. Treasury Allocation Master Portfolio
Extended Index Master Portfolio
U.S. Equity Index Master Portfolio
International Index Master Portfolio
Dated: October 21,1996
Amended: June 11, 1998 to include the Money Market Master Portfolio
Amended: October 28, 1998 to include the Extended Index and U.S. Equity Index
Master Portfolios
Amended: July 28, 1999 to include the International Index Master Portfolio
<PAGE>
Schedule B
Custody Agreement
Master Investment Portfolio
IBT shall not be entitled to separate compensation from MIP
for providing custody and fund accounting services to MIP's Master Portfolios
(with the exception of the Extended Index and U.S. Equity Index Master
Portfolios) pursuant to this Agreement so long as IBT is entitled to receive
fees and related expenses from BGI, pursuant to the Sub-administration Agreement
between BGI and IBT, for providing such custody and fund accounting services to
MIP's Master Portfolios. If IBT is no longer entitled to receive such fees and
expenses under such Sub-administration Agreement, then IBT shall be entitled to
receive compensation from MIP as IBT may from time to time negotiate with MIP,
and this Schedule B shall be amended accordingly.
<PAGE>
Schedule C
Custody Agreement
Master Investment Portfolio
Fund Accounting Duties
I. A.Journals containing an itemized daily record in detail of all
purchases and sales of securities, all receipts and disbursements of cash and
all other debits and credits, as required by subsection (b)(1) of rule 31a-1
under the 1940 Act (the "Rule");
B.General and auxiliary ledgers reflecting all asset, liability,
reserve, capital, income and expense accounts, including interest accrued and
interest received, as required by subsection (b)(2)(i) of the Rule;
C.Separate ledger accounts required by subsection (b) (2) (ii) and
(iii) of the Rule; and
D.A monthly trial balance of all ledger accounts (except
shareholder accounts) as required by subsection (b)(8) of the Rule.
II. All such books and records shall be the property of the Trust, and
IBT agrees to make such books and records available for inspection by the Trust
or by the Securities and Exchange Commission at reasonable times and otherwise
to keep confidential all records and other information relative to the Trust;
except when requested to divulge such information by duly constituted
authorities or court process, or when requested by the Trust.
III. In addition to the maintenance of the books and records specified
above, IBT shall perform the following accounting services daily for each Master
Portfolio;
A.Calculate the net asset value per interest;
B.Calculate changes in net asset value;
C.Calculate the per share dividend distribution rates:
D.Calculate dividends and any capital-gain distributions;
E.Calculate performance figures, including any yield or total
return and other performance figures, as appropriate;
F.Provide the following reports:
1. a current security position report;
2. a summary report of transactions and pending
maturities (including the principal cost, and accrued
interest on each portfolio security in maturity date
order); and
3. a current cash position report (including cash
available from portfolio sales and maturities and
sales of a Master Portfolio's interests less cash
needed for redemptions and settlement of portfolio
purchases);
G.Such other similar services with respect to a Master Portfolio
as may be reasonably requested by the Trust.
IV. IBT shall forward the information contained in Section III of this
Schedule to third-party service providers reasonably requested by the Trust, the
Co-Administrators or BGFA.
<PAGE>
CO-ADMINISTRATION AGREEMENT
Master Investment Portfolio
111 Center Street
Little Rock, Arkansas 72201
Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
Barclays Global Investors, N.A.
45 Fremont Street
San Francisco, CA 94105
Ladies and Gentlemen:
This will confirm the agreement among Master Investment Portfolio (the
"Trust") on behalf of its Master Portfolios listed in the attached Appendix A;
as such Appendix may be amended from time to time (each, a "Master Portfolio"
and, collectively, the "Master Portfolios"), Barclays Global Investors, N.A.
("BGI") and Stephens Inc. ("Stephens", together with BGI, the
"Co-administrators") as follows:
1. The Trust is a registered open-end, management investment company.
The Trust engages in the business of investing and reinvesting the assets of
each Master Portfolio in the manner and in accordance with the applicable
investment objective, policies and restrictions specified in the Trust's
currently effective Registration Statement, as amended from time to time (the
"Registration Statement"), filed by the Trust under the Investment Company Act
of 1940 (the "Act"). Copies of the Registration Statement, as most recently
amended, have been furnished to the Co-administrators. Any amendments to the
Registration Statement shall be furnished to the Co-administrators promptly.
2. The Trust is engaging the Co-administrators to provide, or cause to
be provided, the administrative services specified elsewhere in this agreement,
subject to the overall supervision of the Trust's Board of Trustees. Pursuant to
advisory contracts between the Trust and Barclays Global Fund Advisors (the
"Adviser") on behalf of each Master Portfolio, the Trust has engaged the Adviser
to manage the investing and reinvesting of the assets of the Master Portfolios
and to provide advisory services as specified in such advisory contracts.
3. The Co-administrators agree, at their expense, to supervise the
administrative operations and undertake to provide, or cause to be provided, the
services described on Appendix B, as such Appendix may be amended from time to
time by the mutual consent of the parties, the provision of, and liability
thereto, for certain of such services to be allocated on such Appendix, in
connection with the operations of the Trust and the Master Portfolios, and take
all reasonable action in the performance of their obligations under this
agreement to assure that the necessary information is made available to other
service providers, as such may be required by the Trust from time to time; and
to provide all other administrative services reasonably necessary for the
operation of the Master Portfolios, other than those services that are to be
provided by the Adviser pursuant to the advisory contracts and by the Trust's
transfer and dividend disbursing agent and custodian.
4. Except as provided in the advisory contracts on behalf of each of
the Trust's Master Portfolios and in this agreement, and only for so long as the
Co-administrators are entitled to compensation for providing co-administration
services to a feeder fund that invests substantially all of its assets in a
corresponding Master Portfolio, the Co-administrators agree to bear such feeder
fund's pro rata portion of the costs of the operations of such Master Portfolio,
including, but not limited to, its pro rata portion of the compensation of the
Trust's trustees who are not affiliated with the Adviser, the Co-administrators
or any of their affiliates; governmental fees; interest charges; taxes; fees and
expenses of its independent auditors, legal counsel (other than in connection
with litigation), transfer agent and dividend disbursing agent; fees paid to
shareholder servicing and other special purpose agents; expenses of preparing
and printing any Parts A or B, interestholders' reports, notices, proxy
statements and reports to regulatory agencies; travel expenses of trustees of
the Trust in connection with their attendance at Board and other meetings
relating to the Trust; office supplies; premiums for fidelity bonds and errors
and omissions and/or officers and trustees liability insurance; trade
association membership dues; fees and expenses of any custodian and fund
accountant, including those for keeping books and accounts and calculating the
net asset value per interest of the Master Portfolios; expenses of
interestholders' meetings; expenses relating to the issuance, registration,
qualification and redemption of interests of the Master Portfolios; any pricing
services; and organizational expenses. Notwithstanding anything to the contrary,
the Co-administrators shall not be required to bear any portion of brokerage
fees payable to the Adviser under its advisory contracts with the Trust and
other expenses connected with the execution of portfolio securities
transactions, litigation expenses, taxes (including income, excise, transfer and
withholding taxes) or cost or expense that a majority of the disinterested
trustees of the Trust deems to be an extraordinary expense. Expenses
attributable to one or more, but not all, of the Master Portfolios shall be
charged against the assets of the relevant Master Portfolios. General expenses
of the Trust shall be allocated among the Master Portfolios in a manner
proportionate to the net assets of each Master Portfolio, on a transactional
basis or on such other basis as the Board of Trustees deems equitable.
5. Each Co-administrator shall exercise reasonable care and shall give
the Trust the benefit of the Co-administrator's best judgment and efforts in
rendering services under this agreement. As an inducement to the
Co-administrators' undertaking to render services hereunder, the Trust agrees
that a Co-administrator shall not be liable under this agreement for any mistake
in judgment or in any other event whatsoever except for lack of good faith,
provided that nothing in this agreement shall be deemed to protect or purport to
protect the Co-administrator against any liability to the Trust or its
interestholders to which the Co-administrator would otherwise be subject by
reason of willful misfeasance, bad faith or negligence in the performance of the
Co-administrators' duties under this agreement or by reason of reckless
disregard of its obligations and duties hereunder.
6. The Co-administrators shall not be entitled to compensation for
providing administrative services to a Master Portfolio so long as the
Co-administrators are entitled to receive fees for providing similar services to
a feeder fund of another registered investment company that invests all of its
assets in the Master Portfolio.
7. This agreement shall become effective on its execution date.
Thereafter, this agreement shall continue with respect to a Master Portfolio for
successive annual periods only so long as the continuance is specifically
approved at least annually (a) by the vote of a majority of the Master
Portfolio's outstanding voting securities (as defined in the Act) or by the
Trust's Board of Trustees and (b) by the vote, cast in person at a meeting
called for the purpose, of a majority of the Trust's trustees who are not
parties to this contract or "interested persons" (as defined in the Act) of any
such party. This contract may be terminated at any time by the Trust without the
payment of any penalty, by a vote of a majority of the Master Portfolio's
outstanding voting securities (as defined in the Act) or by a vote of a majority
of the Trust's entire Board of Trustee's on 60 days' written notice to the
Co-administrators, or by the Co-administrators on 60 days' written notice to the
Trust. This contract shall terminate automatically in the event of its
assignment (as defined in the Act).
8. Except to the extent necessary to perform the Co-administrators'
obligations under this agreement, nothing herein shall be deemed to limit or
restrict the right of the Co-administrators, or any affiliate of the
Co-administrators, or any employee of the Co-administrators, to engage in any
other business or to devote time and attention to the management or other
aspects of any other business, whether of a similar or dissimilar nature, or to
render services of any kind to any other corporation, firm, individual or
association.
9. This agreement shall be governed by and construed in accordance with
the laws of the State of Arkansas.
10. The Trust hereby agrees and acknowledges that each Co-administrator
may allocate or further delegate responsibility for any or all of the services
to be provided hereunder, as listed on Appendix B hereto, between each
Co-administrator; provided that the Co-administrators shall have joint and
several liability for the provision of the services under this agreement, except
that BGI or Stephens each agree to assume sole responsibility, and related
liability thereto, for providing the duties and services identified as the sole
responsibility of BGI or Stephens on such Appendix B; and, further provided that
each Co-administrator agrees to remain fully liable to the Trust for the
provision of any service that such Co-administrator delegates to another entity.
12. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
If the foregoing correctly sets forth the agreement between
the Trust and the Co-administrators, please so indicate by signing and returning
to the Trust the enclosed copy hereof.
Very truly yours,
MASTER INVESTMENT PORTFOLIO,
on behalf of LifePath 2000, LifePath 2010, LifePath
2020, LifePath 2030, LifePath 2040, Asset Allocation,
Bond Index, Extended Index, Money Market, S&P 500
Index, U.S. Equity Index, U.S. Treasury Allocation
Master Portfolios
By: ___s/Richard H. Blank, Jr.__
Name: Richard H. Blank, Jr.
Title: Chief Operating Officer,
Secretary and Treasurer
ACCEPTED as of the date set forth above:
BARCLAYS GLOBAL INVESTORS, N.A.
By: ____________________________
Name: Larry G. Tint
Title: Managing Director
BARCLAYS GLOBAL INVESTORS, N.A.
By: ____________________________
Name: Julia LeSage
Title: Principal
STEPHENS INC.
By: ____________________________
Name: Richard H. Blank, Jr.
Title: Senior Vice President
<PAGE>
Appendix A
Master Investment Portfolio
LifePath 2000 Master Portfolio
LifePath 2010 Master Portfolio
LifePath 2020 Master Portfolio
LifePath 2030 Master Portfolio
LifePath 2040 Master Portfolio
Asset Allocation Master Portfolio
Bond Index Master Portfolio
Money Market Master Portfolio
S & P 500 Index Master Portfolio
U.S. Treasury Allocation Master Portfolio
Extended Index Master Portfolio
U.S. Equity Index Master Portfolio
International Index Master Portfolio
Dated: October 21, 1996
as amended: June 11, 1998 to include the Money Market Master Portfolio
as amended: October 28, 1998 to include the Extended Index and U.S.
Equity Index Master Portfolios
as amended: July 29, 1999 to include the International Index Master Portfolio
<PAGE>
Appendix B
Master Investment Portfolio
LIST OF ADMINISTRATIVE SERVICES
Stephens Inc.
(1) Review agenda and assemble Board materials for quarterly Board
meetings; prepare supporting information when necessary; prepare
minutes of Board and committee meetings.
(2) Review and approve Board material.
(3) Provide expense budgets.
(4) Monitor actual expenses and update budgets/expense accruals as necessary.
(5) Review and authorize filing of Forms N-SAR.
(6) Maintain records of sales and file appropriate registrations and renewals,
sales information and other required material for Blue Sky purposes.
(7) Review and provide advice to the distributor and the Trust on
behalf of the Master Portfolios and investment adviser regarding
sales literature and marketing plans to assure regulatory
compliance.
Barclays Global Investors
(8) Continuously monitor portfolio activity and related functions in
conjunction with all applicable regulatory requirements. Take
corrective action as necessary.
(9) Identify the services to which the Funds report performance
information. Provide information as requested on performance
questionnaires.
(10)Prepare appropriate management letter and coordinate production of
Management Discussion and Analysis, with respect to the preparation
and printing of shareholder reports.
(11)Coordinate review and approval by portfolio managers of portfolio
listings to be included in financial statements, with respect to
the preparation and printing of shareholder reports.
(12) Prepare selected portfolio and financial information for inclusion in Board
material.
(13) Assist in presentation to Board as desired by Fund Officer(s).
(14) Calculate total return information and other statistical
information including undistributed income and capital gains with
respect to condensed financial information for review by
management.
(15) Perform tests of specific portfolio activities against compliance
checklists designed from the provisions of the Masters' and Money
Market Fund's current Prospectus and SAI.
(16) Calculate dividend amounts available for distribution.
(17) Coordinate review of dividend amounts by management and auditors.
(18) Notify fund accounting and transfer agent of authorized dividends rates.
(19) Prepare responses to various performance questionnaires; coordinate
as necessary, and submit responses to the appropriate agency;
(20) Prepare Forms N-SAR for filing; obtain any necessary supporting documents;
file with the SEC via EDGAR.
(21) Draft semi-annual and annual shareholder reports and coordinate auditor and
management review.
(22) Coordinate printing of reports and EDGAR conversion with outside printer
and filing with the SEC via EDGAR.
(23) Provide information for Financial Highlights and expense tables.
(24) Continuously monitor portfolio activity regarding diversification
in conjunction with IRS requirements for registered investment
companies.
(25) Continuously monitor portfolio activity regarding "short short"
income and qualifying income in conjunction with IRS requirements
for registered investment companies.
Stephens Inc. and Barclays Global Investors
(26) Prepare, or assist in the preparation, and file with the SEC and
state securities regulators, if applicable, registration
statements, notices, reports, and other material required to be
filed under applicable laws.
(27) Review financial information and take any necessary action.
(28) Develop and implement procedures for monitoring compliance with
regulatory requirements and compliance with each Master Portfolio's
investment objective, policies and restrictions as established by
the Trust's Board, perform compliance testing and approve
resolution of compliance issues.
(29) Approve dividend rates; obtain Board approval when required.
(30) Determine allocation of invoices among funds. Authorize and send to fund
accountants for payment of expenses.
(31) Coordinate activities of other vendors as necessary.
(32) Provide appropriate responses to Forms N-SAR.
(33) Provide marketing input of shareholder report style and graphics.
(34) Review and approve entire shareholder report.
(35) Review drafts and coordinate review process of Forms N-1A updates and
prospectus supplements.
(36) Coordinate printing, EDGAR conversion, and filing with the SEC with outside
printers of Forms N-1A.
(37) Maintain and preserve the corporate records of the Company, including each
Master Portfolio.
(38) Make appropriate representations in conjunction with audit.
(39) Review diversification test results and corrective actions taken, with
respect to qualifications as a registered investment company.
(40) Approve tax positions taken regarding qualification as a registered
investment company.
(41) Review "short short" income and qualifying income test results and
corrective actions taken, with respect to qualifications as a
registered investment company.
(42) Approve tax positions taken regarding "short short" income and
qualifying income, with respect to qualifications as a registered
investment company.
(43) Approve tax accounting positions to be taken.
(44) Approve distributions
(45) Review tax returns and coordinate signature thereof with a Fund Officer.
(46) Approved: October 21, 1996
