________________________________________________________________________________
As filed with the Securities and Exchange Commission on August 5, 1999
Registration No. 333-83693
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[X] Pre-Effective Amendment No. 1 [_] Post-Effective Amendment No. ___
(Check appropriate box or boxes)
_______________________________________
Exact Name of Registrant as Specified in Charter:
BARCLAYS GLOBAL INVESTORS FUNDS, INC.
(formerly MasterWorks Funds Inc.)
Area Code and Telephone Number:
(800) 643-9691
Address of Principal Executive Offices:
111 Center Street
Little Rock, Arkansas 72201
________________________________
Name and Address of Agent for Service:
Richard H. Blank, Jr.
c/o Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
Copies to:
Robert M. Kurucza, Esq.
Marco E. Adelfio, Esq.
Morrison & Foerster LLP
2000 Pennsylvania Ave., N.W., Suite 5500
Washington, D.C. 20006
________________________________________________________________________________
No filing fee is due because the Registrant has previously filed an election
pursuant to Rule 24f-2 to register an indefinite number of the Registrant's
shares.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8 (a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8 (a),
may determine.
BARCLAYS GLOBAL INVESTORS FUNDS, INC.
CROSS-REFERENCE SHEET
Items Required by Form N-14
---------------------------
Letter to Shareholders
- ----------------------
Notice of Special Meeting
- -------------------------
PART A
- ------
Item No. Prospectus Caption
- -------- ------------------
1 Cover Page
Cross-Reference Sheet
Front Cover Page of Combined Prospectus/Proxy Statement
2 Table of Contents
3 The Proposed Transaction
4 The Proposed Transaction
Description of the Agreement and Plan of Consolidation
5 Information about the Funds
6 Information about the Funds
7 Voting Information
8 Not Applicable
9 Not Applicable
PART B
- ------
Statement of Additional
Item No. Information Caption
- -------- -----------------------
10 Cover Page
11 Table of Contents
12 Incorporation of Documents by Reference in
Statement of Additional Information
General Information
13 Incorporation of Documents by Reference in
Statement of Additional Information
General Information
14 Incorporation of Documents by Reference in
Statement of Additional Information
General Information
Pro-Forma Financial Information
PART C
- ------
Item Nos.
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15-17
THE FOLLOWING ITEMS ARE INCORPORATED BY REFERENCE:
A) From Post-Effective Amendment No. 21 of Barclays Global Investors
Funds, Inc, filed June 30, 1999 (SEC File No. 33-54126; 811-7332): The
Prospectus
and Statement of Additional Information dated July 1, 1999, describing
the Bond Index Fund and the U.S. Treasury Allocation Fund;
B) The audited financial statements and related independent auditors'
reports for the Bond Index Fund and U.S. Government Allocation Fund of
Barclays Global Investors Funds, Inc., contained in the Annual Reports
for the fiscal period ended February 28, 1999, as filed with the SEC on
April 26, 1999.
________________________________________________________________________________
IMPORTANT NOTICE: Please vote using the
Enclosed Proxy Ballot as soon as possible.
For your convenience, you may vote by calling Shareholder
Communications Corp. ("SCC") toll-free at 1-800-733-8481 Ext. 435
from 6:00 a.m. to 8:00 p.m. (Pacific time). You may
also vote by faxing the front and back of your
Proxy Ballot to SCC at 1-800-733-1885.
A confirmation of your telephonic or facsimile
vote will be sent to you.
________________________________________________________________________________
BARCLAYS GLOBAL INVESTORS FUNDS, INC.
111 Center Street
Little Rock, Arkansas 72201
August 27, 1999
Dear Shareholder of the U.S. Treasury Allocation Fund:
We are pleased to invite you to a Special Meeting of the Shareholders
of the U.S. Treasury Allocation Fund (the "U.S. Treasury Fund") of Barclays
Global Investors Funds, Inc. ("BGI Funds") to be held on Tuesday, September 28,
1999. The Special Meeting is being held to consider a proposal to consolidate
the U.S. Treasury Fund into the Bond Index Fund of BGI Funds. If the proposed
consolidation is approved, you will receive shares of the Bond Index Fund equal
in value to your shares of the U.S. Treasury Fund.
The Board of Directors of BGI Funds unanimously recommends that you
vote in favor of the proposal.
This booklet describes the proposed consolidation and the Board of
Directors' reasons for recommending approval. The booklet includes this cover
letter, a formal notice, a Combined Prospectus/Proxy Statement and several
exhibits. Please take the time to review all of the information before casting
your vote. You may attend the Special Meeting in person or you may use the
enclosed Proxy Ballot to cast your vote.
You should weigh several considerations in particular:
. Reasons for the Proposed Consolidation
The investment adviser to both the U.S. Treasury Fund and the Bond
Index Fund is Barclays Global Fund Advisors ("BGFA"). BGFA has been primarily
responsible for supervisory, overall management and reporting responsibilities,
as well as responsible for the
1
day-to-day portfolio management of the Funds. For various reasons that are
described further in the Combined Prospectus/Proxy Statement, BGFA has advised
the Board of Directors of BGI Funds that it does not believe that the U.S.
Treasury Fund, with only $33 million in assets as of June 30, 1999, is viable on
a long-term basis. As an alternative to liquidation, the proposed consolidation
allows shareholders to continue to benefit from BGFA's day-to-day portfolio
management services, in a similar fund with generally similar investment
objectives and policies.
. Important Facts About The Funds
. Objectives and Policies--The investment objectives and policies
of the Funds are generally similar, although there are some
important differences that you should consider. The principal
similarities and differences are described in the Combined
Prospectus/Proxy Statement that is part of this booklet.
. Access Arrangements--The shareholder servicing, transaction and
other access arrangements are similar for both Funds.
. Share Values--The total dollar value of shares you will receive
in the Bond Index Fund will be equal to the total dollar value of
your shares in the U.S. Treasury Fund.
Whether or not you attend the Special Meeting of Shareholders, you may
vote by proxy in any of three ways:
. By Mail--Mark, sign, date and return the enclosed Proxy Ballot in
the enclosed postage-paid envelope;
. By Phone--Call SCC toll-free at 1-800-733-8481 Ext. 435 from 6:00
a.m. to 8:00 p.m. (Pacific time); or
. By Fax--Mark, sign, date and fax both sides of the enclosed Proxy
Ballot to SCC at 1-800-733-1885.
A confirmation of your telephonic or fax vote will be sent to you.
Every vote is important to us.
If you have any questions, please call BGI Funds at 1-888-204-3956.
Very truly yours,
Barclays Global Investors Funds, Inc.
R. Greg Feltus
President
2
BARCLAYS GLOBAL INVESTORS FUNDS, INC.
111 Center Street
Little Rock, Arkansas 72201
Telephone: 1-888-204-3956
_____________________________________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
U.S. TREASURY ALLOCATION FUND
To Be Held on September 28, 1999
_____________________________________________
To the Shareholders of the U.S. Treasury Allocation Fund (the "U.S. Treasury
Fund") of Barclays Global Investors Funds, Inc. ("BGI Funds"):
PLEASE TAKE NOTE that a SPECIAL MEETING OF SHAREHOLDERS (the "Special
Meeting") of the U.S. Treasury Fund will be held on Tuesday, September 28, 1999,
at 11:00 a.m. (Central time) at the principal office of BGI Funds, 111 Center
Street, Little Rock, Arkansas 72201. The Special Meeting is being called for
the following purposes:
(1) To approve an Agreement and Plan of Consolidation (the "Plan")
for the U.S. Treasury Fund and the transactions contemplated
thereby, which include (a) the transfer of all of the assets of
the U.S. Treasury Fund to the Bond Index of BGI Funds, and the
assumption by the Bond Index Fund of all of the liabilities of
the U.S. Treasury Fund, in exchange for shares of the Bond Index
Fund; and (b) the distribution to shareholders of the U.S.
Treasury Fund of the shares of the Bond Index Fund so received.
(2) To transact such other business as may properly come before the
meeting, or any adjournment(s) thereof, including any
adjournment(s) necessary to obtain requisite quorums and/or
approvals.
The Board of Directors of BGI Funds has fixed the close of business on
Friday, August 13, 1999, as the record date (the "Record Date") for the
determination of Fund shareholders entitled to receive notice of and to vote at
the Special Meeting or any adjournment(s) thereof. The Combined
Prospectus/Proxy Statement contains further information regarding the meeting
and the proposal. Even if you do not attend the Special Meeting in person, you
may vote in any one of three ways:
1. Mark, sign, date and return the enclosed Proxy Ballot in the
enclosed postage-paid envelope; or
1
2. Vote by telephone by calling Shareholder Communications Corp.
("SCC") toll-free at 1-800-733-8481 Ext. 435 from 6:00 a.m. to 8:00 p.m.
(Pacific time) (a confirmation of your telephonic vote will be sent to you); or
3. Mark, sign, date and fax the enclosed Proxy Ballot (both front
and back) to SCC at 1-800-733-1885 (a confirmation of your facsimile vote will
be sent to you).
In order for the Plan to be approved, the holders of a majority of the
U.S. Treasury Fund's shares outstanding on the Record Date must be present in
person or by proxy. Therefore, your proxy is very important to us. Whether or
not you plan to attend the meeting in person, please mark, sign, date and return
the enclosed Proxy Ballot today, either in the enclosed postage-paid envelope or
by telefacsimile (front and back) at 1-800-733-1885, or by calling toll-free at
1-800-733-8481 Ext. 435. Signed but unmarked Proxy Ballots will be counted in
determining whether a quorum is present and will be voted in favor of the
proposal.
By Order of the Board of Directors
Richard H. Blank, Jr.
Secretary
August 27, 1999
______________________________________________
YOUR VOTE IS VERY IMPORTANT TO US
REGARDLESS
OF THE NUMBER OF SHARES THAT YOU OWN.
PLEASE VOTE BY MAIL, FACSIMILE OR
OR TELEPHONE IMMEDIATELY.
______________________________________________
2
COMBINED PROSPECTUS/PROXY STATEMENT
August 27, 1999
Barclays Global Investors Funds, Inc.
111 Center Street
Little Rock, Arkansas 72201
Telephone: 1-888-204-3956
This Combined Prospectus/Proxy Statement is being furnished to
shareholders of the U.S. Treasury Allocation Fund ("U.S. Treasury Fund") of
Barclays Global Investors Funds, Inc. ("BGI Funds") in connection with the
solicitation of proxies by the Board of Directors of BGI Funds, for a special
meeting of Shareholders of the U.S. Treasury Fund (the "Special Meeting") to be
held at the principal office of BGI Funds, 111 Center Street, Little Rock,
Arkansas 72201, on Tuesday, September 28, 1999 beginning at 11:00 a.m. (Central
time). The Special Meeting has been called to consider the following proposal,
and to transact such other business as may properly come before the meeting.
Proposal: To approve an Agreement and Plan of Consolidation dated _______
__, 1999 (the "Plan"), between the U.S. Treasury Fund and the Bond Index
Fund (collectively, the "Funds") of BGI Funds. The Plan provides for the
transfer of the assets and liabilities of the U.S. Treasury Fund to the
Bond Index Fund in exchange for shares of equal value of the Bond Index
Fund (the "Consolidation"). As a result of the Consolidation, shareholders
of the U.S. Treasury Fund will become shareholders of the Bond Index Fund.
This Combined Prospectus/Proxy Statement, which should be retained for
future reference, sets forth concisely the information about the Bond Index Fund
that prospective investors, including shareholders of the U.S. Treasury Fund,
should know before investing. Additional information, incorporated by reference
herein, is contained in a separate Statement of Additional Information, dated
July 1, 1999, which has been filed with the Securities and Exchange Commission
(the "SEC") and is available without charge by calling BGI Funds at 1-888-204-
3956.
The Prospectus for the U.S. Treasury Fund and the Bond Index Fund is
incorporated by reference in this Combined Prospectus/Proxy Statement and
accompanies this Combined Prospectus/Proxy Statement. The Prospectus also is
available without charge by calling BGI Funds at 1-888-204-3956.
1
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
2
TABLE OF CONTENTS
PAGE
----
I. THE PROPOSED TRANSACTION - Item 3.................................................................. __
. Overview - Item 3(b)............................................................................... __
. Comparison of Fees and Expenses - Item 3(a)........................................................ __
. Comparison of Investment Objectives, Policies and Restrictions - Item 3(b)(1)...................... __
. Comparison of Risks - Item 3(b).................................................................... __
. Comparison of Advisory and Other Service Arrangements and Fees - Item 3(b)(2)...................... __
. Comparison of Purchase and Redemption Procedures and Other Considerations -
Items 3(b)(3) and (4)............................................................................ __
. Comparison of Performance - Item 3(b).............................................................. __
. A Discussion of Principal Risk Factors - Item 3(c)................................................. __
II. DESCRIPTION OF THE AGREEMENT AND PLAN
OF CONSOLIDATION - Item 4........................................................................ __
. Board Consideration - Item 4(a).................................................................... __
. Reasons for the Consolidation - Item 4(a)(3)....................................................... __
. Federal Income Tax Consequences - Item 4(a)(4)..................................................... __
. Capitalization - Item (4)(b)...................................................................... __
III. INFORMATION ABOUT THE FUNDS - Items 5 and 6 ....................................................... __
. Organization of BGI Funds ......................................................................... __
. Substantial Shareholders .......................................................................... __
. Additional Information - Items 5(e), 5(f) and 6(b)(1) ............................................. __
. Items 5(a) and 6(a) are incorporated by reference to each Fund's Prospectus.
. Item 5(a) of Form N-1A is incorporated by reference into the U.S. Treasury Fund's
Annual Report. See Exhibit B for Bond Index Fund.
. Items 5(b),5(c),5(d), 6(c) and 6(d) are not applicable.
IV. VOTING INFORMATION - Item 7 ....................................................................... __
. Approval and Consummation of the Proposed Transaction ............................................. __
. Solicitation of Proxies and Payment of Expenses ................................................... __
V. INTEREST OF CERTAIN PERSONS AND EXPERTS - Item 8 .................................................. N/A
VI. ADDITIONAL INFORMATION REQUIRED FOR REOFFERING BY PERSONS
DEEMED TO BE UNDERWRITERS - Item 9 .............................................................. N/A
MISCELLANEOUS .......................................................................................... __
. Other Business .................................................................................... __
. Future Shareholder Proposals ...................................................................... __
EXHIBIT A - FORM OF AGREEMENT AND PLAN OF CONSOLIDATION
EXHIBIT B - MANAGEMENT'S DISCUSSION OF BOND INDEX FUND
PERFORMANCE
APPENDIX - FORM OF PROXY BALLOT
BARCLAYS GLOBAL INVESTORS FUNDS, INC.
111 Center Street
Little Rock, Arkansas 72201
_________________________________________________
SPECIAL MEETING OF SHAREHOLDERS
U.S. TREASURY ALLOCATION FUND
To Be Held on September 28, 1999
I. THE PROPOSED TRANSACTION
Important information about the matter to be considered at the Special
Meeting of Shareholders follows. This information is qualified by reference to
the Exhibits at the end of this document.
Overview
The Directors are seeking your approval of an Agreement and Plan of
Consolidation, which contemplates that the Bond Index Fund of BGI Funds will
acquire all of the assets of the U.S. Treasury Fund of BGI Funds and assume all
of the liabilities of the U.S. Treasury Fund in exchange for shares of the Bond
Index Fund. The shares of the Bond Index Fund received by the U.S. Treasury Fund
will then be distributed to the U.S. Treasury Fund's shareholders and the U.S.
Treasury Fund will be dissolved and liquidated.
The Plan must be approved by a vote of a majority of the shareholders of
the U.S. Treasury Fund. The Shareholder Meeting of the U.S. Treasury Fund
shareholders is scheduled for Tuesday, September 28, 1999. The Consolidation, if
approved, is expected to occur on or about Friday, October 15, 1999. For more
information about the Plan, see "Description of the Agreement and Plan of
Consolidation."
As a result of the Consolidation, you will receive full and fractional
shares of the Bond Index Fund equal in value to the shares of the U.S. Treasury
Fund owned by you immediately prior to the transaction. No commissions or sales
loads will be charged in connection with the Consolidation
Shareholders of the U.S. Treasury Fund whose shares are held in a taxable
account will recognize a taxable gain or loss for federal income tax purposes.
For each such shareholder, this gain or loss will be measured by the difference
between the tax basis in the U.S. Treasury Fund shares and their net asset value
at the closing date of the Consolidation ("Closing"). Shareholders who hold
U.S. Treasury Fund shares in a tax-deferred retirement account will not
recognize a taxable gain or loss as a result of the
1
Consolidation. See "Federal Income Tax Consequences" for additional information.
You should separately consider any state tax consequences in consultation with
your tax advisor.
The U.S. Treasury Fund seeks to provide a high level of long-term total
return, consisting of capital appreciation and current income, consistent with a
reasonable level of risk, before fees and expenses. It attempts to improve on
the markets' long-term risk-and-return tradeoff by shifting its investments
among markets in response to changes in the investment environment. The U.S.
Treasury Fund pursues this objective by investing all of its assets in the U.S.
Treasury Allocation Master Portfolio (the "U.S. Treasury Master Portfolio") of
Master Investment Portfolio ("MIP"), which has the same investment objective and
policies as the Fund. The U.S. Treasury Master Portfolio invests directly in a
portfolio of securities. This is sometimes called a "master-feeder structure."
The Bond Index Fund seeks to approximate as closely as practicable,
before fees and expenses, the total rate of return of the U.S. market for issued
and outstanding U.S. government and high-grade corporate bonds as measured by
the Lehman Brothers Government/Corporate Bond Index ("LB Bond Index"). The Bond
Index Fund pursues this objective by investing all of its assets in the Bond
Index Master Portfolio of MIP, which has the same investment objective and
policies as the Bond Index Fund. The Master Portfolio invests directly in a
portfolio of securities. This is another example of a master-feeder structure.
Although both Funds, through their respective Master Portfolios, invest
primarily in fixed-income securities, there are differences in the types of
fixed-income securities that the Funds generally purchase for investment. The
U.S. Treasury Fund has a policy of investing, under normal market condition, at
least 65% of its assets in U.S. Treasury securities such as long-term U.S.
Treasury Bonds, intermediate-term U.S. Treasury Notes and short-term U.S.
Treasury Bills. In addition, the U.S. Treasury Fund may hold money market
instruments for liquidity purposes. The Bond Index Fund invests, under normal
market conditions, at least 90% of its assets in securities representing the LB
Bond Index. The LB Bond Index is composed of approximately 6,500 debt issues of
fixed-income securities, including U.S. Government Securities and investment
grade corporate bonds, each with an issue size of at least $150 million and a
remaining time to maturity of one year or more. As a practical matter, the Bond
Index Fund cannot hold each of the 6,500 securities included in the LB Bond
Index. It can, however, substantially replicate the index's profile by holding
U.S. Government obligations and corporate bonds in a similar proportion to the
index.
If the Consolidation is approved, the master-feeder structure of the U.S.
Treasury Fund will be dissolved. The dissolution of the master-feeder structure
does not require shareholder approval and is expected to occur shortly after the
proposed Consolidation.
The risk factors of investing in the Bond Index Fund are generally
comparable to those of investing in the U.S. Treasury Fund. If the U.S. Treasury
Fund invested directly
2
in a portfolio of securities, the portfolio composition of the U.S. Treasury
Fund would be virtually identical to that of its Master Portfolio, since it is
the only feeder fund of the Master Portfolio (99.99% of all the Master
Portfolio's interests are owned by the U.S. Treasury Fund). The cost to
shareholders also would be the same, as the U.S. Treasury Fund's pro-rata share
of the Master Portfolio's fees would be equal to such costs if occurred directly
by the U.S. Treasury Fund. Consequently, the risks and expenses of investing in
the U.S. Treasury Fund would be virtually unchanged if the Fund were not part of
a master-feeder structure. For a more detailed comparison of the Funds' risks
see "Comparison of Risks."
Comparison of Fees and Expenses
The following comparison is based on current information for the U.S.
Treasury and Bond Index Funds, restated to reflect voluntary fee waivers and
expense reimbursements that are expected to continue during the current fiscal
year. There can be no assurances that the waivers or reimbursements will
continue after the end of the current fiscal year.
Shareholder Transaction Expenses
Pro Forma
U.S. Treasury Bond Index (After
Fund Fund Consolidation)
---- ---- --------------
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)
None None None
Annual Fund Operating Expenses*
(as a percentage of average daily net assets)
Pro Forma
U.S. Treasury Bond Index (After
Fund Fund Consolidation)
---- ---- --------------
Management Fees 0.30% 0.08% 0.08%
Distribution Fees 0.00% 0.00% 0.00%
Other Expenses 0.40% 0.15% 0.15%
---- ---- ----
TOTAL FUND OPERATING EXPENSES 0.70% 0.23% 0.23%
_____________________________
* Information on annual Fund operating expenses reflects the combined expenses
of the Funds and the Master Portfolios in which they invest.
Annual Fund operating expenses for the Funds are based on amounts
incurred during the most recent fiscal year. Stephens Inc. ("Stephens") and
Barclays Global Investors, N. A. ("BGI") have agreed to assume all of the
ordinary operating expenses of
3
the Funds (other than investment advisory fees, portfolio transaction expenses
and administrative fees).
Example of Expenses: The example below is intended to help you compare
-------------------
each Fund's expenses with those of other mutual funds. Actual costs may vary.
The example illustrates the expenses you would have incurred on an initial
$10,000 investment in each of the Funds over the time periods shown. It assumes
your investment earns an annual return of 5% over the periods and that the
Funds' expenses remain constant. The 5% annual return is hypothetical. It does
not represent actual or expected performance.
The Funds do not charge sales or redemption fees. This means that your expenses
for each period would be the same whether or not you sell your shares at the end
of a period. Your actual costs may be higher or lower than this hypothetical
example.
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
U.S. Treasury Fund $72 $224 $390 $871
Bond Index Fund $24 $ 74 $130 $293
Pro Forma $24 $ 74 $130 $293
Comparison of Investment Objectives, Policies and Restrictions
The investment objective, policies and strategies of the U.S. Treasury
Fund are generally similar to those of the Bond Index Fund. The investment
objective of each Fund is fundamental and may not be changed without shareholder
approval. Below is a table comparing the investment objectives and key policies
of the Funds.
- -----------------------------------------------------------------------------------------
U.S. Treasury Fund Bond Index Fund
- -----------------------------------------------------------------------------------------
Objective: Seeks to achieve a high level Objective: Seeks to approximate as closely
of long-term total return, consisting of as practicable, before fees and expenses,
capital appreciation and current income, the total rate of return of the U.S.
consistent with reasonable risk. markets for issued and outstanding U.S. and
high-grade corporate bonds as measured by
the LB Bond Index.
- -----------------------------------------------------------------------------------------
In Pursuing its Objective: The Fund In Pursuing its Objective: The Fund
allocates and reallocates its investments invests substantially all of its assets in
among the three classes of U.S. Treasury the LB Bond Index, which is composed of
debt securities, long-term bonds, approximately 6,500 issues of fixed-income
intermediate-term notes and bonds and securities, including U.S. Government
short-term bills. securities and investment grade corporate
bonds, each with an issue size of at least
$150 million and a remaining maturity of
greater than one year.
- -----------------------------------------------------------------------------------------
4
- ----------------------------------------------------------------------------------------------
U.S. Treasury Fund Bond Index Fund
Key Investment Policies: Key Investment Policies:
- ----------------------------------------------------------------------------------------------
. The U.S. Treasury Fund invests at least . The Bond Index Fund invests at least 65%
65% of its total assets in U.S. Treasury of its total assets in bonds and debentures.
securities, such as long-term bonds,
intermediate-term notes and bonds and . Securities are selected for investment
short-term bills. by the Fund based on a mix of factors, such
as the relative proportion of such
. The U.S. Treasury Allocation Fund uses securities in the LB Bond Index, credit
an investment model to determine the quality, issue sector, maturity structure,
investment strategy for the Fund (the coupon rates and callability.
"Model").
. The Bond Index Fund seeks to come within
. The Model concentrates its analysis on 95% of the total rate of return of the LB
maturity classes of U.S. Treasury Bond Index, before fees and expenses, in
securities, combining: (i) comprehensive falling as well as rising markets.
return data; (ii) statistically
predictable variations from expected . BGFA, makes no attempt to apply
returns; and (iii) information on how economic, financial or market analysis when
varying returns correlate. managing the Fund's portfolio. BGFA
selects securities because they will help
. When the Model identifies potential the Fund achieve returns corresponding to
gains for the Fund, transaction costs the LB Bond Index.
help determine modifications in the
Fund's investment allocation. Barclays
Global Fund Advisors ("BGFA"), the Fund's
investment adviser, decides whether or
not the cost of buying and selling
securities outweighs the potential gains
identified by the Model.
- ----------------------------------------------------------------------------------------------
Investments in either the U.S. Treasury Fund or the Bond Index Fund
discussed in this Combined Prospectus/Proxy Statement are not bank deposits or
obligations of BGI or BGFA. They are not guaranteed or endorsed by the Federal
Deposit Insurance Corporation or any other government agency.
Comparison of Risks
Risks of investing in the Bond Index Fund
. value of the bonds in which the Fund invests may fall because of a rise in
interest rates, which generally reduces the value of bonds, even those issued
by the U.S. government
. value of individual bonds may fall with the decline in a borrower's real or
apparent ability to meet its financial obligations
. prices of bonds may fall in response to economic events or trends
5
. bonds that the Bond Index Fund's investment adviser selects may not match the
performance of the market index
. requirements for cash balances may exert a drag on overall Bond Index Fund
performance
. issuer may be unable to make interest payments or repay principal on time and
the bond could lose all of its value, or be renegotiated at a lower interest
rate or principal amount
. no attempt is made to individually select bonds because the Bond Index Master
Portfolio is managed by determining which securities are to be purchased or
sold to maintain, to the extent feasible, a representative sample of
securities in the LB Bond Index
Risks of investing in the U.S. Treasury Fund
. prices of Treasury bonds may fall in response to economic events or trends
. the U.S. Treasury Fund's investment allocation may not perform to
expectations
. requirements for large cash balances may exert a drag on overall Fund
performance
Comparison of Advisory and Other Service Arrangements and Fees
The Funds have the same service providers. Upon completion of the
Consolidation, these service providers will continue to serve the Funds in the
capacities indicated below.
U.S. Treasury and Bond Index Funds
----------------------------------
Investment Adviser BGFA (to the Master Portfolio)
Distributor Stephens
Co-Administrators Stephens, BGI
Custodian Investors Bank & Trust Company ("IBT")
Transfer Agent IBT
Independent Auditors KPMG LLP
Investment Advisory Services. BGFA provides investment advisory services
----------------------------
to both Master Portfolios in which each Fund invests. The maximum advisory fee
payable by each Master Portfolio is a monthly fee at an annual rate of 0.30% and
0.08% of the U.S. Treasury and Bond Index Master Portfolios' average daily net
assets, respectively. BGFA provides investment guidance and policy direction in
connection with the management of the Master Portfolios' assets. BGFA is an
indirect subsidiary of Barclays Bank PLC and is located at 45 Fremont Street,
San Francisco, California 94105. As of December 31, 1998, BGFA and its
affiliates provided investment advisory services for approximately $615 billion
of assets.
Administrative Services. Stephens and BGI are the co-administrators for
-----------------------
the Funds. Stephens and BGI provide the Funds with administrative services,
including, among other things, general supervision of the Funds' non-investment
operations, preparation of proxy statements and shareholder reports and general
supervision of data completion in connection with preparing periodic reports to
the Board of Directors and
6
officers of BGI Funds. Stephens and BGI have agreed to assume all of the
ordinary operating expenses of the Funds (other than investment advisory fees,
portfolio transaction expenses and administrative fees). For these services and
the assumption of expenses, Stephens and BGI are entitled to a monthly fee, in
the aggregate, at the annual rate of 0.40% and 0.15% of the U.S. Treasury and
Bond Index Funds' average daily net assets, respectively.
Distribution and Shareholder Servicing Arrangements. Shares of the Funds
---------------------------------------------------
are distributed by Stephens, a full service broker-dealer, pursuant to a
Distribution Agreement. For performing the services contemplated by the
Distribution Agreement, Stephens does not receive compensation so long as it is
entitled to receive compensation for providing co-administration services to the
Funds.
The Directors of BGI Funds also have approved Shareholder Servicing Plans
for the Funds (the "Servicing Plans") pursuant to which they have entered into
Shareholder Servicing Agreements. For these services, the U.S. Treasury Fund and
Bond Index Fund may pay monthly fees equal to 0.20% and 0.07%, respectively, of
the average daily net assets of the Funds represented by shares owned during the
period for which payment is being made by investors with whom the Shareholder
Servicing Agent maintains a servicing relationship, or an amount which equals
the maximum amount payable to the Shareholder Servicing Agent under applicable
laws, regulations or rules, including the Conduct Rules of the National
Association of Securities Dealers, Inc. (the "NASD") whichever is less. Stephens
and BGI, as co-administrators, have agreed to pay these shareholder servicing
fees out of the fees each receives for co-administration services.
Comparison of Purchase and Redemption Procedures and Other Considerations
Sales Loads: The shares of the U. S Treasury and Bond Index Funds do not
------------
have a sales load. There are no sales charges on reinvested distributions for
either Fund.
Minimum Investments: Both Funds require a minimum initial investment
-------------------
amount of $1 million from direct buyers, although the requirement may be waived
under certain circumstances. Both Funds typically waive the minimum in
connection with retirement, benefit and pension plans.
Purchases: Both Funds' shares may be purchased by mail, by wire or by
----------
phone, directly from the Fund, through a brokerage account with an approved
selling or shareholder servicing agent, through certain retirement, benefit and
pension plans, or through certain packaged investment products. Both Funds
process requests at net asset value on the same day if the request is proper and
received before 1 p.m. (Pacific Time) on a business day. Shareholder servicing
agents with Approved Bank Accounts may transmit orders for Fund shares on behalf
of qualified buyers through the transfer agent.
Redemptions: Investors may redeem their shares free of charge on any
-----------
business day by mail or telephone. Redemption proceeds are calculated at the
next determined net
7
asset value after a proper request is received, and are remitted generally
within seven days. Benefit, pension, retirement and similar plan investors
usually have separate established withdrawal procedures. Proceeds may sent by
check or credited to a designated account for certain investors.
Exchanges: The Funds allow investors to exchange shares free of charge
---------
between BGI Funds. You can obtain a prospectus of the Fund for which you wish to
exchange your shares by calling BGI Funds at 1-888-204-3956. The Funds may limit
the number of times you may exchange shares if they believe doing so is in the
best interest of other Fund shareholders. They may also modify or terminate this
exchange privilege by giving 60 days' written notice.
Dividends: Both Funds pay monthly dividends from net investment income
---------
and distribute capital gains, if any, at least annually. Each Fund allows
shareholders to reinvest the dividends in the Fund or receive cash payments.
Portfolio Management: Unlike traditional actively managed investment
--------------------
funds, there is no single portfolio manager who makes investment decisions for
the Funds. Instead, the Bond Index Fund tracks the LB Bond Index, and a team of
investment professionals evaluate recommendations made by BGFA's mathematical
models for the U.S. Treasury Fund.
Comparison of Performance
Total returns (after fees and expenses)
The bar charts and tables in this section can help you evaluate the
potential risk and return of investing in the Bond Index Fund as compared with
investing in the U.S. Treasury Fund by showing the changes in their performance
from year to year. The bar charts show the returns for each Fund for each full
calendar year since inception. The average annual total return tables compare
each Fund's average annual total return with the return of a corresponding index
for one and five years, as well as since inception. How the Funds have performed
in the past is not necessarily an indication of how the Funds will perform in
the future.
US Treasury Allocation Fund*/Bond Index Fund** Bar Chart
[bar chart]
- ------------------------------------------------------------------------------------------------
BARS BARS BARS BARS BARS
- ------------------------------------------------------------------------------------------------
1994 1995 1996 1997 1998
- ------------------------------------------------------------------------------------------------
The years in the bar chart table should go from lowest to highest.
* The U.S. Treasury Fund's year-to-date return as of June 30, 1999 was -0.36%
** The Bond Index Fund's year-to-date return as of June 30, 1999 was -2.80%
The highest quarterly return for the U.S. Treasury Fund since inception is 5.11%
(2nd Q, 1995) and the lowest is -4.63% (1st Q, 1994).
The highest quarterly return for the Bond Index Fund since inception is 6.50%
(2nd Q, 1995) and the lowest is -2.87% (1st Q, 1994).
8
Average Annual Returns
(as of December 31, 1998)
------------------------------------------
One Five Since inception
year years (July 2, 1993*)
- ------------------------------------------------------------------------------------------------
U.S. Treasury Allocation Fund 6.05% 5.04% 5.51%
- ------------------------------------------------------------------------------------------------
Lehman Brothers U.S. Government/Corporate Bond 8.49% 6.45% 6.28%
Intermediate Index*
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Bond Index Fund 9.34% 6.98% 6.77%
- ------------------------------------------------------------------------------------------------
Lehman Brothers Government/Corporate 9.47% 7.30% 7.19%
Bond Index*
- ------------------------------------------------------------------------------------------------
* Calculated from June 30, 1993.
Additional information regarding the performance of the Bond Index Fund
is contained in Exhibit B to this Combined Prospectus/Proxy Statement.
- ------------------------------------------------------------------------------------------------
Portfolio Diversification as of June 30, 1999:
- ------------------------------------------------------------------------------------------------
U.S. Treasury Fund Bond Index Fund
- ------------------------------------------------------------------------------------------------
U.S. Treasury Bonds 19% U.S. Treasury Bonds 16%
U.S. Treasury Notes 78% U.S. Treasury Notes 34%
U.S. Government Agencies 0% U.S. Government Agencies 14%
Corporate Bonds 0% Corporate Bonds 31%
Foreign Issuer Bonds 0% Foreign Issuer Bonds 2%
Cash 3% Cash 3%
- ------------------------------------------------------------------------------------------------
A Discussion of Principal Risk Factors
In addition to the general risks of investing, the Funds share several
specific risks.
Derivatives
A derivative is a financial contract whose value depends on, or is
derived from, the value of an underlying asset such as a security or an index.
Index futures contracts are considered derivatives because they derive their
value from the prices of the indexes. The floating rate or variable rate bonds
that the Funds may purchase are also considered derivatives. Compared to
conventional securities, derivatives can be more sensitive to changes in
interest rates or to sudden fluctuations in market prices.
9
Year 2000 risk
Most of the services provided to the Funds depend on the smooth
functioning of computer systems. Any failure of these systems to adapt to the
changes necessary from dates in the year 1999 to the year 2000 could hamper Fund
operations and services. The Funds' principal service providers have informed
BGFA that they are working on the changes necessary and they expect their
systems to be ready in time. But there can be no assurance of success. Moreover,
since the changes will affect virtually every organization, the companies or
entities in which the Funds invest could also be negatively affected.
Other risks
The debt instruments in which the Funds invest are subject to credit risk
and interest rate risk. Credit risk is the risk that issuers of the debt
instruments in which the Funds invest may default on the payment of principal
and/or interest. Interest-rate risk is the risk that increases if market
interest rates may adversely affect the value of the debt instruments in which
the Funds invest. The value of the debt instruments generally changes inversely
to market interest rates. Debt securities with longer maturities, which tend to
produce higher yields, are subject to potentially greater capital appreciation
and depreciation than obligations with shorter maturities. Changes in the
financial strength of an issuer or changes in the ratings of any particular
security may also affect the value of these investments. By investing in
corporate bonds, the Bond Index Fund has greater exposure to credit risk and
interest rate risk.
Although some of the Funds' securities are guaranteed by the U.S.
Government, its agencies or instrumentalities, such securities are subject to
interest rate risk and the market value of these securities, upon which the
Funds' daily NAV is based, will fluctuate. No assurance can be given that the
U.S. Government would provide financial support to its agencies or
instrumetalities where it is not obligated to do so.
Market risk is the risk that the value of a bond or other security will
be reduced by market activity. By investing in corporate bonds, the Bond Index
Fund has greater market risk exposure than the U.S. Treasury Fund. Counter party
risk is the risk that the other party in a repurchase agreement or other
transaction will not fulfill its contract obligation. Both Funds invest in
repurchase agreements.
* * * *
Because the investment objective, policies, strategies and risks of the
Funds are generally similar, the overall level of investment risk should not
materially change as a result of the Consolidation. For a more complete
description of the Bond Index Fund's and the U.S. Treasury Fund's investment
policies and restrictions, see the Funds' Prospectus and Statement of Additional
Information.
II. DESCRIPTION OF THE AGREEMENT AND PLAN OF CONSOLIDATION
The Plan provides that all of the assets of the U.S. Treasury Fund as of
the Closing Date will be transferred to the Bond Index Fund, and that the Bond
Index Fund
10
will assume all of the liabilities of the U.S. Treasury Fund, in exchange for
shares of the Bond Index Fund. The "Closing Date" is expected to be on or about
August 10, 1999. A copy of the Plan is attached as Exhibit A to this Combined
Prospectus/Proxy Statement.
Promptly after the Closing Date, the U.S. Treasury Fund will distribute
the shares of the Bond Index Fund received to the U.S. Treasury Fund's
shareholders of record as of the close of business on the Closing Date. The
shares of the Bond Index Fund that will be issued for distribution to the U.S.
Treasury Fund's shareholders will be equal in value to the shares of the U.S.
Treasury Fund held as of the Closing Date. BGI Funds will then take all
necessary steps to terminate the qualification, registration and classification
of the U.S. Treasury Fund. All issued and outstanding shares of the U.S.
Treasury Fund will be cancelled on the U.S. Treasury Fund's books. Shares of the
Bond Index Fund will be represented only by book entries; no share certificates
will be issued unless expressly requested in writing. Certificates are not
issued for fractional shares. All remaining organizational expenses of the U.S.
Treasury Fund will be offset against the original shares of such Fund prior to
consolidation.
The consummation of the proposed Consolidation is subject to the
satisfaction of a number of conditions set forth in the Plan, including approval
by the shareholders of the U.S. Treasury Fund. The U.S. Treasury Fund may waive
certain conditions at any time before or after approval of the Plan by the
shareholders. The Plan also may be terminated and the Consolidation abandoned at
any time by BGI Funds if any of the conditions precedent to the Closing are not
satisfied.
Shareholders of the U.S. Treasury Fund will have no dissenters' rights or
appraisal rights. All shareholders of the U.S. Treasury Fund as of the Closing
Date, including those that vote against the approval of the Plan and those that
do not vote, will receive shares of the Bond Index Fund if the Consolidation is
approved. All shareholders of the U.S. Treasury Fund have the right at any time
up to the business day preceding the Closing Date to redeem their shares at net
asset value according to the procedures set forth in the U.S. Treasury Fund's
Prospectus. In addition, up until the business day preceding the Closing Date,
shareholders of the U.S. Treasury Fund may exchange their shares for shares of
other funds in the BGI Funds Family of Funds, in accordance with the exchange
privilege described in the U.S. Treasury Fund's Prospectus.
11
Board Consideration
The business and affairs of BGI Funds are managed under the direction of
its Board of Directors and the business and affairs of MIP are managed under the
direction of its Board of Trustees (collectively, the "Boards"). The Boards
unanimously voted to approve the Agreements and Plans of Consolidation at a
meeting held on April 28, 1999. In reviewing the proposed Consolidation, the
Boards considered the potential impact of the Consolidation on each Fund's
shareholders. The Boards considered, among other things: (i) the terms and
conditions of the Plan, including those intended to avoid the dilution of
shareholder interests; (ii) the potential marketing and shareholder benefits
obtained by having a combined fund; (iii) the similarity of the investment
objectives and significant policies and restrictions of the Funds; (iv) the
historical investment performance of the Funds; (v) the historical and projected
investment advisory fee rates and operating expenses of the Funds; (vi) the
identity of the organizations that provide investment advisory and certain other
services to the Funds, and the terms on which these services are provided; and
(vii) the prospects for long-term viability of the Funds.
Based upon their evaluation of these factors, and in light of their
fiduciary duties under federal and state law, the Boards have determined that
the proposed Consolidation is in the best interests of the shareholders of the
respective Funds and that the interests of the shareholders of the respective
Funds will not be diluted as a result of the Consolidation.
BGI Funds' Board of Directors unanimously recommends that shareholders
vote FOR the Plan of Consolidation.
---
Reasons for the Consolidation
The primary reason for the proposed Consolidation is to allow U.S.
Treasury Fund investors to transfer their investment into a fund that has
greater prospects for long-term viability. As of June 30, 1999, the U.S.
Treasury Fund had only $33 million in net assets; the Bond Index Fund had
approximately $117 million in net assets. Management of BGI Funds believes that
consolidating the U.S. Treasury Fund into a fund that has generally compatible
investment objectives and policies and greater prospects for continued growth,
is a better alternative than liquidation of the U.S. Treasury Fund.
Combining the U.S. Treasury Fund into a larger, more viable fund is
intended to provide various benefits to shareholders of the U.S. Treasury Fund.
For example, higher asset levels should benefit portfolio management by
permitting larger individual portfolio investments (in quantities that may
result in reduced transaction costs and/or more favorable pricing) and by
providing the opportunity for greater portfolio diversity.
Currently, the fees and expenses of the Bond Index Fund are lower than
those of the U.S. Treasury Fund. Your Board of Directors believes that the
proposed Consolidation will likely benefit U.S. Treasury Fund shareholders not
only because of the lower fees and expenses, but for all of the reasons
described here. One difference is that BGI and Stephens
12
have agreed to assume all of the ordinary operating expenses of the U.S.
Treasury Fund (other than investment advisory fees, portfolio transaction
expenses and administrative fees), which, given the relatively small size of the
U.S. Treasury Fund, requires BGI and Stephens, in effect, to subsidize the U.S.
Treasury Fund's ongoing operations. Since the Bond Index Fund is much larger,
there is not so much of a need for BGI and Stephens to subsidize the Bond Index
Fund's ongoing operations. See "Comparison of Fees and Expenses" at page __,
above.
In short, management of BGI Funds believes that the proposed
Consolidation should provide U.S. Treasury Fund shareholders with an investment
vehicle that has compatible investment objectives and policies and greater
prospects for long-term viability and continued growth.
Material Federal Income Tax Consequences
The applicants intend that the Consolidation will not qualify as a
"reorganization," within the meaning of Section 368(a) of the Code, and that the
U.S. Treasury Fund and the Bond Index Fund will each not be a "party to a
reorganization," within the meaning of Section 368(b) of the Code, with respect
to the Consolidation. Accordingly, the Consolidation is expected to be a taxable
event to the U.S. Treasury Fund and its shareholders with the exception of
shareholders who hold shares in a tax deferred account. Effectively, for federal
income tax purposes, the Consolidation will resemble a transaction in which a
shareholder in the U.S. Treasury Fund sold his or her shares and purchased new
shares in the Bond Index Fund.
In anticipation of the Consolidation, the U.S. Treasury Fund expects to
sell a substantial portion of its portfolio securities prior to the Closing. The
proceeds of such sales will be held in temporary investments or reinvested in
assets that qualify to be held by the Bond Index Fund. The gain from such sales,
if any, will be distributed to the U.S. Treasury Fund's shareholders, and will
be taxable to shareholders whose shares are held in taxable (i.e., non-
retirement) accounts. In addition, shareholders of the U.S. Treasury Fund whose
shares are held in taxable accounts generally will recognize a gain or loss, for
federal income tax purposes, on the difference between the fair market value of
the Bond Index Fund shares, as of the closing, received in the Consolidation and
their federal income tax basis in their shares of the U.S. Treasury Fund. The
federal income tax basis in shares of the Bond Index Fund received in the
exchange by all U.S. Treasury Fund shareholders will be the fair market value of
those shares as of the Closing and the holding period for such shares will begin
the day following the Closing. Consummation of the Consolidation is subject to
the condition that BGI Funds receive an opinion from Morrison & Foerster LLP
substantially to the effect that the Consolidation will have the foregoing
federal income tax consequences.
BGI Funds has not sought a and will not seek ruling from the Internal
Revenue Service ("IRS") regarding the federal income tax consequences of the
Consolidation. The opinion of counsel described above is not binding on the IRS
and does not preclude the IRS
13
from adopting a contrary position. Shareholders of the U.S. Treasury Fund are
urged to consult with their own tax advisors concerning the potential tax
consequences to them of the Consolidation, including foreign, state and local
income tax consequences.
Capitalization
The following table shows the capitalization of each Fund as of February
28, 1999, and the pro forma capitalization adjusted to give effect to the
Consolidation:
U.S. Treasury Pro Forma
Fund Bond Index Fund Combined
---- --------------- --------
Net assets $35,338,195 $126,732,838 $162,071,033
Net asset value per share $ 9.38 $ 9.73 $ 9.73
Shares outstanding 3,768,853 13,021,489 16,656,838
Shares authorized 300 million 100 million 400 million
___________________
The Bond Index Fund's financial highlights can be found in its
Prospectus, which accompanies and is incorporated by reference into this
Combined Prospectus/Proxy Statement. The Bond Index Fund's financial statements
are incorporated by reference in the Statement of Additional Information to this
Combined Prospectus/Proxy Statement.
III. INFORMATION ABOUT THE FUNDS
Organization of BGI Funds
BGI Funds is registered as open-end management investment companies under
the 1940 Act. BGI Funds currently consists of 11 series of shares.
BGI Funds is organized as a Maryland Corporation and is subject to the
provisions of its respective Articles of Incorporation and By-Laws. BGI Funds
was incorporated on October 15, 1992. Shares of each Fund have a par value of
$.001 per share. The Bond Index Fund currently consists of 500 million shares.
Shares of each Fund are entitled to one vote for each full share held and
fractional votes for fractional shares held, and will vote in the aggregate and
not by portfolio or class except as otherwise required by law. Shares of the
Funds have no preemptive rights and have only such conversion and exchange
rights as the Board of Directors of BGI Funds may grant in its discretion. When
issued for payment as described in their respective prospectuses, each Fund's
shares are fully paid and non-assessable.
14
Each share of the U.S. Treasury Fund and each share of the Bond Index
Fund represents an equal proportionate interest in the Fund with other shares of
the same class. Each share is entitled to cash dividends and distributions
earned on such shares as may be declared in the discretion of the Board of
Directors. Shares of the Bond Index Fund bear a pro rata portion of all
operating expenses paid by the Fund.
Substantial Shareholders
As of June 30, 1999,* the shareholders identified below were known by BGI
Funds to own 5% or more of the U.S. Treasury Fund's outstanding shares in the
following capacity:
Percentage
Name and Address of Shareholder Type of Ownership of Fund
------------------------------- ----------------- -------
Merrill Lynch Pierce Fenner & Smith Record 97.49%
Qualified Retirement Plan
265 Davidson Ave., 4th Floor
Somerset, NJ 08873
_____________
*As of the close of business on June 30, 1999, the officers and Directors of BGI
Funds as a group beneficially owned less than 1% of the outstanding shares of
BGI Funds.
As of June 30, 1999,* the shareholders identified below were known by BGI
Funds to own 5% or more of the Bond Index Fund's outstanding shares in the
following capacity:
Percentage
Name and Address of Shareholder Type of Ownership of Fund
------------------------------- ----------------- -------
Merrill Lynch Pierce Fenner & Smith TTEE Record 45.99%
Qualified Retirement Plan
265 Davidson Ave., 4th Floor
Somerset, NJ 08873
State Street Bank & Trust Co. TTEE Record 36.49%
FBO American Bar Association Members
State Street Collective Trust
1 Heritage Drive
North Quincy, MA 02171
Wells Fargo Bank FBO Record 11.73%
Business Retirement Programs Omnibus Act
HF HAC 9139-027
P.O. Box 9800
Calabasas, CA 91372
15
____________
*As of the close of business on June 30, 1999, the officers and Directors of BGI
Funds as a group beneficially owned less than 1% of the outstanding shares of
BGI Funds.
Additional Information
BGI Funds is subject to certain informational requirements of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the 1940 Act,
and in accordance therewith files reports, proxy materials and other information
with the SEC. Such reports, proxy materials and other information may be
inspected and copied at the public reference facilities of the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549. Copies of such materials can be obtained
from the Public Reference Branch, Office of Consumer Affairs and Information
Services, Securities and Exchange Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates, or on the SEC's website at
www.sec.gov.
IV. VOTING INFORMATION
Approval and Consummation of the Proposed Transaction
Only shareholders of record at the close of business on August 13, 1999,
will be entitled to vote at the Special Meeting. On that date, [______] U.S.
Treasury Fund shares were outstanding and entitled to be voted. The date of the
first mailing of this Combined Prospectus/Proxy Statement to shareholders is
approximately August 27, 1999.
Shareholders holding more than one-third of the outstanding shares of the
U.S. Treasury Fund at the close of business on the Record Date will be deemed
sufficient to constitute a quorum for the transaction of business at the Special
Meeting. Pursuant to Maryland law, the affirmative vote of the holders of a
majority of the outstanding voting securities of the U.S. Treasury Fund, is
required for approval of the Plan. If the U.S. Treasury Fund's shareholders do
not approve the proposed Consolidation, BGI Funds' Board of Directors will
consider what other alternatives would be in the shareholders' best interests,
including possibly, approving a Plan of Liquidation.
Any proxy which is properly executed and received in time to be voted at
the Special Meeting will be counted in determining whether a quorum is present
and will be voted in accordance with the instructions marked thereon. In the
absence of any instructions, such proxy will be voted in favor of the Plan. Any
shareholder giving a proxy may revoke it at any time before it is exercised (i)
by submitting to BGI Funds a written notice of revocation, (ii) by submitting to
BGI Funds a subsequently executed proxy or (iii) by attending the Special
Meeting and voting in person. Abstentions and "broker non-votes" (i.e., proxies
from brokers or nominees indicating that such persons have not received
instructions from the beneficial owners or other persons entitled to vote shares
as to a particular matter with respect to which the brokers or nominees do not
have discretionary power to vote) will not be counted for or against any proxy
to which they relate, but will be counted for purposes of determining whether a
quorum is present and
16
will be counted as votes present at the Special Meeting. For this reason,
abstentions and broker non-votes will have the effect of a vote against the
proposal.
The duly appointed Proxies may, in their discretion, vote upon such other
matters as properly may come before the Special Meeting or any adjournment(s)
thereof, including any proposal to adjourn a meeting at which a quorum is
present to permit the continued solicitation of proxies in favor of the
Consolidation. Any such adjournment(s) will require the affirmative vote of a
majority of the shares present in person or by proxy at the session of the
Special Meeting to be adjourned. In case any such adjournment is proposed, the
duly appointed Proxies will vote those proxies which they are entitled to vote
for the Plan in favor of adjournment, and will vote those proxies required to be
voted against the Plan against adjournment.
Solicitation of Proxies and Payment of Expenses
It is expected that the solicitation of proxies will be primarily by
mail. Officers and agents of BGI Funds also may solicit proxies by telephone,
telegraph or personal interview. Shareholders may vote by (1) mail, by marking,
signing, dating and returning the enclosed Proxy Ballot in the enclosed postage-
paid envelope; (2) telephone, by calling Shareholder Communications Corp.
("SCC") toll-free at 1-800-733-8481, Ext. 435 from 6:00 a.m. to 8:00 p.m.
Pacific time; or (3) telefacsimile, by marking, signing, dating and faxing the
enclosed Proxy Ballot to SCC at 1-800-733-1885. SCC has been retained by BGI
Funds to assist in both the tabulation and solicitation of proxy votes for the
Consolidation.
The cost of soliciting proxies for the Special Meeting, consisting
principally of printing and mailing expenses, together with the costs of any
supplementary solicitation and proxy soliciting services provided by third
parties, will be borne by BGI in its capacity as co-administrator. Proxies will
be solicited in the initial, and any supplemental, solicitation by mail and may
be solicited in person, by telephone, telegraph, telefacsimile or other
electronic means by officers of BGI Funds, personnel of BGFA or Stephens, or an
agent of BGI Funds, such as SCC.
MISCELLANEOUS
Other Business
The Board of Directors of BGI Funds knows of no other business to be
brought before the Special Meeting. However, if any other matters come before
the Special Meeting, including any proposal to adjourn the meeting to permit the
continued solicitation of proxies in favor of the Consolidation, it is their
intention that proxies which do not contain specific restrictions to the
contrary will be voted on such matters in accordance with the judgment of the
persons named in the enclosed Proxy Ballot.
Future Shareholder Proposals
17
Pursuant to rules adopted by the SEC under the 1934 Act, investors may
request inclusion in the Board's proxy statement for shareholder meetings
certain proposals for action which they intend to introduce at such meeting. Any
shareholder proposals must be presented a reasonable time before the proxy
materials for the next meeting are sent to shareholders. The submission of a
proposal does not guarantee its inclusion in BGI Fund's proxy statement and is
subject to limitations under the 1934 Act. Because BGI Funds does not hold
regular meetings of shareholders, no anticipated date of the next meeting can be
provided.
18
EXHIBIT A
FORM OF
AGREEMENT AND
PLAN OF CONSOLIDATION
FOR THE
U.S. TREASURY ALLOCATION FUND
AND THE
BOND INDEX FUND
OF
BARCLAYS GLOBAL INVESTORS FUNDS, INC.
[ ], 1999
This AGREEMENT AND PLAN OF CONSOLIDATION (the "Plan") is made as of
----
this [___] day of [_______], 1999 by Barclays Global Investors Funds, Inc.
("BGIF"), a Maryland corporation, for itself and on behalf of the U.S. Treasury
- ------
Allocation Fund ("Treasury Fund") and the Bond Index Fund (together, the
-------------
"Funds"), each a portfolio of BGIF.
-----
WHEREAS, BGIF is an open-end management investment companies
registered with the Securities and Exchange Commission (the "SEC") under the
---
Investment Company Act of 1940, as amended (the "1940 Act"); and
--------
WHEREAS, the Treasury Fund pursues its investment objective by
investing substantially all of its assets in the U.S. Treasury Master Portfolio
of Master Investment Portfolio ("MIP") and the Bond Index Fund pursues its
---
investment objectively investing substantially all of its assets in the Bond
Index Master Portfolio of MIP; and
WHEREAS, BGIF desires that the assets and liabilities of the Treasury
Fund as stated herein, be conveyed to and be acquired and assumed by, the Bond
Index Fund, in exchange for shares of equal value of the Bond Index Fund which
shall thereafter promptly be distributed to the shareholders of the Treasury
Fund in connection with its liquidation as described in this Plan (the
"Consolidation"); and
- --------------
WHEREAS, the parties intend that the Consolidation does not qualify as
a "reorganization," within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and the Funds will each not be a "party
----
to a reorganization," within the meaning of Section 368(b) of the Code, with
respect to the Consolidation.
NOW, THEREFORE, in accordance with the terms and conditions described
herein, the Funds shall be consolidated as follows:
1. Conveyance of Assets of Treasury Fund.
-------------------------------------
(a) At the Effective Time of the Consolidation, as defined in Section
7, all assets of every kind, and all interests, rights, privileges and powers of
the Treasury Fund, subject to all liabilities of such Fund, whether accrued,
absolute, contingent or otherwise existing as of the Effective Time of the
Consolidation, shall be transferred and conveyed by the Treasury Fund to the
Bond Index Fund (as set forth below) and shall be accepted and assumed by the
Bond Index Fund as more particularly set forth in this Plan, such that at and
after the Effective Time of the Consolidation: (i) all assets of the Treasury
Fund shall become and be the assets of the Bond Index Fund; and (ii) all
liabilities of the Treasury Fund shall attach to the Bond Index Fund as
aforesaid and may thenceforth be enforced against the Bond Index Fund to the
same extent as if incurred by it.
1
(b) At least fifteen (15) business days prior to the Effective Time of
the Consolidation, the Treasury Fund shall provide the Bond Index Fund with a
schedule of its securities and other assets and its known liabilities (the
"Asset List"). The Bond Index Fund will simultaneously provide the Treasury
- -----------
Fund with a copy of the current investment objective and policies applicable to
the Bond Index Fund. The Treasury Fund reserves the right to sell any of the
securities or other assets shown on the list Assets List of the Treasury Fund
prior to the Effective Time of the Consolidation but will not, without the prior
approval of the Bond Index Fund, acquire any additional securities other than
securities which the Bond Index Fund is permitted to purchase in accordance with
its stated investment objective and policies. At least ten (10) business days
prior to the Effective Time of the Consolidation, the Bond Index Fund will
advise the Treasury Fund of any investments of the Treasury Fund shown on the
Assets List which the Bond Index Fund would not be permitted to hold, pursuant
to its stated investment objective and policies or otherwise. In the event that
the Treasury Fund holds any investments that the Bond Index Fund would not be
permitted to hold under its stated investment objective or policies, the
Treasury Fund, if requested by the Bond Index Fund, will dispose of such
securities prior to the Effective Time of the Consolidation to the extent
practicable. In addition, if it is determined that the portfolios of the
Treasury Fund and the Bond Index Fund, when aggregated, would contain
investments exceeding certain percentage limitations to which the Bond Index
Fund is or will be subject with respect to such investments, the Treasury Fund,
if requested by the Bond Index Fund, will dispose of and/or reinvest a
sufficient amount of such investments as may be necessary to avoid violating
such limitations as of the Effective Time of the Consolidation.
(c) The Treasury Fund will endeavor to discharge all of its known
liabilities and obligations prior to the targeted closing date of the
Consolidation, on or about [__________] (the "Closing Date").
------------
(d) Without limiting the generality of the foregoing, it is understood
that the Treasury Fund assets shall include all property and assets of any
nature whatsoever, including, without limitation, all cash, cash equivalents,
securities, claims (whether absolute or contingent, known or unknown, accrued or
unaccrued) and receivables (including dividend and interest receivables) owned
by the Treasury Fund, and any deferred or prepaid expenses shown as an asset on
the Treasury Fund's books, at the Effective Time of the Consolidation, and all
goodwill, all other intangible property and all books and records belonging to
the Treasury Fund.
(e) The Treasury Fund assets shall be transferred and conveyed to the
Bond Index Fund, as set forth below:
(1) In exchange for the transfer of the Treasury Fund assets, the
Bond Index Fund shall simultaneously issue to the Treasury Fund at the
Effective Time of the Consolidation full and fractional shares of Common
Stock in the Bond Index Fund having an aggregate net asset value equal to
the net value of the Treasury Fund assets so conveyed, all
2
determined and adjusted as provided in this Section 1. In
particular, the Bond Index Fund shall deliver to the Treasury
Fund the number of shares, including fractional shares,
determined by dividing the value of the assets of the Treasury
Fund that are so conveyed and are attributable to the Bond Index
Fund's shares, computed in the manner and as of the time and date
set forth in this Section, by the net asset value of one Bond
Index Fund share that is to be delivered with respect thereto,
computed in the manner and as of the time and date set forth in
this Section.
(2) The net asset value of shares to be delivered by the
Bond Index Fund, and the net value of the Treasury Fund assets to
be conveyed by the Treasury Fund, shall, in each case, be
determined as of the Valuation Time specified in Section 3. The
net asset value of shares of the Bond Index Funds shall be
computed in the manner set forth in the Bond Index Fund's then
current prospectus under the Securities Act of 1933, as amended
(the "1933 Act"). In determining the value of the securities the
---------
Treasury Fund to the Bond Index Fund, transferred by each
security shall be priced in accordance with the pricing policies
and procedures of the Bond Index Fund as described in its then
current prospectus.
2. Liquidation of Treasury Fund. At the Effective Time of the
----------------------------
Consolidation, the Treasury Fund shall make a liquidating distribution to its
shareholders as follows. Shareholders of record of the Treasury Fund shall be
credited with full and fractional shares of common stock that is issued by the
Bond Index Fund in connection with the Consolidation with respect to the shares
that are held of record by the shareholder. In addition, each shareholder of
record of the Treasury Fund shall have the right to receive any unpaid dividends
or other distributions which were declared before the Effective Time of the
Consolidation with respect to the shares of the Treasury Fund that are held by
the shareholder at the Effective Time of the Consolidation. BGIF shall record
on its books the ownership of the respective Bond Index Fund shares by the
shareholders of record of the Treasury Fund (the "Transferor Record Holders").
-------------------------
All of the issued and outstanding shares of the Treasury Fund at the Effective
Time of the Consolidation shall be redeemed and canceled on the books of BGIF at
such time. After the Effective Time of the Consolidation, BGIF shall wind up
the affairs of the Treasury Fund and shall file any final regulatory reports,
including but not limited to any Form N-SAR and Rule 24f-2 filings with respect
to the Treasury Fund, and also shall take all other steps as are necessary and
proper to effect the termination or declassification of the Treasury Fund in
accordance with the laws of the State of Maryland and other applicable
requirements.
3. Valuation Time. The Valuation Time for the Treasury Fund and the
--------------
Bond Index Fund shall be a mutually agreed upon time on [___________], or such
earlier or later date as may be determined by BGIF's duly authorized officers.
3
4. Certain Representations, Warranties and Agreements of BGIF. BGIF,
----------------------------------------------------------
for itself and, where appropriate, on behalf of the Funds, represents and
warrants to the following, such representations, warranties and agreements being
made on behalf of each Fund on a several (and not joint, or joint and several)
basis:
(a) BGIF is a Maryland corporation duly created pursuant to
its Articles of Incorporation for the purpose of acting as
a management investment company under the 1940 Act, and is
validly existing under the laws of the State of Maryland.
BGIF is registered as an open-end management investment
company under the 1940 Act and its registration with the
SEC as an investment company is in full force and effect.
(b) BGIF has the power to own all of its properties and assets
and to consummate the transactions contemplated herein,
and has all necessary federal, state and local
authorizations to carry on its business as now being
conducted and to consummate the transactions contemplated
by this Plan.
(c) The execution and delivery of the Plan have been duly
authorized by the Board of Directors of BGIF, and executed
and delivered by the duly authorized officers of BGIF, and
represents a valid and binding contract, enforceable in
accordance with its terms, subject as to enforcement to
bankruptcy, insolvency, reorganization, arrangement,
moratorium and other similar laws of general applicability
relating to or affecting creditors' rights and to general
equity principles. The execution and delivery of this Plan
does not, and the consummation of the transactions
contemplated by this Plan will not, violate BGIF'S
Restated Articles of Incorporation or By-Laws or any
material agreement, obligation, decree or arrangement to
which it is a party or by which it is bound. No other
action by BGIF is necessary to authorize its officers to
effectuate this Plan and the transactions contemplated
herein.
(d) BGIF has qualified, and will continue to qualify, as a
regulated investment company under Part I of Subchapter M
of the Code, and with respect to the Funds as operating
prior to the Effective Time of the Consolidation, has
elected to qualify and has qualified as a regulated
investment company under Part I of Subchapter M of
Subtitle A, Chapter 1, of the Code, as of and since its
first taxable year; has been a regulated investment
company under such Part of the Code at all times since the
end of its
4
first taxable year when it so qualified; and qualifies and
shall continue to qualify as a regulated investment
company for its current taxable year.
(e) BGIF has valued, and will continue to value, its portfolio
securities and other assets in accordance with applicable
legal requirements.
(f) The N-14 Registration Statement and the Consolidation
Proxy Materials, from their effective and clearance dates
with the SEC, through the time of the shareholders meeting
referred to in Section 7 and at the Effective Time of the
Consolidation, insofar as they relate to BGIF (i) shall
comply in all material respects with the provisions of the
1933 Act, the Exchange Act of 1934 and the 1940 Act, the
rules and regulations thereunder, and state securities
laws, and (ii) shall not contain any untrue statement of a
material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made
therein not misleading.
(g) The shares of the Bond Index Fund to be issued and
delivered to the Treasury Fund for the account of the
shareholders of the Treasury Fund, pursuant to the terms
hereof, shall have been duly authorized as of the
Effective Time of the Consolidation and, when so issued
and delivered, shall be duly and validly issued, fully
paid and non-assessable, and no shareholder of the Bond
Index Fund shall have any preemptive right of subscription
or purchase in respect thereto.
(h) All of the issued and outstanding shares of the Bond Index
Fund have been validly issued and are fully paid and non-
assessable, and were offered for sale and sold in
conformity with the registration requirements of all
applicable federal and state securities laws.
(i) BGIF shall operate its business in the ordinary course
between the date hereof and the Effective Time of the
Consolidation. It is understood that such ordinary course
of business will include the declaration and payment of
customary dividends and distributions and any other
dividends and distributions deemed advisable.
5
(j) At the Effective Time of the Consolidation, the Treasury
Fund will have good and marketable title to its assets and
full right, power and authority to assign, deliver and
otherwise transfer such assets.
5. Shareholder Action. As soon as practicable after the effective
------------------
date of the N-14 Registration Statement and SEC clearance of the proxy
solicitation materials referred to in Section 7, but in any event prior to the
Effective Time of the Consolidation and as a condition thereto, the Board of
Directors of BGIF shall call, and BGIF shall hold, meeting(s) of the
shareholders of the Treasury Fund for the purpose of considering and voting
upon:
(a) approval of this Plan and the transactions contemplated
hereby; and
(b) such other matters as may be determined by the Board of
Directors of BGIF.
6. Regulatory Filings. BGIF shall file a post-effective amendment
------------------
(the "N-1A Post-Effective Amendment") to its registration statement on Form N-1A
-----------------------------
(File Nos. 33-54126; 811-7332) with the SEC, and the appropriate state
securities commissions, as promptly as practicable so that the shares of the
Bond Index Fund required to complete the Consolidation are registered under the
1933 Act, 1940 Act and applicable state securities laws. In addition, BGIF
shall file an N-14 Registration Statement, which shall include the Consolidation
Proxy Materials, with the SEC, and with the appropriate state securities
commissions, in connection with the Treasury Fund shareholder approval
referenced in Section 5 as promptly as practicable.
7. Effective Time of the Consolidation. Delivery of the Treasury
-----------------------------------
Fund assets and the shares of the Bond Index Fund to be issued pursuant to
Section 1 and the liquidation of the Treasury Fund pursuant to Section 2 shall
occur on the day following the Valuation Time, whether or not such day is a
business day, or on such other date, and at such place and time and date, as may
be agreed to by each of the parties. The date and time at which such actions
are taken are referred to herein as the "Effective Time of the Consolidation."
-----------------------------------
To the extent any Treasury Fund assets are, for any reason, not transferred at
the Effective Time of the Consolidation, BGIF shall cause such Treasury Fund
assets to be transferred in accordance with this Plan at the earliest
practicable date thereafter.
8. Conditions to BGIF's Obligations. The obligations of BGIF
--------------------------------
hereunder shall be subject to the following conditions precedent:
(a) BGIF shall have received a certificate executed in its
name by its President or Vice President and its Treasurer
or Assistant Treasurer, dated as of the Effective Time of
the
6
Consolidation, to the effect that its representations
and warranties made in this Plan are true and correct at
and as of the Effective Time of the Consolidation, except
as they may be affected by the transactions contemplated
by this Plan.
(b) BGIF shall have received an opinion of Morrison & Foerster
LLP, counsel to BGIF, in form reasonably satisfactory to
BGIF and dated the Effective Time of the Consolidation,
substantially to the effect that (i) BGIF is a Maryland
corporation duly established and validly existing under
the laws of the State of Maryland; (ii) this Plan has been
duly authorized, executed and delivered by BGIF; (iii) the
execution and delivery of this Plan did not, and the
consummation of the transactions contemplated by this Plan
will not, violate the Restated Articles of Incorporation
or By-Laws of BGIF or any material contract known to such
counsel to which BGIF is a party or by which it is bound.
Such opinion may rely on the opinion of other counsel to
the extent set forth in such opinion, provided such other
counsel is reasonably acceptable to BGIF; (iv) the shares
of the Bond Index Fund to be delivered to the Treasury
Fund as provided for by this Plan are duly authorized and
upon delivery will be validly issued, fully paid and non-
assessible by BGIF; and (v) no consent, approval,
authorization, or order of any court or governmental
authority is required for the consummation by BGIF of the
transaction contemplated by this Plan, except such as have
been obtained under the 1933 Act, the 1934 Act, the 1940
Act, the rules and regulations under those Acts and such
as may be required by state securities laws or such as may
be required subsequent to the Effective Time of the
Consolidation. Such opinion may rely on the opinion of
other counsel to the extent set forth in such opinion,
provided such other counsel is reasonably acceptable to
BGIF.
(c) The Treasury Fund assets to be transferred to the Bond
Index Fund under this Plan shall include no assets which
the Bond Index Fund may not properly acquire pursuant to
its investment limitations or objectives or may not
otherwise lawfully acquire.
(d) The Board of Directors of BGIF, including a majority of
the "non-interested" Directors shall have determined that
7
the Consolidation is in the best interest of each Fund and
that the shares of existing shareholders of each Fund
would not be diluted as a result of the Consolidation.
(e) The N-1A Post-Effective Amendment and the N-14
Registration Statement shall have become effective under
the 1933 Act and no stop order suspending such
effectiveness shall have been instituted or, to the
knowledge of BGIF, contemplated by the SEC and the parties
shall have received all permits and other authorizations
necessary under state securities laws to consummate the
transactions contemplated by this Plan.
(f) No action, suit or other proceeding shall be threatened or
pending before any court or governmental agency in which
it is sought to restrain or prohibit or obtain damages or
other relief in connection with this Plan or the
transactions contemplated herein.
(g) Prior to the Valuation Time, the Treasury Fund shall have
declared a dividend or dividends, with a record date and
ex-dividend date prior to the Valuation Time, which,
together with all previous dividends, shall have the
effect of distributing to its shareholders all of its net
investment company taxable income, if any, for the taxable
periods or years ending [_____________] and for the
taxable periods from said date to and including the
Effective Time of the Consolidation (computed without
regard to any deduction for dividends paid), and all of
its net capital gain, if any, realized in taxable periods
or years ending [____________], and in the taxable periods
from said date to and including the Effective Time of the
Consolidation.
(h) BGIF shall have performed and complied in all material
respects with each of its agreements and covenants
required by this Plan to be performed or complied with by
it prior to or at the Valuation Time and the Effective
Time of the Consolidation.
(i) BGIF shall have received a letter from KPMG LLP addressed
to BGIF and MIP in a form reasonably satisfactory to them,
and dated the Effective Time of the Consolidation, to the
effect that on the basis of limited procedures agreed to
by BGIF and described in such letter (but not an
examination in accordance with generally
8
accepted auditing standards): (i) the data used in the pro
forma adjustment and calculation of the current and pro
forma expense ratios of the Funds appearing in the N-14
Registration Statement and Consolidation Proxy Materials
agree with underlying accounting records of the BGIF Fund
or to written estimates provided by officers of BGIF
having responsibility for financial and reporting matters
and were found to be mathematically correct, and (ii) the
calculation of the net value of the Treasury Fund assets
and the net asset value of the Bond Index Fund shares, in
each case as of the Valuation Time, was determined in
accordance with the pricing policies and procedures of
BGIF as described in its then current prospectus.
9. Further Assurances. Subject to the terms and conditions herein
------------------
provided, BGIF shall use its best efforts to take, or cause to be taken, such
action, to execute and deliver, or cause to be executed and delivered, such
additional documents and instruments and to do, or cause to be done, all things
necessary, proper or advisable under the provisions of this Plan and under
applicable law to consummate and make effective the transactions contemplated by
this Plan, including without limitation, delivering and/or causing to be
delivered each of the items required under this Plan as a condition to such
obligations hereunder.
10. Survival of Representations and Warranties. The representations
------------------------------------------
and warranties of BGIF set forth in this Plan shall survive the delivery of the
Treasury Fund assets to the Bond Index Fund and the issuance of the shares of
the Bond Index Fund at the Effective Time of the Consolidation.
11. Termination of Plan. This Plan may be terminated by BGIF at, or
-------------------
at any time prior to, the Effective Time of the Consolidation, by a majority
vote of its Board of Directors/Trustees if the conditions set forth in Section 9
are not satisfied as specified in said section.
12. Governing Law. This Plan and the transactions contemplated
-------------
hereby shall be governed, construed and enforced in accordance with the laws of
the State of Maryland.
13. Brokerage Fees and Expenses
---------------------------
(a) BGIF, for itself and on behalf of the Funds, represents and
warrants that there are no brokers or finders entitled to receive any payments
in connection with the transactions provided for herein.
(b) Except as may be otherwise provided herein, the Treasury Fund
shall be liable for its expenses incurred in connection with entering into and
carrying out the
9
provisions of this Plan, whether or not the transactions contemplated hereby are
consummated. The expenses payable by the Treasury Fund hereunder are not limited
to, but shall include (i) fees and expenses of its counsel and independent
auditors incurred in connection with the Consolidation; (ii) expenses associated
with printing and mailing the Prospectus/Proxy Statement and soliciting proxies
in connection with the meeting of shareholders of the Treasury Fund; (iii) all
fees and expenses related to the liquidation of the Treasury Fund; (iv) fees and
expenses of the Treasury Fund's custodian and transfer agent(s) incurred in
connection with the Consolidation; and (v) any special pricing fees associated
with the valuation of the Treasury Fund's portfolio on the Applicable Valuation
Date. The expenses payable by the Bond Index Fund hereunder shall include (i)
fees and expenses of its counsel and independent auditors incurred in connection
with the Consolidation; (ii) expenses associated with preparing this Agreement
and preparing and filing the Registration Statement under the 1933 Act covering
the Bond Index Fund Shares to be issued in the Consolidation; (iii) registration
or qualification fees and expenses of preparing and filing such forms, if any,
as are necessary under applicable state securities laws to qualify the Bond
Index Fund shares to be issued in connection with the Consolidation; (iv) any
fees and expenses of the Bond Index Fund's custodian and transfer agent(s)
incurred in connection with the Consolidation; and (v) any special pricing fees
associated with the valuation of the Bond Index Fund's portfolio on the
applicable Valuation Date.
10
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their duly authorized officers designated below as of the date
first written above.
BARCLAYS GLOBAL INVESTORS FUNDS, INC.,
on behalf of the U.S. Treasury Allocation Fund
ATTEST:
__________________________ By:____________________________________
R. Greg Feltus Richard H. Blank, Jr.
President Chief Operating Officer,
Secretary and Treasurer
BARCLAYS GLOBAL INVESTORS FUNDS, INC.,
on behalf of the Bond Index Fund
ATTEST:
__________________________ By:____________________________________
R. Greg Feltus Richard H. Blank, Jr.
President Chief Operating Officer,
Secretary and Treasurer
11
EXHIBIT B
This Exhibit reproduces in its entirety the discussion of Fund performance
for shares from the Bond Index Fund's February 28, 1999, Annual Report. The
discussion reviews some of the factors that affected the Fund's performance
during this fiscal year and shows the performance of the Fund for various
periods. The discussion has not been updated to reflect events occurring after
February 28, 1999.
Bond Index Fund
The BGI Funds Bond Index Fund (the "Fund") seeks to approximate as closely
as practicable before fees and expenses the total rate of return of the U.S.
markets for issued and outstanding U.S. and high-grade corporate bonds as
measured by the Lehman Brothers Government/Corporate Bond Index ("LB Bond
Index").
Performance Summary
Average Annual
PERFORMANCE AS OF 2/28/99 Total Return
- ---------------------------------------------------------------------
One Year 6.24%
Five Year 6.76%
Since Inception Date (7/2/93-2/28/99) 6.21%
Average and total return represents the Bond Index Fund's average annual
increase in value during the time periods noted above. These figures assume that
dividends and capital gain distributions have been reinvested in the Fund at net
asset value. The Fund's past performance is no guarantee of future results. The
investment return and principal value of shares of the Fund will vary with
changes in market conditions. Shares of the Fund may be worth more or less than
their original cost when they are redeemed.
A fund's "net asset value," or NAV, is the market value of one share of a fund.
The Bond Index Fund's NAV remained the same at $9.73 on February 28, 1998, and
February 28, 1999. "Net investment income" includes income from dividends and
interest on the Fund's investments after management and administrative fees have
been deducted. Cumulative dividends on net investment income were approximately
$0.60 per share during this period. Of course, past performance is no guarantee
of future results.
The Bond Index Fund tracks the Lehman Brothers Government/Corporate Bond Index.
For the fiscal year that ended February 28, 1999, the Fund returned 6.24%, while
the index returned 6.35% for the same period. The Fund's performance lagged
slightly behind the performance of the index because administrative and
management fees are deducted from the total return, and because a small
percentage of the Fund's assets are invested in low-risk, low-return money
market securities used to process transactions.
The Fund invests in the same proportions of the same securities that comprise
the index it tracks. At the close of the fiscal year, the Fund had invested 54%
of its assets in U.S. Treasury bonds, 33% in long-term corporate bonds, and 13%
in U.S. agency securities.
The bond market fluctuated dramatically during the last fiscal year due to
investors' uncertainty about the strength of the U.S. economy and the
devaluation of the Russian ruble. Economic and political turmoil in foreign
markets such as Brazil and Southeast Asia also contributed to the bond market's
volatility.
During the second quarter of the fiscal year, the Bond Index Fund returned
2.73%. When Japan's economy started to weaken and riots erupted in Indonesia,
bond investors looks to the U.S. market for safety and stability. The Bond Index
Fund benefited from having more than half of its assets in U.S. Treasury
securities, which performed better than other fixed-income securities. Although
a strong economy can lead
1
to increased inflation, which in turn can cause bond prices to drop, the bond
market rallied as reports showed inflation remained at historically low levels
in the U.S.
Interest rates dropped dramatically in the third quarter of the fiscal year,
partially in response to Russia's devaluation of its currency and concerns that
Brazil would default on its debt. These events created a renewed demand for
high-quality U.S. investments. Even though the U.S. economy did not appear to be
slowing down, the Federal Reserve Board reduced short-term interest rates from
5.5% to 5.25% to reassure investors that uncertainty in international markets
would not affect the U.S. economy. The bond market rallied and the Bond Index
Fund returned 5.05% for the third quarter of the fiscal year. The U.S.-
government securities and high-quality corporate bonds in which the Fund was
invested contributed to its strong performance during this period.
In the fourth quarter of the fiscal year, investors became more confident that
foreign markets were beginning to stabilize. This increased confidence lessened
the demand for safer, more secure investments, which resulted in lower returns
on bond investments. Despite the Federal Reserve Board's lowering interest rates
to 4.75%, U.S. Treasury security rates rose and the Bond Index Fund returned
only .07% for the quarter.
The first two months of 1999 resulted in negative returns for bondholders.
Inflation remained at record lows, the U.S. economy showed no signs of slowing
down after last year's foreign-market shocks, and some investors were concerned
that the Federal Reserve Board would raise interest rates in the immediate
future. The potential for interest rate hikes and the decreased demand for U.S.
Treasury market securities from international investors caused interest rates on
these securities to rise in January and February 1999. In fact, February was the
worst month for the performance of U.S. Treasury bonds since 1981. The Bond
Index Fund returned -- 1.89% for the first two months of 1999.
The accompanying chart compares the performance of the BGI Funds Bond Index Fund
shares since inception with the Lehman Brothers Government/Corporate Bond Index.
The chart assumes a hypothetical $10,000 initial investment, reflects all
operating expenses. The Lehman Brothers Government/Corporate Bond Index is
composed of approximately 6,500 issues of fixed-income securities, including
U.S. Government securities and investment grade corporate bonds, each with an
outstanding market value of at least $150 million and a remaining maturity of
greater than one year. The Fund is a professionally managed mutual fund. The
index presented here does not incur expenses and is not available directly for
investment. Had this Index incurred operating expenses, its performance would
have been lower.
[INSERT PERFORMANCE CHART]
The Bond Index Fund is organized as a "feeder" fund in a "master-feeder"
structure. Instead of investing directly in the individual securities in the
portfolio, the feeder fund, which is offered to the public, holds interests in
the net assets of the Master Portfolio. It is the Master Portfolio that actually
invests in the individual securities. References to "the fund" are to the feeder
fund or the Master Portfolio. Barclays Global Fund Advisors (BGFA) advises the
Master Portfolio.
2
Statement of Additional Information
Dated August 27, 1999
BARCLAYS GLOBAL INVESTORS FUNDS, INC.
(formerly MasterWorks Funds Inc.)
111 Center Street
Little Rock, Arkansas 72201
Telephone: 1-888-204-3956
September 28, 1999 Special Meeting of Shareholders
of the U.S. Treasury Allocation Fund of Barclays Global Investor Funds, Inc.
This Statement of Additional Information is not a prospectus but should
be read in conjunction with the Combined Prospectus/Proxy Statement dated the
date hereof, for the Special Meeting of Shareholders of U.S. Treasury Allocation
Fund to be held on September 28, 1999. Copies of the Combined Prospectus/Proxy
Statement may be obtained at no charge by writing or calling Barclays Global
Investors Funds, Inc. ("BGI Funds") at the address or telephone number set forth
above. Unless otherwise indicated, capitalized terms used herein and not
otherwise defined have the same meanings as are given to them in the Combined
Prospectus/Proxy Statement.
Incorporation of Documents by Reference in Statement of Additional Information
Further information about the U.S. Treasury Allocation Fund and Bond
Index Fund is contained in and incorporated herein by reference to the Statement
of Additional Information for the U.S. Treasury Allocation and Bond Index Fund,
dated July 1, 1999.
The audited financial statements and related Report of Independent
Accountants for the year ended February 28, 1999 for the U.S. Treasury
Allocation Fund and Bond Index Fund are incorporated herein by reference. No
other parts of the annual report is incorporated herein by reference.
1
Table of Contents
General Information........................................... 3
Introductory Note to Pro Forma Financial Information.......... 4
2
General Information
The Consolidation contemplates the transfer of all of the assets and
liabilities of the U.S. Treasury Allocation Fund to the Bond Index Fund in
exchange for shares of the Bond Index Fund.
The shares issued by the Bond Index Fund will have an aggregate value equal
to the aggregate value of the shares of the U.S. Treasury Allocation Fund that
were outstanding immediately before the Closing.
After the transfer of their assets and liabilities in exchange for shares
of the Bond Index Fund, BGI Funds will distribute the shares of the Bond Index
Fund to the U.S. Treasury Allocation Fund shareholders in liquidation of that
Fund. Each shareholder owning shares of the U.S. Treasury Allocation Fund at the
Closing will receive shares of the of the Bond Index Fund of equal value, and
will receive any unpaid dividends or distributions that were declared before the
Closing on shares of the U.S. Treasury Allocation Fund. BGI Funds will establish
an account for each former shareholder of the U.S. Treasury Allocation Fund
reflecting the appropriate number of Bond Index Fund shares distributed to the
shareholder. These accounts will be substantially identical to the accounts
maintained by BGI Funds for each shareholder. Upon completion of the
consolidation with respect to the U.S. Treasury Allocation Fund, all outstanding
shares of that Fund will have been redeemed and cancelled in exchange for shares
of the Bond Index Fund distributed.
For further information about the transaction, see the Combined
Prospectus/Proxy Statement.
3
Introductory Note to Pro Forma Financial Information
The following unaudited pro forma information gives effect to the proposed
transfer of the assets and liabilities of the U.S. Treasury Allocation Fund to
the Bond Index Fund, accounted for as if the transfer had occurred as of
February 28, 1999. In addition, the pro forma combined statement has been
prepared based upon the proposed fee and expense structure of the surviving
combined Fund (i.e., Bond Index Fund).
The pro forma financial information should be read in conjunction with the
historical financial statements and notes thereto of the U.S. Treasury
Allocation Fund and Bond Index Fund included or incorporated herein by reference
in this Statement of Additional Information. The combination of such Funds will
be accounted for as a taxable consolidation.
4
BGI Funds Bond Index/ U.S. Treasury Allocation Consolidation
Pro Forma Combining Schedule of Investments (unaudited)
February 28, 1999
U.S. Treasury Combined Pro
Bond Index Fund Allocation Fund Forma Interest
Shares/Value Shares/Value Shares/Value Description Rate
--------------------- -------------------- ------------------ --------------------------------- --------------
AEROSPACE & DEFENSE-0.23%
1,000,000 1,000,000 Lockheed Martin Corp 6.85%
AUTO PARTS & EQUIPMENT-0.23%
1,000,000 1,000,000 Goodyear Tire & Rubber Co 6.63%
AUTOMOBILES-2.04%
3,500,000 3,500,000 Chrysler Corp 7.45%
500,000 500,000 Ford Motor Co 8.88
4,500,000 4,500,000 General Motors 5.8
BANK & FINANCE-10.77%
500,000 500,000 ABN Amro Bank NV 7.30%
500,000 500,000 African Development Bank 7.75
1,000,000 1,000,000 American General Finance 5.88
1,000,000 1,000,000 Associates Corp NA 6.95
2,500,000 2,500,000 Associates Corp NA 6.25
1,000,000 1,000,000 Bank Of New York Co 6.5
1,000,000 1,000,000 BankAmerica Corp 6.25
1,000,000 1,000,000 CIT Group Holdings 6.63
1,000,000 1,000,000 Citigroup Inc 7.88
1,000,000 1,000,000 Commercial Credit Corp 8.7
1,000,000 1,000,000 Diageo PLC 6.13
1,000,000 1,000,000 Dresdner Bank AG 6.63
2,000,000 2,000,000 Duke Energy Corp 6
1,285,000 1,285,000 Financing Corp 9.8
2,000,000 2,000,000 First Union Capital Corp 8.04
500,000 500,000 First Union Corp 6.63
5,400,000 5,400,000 Ford Motor Credit Co 6.5
1,000,000 1,000,000 General Motors Acceptance Corp 7.12
1,000,000 1,000,000 Household Finance Corp 6.7
4,000,000 4,000,000 Houston Lighting & Power Co 6.5
450,000 450,000 Interamerica Development Bank 8.5
200,000 200,000 Interamerica Development Bank 8.4
3,500,000 3,500,000 KFW International Finance 7.63
250,000 250,000 KFW International Finance Inc 8
500,000 500,000 Lehman Brothers Inc 9.88
1,000,000 1,000,000 Mellon Capital II 7.99
3,000,000 3,000,000 Mellon Financial 6
1,000,000 1,000,000 Merrill Lynch & Co Inc 6.38
500,000 500,000 Skandinaviska Enskilda 6.88
1,500,000 1,500,000 U.S. West Capital Funding Inc 6.88%
4,000,000 4,000,000 Westdeutsche NY 6.05
BEVERAGES-0.68%
1,500,000 1,500,000 Anheuser Busch 9.00%
1,000,000 1,000,000 Coca-Cola Enterprises 8
BROADCASTING-2.11%
2,000,000 2,000,000 Comcast Cable Communications 8.38%
1,000,000 1,000,000 TCI Communications Inc 7.12
2,000,000 2,000,000 Time Warner Inc 9.63
3,500,000 3,500,000 Viacom Inc 7.75
CHEMICALS-0.36%
1,000,000 1,000,000 American Home Product 6.50%
500,000 500,000 Dow Chemical Co 8.62
ELECTRONICS-1.10%
1,000,000 1,000,000 Raytheon Co 7.38%
3,800,000 3,800,000 Raytheon Co 5.95
ENERGY & RELATED-0.23%
1,000,000 1,000,000 Phillips 66 Capital Trust II 8.00%
ENTERTAINMENT & LEISURE-1.68%
Maturity Market
Date Value
----------- ---------------
1,000,000 5/15/2001 $ 1,020,841
---------------
1,000,000 12/1/2006 $ 1,016,725
---------------
3,500,000 3/1/2027 $ 3,854,197
500,000 4/1/2006 574,423
4,500,000 4/9/2001 4,497,939
---------------
$ 8,926,559
---------------
500,000 12/1/2026 $ 487,367
500,000 12/15/2001 526,158
1,000,000 7/1/2000 1,002,148
1,000,000 11/1/2018 1,030,566
2,500,000 11/1/2008 2,496,400
1,000,000 12/1/2003 1,016,017
1,000,000 4/1/2008 993,326
1,000,000 6/15/2005 1,024,901
1,000,000 5/15/2025 1,096,128
1,000,000 6/15/2010 1,159,789
1,000,000 8/15/2005 999,590
1,000,000 9/15/2005 1,012,754
2,000,000 12/1/2028 1,842,340
1,285,000 4/6/2018 1,815,501
2,000,000 12/1/2026 2,132,048
500,000 7/15/2005 509,332
5,400,000 2/28/2002 5,473,240
1,000,000 5/1/2003 1,036,619
1,000,000 6/15/2002 1,022,044
4,000,000 4/21/2003 4,046,232
450,000 3/15/2011 544,559
200,000 9/1/2009 236,824
3,500,000 2/15/2004 3,788,302
250,000 2/15/2010 292,757
500,000 10/15/2000 524,357
1,000,000 1/15/2027 1,064,589
3,000,000 3/1/2004 2,977,647
1,000,000 10/15/2008 992,643
500,000 2/15/2009 507,669
1,500,000 7/15/2028 1,527,588
4,000,000 1/15/2009 3,903,004
----------------
$ 47,082,439
----------------
1,500,000 12/1/2009 $ 1,856,070
1,000,000 9/15/2022 1,136,569
----------------
$ 2,992,639
----------------
2,000,000 5/1/2007 $ 2,251,298
1,000,000 2/15/2028 1,055,964
2,000,000 5/1/2002 2,207,308
3,500,000 6/1/2005 3,727,129
----------------
$ 9,241,699
----------------
1,000,000 10/15/2002 $1,022,342
500,000 4/1/2006 560,080
----------------
$ 1,582,422
----------------
1,000,000 7/15/2025 $998,736
3,800,000 3/15/2001 3,813,042
----------------
$ 4,811,778
----------------
1,000,000 1/15/1937 $ 1,015,358
----------------
500,000 500,000 Disney (Walt) Co 6.75% 3/30/06 $ 521,721
4,000,000 4,000,000 Disney (Walt) Co 5.13 12/15/03 3,908,188
2,500,000 2,500,000 Time Warner Entertainment 8.38 3/15/23 2,912,433
-----------
$7,342,342
-----------
FOOD & RELATED-0.25%
500,000 500,000 Archer-Daniels-Midland Co 8.38% 4/15/17 $ 594,860
500,000 500,000 McDonald's Corp 6.75 2/15/03 503,326
-----------
$1,098,186
-----------
HEALTHCARE-0.24%
1,000,000 1,000,000 Baxter International Inc 7.63% 11/15/02 $1,053,751
-----------
INSURANCE-0.23%
1,000,000 1,000,000 Aetna Services Inc 7.12% 8/15/06 $1,013,676
-----------
INVESTMENT BANKING & BROKERAGE-1.46%
4,000,000 4,000,000 Merrill Lynch & Co 6.00% 2/17/09 $3,853,060
1,500,000 1,500,000 Morgan Stanley Group Inc 6.7 5/1/01 1,518,521
1,000,000 1,000,000 Salomon Inc 6.5 3/1/00 1,005,831
-----------
$6,377,412
-----------
MANUFACTURING-0.80%
500,000 500,000 ICI Wilmington 8.75% 5/1/01 $ 518,644
3,000,000 3,000,000 Tyco Intl Group 6.88 1/15/29 2,961,360
-----------
$3,480,004
-----------
PHARMACEUTICALS-0.12%
500,000 500,000 American Home Products 7.70% 2/15/00 $ 510,552
-----------
PUBLIC ADMINISTRATION-1.30%
1,500,000 1,500,000 Northern State Power 6.50% 3/1/28 $1,502,523
1,500,000 1,500,000 Saks Inc 7.5 12/1/10 1,539,132
2,600,000 2,600,000 Tennessee Valley 6.25 12/15/17 2,642,949
-----------
$5,684,604
-----------
RETAIL & RELATED-0.78%
2,000,000 2,000,000 Walmart 8.50% 9/15/24 $2,294,440
1,000,000 1,000,000 Walmart 7.25 6/1/13 1,107,548
-----------
$3,401,988
-----------
SERVICES-0.48%
2,000,000 2,000,000 Amoco Canada 7.25% 12/1/02 $2,089,280
-----------
TELECOMMUNICATIONS-1.70%
250,000 250,000 Bell Telephone Canada 9.50% 10/15/10 $ 311,613
2,500,000 2,500,000 Motorola Inc 7.5 5/15/25 2,698,100
500,000 500,000 New York Telecom 6 4/15/08 502,829
4,000,000 4,000,000 Sprint Cap Corp 6.13 11/15/08 3,937,884
-----------
$7,450,426
-----------
TRANSPORTATION-0.26%
1,000,000 1,000,000 Norfolk Southern Corp 7.80% 5/15/27 $1,126,231
-----------
UTILITIES-0.83%
1,500,000 1,500,000 Central Power & Lighting Inc 7.50% 12/1/02 $1,577,964
1,000,000 1,000,000 Texas Utilities 6.38 1/1/08 992,152
1,000,000 1,000,000 Virginia Electric & Power Co 7.38 7/1/02 1,047,271
-----------
$3,617,387
-----------
FOREIGN GOV BONDS & NOTES-2.18%
1,000,000 1,000,000 British Columbia (Province of) 6.50% 1/15/26 $1,001,420
2,000,000 2,000,000 Hydro Quebec 8.4 1/15/22 2,391,820
1,200,000 1,200,000 New Brunswick 7.63 6/29/04 1,295,784
3,300,000 3,300,000 Ontario (Province of) 7.75 6/4/02 3,493,347
750,000 750,000 Ontario (Province of) 7.63 6/22/04 810,030
500,000 500,000 Victoria 8.45 10/1/01 532,053
-----------
$9,524,454
FEDERAL AGENCY-OTHER-0.12%
500,000 500,000 Tennessee Valley Authority 6.13% 7/15/03 $ 508,281
-----------
FEDERAL HOME LOAN BANK-2.15%
1,000,000 1,000,000 Federal Home Loan Bank 5.50% 1/21/03 $ 993,436
1,500,000 1,500,000 Federal Home Loan Bank 5.4 1/15/03 1,485,102
500,000 500,000 Federal Home Loan Bank 5.26 6/29/01 496,650
5,500,000 5,500,000 Federal Home Loan Bank 5.02 2/11/02 5,432,900
1,000,000 1,000,000 Federal Home Loan Bank 4.38 10/23/00 984,264
-----------
$9,392,352
-----------
FEDERAL HOME LOAN MORTGAGE CORP-2.50%
700,000 700,000 Federal Home Loan Mortgage Corp 7.22% 5/17/05 $ 713,976
4,000,000 4,000,000 Federal Home Loan Mortgage Corp 5.75 7/15/03 4,028,848
3,000,000 3,000,000 Federal Home Loan Mortgage Corp 5.25 2/16/01 2,986,389
3,400,000 3,400,000 Federal Home Loan Mortgage Corp. 5.13 10/15/08 3,207,720
------------
$10,936,933
------------
FEDERAL NATIONAL MORTGAGE ASSOC-5.66%
500,000 500,000 Federal National Mortgage Assoc 7.55% 4/22/02 $ 528,420
500,000 500,000 Federal National Mortgage Assoc 6.7 8/10/01 503,449
1,000,000 1,000,000 Federal National Mortgage Assoc 6.45 2/14/02 1,007,804
1,500,000 1,500,000 Federal National Mortgage Assoc 6.44 6/21/05 1,550,883
5,000,000 5,000,000 Federal National Mortgage Assoc 6.26 2/25/09 4,958,500
5,700,000 5,700,000 Federal National Mortgage Assoc 6.18 2/19/09 5,582,837
400,000 400,000 Federal National Mortgage Assoc 6.16 12/18/07 405,788
1,000,000 1,000,000 Federal National Mortgage Assoc 5.91 2/25/00 1,005,918
1,000,000 1,000,000 Federal National Mortgage Assoc 5.75 6/15/05 1,008,590
2,000,000 2,000,000 Federal National Mortgage Assoc 5.75 2/15/08 1,992,344
4,500,000 4,500,000 Federal National Mortgage Assoc 5.63 2/20/04 4,445,550
1,000,000 1,000,000 Federal National Mortgage Assoc 5.25 1/15/09 957,125
500,000 500,000 Federal National Mortgage Assoc 5.13 2/13/04 488,807
1,000,000 1,000,000 Federal National Mortgage Assoc 0.00 6/1/17 327,084
------------
$24,763,099
------------
U.S. TREASURY BONDS-13.85%
1,100,000 1,100,000 U.S. Treasury Bonds 12.00% 8/15/13 $ 1,604,625
8,550,000 8,550,000 U.S. Treasury Bonds 11.25 2/15/15 13,407,468
1,100,000 1,100,000 U.S. Treasury Bonds 10.38 11/15/12 1,453,032
2,800,000 2,800,000 U.S. Treasury Bonds 9.13 5/15/09 3,250,626
700,000 700,000 U.S. Treasury Bonds 9.13 5/15/18 963,594
9,250,000 9,250,000 U.S. Treasury Bonds 8.13 8/15/19 11,744,613
7,100,000 7,100,000 U.S. Treasury Bonds 8 11/15/21 8,999,250
2,500,000 2,500,000 U.S. Treasury Bonds 7.88 2/15/21 3,118,750
7,300,000 7,300,000 U.S. Treasury Bonds 7.63 2/15/25 9,077,097
500,000 500,000 U.S. Treasury Bonds 7.5 11/15/16 591,719
500,000 500,000 U.S. Treasury Bonds 7.25 5/15/16 577,657
1,000,000 1,000,000 U.S. Treasury Bonds 7.12 2/15/23 1,165,625
1,500,000 1,500,000 U.S. Treasury Bonds 6.5 11/15/26 1,645,782
1,000,000 1,000,000 2,000,000 U.S. Treasury Bonds 6.13 11/15/27 2,099,376
900,000 900,000 U.S. Treasury Bonds 5.5 8/15/28 872,157
------------
$60,571,371
------------
U.S. TREASURY NOTES-35.38%
500,000 500,000 U.S. Treasury Notes 5.63% 4/30/00 $ 502,969
1,000,000 1,000,000 U.S. Treasury Notes 5.5 3/31/00 1,004,688
2,300,000 2,300,000 U.S. Treasury Notes 7.88 8/15/01 2,440,875
8,200,000 8,200,000 U.S. Treasury Notes 7.5 11/15/01 8,666,375
1,300,000 1,300,000 U.S. Treasury Notes 7.5 2/15/05 1,438,938
11,050,000 11,050,000 U.S. Treasury Notes 7.25 8/15/04 12,030,687
1,000,000 1,000,000 U.S. Treasury Notes 7.12 2/29/00 1,020,000
9,200,000 9,200,000 U.S. Treasury Notes 7 7/15/06 10,071,129
2,250,000 2,250,000 U.S. Treasury Notes 6.5 5/31/01 2,312,579
1,400,000 1,400,000 U.S. Treasury Notes 6.5 5/15/05 1,482,250
2,800,000 2,800,000 U.S. Treasury Notes 6.5 8/15/05 2,965,376
1,400,000 1,400,000 U.S. Treasury Notes 6.5 10/15/06 1,492,750
11,500,000 11,500,000 U.S. Treasury Notes 6.38 3/31/01 11,773,124
4,700,000 4,700,000 U.S. Treasury Notes 6.38 8/15/02 4,860,096
1,800,000 1,800,000 U.S. Treasury Notes 6.25 5/31/00 1,824,750
2,800,000 2,800,000 U.S. Treasury Notes 6.25 10/31/01 2,872,626
1,000,000 1,000,000 U.S. Treasury Notes 6.25 1/31/02 1,027,500
10,800,000 10,800,000 U.S. Treasury Notes 6.25 2/15/03 11,161,129
1,200,000 1,200,000 U.S. Treasury Notes 6.13 12/31/01 1,228,500
5,500,000 5,500,000 U.S. Treasury Notes 6.13 8/15/07 5,756,097
1,000,000 1,000,000 U.S. Treasury Notes 5.88 6/30/00 1,009,375
850,000 850,000 U.S. Treasury Notes 5.88 11/30/01 864,610
1,000,000 1,000,000 U.S. Treasury Notes 5.88 2/15/04 1,025,625
1,500,000 1,500,000 U.S. Treasury Notes 5.88 11/15/05 1,539,375
1,600,000 1,600,000 U.S. Treasury Notes 5.75 11/30/02 1,624,501
1,000,000 1,000,000 U.S. Treasury Notes 5.75 4/30/03 1,016,250
14,000,000 14,000,000 U.S. Treasury Notes 5.75 8/15/03 14,236,249
2,100,000 2,100,000 U.S. Treasury Notes 5.63 11/30/00 2,115,750
1,000,000 1,000,000 U.S. Treasury Notes 5.63 2/28/01 1,009,063
800,000 800,000 U.S. Treasury Notes 5.63 5/15/08 815,500
4,900,000 4,900,000 U.S. Treasury Notes 5.5 5/31/00 4,922,971
2,100,000 2,100,000 U.S. Treasury Notes 5.5 1/31/03 2,115,095
1,000,000 1,000,000 U.S. Treasury Notes 5.13 8/31/00 999,688
10,800,000 10,800,000 U.S. Treasury Notes 4.75 11/15/08 10,367,999
5,500,000 5,500,000 U.S. Treasury Notes 4.63 12/31/00 5,448,438
10,000,000 10,000,000 U.S. Treasury Notes 4.5 1/31/01 9,884,380
10,000,000 10,000,000 U.S. Treasury Notes 4 10/31/00 9,815,630
-------------
$154,742,937
-------------
CASH EQUIVALENTS-8.18%
7,161,200 2,500 7,163,700 Dreyfus Institutional Money Market Fund $ 7,163,700
18,500,000 1,100,000 19,600,000 Janus International Money Market Fund 19,600,000
9,000,000 9,000,000 Merrimac Cash Fund-Premium Class 9,000,000
-------------
$ 35,763,700
-------------
REPURCHASE AGREEMENTS-1.32%
5,763,108 5,763,108 Morgan Stanley Triparty Repurchase $ 5,763,108
Agreement dated 2/26/99, 3/1/99 with a
maturity value of $5,765,283 and an
effective yield of 4.53% collateralized
by U.S. Treasury Bonds with a rate of
9.875%, a maturity of 11/15/15 and a
market value of $5,875,689
U.S. TREASURY BONDS-1.30%
900,000 900,000 U.S. Treasury Bonds 8.88% 2/15/19 $ 1,219,219
300,000 300,000 U.S. Treasury Bonds 8.13% 5/15/21 383,906
1,250,000 1,250,000 U.S. Treasury Bonds 7.63% 11/15/22 1,533,986
1,200,000 1,200,000 U.S. Treasury Bonds 7.25% 8/15/22 1,412,626
1,000,000 1,000,000 U.S. Treasury Bonds 6.88% 8/15/25 1,144,375
-------------
$ 5,694,112
-------------
U.S. TREASURY BILLS-6.59%
28,885,000 28,885,000 U.S. Treasury Bills 4.25%* 4/1/99 $ 28,769,893
36,000 36,000 U.S. Treasury Bills 4.80%* 5/13/99 35,669
-------------
$ 28,805,562
-------------
TOTAL MARKET FOR COMBINED FUND $468,402,208
Other Assets less Liabilities -$ 31,064,064
-------------
Total Combined Net Assets $437,338,144
============
Barclays Global Investors Funds, Inc.
Pro Forma combined financial statements for the Bond Index Fund /U.S. Treasury
Allocation Fund consolidation
Pro Forma as of 2/28/99 (unaudited)
STATEMENT OF ASSETS AND LIABILITIES
U.S. Treasury
Allocation Fund Bond Index Fund Pro Forma Combined
---------------- --------------- ------------------
ASSETS
Investments:
In corresponding Master Portfolio, at market value $35,610,248 $126,693,777 $162,304,025
Receivables:
Fund Shares sold 48,916 103,161 152,077
----------- ------------ ------------
Total Assets 35,659,164 126,796,938 162,456,102
----------- ------------ ------------
LIABILITIES
Payables:
Capital Shares redeemed 313,853 42,268 356,121
Distribution to Shareholders 2,245 3,887 6,132
Due to BGI and Stephens 4,871 17,945 22,816
----------- ------------ ------------
Total Liabilities 320,969 64,100 385,069
----------- ------------ ------------
TOTAL NET ASSETS $35,338,195 $126,732,838 $162,071,033
=========== ============ ============
Net assets consist of:
Paid in capital 39,334,374 127,668,181 167,002,555
Undistributed net investment income 3,780 19,349 23,129
Undistributed net realized gain (loss) on investments (3,705,319) 259,209 (3,446,110)
Net unrealized appreciation (depreciation) on investments (294,640) (1,213,901) (1,508,541)
----------- ------------ -------------
TOTAL NET ASSETS $35,338,195 $126,732,838 $162,071,033
=========== ============ ============
Net Assets $35,338,195 $126,732,838 $162,071,033
Shares Outstanding 3,768,853 13,021,489 16,656,840
Net Asset value per share $ 9.38 $ 9.73 $ 9.73
The accompanying notes are an integral part of these pro forma financial
statements
Barclays Global Investors Funds, Inc.
Pro Forma combined financial statements for the Bond Index Fund/ U.S. Treasury
Allocation Fund consolidation
Pro Forma as of 2/28/99 (unaudited)
STATEMENT OF OPERATIONS
U.S. Treasury
Allocation Fund Bond Index Fund Pro Forma Combined
------------------ -------------------- ------------------
NET INVESTMENT INCOME ALLOCATED
FROM MASTER PORTFOLIO
Interest $2,300,666 $6,773,786 $9,074,452
Expenses (Note 2) (130,490) (85,135) (120,412)
---------- ---------- ----------
Net Investmet Income (Loss) Allocated from Master Portfolio 2,170,176 6,688,651 8,954,040
---------- ---------- ----------
EXPENSES
Administration Fees (Note 2) (173,856) (159,900) (225,773)
---------- ---------- ----------
Total Expenses (173,856) (159,900) (225,773)
---------- ---------- ----------
NET INVESTMENT INCOME (LOSS) 1,996,320 6,528,751 8,728,267
---------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS ALLOCATED FROM MASTER PORTFOLIO
Net realized gain (loss) on sale of investments 450,904 416,912 867,816
Net change in unrealized appreciation (depreciation) of investments (417,682) (1,350,936) (1,768,618)
---------- ---------- ----------
Net Gain (Loss) on Investments 33,222 (934,024) (900,802)
---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $2,029,542 $5,594,727 $7,827,465
The accompanying notes are an integral part of these pro forma financial
statements
Consolidation of Bond Index
Fund & U.S. Treasury Allocation Fund
Notes to Pro Forma Combining Financial Statements (unaudited)
1. Basis of Consolidation
Barclays Global Investors Funds, Inc. (the "Company"), is registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end series investment company. The Company commenced operations on
July 2, 1993, and currently offers eleven Funds.
The unaudited Pro Forma Combining Statement of Assets and Liabilities
assumes the consolidation described in the next paragraph occurred as of
February 28, 1999, and the Combining Statement of Operations for the year
ended February 28, 1999 assumes the exchange occurred as of March 1, 1998.
These statements have been derived from the books and records utilized in
calculating daily net asset value of each Fund at February 28, 1999 and for
the twelve month period then ended.
The Pro Forma statements give effect to the proposed consolidation of the
assets and stated liabilities of the U.S. Treasury Allocation Fund in
exchange for shares of the Bond Index Fund. Under generally accepted
accounting principles, the market value of investment securities of the
U.S. Treasury Allocation Fund will be carried forward as the cost basis to
the surviving entity and the results of operations of the Bond Index Fund
for pre-combination periods will not be restated. The pro forma financial
statements do not reflect the expenses of either fund in carrying out its
obligations under the proposed Agreement and Plan of Consolidation, which
are not considered to be material.
The unaudited Pro Forma Combining Financial Statements should be read in
conjunction with the historical financial statements of the Funds
incorporated by reference in the Statement of Additional Information.
2. Pro Forma Operations
Pro forma operating expenses include the actual expenses of each Fund and
the combined Fund, with certain expenses adjusted to reflect the expected
expenses of the combined entity.
FORM N-14
PART C-- OTHER INFORMATION
BARCLAYS GLOBAL INVESTORS FUNDS, INC.
111 Center Street
Little Rock, Arkansas 72201
Telephone: 1-888-204-3956
Item 15. Indemnification.
---------------
Under the terms of the Maryland Corporation Law and the Restated Articles of
Incorporation and By-Laws of Barclays Global Investors Funds, Inc. ("BGI
Funds"), incorporated by reference as Exhibits (1) and (2) hereto, provides for
the indemnification of BGI Funds' directors and employees. Item 27. The
following paragraphs of Article VIII of BGI Funds' Articles of Incorporation
provide:
(h) The Corporation shall indemnify (1) its Directors and
officers, whether serving the Corporation or at its request any other
entity, to the full extent required or permitted by the General Laws of
the State of Maryland now or hereafter in force, including the advance of
expenses under the procedures and to the full extent permitted by law, and
(2) its other employees and agents to such extent as shall be authorized
by the Board of Directors or the Corporation's By-Laws and be permitted by
law. The foregoing rights of indemnification shall not be exclusive of
any other rights to which those seeking indemnification may be entitled.
The Board of Directors may take such action as is necessary to carry out
these indemnification provisions and is expressly empowered to adopt,
approve and amend from time to time such By-Laws, resolutions or contracts
implementing such provisions or such further indemnification arrangements
as may be permitted by law. No amendment of these Articles of
Incorporation of the Corporation shall limit or eliminate the right to
indemnification provided hereunder with respect to acts or omissions
occurring prior to such amendment or repeal. Nothing contained herein
shall be construed to authorize the Corporation to indemnify any Director
or officer of the Corporation against any liability to the Corporation or
to any holders of securities of the Corporation to which he is subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office. Any
indemnification by the Corporation shall be consistent with the
requirements of law, including the 1940 Act.
(i) To the fullest extent permitted by Maryland statutory and
decisional law and the 1940 Act, as amended or interpreted, no Director or
officer of the
C-1
Corporation shall be personally liable to the Corporation or its
stockholders for money damages; provided, however, that nothing herein
shall be construed to protect any Director or officer of the Corporation
against any liability to which such Director or officer would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office. No
amendment, modification or repeal of this Article VIII shall adversely
affect any right or protection of a Director or officer that exists at the
time of such amendment, modification or repeal.
Item 16. Exhibits.
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All references to the "Registration Statement" in the following list of
Exhibits refer to BGI Funds' Registration Statement on Form N-1A (File Nos. 33-
54126; 811-7332).
Exhibit Number Description
(1)(a) Restated Articles of Incorporation dated October 31, 1995, incorporated by
reference to Post-Effective Amendment No. 11, filed December 1, 1995.
(2) By-Laws, incorporated by reference to Post-Effective Amendment No. 8, filed
June 27, 1995.
(3) Not Applicable.
(4) Agreement and Plan of Consolidation, filed herewith as Exhibit A to the
Combined Prospectus/Proxy Statement.
(5) Not Applicable.
(6) Not Applicable.
(7) Amended and Restated Distribution Agreement with Stephens Inc. on behalf of
the Funds, dated February 16, 1996, incorporated by reference to
Post-Effective Amendment No. 13, filed June 28, 1996.
(8) Not Applicable.
(9) Custody Agreement with Investors Bank & Trust Company on behalf of the
Funds, dated October 21, 1996, incorporated by reference to Post-Effective
Amendment No. 22, filed July 30, 1999.
C-2
Exhibit Number Description
(10) Distribution Plan dated October 28, 1998, on behalf of the Asset
Allocation, Institutional Money Market, LifePath 2000, LifePath 2010,
LifePath 2020, LifePath 2030 and LifePath 2040 Funds, incorporated by
reference to Post-Effective Amendment No. 22, filed July 30, 1999.
(11) Opinion and Consent of Morrison & Foerster LLP, filed herewith.
(12) See Item 17(3) of this Part C.
(13)(a) Transfer Agency and Service Agreement with Investors Bank & Trust Company
on behalf of the Funds, dated February 27, 1998, incorporated by reference
to Post-Effective Amendment No. 22, filed July 30, 1999.
(13)(b) Shareholder Servicing Plan and Form of Shareholder Servicing Agreement for
the Funds, dated February 1, 1994, as amended October 29, 1998,
incorporated by reference to Post-Effective Amendment No. 18, filed
November 20, 1998.
(13)(c) Co-Administration Agreement with Stephens Inc. and Barclays Global
Investors, N.A. on behalf of the Funds, dated October 21, 1996, as amended
on June 11, 1998, incorporated by reference to Post-Effective Amendment No.
22, filed July 30, 1999.
(13)(d) Sub-Administration Agreement by and among Barclays Global Investors, N.A.
and Investors Bank & Trust Company on behalf of the Funds, dated October
21, 1996, incorporated by reference to Post-Effective Amendment No. 14,
filed June 30, 1997.
(13)(e) Service Agreement with Merrill Lynch, Pierce, Fenner & Smith Incorporated
on behalf of the Funds, dated December 31, 1997, incorporated by reference
to Post-Effective Amendment No. 16, filed July 2, 1998
(13)(f) Financial Services Agreement with Merrill Lynch, Pierce, Fenner & Smith
Incorporated on behalf of the Funds, dated December 31, 1997, incorporated
by reference to Post-Effective Amendment No. 16, filed July 2, 1998.
14 Consent of Independent Auditors -KPMG LLP, filed herewith.
15 Not Applicable
C-3
Exhibit Number Description
16 Powers of Attorney for Jack S. Euphrat, R. Greg Feltus, Thomas S. Goho, W.
Rodney Hughes and J. Tucker Morse, incorporated by reference to
Post-Effective Amendment No. 14, filed June 30, 1997.
17(a) Plan entered into by Registrant pursuant to Rule 18f-3 under
the Investment Company Act of 1940, dated October 28, 1998,
is incorporated by reference to Post-Effective Amendment No.
22, filed on July 30, 1999.
17(b) Forms of Proxy Ballot, filed herewith.
17(c)(i) Prospectuses and Statements of Additional Information for U.S. Treasury
Allocation Fund and Bond Index Fund, dated July 1, 1999, are incorporated
by reference to Post-Effective Amendment No. 21 to the Registration
Statement, as filed on June 30, 1999.
17(c)(ii) Annual Reports for U.S. Treasury Allocation Fund and Bond Index Fund for
the fiscal year ended February 28, 1999, filed on April 26, 1999.
Item 17. Undertakings.
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(1) BGI Funds agrees that, prior to any public reoffering of the
securities registered through the use of a prospectus which is a
part of this registration statement by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c) of
the Securities Act of 1933, the reoffering prospectus will
contain the information called for by the applicable registration
form for the reofferings by persons who may be deemed
underwriters, in addition to the information called for by the
other items of the applicable form.
(2) The undersigned registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as part of an
amendment to the registration statement and will not be used
until the amendment is effective, and that, in determining any
liability under the Securities Act of 1933, each post-effective
amendment shall be deemed to be a new registration statement for
the securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial bona
fide offering of them.
(3) The undersigned Registrant agrees to file, by post-effective
amendment, an opinion of counsel or a copy of an IRS ruling
supporting the tax consequences of the Reorganization within a
reasonable time after receipt of such opinion or ruling.
C-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Pre-Effective Amendment to its Registration Statement on Form N-14 to be signed
on its behalf by the undersigned, thereto duly authorized, in the City of Little
Rock, State of Arkansas on the 5th day of August, 1999.
BARCLAYS GLOBAL INVESTORS FUNDS, INC.
By /s/ Richard H. Blank, Jr.
-------------------------------
Richard H. Blank, Jr.
Secretary and Treasurer
(Principal Financial Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment to the Registration Statement on Form N-14 has been
signed below by the following persons in the capacities and on the date
indicated:
Signature Title
- --------- -------
* Director, Chairman and President 8/05/99
- ------------------------------
(R. Greg Feltus) (Principal Executive Officer)
/s/ Richard H. Blank, Jr. Secretary and Treasurer 8/05/99
- ------------------------------
(Richard H. Blank, Jr.) (Principal Financial Officer)
* Director 8/05/99
- ------------------------------
(Jack S. Euphrat)
* Director 8/05/99
- ------------------------------
(W. Rodney Hughes)
*By: /s/ Richard H. Blank, Jr.
-------------------------
Richard H. Blank, Jr.
As Attorney-in-Fact
August 5, 19995
BARCLAYS GLOBAL INVESTORS FUNDS, INC.
N-14 Exhibit Index
Exhibit Number Description
- -------------- -----------
99.11 Opinion and Consent of Morrison & Foerster LLP
99.14* Consent of Independent Auditors
99.17(b) Form of Proxy Ballot
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* To be filed by amendment