- --------------------------------------------------------------------------------
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. 448
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.
- --------------------------------------------------------------------------------
MASTERWORKS FUNDS INC.
111 CENTER STREET
LITTLE ROCK, ARKANSAS 72201
OCTOBER 26, 1998
Dear Shareholder:
We are pleased to invite you to a Special Meeting of the
Shareholders of the Growth Stock Fund ("Growth Stock") of MasterWorks Funds Inc.
("MasterWorks") to be held on November 24, 1998 at MasterWorks' principal
offices in Little Rock, Arkansas.
SUMMARY OF PROPOSALS
The Special Meeting is being held to consider an Agreement and
Plan of Consolidation (the "Consolidation Plan") and a Plan of Liquidation (the
"Liquidation Plan"). The Consolidation Plan provides for Growth Stock to be
combined into the Large Company Growth Fund ("Large Company"), a series of
Norwest Advantage Funds. Large Company invests in a core portfolio that is
advised by Norwest Investment Management, Inc., and subadvised by its affiliate,
Peregrine Capital Management, Inc. A Large Company prospectus accompanies these
materials.
If the proposed consolidation is approved and consummated, you
will receive A Shares of Large Company equal in value to your shares of Growth
Stock. THE SHARES YOU RECEIVE WILL BE FREE OF COMMISSIONS AND SALES LOADS, AND
THE EXCHANGE SHOULD NOT CAUSE YOU TO RECOGNIZE A GAIN OR LOSS FOR FEDERAL INCOME
TAX PURPOSES. For a further discussion of tax matters, please refer to "Proposal
One: Approval of an Agreement and Plan of Consolidation - Information About the
Consolidation - Federal Income Tax Consequences of the Consolidation" in the
Combined Prospectus/Proxy Statement that accompanies this letter. As a "fall
back" to the Consolidation Plan, shareholders also are being asked to consider
the liquidation of Growth Stock. The liquidation will occur only if the
Liquidation Plan is approved and either the Consolidation Plan is not approved
or, for any other reason, the consolidation of Growth Stock into Large Company
does not occur.
REASONS FOR PROPOSALS
Growth Stock is an actively managed fund that invests, through a
master portfolio, primarily in growth-oriented, small- and medium-sized
companies. Wells Fargo Bank, N.A., as investment subadviser,
<PAGE>
individually selects the Fund's investments and the Fund's portfolio turnover
rate is high due to its active trading strategy. For the most part, MasterWorks'
other funds, whose investments are managed by Barclays Global Fund Advisors,
seek to replicate certain indexes or pursue asset allocation strategies.
Accordingly, Growth Stock does not fit within MasterWorks' core strategy.
Because Growth Stock does not fit within this strategy, and because Growth Stock
has experienced relative underperformance, investor demand for this fund is not
strong. The Board of Directors of MasterWorks is concerned, therefore, that
Growth Stock may not be viable on a long-term basis.
In light of these concerns, the MasterWorks Board of Directors has
approved the proposals described in these materials. The primary reason for
proposing the consolidation of Growth Stock into Large Company is to offer
Growth Stock investors the opportunity to transfer their investment, on a basis
that should be tax-free, into a fund that has greater prospects for success.
Large Company's core portfolio has approximately $1 billion in assets, as
compared to Growth Stock's master portfolio, which has less than $200 million in
assets.
Large Company's investment objective and policies are broadly
similar to those of Growth Stock, although Large Company tends to invest in
larger capitalization companies, tends to hold fewer companies in its portfolio
and has had a much lower portfolio turnover rate. MasterWorks' Board of
Directors believes that merging Growth Stock into a fund that has generally
compatible investment objectives and policies, a better historic performance
record and greater prospects for continued growth will provide investors
potential benefits. Large Company also was chosen, in part, because of the
pending merger between Wells Fargo & Company, the parent of Growth Stock's
investment subadviser, and Norwest Corporation, the parent of Large Company's
investment adviser. Although Large Company's expense ratio is higher than that
of Growth Stock, the Board of Directors believes the Consolidation is in the
best interests of shareholders and is preferable to liquidation of Growth Stock.
Due to the viability concerns described above, the Board of
Directors believes that Growth Stock should be liquidated if the Consolidation
Plan is not approved or is not consummated for any other reason. Therefore,
shareholders of Growth Stock are also being asked to approve the Liquidation
Plan. THE LIQUIDATION PLAN EXPRESSLY PROVIDES THAT IT WILL BE IMPLEMENTED ONLY
IF THE CONSOLIDATION PLAN IS NOT CONSUMMATED.
THE BOARD OF DIRECTORS OF MASTERWORKS HAS UNANIMOUSLY APPROVED THE CONSOLIDATION
PLAN AND THE LIQUIDATION PLAN AND, IN ORDER TO ENSURE THAT GROWTH STOCK WILL BE
LIQUIDATED IF THE CONSOLIDATION DOES NOT OCCUR, RECOMMENDS THAT SHAREHOLDERS OF
GROWTH STOCK VOTE FOR EACH PLAN.
The formal Notice of Special Meeting is enclosed, together with a
Proxy Ballot. If you will not be attending the Special Meeting, you may vote by
proxy in any one of three ways:
o BY MAIL--Mark, date, sign and return the enclosed Proxy Ballot in the
postage-paid envelope;
o BY PHONE--Call SCC toll-free at 1-800-733-8481 EXT. 448 from 6:00 A.M. TO
8:00 P.M. (PACIFIC TIME); or
o BY FAX--Mark, date, sign and fax both sides of the enclosed Proxy Ballot
to Shareholder Communications Corp. at 1-800-733-1885.
A confirmation of phone and fax votes will be mailed to you. Every vote
is important to us. If you have any questions, please call MasterWorks at
1-888-204-3956.
Very truly yours,
/s/ R. Greg Feltus
MasterWorks Funds Inc.
R. Greg Feltus
President
<PAGE>
MASTERWORKS FUNDS INC.
111 CENTER STREET
LITTLE ROCK, ARKANSAS 72201
TELEPHONE: 1-888-204-3956
-----------------------------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
GROWTH STOCK FUND
TO BE HELD ON NOVEMBER 24, 1998
-----------------------------------------------------
To the Shareholders of the Growth Stock Fund ("Growth Stock") of MasterWorks
Funds Inc. ("MasterWorks"):
PLEASE TAKE NOTE that a SPECIAL MEETING OF SHAREHOLDERS (the "Special
Meeting") of Growth Stock will be held on Tuesday, November 24, 1998, at 11:00
a.m. (Central time) at the principal office of MasterWorks, 111 Center Street,
Little Rock, Arkansas 72201. The Special Meeting is being called for the
following purposes:
(1) To consider and vote upon an Agreement and Plan of Consolidation
(the "Consolidation Plan") for Growth Stock and the transactions
contemplated therein, which include (a) the transfer of all of
the assets of Growth Stock to Large Company Growth Fund ("Large
Company"), a series of Norwest Advantage Funds, and the
assumption by Large Company of all of the liabilities of Growth
Stock, in exchange for A Shares of Large Company; and (b) the
distribution to shareholders of Growth Stock of the A Shares of
Large Company;
(2) To consider and vote upon the Plan of Liquidation (the
"Liquidation Plan") of Growth Stock, which will be implemented
only if the Consolidation Plan is not approved or the
consolidation of Growth Stock into Large Company does not occur;
and
(3) 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 MasterWorks has fixed the close of business on
October 9, 1998, 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 enclosed proxy is being solicited on
behalf of the Board of Directors of MasterWorks. The Combined Prospectus/Proxy
Statement contains additional information regarding the Special Meeting and the
proposals. 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;
2. Vote by telephone by calling Shareholder Communication Corp. ("SCC")
toll-free at 1-800-733-8481 Ext. 448 from 6:00 a.m. to 8:00 p.m. (Pacific time).
SCC will send to you a confirmation of your telephonic vote; or
3. Mark, sign, date and fax the enclosed Proxy Ballot (both front and
back) to SCC at 1-800-733-1885. SCC will send to you a confirmation of your
facsimile vote.
IN ORDER FOR EACH OF THE CONSOLIDATION PLAN AND LIQUIDATION PLAN TO BE
APPROVED, THE HOLDERS OF A MAJORITY OF GROWTH STOCK'S SHARES OUTSTANDING ON THE
RECORD DATE MUST BE PRESENT IN PERSON
<PAGE>
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. 448. SIGNED BUT UNMARKED PROXY BALLOTS WILL BE COUNTED IN
DETERMINING WHETHER A QUORUM IS PRESENT AND WILL BE VOTED IN FAVOR OF THE
PROPOSAL.
THE BOARD OF DIRECTORS OF MASTERWORKS UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN
FAVOR OF BOTH PROPOSALS.
By Order of the Board of Directors
/s/ Richard H. Blank, Jr.
Richard H. Blank, Jr.
Secretary
October 26, 1998
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
<PAGE>
COMBINED PROSPECTUS/PROXY STATEMENT
GROWTH STOCK FUND
OF MASTERWORKS FUNDS INC.
111 CENTER STREET
LITTLE ROCK, ARKANSAS 72201
LARGE COMPANY GROWTH FUND
OF NORWEST ADVANTAGE FUNDS
TWO PORTLAND SQUARE
PORTLAND, MAINE 04101
OCTOBER 26, 1998
INTRODUCTION
This Combined Prospectus/Proxy Statement (the "Statement")
relates to the solicitation of shareholder approval for the proposed transfer of
all the assets of Growth Stock Fund ("Growth Stock"), a diversified series of
MasterWorks Funds Inc. ("MasterWorks") to Large Company Growth Fund ("Large
Company"), a diversified series of Norwest Advantage Funds ("Norwest Trust") in
exchange for A Shares of Large Company and the assumption by Large Company of
all the liabilities of Growth Stock (the "Consolidation"). Both MasterWorks and
Norwest Trust are registered with the Securities and Exchange Commission (the
"SEC") as open-end, management investment companies. This Statement sometimes
refers to Growth Stock or Large Company as a "Fund."
As part of the consolidation, MasterWorks would distribute the
A Shares of Large Company to shareholders of Growth Stock and would terminate
Growth Stock as a series of MasterWorks. MasterWorks and Norwest Trust would
effect the Consolidation at net asset value without the imposition of any sales
charges or other fees.
This Statement also solicits shareholder approval for the
proposed liquidation of Growth Stock (the "Liquidation"). THE LIQUIDATION WILL
OCCUR ONLY IF SHAREHOLDERS APPROVE THE LIQUIDATION AND THE CONSOLIDATION IS NOT
APPROVED OR DOES NOT OCCUR. IF SHAREHOLDERS APPROVE BOTH THE CONSOLIDATION AND
THE LIQUIDATION, MASTERWORKS AND NORWEST TRUST WILL PROCEED WITH THE
CONSOLIDATION, REGARDLESS OF WHICH ACTION IS APPROVED BY THE GREATER NUMBER OF
SHARES VOTED. The Board of Directors of MasterWorks will analyze other
alternatives for Growth Stock if shareholders do not approve either the
Consolidation or the Liquidation.
A copy of the Agreement and Plan of Consolidation (the
"Consolidation Plan") is included as Exhibit A to this Statement. Exhibit B
includes a discussion of the factors that materially affected the performance of
Large Company during its most recently completed fiscal year and a graph
illustrating the performance of the Fund's I Shares, the only class of shares
outstanding at that time. Exhibit C includes a copy of the Plan of Liquidation
(the "Liquidation Plan").
THE BOARD OF DIRECTORS OF MASTERWORKS RECOMMENDS
APPROVAL OF THE CONSOLIDATION PLAN
AND, IN ORDER TO ENSURE THAT GROWTH STOCK WILL BE
LIQUIDATED IF THE CONSOLIDATION DOES NOT OCCUR,
APPROVAL OF THE LIQUIDATION PLAN
This Statement sets forth the information you should know
about Large Company and the proposals before you sign and return the enclosed
proxy ballot. Please retain this Statement for future reference. A Prospectus
offering A Shares of Large Company dated October 1, 1998 (the "Large Company
Prospectus") accompanies this
<PAGE>
Statement. "Information About the Funds" below provides information about the
Prospectus offering shares of Growth Stock.
Norwest Trust has filed a Statement of Additional Information
dated October 26, 1998 (the "SAI") with the SEC. The SAI provides more
information about the matters discussed in this Statement and about the Funds.
Norwest Trust filed the Statement of Additional Information offering shares of
Large Company (the "Large Company SAI") dated October 1, 1998 with the SEC as
part of the SAI. You may obtain a copy of the SAI without charge by writing to
the distributor of Norwest Trust, Forum Financial Services, Inc. ("Forum") at
Two Portland Square, Portland, Maine, 04101, or by calling 1-207-879-1900.
This Statement incorporates by reference the SAI and the
information in the Large Company Prospectus and Large Company SAI that pertains
to Large Company.
AN INVESTMENT IN LARGE COMPANY IS NOT A DEPOSIT OF NORWEST BANK MNNESOTA, N.A.
OR ANY OTHER BANK AND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
INVESTING IN ANY MUTUAL FUND HAS RISK. IT IS POSSIBLE TO LOSE MONEY BY INVESTING
IN LARGE COMPANY.
NO GOVERNMENTAL AGENCY, INCLUDING TH U.S. SECURITIES AND EXCHANGE COMMISSION,
HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED WHETHER OR NOT THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
2
<PAGE>
PROPOSAL ONE: APPROVAL OF AN AGREEMENT AND PLAN OF CONSOLIDATION
SUMMARY
The following is a summary of information about the
Consolidation. Before signing and returning the enclosed proxy ballot, you
should read this Statement, including the Consolidation Plan attached as Exhibit
A and the performance information about Large Company attached as Exhibit B, and
the Large Company Prospectus.
FUND STRUCTURES. As opposed to investing directly in portfolio
securities, each Fund invests in a series of another investment company that
does not offer shares to the general public. Large Company invests in Large
Company Growth Portfolio ("Large Company Portfolio"), a series of Core Trust
(Delaware) ("Core Trust"). Growth Stock invests in Growth Stock Master Portfolio
("Growth Stock Portfolio"), a series of Managed Series Investment Trust
("MSIT"). Both Core Trust and MSIT are open-end management investment companies
that are organized as Delaware business trusts. This Statement sometimes refers
to Growth Stock Portfolio or Large Company Portfolio as a "Portfolio."
PROPOSED CONSOLIDATION. At meetings held on September 16, 1998
and September 25, 1998, the Board of Directors of MasterWorks and the Board of
Trustees of Norwest Trust (each, a "Board"), respectively, including the
Directors and Trustees who are not "interested persons" of Norwest Trust or
MasterWorks (the "Independent Trustees") within the meaning of the Investment
Company Act of 1940 (the "1940 Act"), approved the Consolidation Plan. The
Consolidation Plan provides for the (i) in-kind redemption by Growth Stock of
its interest in Growth Stock Portfolio; (ii) transfer of all the assets of
Growth Stock to Large Company in exchange for A Shares of Large Company; (iii)
assumption by Large Company of all the liabilities of Growth Stock; and (iv)
distribution of the A Shares of Large Company to shareholders of Growth Stock.
The aggregate net asset value of the A Shares of Large Company issued in the
Consolidation will be equal to the net value of the assets and liabilities
transferred by Growth Stock.
As a result of the Consolidation, each holder of Growth Stock
shares will receive that number of full and fractional A Shares of Large Company
equal in net asset value at the close of business on the date of the exchange to
the net asset value of the holder's shares of Growth Stock. The Consolidation
will be effected at net asset value without the imposition of any sales charges
or other fees. Immediately after the Consolidation, Large Company will transfer
in-kind the assets transferred by Growth Stock to Large Company Portfolio in
exchange for shares of beneficial interest of Large Company Portfolio.
The Board of each Fund has determined that (i) the interests
of existing shareholders of the Fund would not be diluted as a result of the
Consolidation and (ii) the Consolidation would be in the best interests of the
Fund and the shareholders of the Fund. The MasterWorks Board recommends approval
of the Consolidation. Approval of the Consolidation Plan and the Consolidation
by Growth Stock will require the affirmative vote of the holders of a majority
of the outstanding shares of Growth Stock. The Funds will bear the expenses
incurred in connection with the Consolidation, but because certain of the Funds'
service providers reimburse for or assume certain expenses of the Funds, the
costs of the Consolidation will not cause an increase in the Funds' expense
ratios.
The Consolidation is expected to occur shortly after its
approval by shareholders of Growth Stock. Either Board, however, may terminate
the Consolidation Plan in its entirety at any time prior to the closing of the
Consolidation.
TAX CONSEQUENCES OF THE CONSOLIDATION. In the opinion of
Seward & Kissel, the Consolidation should be treated as a reorganization within
the meaning of section 368(a)(1)(C) of the Internal Revenue Code of 1986, as
amended (the "Code"). Under this treatment, Large Company, Growth Stock and the
shareholders of Growth Stock would not recognize gain or loss as a result of the
Consolidation. Due to the absence of any authority involving facts substantially
identical to the Consolidation, however, the tax effects of the Consolidation
are not entirely clear. For a further discussion of tax matters, see
"Information About the Consolidation - Federal Income Tax Consequences of the
Consolidation" below.
3
<PAGE>
MANAGEMENT OF THE FUNDS. The investment adviser to Large Company Portfolio
is Norwest Investment Management, Inc. ("Norwest"). Norwest and Core Trust have
retained Peregrine Capital Management, Inc. ("Peregrine") to act as investment
subadviser to Large Company Portfolio.
Barclays Global Fund Advisors ("BGFA") serves as investment
adviser to Growth Stock Portfolio. BGFA and MSIT have retained Wells Fargo Bank,
N.A. ("Wells Fargo Bank") to serve as investment subadviser to Growth Stock
Portfolio.
ADVISORY, DISTRIBUTION AND OTHER FEES; EXPENSE RATIOS. Large
Company has higher investment advisory fees and a higher expense ratio than
Growth Stock. In addition, Large Company, unlike Growth Stock, has distribution
or Rule 12b-1 fees.
DIVIDENDS AND DISTRIBUTIONS. Large Company declares and pays
dividends of net investment income annually and distributes net capital gain at
least annually. Growth Stock pays quarterly dividends consisting of
substantially all of its net investment income and annual distributions
consisting of substantially all of its net realized capital gains. There is no
sales or other charge for either Fund in connection with the reinvestment of
dividends or distributions.
PURCHASE PROCEDURES, EXCHANGE PRIVILEGES AND REDEMPTION
PROCEDURES. Each Fund offers its shares on business days at their net asset
value next determined after receipt of a purchase order in proper form. However,
A Shares of Large Company, unlike shares of Growth Stock, have an initial sales
charge. There are several methods of lowering the initial sales charge on A
Shares of Large Company. In some cases, the sales charge may be waived entirely,
such as for purchases of A Shares by any bank, trust company or other
institution acting on behalf of its fiduciary customer accounts or any other
account maintained by its trust department (including a pension, profit sharing
or other employee benefit trust created pursuant to a plan qualified under
Section 401 of the Code).
Both Funds redeem shares on business days at net asset value
next-determined after receipt of a redemption request in proper form. In most
cases, if you redeem A Shares of Large Company purchased at a reduced sales
charge within two years of the purchase, you will pay a charge for the early
redemption.
Large Company will not assess any sales or redemption charges on
the A Shares issued pursuant to the Consolidation.
The shares of both Funds have exchange privileges. The exchange
privileges differ in that shareholders of Large Company may exchange their
shares for shares of other series of Norwest Trust, whereas shareholders of
Growth Stock may exchange their shares for shares of other series of
MasterWorks.
INVESTMENT OBJECTIVES AND POLICIES AND RISK FACTORS. The investment
objectives and policies of the Funds are broadly similar. The Funds' investment
objectives are listed below.
Fund Investment Objective
- ---- --------------------
Large Company to provide long-term capital appreciation by investing
primarily in large, high-quality domestic companies that
the investment adviser believes have superior growth
potential.
Growth Stock to provide above-average, long-term total return, with a
primary focus on capital appreciation. Current income is
a secondary consideration.
All of the Funds' investments have risk. The risks of investing in Growth Stock
are generally similar to those of investing in Large Company. There are certain
differences in the risks of the Funds' investments and, in general, Growth Stock
is a riskier investment than Large Company. In particular, Growth Stock, unlike
Large Company, invests a substantial portion of its portfolio in the securities
of smaller companies. Investments in smaller companies tend to be more volatile
than investments in larger companies. Short term changes in the demand for the
securities of
4
<PAGE>
smaller companies may have a disproportionate effect on their market price,
tending to make prices of these securities fall more in response to selling
pressure. Also, unlike Large Company, Growth Stock may invest in the securities
of issuers located or doing business in emerging markets. Investments in issuers
located or doing business in emerging markets are riskier than other foreign
investments.
In deciding whether to approve the Consolidation, you should
consider the differences between the investment objectives and policies of the
Funds as discussed under "Comparison of Investment Objectives and Policies"
below and in the prospectuses offering shares of the Funds.
EXPENSE INFORMATION
The tables below set forth information with respect to A
Shares of Large Company, shares of Growth Fund as well as pro forma information
for the A Shares of Large Company after giving effect to the Consolidation. The
tables were prepared based on the net asset, fee and expense levels of Growth
Stock as of February 28, 1998. The expense levels of Large Company are the
estimated expenses for the Fund's current fiscal year.
<TABLE>
<S> <C> <C> <C>
Large Growth Pro Forma
Company Stock Combined Fund
------- ----- (i.e., Large Company
Following
Consolidation)
Shareholder Transaction Expenses ---------------------
Maximum sales charge imposed on purchases (as a 5.50% Zero 5.50%
percentage of offering price) (a)
Maximum deferred sales charge (as a percentage Zero Zero Zero
of the lesser of original purchase price or
redemption proceeds)(a)
Exchange Fee Zero Zero Zero
Annual operating expenses (as a percentage of
average daily net assets after applicable fee
waivers and expense reimbursements)(b)(c)
Investment Advisory Fees 0.65% 0.58% 0.65%
Rule 12b-1 Fees 0.10% Zero 0.10%
Other Expenses(d) 0.45% 0.18% 0.45%
----- ----- -----
Total Operating Expenses 1.20% 0.76% 1.20%
===== ===== =====
</TABLE>
- ------------------------
(a) Large Company will not assess any sales or redemption
charge on the A Shares issued pursuant to the Consolidation. The
sales charge on Large Company's A Shares will be waived entirely for
purchases of A Shares by any bank, trust company or other institution
acting on behalf of its fiduciary customer accounts or any other
account maintained by its trust department (including a pension,
profit sharing or other employee benefit trust created pursuant to a
plan qualified under Section 401 of the Code).
5
<PAGE>
If A Shares of Large Company purchased without an initial sales
charge (purchases of $1,000,000 or more) are redeemed within two
years after purchase, a contingent deferred sales charge of up to
1.00% will be applied to the redemption.
(b) Absent expense reimbursements and fee waivers, the expenses of
the shares of Growth Stock would have been: Investment Advisory Fees,
0.60%; and Total Operating Expenses, 0.78%.
The amount of expenses for Large Company and the pro forma
combined fund are estimated. Absent estimated expense reimbursements
and fee waivers, the estimated expenses of the A Shares of Large
Company and the pro forma combined fund would be: Other Expenses,
0.57% and 0.57%, respectively; and Total Operating Expenses, 1.32%
and 1.32%, respectively. Reimbursements and waivers may be reduced or
eliminated at any time.
(c) Each of the Fund's expenses include a pro-rata share of
the expenses of the Portfolio in which it invests.
(d) Other Expenses for Growth Stock is a co-administrators' fee of
0.18%. The co-administrators have agreed to absorb all ordinary
operating expenses other than investment advisory fees, portfolio
transaction expenses and administrative fees.
EXAMPLE
The Example below indicates the dollar amount of expenses that
an investor would pay assuming a $1,000 investment in a Fund's shares, a 5%
annual return and reinvestment of all dividends and distributions.
<TABLE>
<S> <C> <C> <C> <C>
1 year 3 years 5 years 10 years
------ ------- ------- --------
Large Company (A Shares) $67 $91 $117 $192
Growth Stock $8 $24 $42 $94
Pro Forma Combined Fund $67 $91 $117 $192
(i.e., A Shares of Large Company
Following the Consolidation)
</TABLE>
The Examples are based on the expenses listed in the "Annual Operating
Expenses" tables above. The Examples assume deduction of the maximum initial
sales charges for A Shares of Large Company. THE EXAMPLES DO NOT REPRESENT PAST
OR FUTURE EXPENSES OR RETURN AND ACTUAL EXPENSES OR RETURN MAY BE GREATER OR
LESS THAN INDICATED.
REASONS FOR THE CONSOLIDATION
Growth Stock is an actively managed fund that invests, through a master
portfolio, primarily in growth-oriented, small- and medium-sized companies.
Wells Fargo Bank, as investment subadviser, individually selects the Fund's
investments and the Fund's portfolio turnover rate is high due to its active
trading strategy. For the most part, MasterWorks' other funds, which are managed
by BGFA, seek to replicate certain indexes or pursue asset allocation
strategies. Accordingly, Growth Stock does not fit within MasterWorks' core
strategy. Because Growth Stock does not fit within this strategy, and because
Growth Stock has experienced relative underperformance, investor demand for this
Fund is not strong. The MasterWorks Board is concerned, therefore, that Growth
Stock may not be viable on a long-term basis.
The primary reason for proposing the consolidation of Growth Stock
into Large Company is to offer Growth Stock investors the opportunity to
transfer their investment, on a basis that should be tax-free, into a fund
6
<PAGE>
that has greater prospects for success. Large Company's Portfolio has
approximately $1 billion in assets, as compared to Growth Stock's Portfolio,
which has less than $200 million in assets. Large Company's investment objective
and policies are broadly similar to those of Growth Stock, although Large
Company Portfolio tends to invest in larger capitalization companies, tends to
hold fewer companies in its portfolio and has had a much lower portfolio
turnover rate. The MasterWorks Board believes that consolidating Growth Stock
into a fund that has generally compatible investment objectives and policies, a
better historical performance record and greater prospects for continued growth
will provide investors potential benefits. Large Company was chosen, in part,
because of the pending merger between Wells Fargo & Company and Norwest
Corporation. Before approving the Consolidation Plan, the MasterWorks Board
examined all factors that it considered relevant, including the investment
strategy and historic performance of Large Company, and the identity,
experiences and resources of Norwest and Peregrine.
Currently, the fees and expenses of Large Company are higher, on
both a before-waiver and after-waiver basis than those of Growth Stock. However,
according to data compiled by an independent data service, the fees and expenses
of Growth Stock have been well below the mean for a fund investing in a growth
equity style. According to that same data, the fees and expenses of Large
Company, while higher than those of Growth Stock, are approximately at the mean
for a fund investing in a growth equity style.
The historic performance of Large Company is better than the
historic performance of Growth Stock. Although historic performance does not
necessarily predict future returns, the MasterWorks Board believes that the
Consolidation should provide Growth Stock shareholders with an investment
vehicle that has compatible investment objectives and policies and greater
prospects for long-term investment returns and continued growth.
Due to the concerns about Growth Stock's performance and prospects
described above, the MasterWorks Board believes that Growth Stock should be
liquidated if shareholders do not approve the Consolidation Plan or, for any
other reason, the Consolidation does not occur. Therefore, shareholders of
Growth Stock also are being asked to approve the Liquidation Plan. The
Liquidation Plan expressly provides that it will be implemented only if the
Consolidation does not occur. The MasterWorks Board believes that the
Consolidation is preferable to the Liquidation.
COMPARISON OF INVESTMENT OBJECTIVES,
POLICIES AND RISK CONSIDERATIONS
The investment objective of Large Company is to provide long-term
capital appreciation by investing primarily in large, high-quality domestic
companies that the investment adviser believes have superior growth potential.
The investment objective of Growth Stock is to seek above-average, long-term
total return, with a primary focus on capital appreciation. Current income is a
secondary consideration. The investment objective of each Fund is "fundamental"
and may not be changed without the approval of the Fund's shareholders. As
discussed above, each Fund invests its assets in a Portfolio. This section,
therefore, compares and contrasts the investment policies of the Portfolios.
The value of each Fund's shares will fluctuate with the value
of the underlying securities held by the Portfolio in which the Fund invests.
There can be no assurance that either Fund will achieve its investment
objective.
The investment strategies of Large Company Portfolio and Growth Stock
Portfolio differ in some respects. Large Company Portfolio invests primarily in
the common stock of large, high-quality domestic companies that have superior
growth potential. Peregrine considers large companies to be those whose market
capitalization is greater than the median of the Russell l000 Index, or
approximately $3.7 billion. In selecting securities for the Portfolio, Peregrine
seeks issuers whose stock is attractively valued with fundamental
characteristics that are significantly better than the market average and
support internal earnings growth capability. Large Company Portfolio may invest
in securities of companies whose growth potential is, in Peregrine's opinion,
generally
7
<PAGE>
unrecognized or misperceived by the market. By investing in common stocks, the
Portfolio is subject to "market risk," which is the general risk that the value
of the Portfolio's investments may decline if the stock markets perform poorly.
Growth Stock Portfolio invests primarily in common stocks that Wells
Fargo Bank believes have better-than-average prospects for appreciation. The
Portfolio seeks to provide investors with a rate of return that, over a three-
to five-year time horizon, exceeds that of the S&P 500 Index (before fees and
expenses) over comparable periods by investing in a diversified portfolio
consisting primarily of growth-oriented common stocks. Growth Stock Portfolio
holds at least 20 common stock issues spread across multiple industry groups,
with the majority of these holdings consisting of established growth companies,
turnaround or acquisition candidates, or attractive larger capitalization
companies. Though Growth Stock Portfolio holds a number of large capitalization
stocks, under normal market conditions more than 50% of Growth Stock Portfolio's
total assets are invested in companies whose market capitalizations at the time
of acquisition are within the capitalization range of companies listed on the
S&P Small Cap 600 Index. As of May l998, the capitalization range for the S&P
Small Cap 600 was from $40 million to $3.7 billion.
Growth Stock Portfolio from time to time acquires securities through
initial public offerings and may acquire and hold common stocks of smaller and
newer issuers. The Portfolio does not invest more than 40% of its assets in
these highly aggressive issues at any one time. Like Large Company Portfolio,
Growth Stock Portfolio is subject to the risk that the market value of the
Portfolio's investments may decline if the stock markets perform poorly. In
addition, however, securities of small and new companies generally trade less
frequently or in limited volume, or only in the over-the-counter market or on a
regional securities exchange. As a result, the prices of such securities tend to
be more volatile than those of larger, more established companies and, as a
group, these securities may suffer more severe price declines during periods of
generally declining equity prices. Accordingly, to the extent that Growth Stock
Portfolio invests in smaller and newer companies, an investment in Growth Stock
may be subject to greater risks than an investment in Large Company.
In addition, Growth Stock Portfolio invests in companies that may have
some of the following characteristics: low or no dividends; less market
liquidity; relatively short operating histories; aggressive capitalization
structures (including high debt levels); and involvement in rapidly
growing/changing industries and/or new technologies. To the extent that Growth
Stock Portfolio invests in securities with these characteristics, an investment
in Growth Stock may be subject to greater risks than an investment in Large
Company.
Both Portfolios may invest in foreign securities. Large Company
Portfolio may invest up to 20% of its total assets in the securities of foreign
companies. Growth Stock Portfolio may invest up to l5% of its assets in equity
securities of companies in emerging or less developed markets and up to 25% of
its assets in American Depositary Receipts and similar investments. Growth Stock
Portfolio considers countries with emerging markets to include the following:
(i) countries with an emerging stock market as defined by the International
Finance Corporation; (ii) countries with low- to middle-income economies
according to the International Bank for Reconstruction and Development (more
commonly referred to as the World Bank); and (iii) countries listed in World
Bank publications as developing. Growth Stock Portfolio may invest in those
emerging markets that have a relatively low gross national product per capita
compared to the world's major economies, and which exhibit potential for rapid
economic growth.
Large Company Portfolio and Growth Stock Portfolio are subject to
foreign risk, which includes the risk of political and economic instability, the
imposition or tightening of exchange controls or other limitations on
repatriation of foreign capital, or nationalization, increased taxation or
confiscation of investors' assets. The Portfolios are also subject to currency
risk, which is the risk that fluctuations in the exchange rates between the U.S.
dollar and foreign currencies may negatively affect a Portfolio's investments.
The risks of investing in foreign securities may be greater for investments in
issuers in emerging or developing markets. To the extent that Growth Stock
Portfolio invests a larger proportion of its assets in securities of foreign
issuers or invests in issuers in emerging or developing markets, an investment
in Growth Stock may be subject to greater risks than an investment in Large
Company.
8
<PAGE>
Both Portfolios may invest in convertible securities. Convertible
securities, which include convertible debt, convertible preferred stock and
other securities exchangeable under certain circumstances for shares of common
stock, are fixed income securities or preferred stock which generally may be
converted at a stated price within a specific amount of time into a specified
number of shares of common stock. Large Company Portfolio may only invest in
convertible securities that are investment grade. Growth Stock Portfolio may
invest up to 5% of its net assets in non-investment grade convertible debt
securities. Growth Stock Portfolio may invest in convertible securities that
provide current income and are issued by companies with the characteristics
described above for the Portfolio and that have a strong earnings and credit
record. The Portfolios are subject to the risk that changes in interest rates
may affect the value of fixed-income securities held by the Portfolios.
Generally, an increase in interest rates causes the value of a Portfolio's fixed
rate securities to fall, while a decline in interest rates may produce an
increase in the market value of the securities. The Portfolios are also subject
to the risk that the issuer of a fixed income security will default or otherwise
be unable to honor its financial obligations. This risk is greater for
non-investment grade securities. To the extent that Growth Stock Portfolio
invests in convertible securities that are non-investment grade, an investment
in Growth Stock may be subject to greater risks than an investment in Large
Company.
The Portfolios' concentration policies also differ. Large Company
Portfolio may not purchase a security if, as a result, more than 25% of the
Portfolio's total assets would be invested in securities of issuers conducting
their principal business activities in the same industry. Growth Stock Portfolio
may not invest 25% or more of its total assets in any particular industry,
except that Growth Stock Portfolio will concentrate its assets in any one
industry for the same period as does the S&P 500 Index. To the extent that
Growth Stock Portfolio concentrates its investments in any one industry, the
Portfolio is subject to the risk that factors adversely affecting that industry
will affect the Portfolio's net asset value more than if the Portfolio had
diversified its investments among more industries. Accordingly, to the extent
that Growth Stock Portfolio concentrates its investments in any particular
industry, an investment in Growth Stock may be subject to greater risks that an
investment in Large Company.
Exhibit B to this Statement includes a discussion of the
factors that materially affected the performance of Large Company during its
most recently completed fiscal year and a graph illustrating the performance of
the Fund's I Shares.
INFORMATION ABOUT THE CONSOLIDATION
AGREEMENT AND PLAN OF CONSOLIDATION. The Consolidation Plan
provides that Growth Stock Portfolio will liquidate Growth Stock's interest in
Growth Stock Portfolio through an in-kind redemption prior to the Consolidation.
At the effective time of the Consolidation, Large Company will acquire all of
the assets of Growth Stock in exchange for A Shares of Large Company. Large
Company also will assume all the liabilities of Growth Stock. Large Company will
issue the number of full and fractional A Shares determined by dividing the net
value of all the assets of Growth Stock by the net asset value of one Large
Company A Share. The Consolidation Plan provides the times for and methods of
determining the net value of Growth Stock's assets and the net asset value of an
A Share of Large Company.
Growth Stock will distribute the Large Company shares to its
shareholders in liquidation of the Fund. Specifically, shareholders of record of
Growth Stock will be credited with A Shares of Large Company corresponding to
the Growth Stock shares that the shareholders hold of record at the effective
time of the Consolidation. At that time, MasterWorks also will redeem and cancel
the outstanding Growth Stock shares and will wind up the affairs of Growth Stock
and terminate the Fund as soon as is reasonably possible after the
Consolidation.
Completion of the Consolidation is subject to certain conditions
set forth in the Consolidation Plan. The Consolidation Plan provides the parties
the ability to terminate the Consolidation Plan by mutual consent and each party
has the right to terminate the Consolidation Plan if the conditions to that
party's obligations under the Consolidation Plan are not satisfied. Either
MasterWorks or Norwest Trust also may at any time terminate the
9
<PAGE>
Consolidation Plan unilaterally upon a determination by the Fund's Board that
proceeding with the Consolidation Plan is not in the best interest of the Fund's
shareholders.
This Statement includes a copy of the Consolidation Plan attached as
Exhibit A.
DESCRIPTION OF SHARES OF LARGE COMPANY. Norwest Trust will issue full and
fractional A Shares of Large Company without the imposition of a sales load or
other fee to the shareholders of Growth Stock in accordance with the procedures
described above. The A Shares of Large Company issued in the Consolidation will
be fully paid and nonassessable when issued and will have no preemptive or
conversion rights.
Each share of each series of Norwest Trust and each class of
shares has equal dividend, distribution, liquidation and voting rights, and
fractional shares have those rights proportionately, except that expenses
related to the distribution of the shares of each class (and certain other
expenses such as transfer agency and administration expenses) are borne solely
by those shares and each class votes separately with respect to the provisions
of any Rule 12b-1 plan for the class and other matters for which separate class
voting is appropriate under applicable law. Generally, shares will be voted in
the aggregate without reference to a particular series or class, except if the
matter affects only one series or class or voting by series or class is required
by law, in which case the shares will be voted separately by series or class, as
appropriate. Delaware law does not require Norwest Trust to hold annual meetings
of shareholders. Shareholder meetings normally will be held only when
specifically required by federal or state law. A shareholder in Large Company is
entitled to the shareholder's pro rata share of all dividends and distributions
arising from Large Company's assets and, upon redeeming shares, will receive the
portion of Large Company's net assets represented by the redeemed shares.
FEDERAL INCOME TAX CONSEQUENCES OF THE CONSOLIDATION. In the opinion of
Seward & Kissel, counsel to Norwest Trust, the Consolidation should be treated
as a reorganization within the meaning of section 368(a)(1)(C) of the Code.
Under this treatment, Large Company, Growth Stock and the shareholders of Growth
Stock would not recognize gain or loss as a result of the Consolidation. Due to
the absence of authority involving facts substantially identical to the
Consolidation, no assurance can be given that this treatment is correct.
Provided that the Consolidation qualifies as a reorganization within
the meaning of Section 368(a)(1)(C) of the Code, the aggregate tax basis of the
shares of Large Company the shareholders of Growth Stock would receive as a
result of the Consolidation would be the same as the aggregate tax basis of
their shares of Growth Stock. The holding period of the shares of Large Company
the shareholders receive would include the holding period of their shares of
Growth Stock, provided that the shareholders held those shares as capital assets
at the time of the Consolidation. The holding period and tax basis of each asset
of Growth Stock acquired by Large Company as a result of the Consolidation would
be the same as the holding period and tax basis of each asset in the hands of
Growth Stock prior to the Consolidation.
If the Consolidation does not qualify as a reorganization
within the meaning of section 368(a)(1)(C) of the Code, the Consolidation would
be treated as a taxable exchange by Growth Stock of all of its assets in
consideration for the Large Company shares and the assumption by Large Company
of all of Growth Stock's liabilities. Under this treatment, Growth Stock would
recognize gain (or loss) to the extent that the sum of the value of the Large
Company shares it receives and the amount of the liabilities assumed by Large
Company is greater than (or less than) Growth Stock's basis in the assets
transferred to Large Company. Growth Stock, however, has qualified as a
"regulated investment company" under the Code and expects to continue to so
qualify until the Consolidation. As a regulated investment company, Growth Stock
will be relieved of federal income tax liability on any gain resulting from the
Consolidation, provided that it distributes all of such gain to its
shareholders. Since Growth Stock will distribute all of its property to its
shareholders following the Consolidation (I.E., all of the Large Company shares
received in the Consolidation) whether or not the Consolidation qualifies as a
reorganization, Growth Stock expects that it will not be taxed on any gain
resulting from the Consolidation. Large Company would not recognize gain or loss
as a result of the Consolidation.
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<PAGE>
If the Consolidation does not qualify as a reorganization within the
meaning of Section 368(a)(1)(C) of the Code, Growth Stock shareholders who hold
their shares in a taxable account would recognize gain or loss in an amount
equal to the difference between (i) the fair market value of the shares of Large
Company they receive pursuant to the Consolidation and (ii) their tax basis in
their shares of Growth Stock. Under this treatment, all Growth Stock
shareholders would have a tax basis in their shares of Large Company equal to
their fair market value at the time of the Consolidation, and their holding
period in the shares of Large Company would commence on the day after the
effective date of the Consolidation. The tax basis of each asset of Growth Stock
acquired by Large Company as a result of the Consolidation would be the fair
market value of each such asset at the time of the Consolidation, and Large
Company's holding period in such assets would commence on the day after the
effective date of the Consolidation.
Under either tax treatment, shareholders of Large Company will
not recognize gain or loss as a result of the Consolidation.
Growth Stock Fund intends, prior to or on the same day as the
consolidation, to declare a dividend to its shareholders of record as of a date
prior thereto. The Fund would declare a dividend to its shareholders prior to
the end of 1998 regardless of whether either the consolidation or the
liquidation is approved or consummated.
Large Company and Growth Stock have not sought a tax ruling from
the Internal Revenue Service ("IRS"). The opinion of counsel described above is
not binding on the IRS.
CAPITALIZATION. The following table shows the capitalization
of Growth Stock and Large Company and the net asset value per share and total
number of outstanding shares of Growth Stock and A Shares of Large Company as of
October 1, 1998 and on a pro forma basis as of that date after giving effect to
the Consolidation.
<TABLE>
<S> <C> <C> <C>
Pro Forma
Growth Stock Large Company Combined Fund
------------ ------------- -------------
Net assets $171,446,899 $257,506,527 $428,953,426
Net asset value per share $12.36 $37.69 $37.69
Shares outstanding 13,875,357 6,832,140 11,381,010
Shares authorized 100,000,000 Unlimited Unlimited
</TABLE>
COMPARISON OF INVESTMENT ADVISERS
LARGE COMPANY. Norwest serves as investment adviser for Large Company
Portfolio. In this capacity, Norwest makes investment decisions for and
administers the Portfolio's investment programs. Norwest is located at Norwest
Center, Sixth Street and Marquette, Minneapolis, Minnesota 55479. Norwest, a
subsidiary of Norwest Bank Minnesota, N.A. ("Norwest Bank"), provides investment
advice to institutions, pension plans and other accounts and currently manages
more than $29 billion in assets. For its services, Norwest is entitled to
receive a fee at the annual rate of 0.65% of the average daily net assets of the
Portfolio.
Peregrine, an investment advisory subsidiary of Norwest Bank,
serves as the Portfolio's investment subadviser. Peregrine provides investment
advisory services to corporate and public pension plans, profit sharing plans,
savings-investment plans and 401(k) plans. Peregrine is located at LaSalle
Plaza, 800 LaSalle Avenue, Suite 1850, Minneapolis, Minnesota, 55479. Norwest
(and not Large Company Portfolio) pays Peregrine's investment subadvisory fees.
The investment subadvisory fees do not increase the amount of investment
advisory fees paid to Norwest by Large Company Portfolio.
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<PAGE>
Messrs. John S. Dale and Gary E. Nussbaum are the portfolio managers of
Large Company Portfolio. Mr. Dale is a Senior Vice President of Peregrine. Mr.
Dale has held investment management positions with Norwest, Peregrine and their
affiliates since 1968. Mr. Nussbaum, a Senior Vice President of Peregrine, has
been associated with Peregrine in investment management positions since 1990.
Norwest Trust has retained Norwest to serve as a "dormant" investment
adviser and Peregrine to serve as a dormant subadviser to Large Company in the
event that assets are redeemed from Large Company Portfolio and invested
directly by the Fund. Norwest and Peregrine do not receive an investment
advisory fee from Large Company as long as the Fund's assets are invested in one
or more core portfolios.
GROWTH STOCK. Growth Stock has not retained the services of an
investment adviser because the Fund's assets are invested in Growth Stock
Portfolio. MasterWorks has retained BGFA to serve as investment adviser to
Growth Stock Portfolio. BGFA provides investment guidance and policy direction
in connection with the management of the Portfolio. BGFA is an indirect
subsidiary of Barclays Bank PLC ("Barclays") and is located at 45 Fremont
Street, San Francisco, California 94105. As of April 30, 1998, BGFA and its
affiliates provided investment advisory services for approximately $575 billion
of assets. For its services to the Portfolio, BGFA is contractually entitled to
receive from the Portfolio monthly fees at an annual rate of 0.60% of the
Portfolio's average daily net assets.
Wells Fargo Bank currently serves as subadviser to Growth
Stock Portfolio. Wells Fargo Bank, subject to the supervision and approval of
BGFA, provides investment advisory assistance and the day-to-day management of
the Portfolio's assets. For providing subadvisory services to the Portfolio,
Wells Fargo Bank is entitled to receive from BGFA (and not Growth Stock
Portfolio) monthly fees at the annual rate of 0.15% of the Portfolio's average
daily net assets.
Mr. Jon Hickman assumed primary responsibility as lead manager of Growth
Stock Portfolio in February 1998. Mr. Hickman has over sixteen years' experience
in the investment management field. He joined Wells Fargo Bank in 1986 managing
equity and balanced portfolios for individuals and employee benefit plans. He is
a senior member of Wells Fargo Bank's Equity Strategy Committee. Mr. Hickman has
a B.A. and an M.B.A. in finance from Brigham Young University. Mr. Thomas
Zeifang also has been responsible for the day-to-day management of Growth Stock
Portfolio since June 1997. Mr. Zeifang joined Wells Fargo Bank in the summer of
1995 and is primarily responsible for providing fundamental equity analysis. Mr.
Zeifang was an analyst at Fleet Investment Advisors from 1992 to 1995 and prior
to 1992 worked for three years as an assistant portfolio manager at Marine
Midland Bank. Mr. Zeifang holds a B.B.A. in finance from Saint Bonaventure
University, an M.B.A. in finance and business policy from the William E. Simon
School of Business Administration and is a Chartered Financial Analyst.
COMPARISON OF SERVICE PROVIDERS
The Funds have different service providers. Upon completion of the
Consolidation, Large Company will continue to engage its existing service
providers, although some service provider changes may occur as a result of the
merger of Wells Fargo & Company and Norwest Corporation described below.
<PAGE>
<TABLE>
<S> <C>
Large Company Service Providers:
- --------------------------------
Investment Adviser to Large Company Portfolio Norwest Investment Management, Inc.
Subadviser to Large Company Portfolio Peregrine Capital Management, Inc.
Distributor Forum Financial Services, Inc.
Administrator Forum Administrative Services, LLC
Custodian Norwest Bank Minnesota, N.A.
Fund Accountant Forum Accounting Services, LLC
Transfer Agent Norwest Bank Minnesota, N.A.
Independent Auditors KPMG Peat Marwick LLP
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
Growth Stock Service Providers:
- -------------------------------
Investment Adviser to Growth Stock Portfolio Barclays Global Fund Advisors
Subadviser to Growth Stock Portfolio Peregrine Capital Management, Inc.
Distributor Stephens Inc.
Co-Administrators Stephens Inc. and Barclays Global Investors, N.A.
Sub-Administrator Investors Bank & Trust Company
Custodian Investors Bank & Trust Company
Transfer Agent Investors Bank & Trust Company
Independent Auditors KPMG Peat Marwick LLP
</TABLE>
WELLS FARGO & COMPANY/NORWEST CORPORATION MERGER. Wells Fargo &
Company, the parent company of Wells Fargo Bank, has signed a definitive
agreement to merge with Norwest Corporation. The proposed merger is subject to
certain regulatory approvals and must be approved by shareholders of both
holding companies. The merger is expected to close in the fourth quarter of
1998. The combined company will be called Wells Fargo & Company. Norwest and
Peregrine have advised representatives of both Boards that the merger will not
reduce the level or quality of advisory or other services they provide to Large
Company Portfolio.
ADVISORY, DISTRIBUTION AND OTHER FEES; EXPENSE RATIOS
Large Company has higher investment advisory fees and a higher
expense ratio than Growth Stock. In addition, A Shares of Large Company, unlike
shares of Growth Stock, pay distribution fees. Each Fund indirectly bears a pro
rata portion of the investment advisory fees paid by the Portfolio in which it
invests.
The annual investment advisory fee payable by Large Company
Portfolio is 0.05% higher than that payable by Growth Stock Portfolio. Large
Company Portfolio pays Norwest an investment advisory fee at an annual rate of
0.65% of average daily net assets, whereas Growth Stock Portfolio pays BGFA an
investment advisory fee at an annual rate of up to 0.60% of average daily net
assets.
A Shares of Large Company have distribution fees of 0.10% of
the average daily net assets of the class under a Rule 12b-1 distribution plan.
These fees are paid out of the Fund's assets on an on-going basis. Shares of
Growth Stock do not have distribution fees.
In addition, A Shares of Large Company are expected to have
total operating expenses that, net of fee waivers and expense reimbursements,
are approximately 0.44% higher annually than those of Growth Stock. Absent
expense reimbursements and fee waivers, Large Company is expected to have total
operating expenses that would be approximately 0.54% higher annually than those
of Growth Stock. As discussed above, Large Company's fees and expenses, although
higher than that of Growth Stock, are approximately at the mean for funds
investing in a growth equity style.
If shareholders approve the Consolidation, the A Shares of Large
Company are expected to operate during the fiscal year ended May 31, 1999 at a
total operating expense ratio of 1.20%. Absent expense reimbursements and fee
waivers, the Fund would be expected to operate at a total operating expense
ratio of 1.32%.
During the fiscal year ended February 28, 1998, Growth Stock
had a total operating expense ratio of 0.76%. Absent fee waivers, the total
operating expense ratio of Growth Stock would have been 0.78%.
13
<PAGE>
COMPARISON OF PURCHASE AND REDEMPTION PROCEDURES
AND EXCHANGE RIGHTS
Each Fund offers its shares on business days at their net asset value
next determined after receipt of a purchase order in proper form. However, A
Shares of Large Company, unlike shares of Growth Stock, have an initial sales
charge. Large Company offers A Shares at their next-determined net asset value
plus an initial sales charge of up to 5.50%. No sales charge applies to
reinvestments of dividends or distributions of either Fund.
There are several methods of lowering the initial sales charge
on A Shares of Large Company. In some cases, the sales charge may be waived
entirely. For example, Large Company does not have sales charges on purchases of
A Shares by any bank, trust company or other institution acting on behalf of its
fiduciary customer accounts or any other account maintained by its trust
department (including a pension, profit sharing or other employee benefit trust
created pursuant to a plan qualified under Section 401 of the Code).
Both Funds redeem shares on business days at net asset value
next-determined after receipt of a redemption request in proper form. If you
redeem A Shares of Large Company purchased at a reduced sales charge within two
years of the purchase, you may pay a charge of up to 1.00% on the redemption.
Large Company will not assess any sales or redemption charges
on the A Shares issued pursuant to the Consolidation.
The shares of both Funds have exchange privileges. The exchange privileges
differ in that shareholders of Large Company may exchange their shares for
shares of other series of Norwest Trust, whereas shareholders of Growth Stock
may exchange their shares for shares of other series of MasterWorks.
COMPARISON OF BUSINESS STRUCTURES
The following information provides only a summary of the major
differences between the organizational structure and governing documents of the
Funds. Growth Stock is a series of MasterWorks, which is organized as a Maryland
corporation. Large Company is a series of Norwest Trust, which is organized as a
Delaware business trust. Accordingly, this information provides a summary of the
major differences between MasterWorks, its Charter and By-Laws and Maryland law
and Norwest Trust, its Trust Instrument and By-Laws and Delaware law. Copies of
the Charter and By-Laws of MasterWorks and copies of the Trust Instrument and
By-Laws of Norwest Trust are a part of each Fund's respective Registration
Statement filed with the SEC.
GENERAL. MasterWorks is organized as a Maryland corporation and is
governed by its Charter, By-Laws and Maryland law. Norwest Trust is organized as
a Delaware business trust and is governed by its Trust Instrument, By-Laws and
Delaware law. The responsibilities, powers and fiduciary duties of the Directors
of MasterWorks and the Trustees of Norwest Trust are substantially similar. Each
Fund has procedures available to its respective shareholders for calling
shareholders' meetings for the removal of Directors or Trustees.
Pursuant to Maryland Law, any Director of MasterWorks may be removed,
either with or without cause, at any meeting of shareholders duly called and at
which a quorum is present by the affirmative vote of a majority of the votes
entitled to be cast for the election of Directors. Pursuant to the Trust
Instrument of Norwest Trust, Trustees may be removed from office at any meeting
of the shareholders by a vote of shareholders owning at least two-thirds of the
outstanding shares.
The Directors of MasterWorks and the Trustees of Norwest Trust, as
applicable, are required to call a special meeting of shareholders when
requested to do so in writing by shareholders owning at least one-tenth of the
outstanding shares entitled to vote. Additionally, MasterWorks' special meetings
can be called by the Chairman of the Board and certain officers and Norwest
Trust's special meetings can be called by the Chairman of the Board or by any
two other Trustees.
14
<PAGE>
Pursuant to the By-Laws of MasterWorks, a majority of the votes cast at a
meeting of shareholders, duly called and at which a quorum is present, shall be
sufficient to take or authorize action upon any matter which may properly come
before the meeting, unless more than a majority of votes cast is required by
statute or by the Charter. The Charter of MasterWorks provides that,
notwithstanding any provision of law requiring the authorization of any action
by a greater proportion than a majority of the total number of shares of any
series of capital stock, or by the total number of such shares, such action
shall be valid and effective if authorized by the affirmative vote of the
holders of a majority of the total number of shares outstanding and entitled to
vote thereon.
Except when a larger vote is required by law or by any provision
of the Trust Instrument or By-Laws, Norwest Trust requires a majority of the
shares voted in person at a meeting or by proxy to decide any question at a
shareholder's meeting.
Except as otherwise required by law, both MasterWorks and Norwest
Trust require one-third of the shares entitled to vote on a matter to constitute
a quorum for the transaction of business at a meeting of the shareholders of a
Fund. Both MasterWorks and Norwest Trust can adjourn meetings by the majority
vote of any lesser number than that sufficient for a quorum.
SHARES. With respect to Growth Stock, MasterWorks has authorized capital
stock of 100,000,000 shares of common stock, each having a par value of $.001
per share. With respect to Large Company, Norwest Trust has designated an
unlimited number of shares of beneficial interest, each having no par value.
LIABILITY OF DIRECTORS, TRUSTEES AND OFFICERS. Each of MasterWorks and
Norwest Trust indemnifies its officers and Directors or Trustees, as applicable,
to the full extent permitted by law. This indemnification does not protect any
such person against any liability to a Fund or any shareholder thereof to which
such person would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
satisfaction of such person's office.
LIABILITY OF SHAREHOLDERS. Under Delaware law, shareholders of Norwest
Trust would not be personally liable for the obligations of Norwest Trust and
are entitled to the same limitation from personal liability extended to
stockholders of private for-profit corporations. Under Maryland law,
shareholders of Growth Stock have no personal liability for acts or obligations
of MasterWorks or the Fund.
INFORMATION ABOUT THE FUNDS
The Large Company Prospectus accompanying this Statement
includes information about Large Company. The Large Company SAI is a part of the
SAI. This Statement incorporates by reference the information about Large
Company in the Large Company Prospectus and the SAI. You may obtain a copy of
the SAI without charge by writing to Forum at Two Portland Square, Portland,
Maine 04101 or by calling 1-207-879-1900.
Information about Growth Stock is included in the Prospectus
offering shares of Growth Stock dated June 30, 1998 (the "Growth Stock
Prospectus"), and the Annual Report to Shareholders of Growth Stock for the
fiscal year ended February 28, 1998, which are available upon request without
charge from MasterWorks by writing to MasterWorks at 111 Center Street, Little
Rock, Arkansas 72201 or by calling 1-888-204-3956. There is also a Statement of
Additional Information dated June 30, l998 offering shares of Growth Stock that
is part of the SAI. This Statement incorporates by reference the information
about Growth Stock in the Growth Stock Prospectus and the SAI.
The Funds file reports, proxy statements and other information with the
SEC. You may inspect and copy these documents and other information at the
public reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You may also obtain copies of these materials from the
Public Reference Branch, Office of Filings and Information Services, Securities
and Exchange Commission, Washington, D.C. 20549 at prescribed rates or through
the SEC's Website at www.sec.gov.
15
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PROPOSAL TWO: APPROVAL OF A PLAN OF LIQUIDATION
OVERVIEW. On September 16, 1998, the Board determined that, if the
Consolidation is not approved by the shareholders of Growth Stock or is not
consummated for any other reason, then an orderly liquidation of Growth Stock's
assets would be in the best interests of Growth Stock and its shareholders.
Accordingly, the MasterWorks Board approved the Liquidation Plan, which provides
for the complete liquidation of Growth Stock. If only the Liquidation Plan is
approved by the requisite shareholder vote, or if both Plans are approved but
the Consolidation Plan cannot be consummated for any reason, MasterWorks will
liquidate Growth Stock's assets at market prices and on such terms and
conditions as MasterWorks shall determine to be reasonable and in the best
interests of Growth Stock and its shareholders.
REASONS FOR THE LIQUIDATION. Growth Stock is an actively managed fund that
invests, through a Master Portfolio, primarily in growth-oriented, small- and
medium-sized companies. Wells Fargo Bank, as investment subadviser, individually
selects the Fund's investments and the Fund's portfolio turnover rate is high
due to its active trading strategy. For the most part, MasterWorks' other funds,
whose investments are managed by BGFA, seek to replicate certain indexes or
pursue asset allocation strategies. Accordingly, Growth Stock does not fit
within MasterWorks' core strategy. Because Growth Stock does not fit within this
strategy, and because Growth Stock has experienced relative underperformance,
investor demand for this Fund is not strong. The MasterWorks Board is concerned,
therefore, that Growth Stock may not be viable on a long-term basis.
At a MasterWorks Board meeting held on September 16, 1998, before
approving the Liquidation Plan, the MasterWorks Board examined all factors that
it considered relevant, including that Growth Stock's total return for the
twelve months ended August 31, 1998, was -22.24%. The MasterWorks Board
recognized that these returns, and the fact that Growth Stock does not fit
within MasterWorks' core strategy, make Growth Stock unattractive to new
investors. The Board, including all of the Directors who are not "interested
persons" of Growth Stock (as that term is defined in the 1940 Act), concluded
that a liquidation of Growth Stock was in the best interests of the Fund and its
shareholders if the Consolidation with Large Company is not approved. The
MasterWorks Board then unanimously adopted resolutions approving the Liquidation
Plan and the implementation thereof, if the Consolidation is not approved by
shareholders of Growth Stock or is not consummated for any other reason,
declaring the proposed liquidation and dissolution advisable and directing that
it be submitted to shareholders for consideration. Growth Stock will bear the
costs associated with the Liquidation, but because of the co-administrators'
assumption of all ordinary expenses of Growth Stock, the costs of the
Liquidation will not cause an increase in Growth Stock's expense ratio.
The MasterWorks Board determined that the Consolidation is
preferable to the Liquidation but that the Liquidation is preferable to the
continued operation of Growth Stock. Accordingly, if both the Consolidation and
the Liquidation are approved by shareholders (assuming all closing conditions
are satisfied), the Consolidation will be consummated. The Board is recommending
approval of the Liquidation Plan as a "fall-back" in case the Consolidation is
not approved or is not consummated for any other reason.
The liquidation of the assets and termination of Growth Stock will
have the effect of permitting Growth Stock's shareholders to invest the
liquidation proceeds in investments of their choice.
In the event that the shareholders do not approve the Consolidation or the
Liquidation Plan, the Board will analyze other alternatives for Growth Stock.
PLAN OF LIQUIDATION OF GROWTH STOCK. The Liquidation Plan provides for the
complete liquidation of all of the assets of Growth Stock. If the Consolidation
is not approved or is not consummated for any reason, and the Liquidation Plan
is approved, BGFA and Wells Fargo will liquidate Growth Stock's assets on such
terms and conditions as BGFA and Wells Fargo determine to be reasonable and in
the best interests of Growth Stock and its shareholders.
16
<PAGE>
LIQUIDATION VALUE. If the Liquidation Plan is implemented, as soon as
practicable after the sale of all of Growth Stock's portfolio securities and the
payment of all of Growth Stock's known liabilities and obligations, each Growth
Stock shareholder will receive a distribution in an amount equal to the Growth
Stock's remaining assets, plus previously declared and unpaid dividends and
distributions (the "Liquidation Distribution").
FEDERAL INCOME TAX CONSEQUENCES. The following summary provides general
information concerning the federal income tax consequences to Growth Stock of
the liquidation and dissolution pursuant to the provisions of the Liquidation
Plan. This summary also discusses the federal income tax consequences to the
shareholders of the receipt of the Liquidation Distribution pursuant to the
Liquidation Plan. This discussion, however, addresses only some federal tax
considerations. Each investor is urged to consult his or her tax advisor
regarding specific questions as to federal, state, local, or foreign taxes.
As discussed above, Growth Stock invests all of its assets
into a corresponding Master Portfolio of MSIT and, pursuant to the Liquidation
Plan, will liquidate its assets by selling its investments. Growth Stock has
qualified as a "regulated investment company" under the Code and expects to
continue to so qualify until the Consolidation or Liquidation. As a regulated
investment company, Growth Stock will be relieved of federal income tax
liability on any gain resulting from the sale of its investments under the
Liquidation Plan, provided that it distributes all of such gain to its
shareholders. Since Growth Stock will distribute all of the proceeds realized by
it on sale of its investments, Growth Stock expects that it will not be taxed on
any gain resulting from the Liquidation Plan.
The receipt by shareholders of the Liquidation Distribution
pursuant to the Plan will, however, be treated as a sale of Growth Stock shares
and, for shareholders who hold their shares in a taxable account, will result in
a taxable capital gain or loss, depending on the amount of the Liquidation
Distribution received for the shares and the cost of the shares.
A shareholder may be subject to a 31% withholding tax ("backup
withholding") on the proceeds received pursuant to the Liquidation Plan if the
shareholder has failed to certify that the Taxpayer Identification Number
("TIN") provided by the shareholder is correct and that he or she is not subject
to backup withholding, or if the IRS notifies MasterWorks that the shareholder's
TIN is incorrect or that the shareholder is subject to backup withholding. Such
tax withheld does not constitute any additional tax imposed on the shareholder,
and may be claimed as a tax payment on the shareholder's federal income tax
return.
LIQUIDATION DISTRIBUTION. At present, the date on which Growth
Stock will be liquidated and on which Growth Stock will pay Liquidation
Distributions to its shareholders is uncertain, but it is anticipated that if
the Liquidation Plan is implemented, such liquidation would occur on or about
December 11, 1998 (the "Liquidation Date"). Shareholders holding Growth Stock
shares as of the close of business on the Liquidation Date will receive their
Liquidation Distribution on or soon after the Liquidation Date without any
further action on their part.
All shareholders will continue to have the right to redeem their shares of
Growth Stock at any time prior to the Consolidation or the Liquidation.
Therefore, a shareholder may redeem shares in accordance with redemption
procedures set forth in Growth Stock's current Prospectuses and Statement of
Additional Information without waiting for Growth Stock to take any action.
Growth Stock does not impose any redemption charges.
THE MASTERWORKS BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
PROPOSED LIQUIDATION OF ASSETS AND DISSOLUTION OF THE FUND PURSUANT TO THE
PROVISIONS OF THE LIQUIDATION PLAN.
VOTING INFORMATION
The Board of Directors of Growth Stock is soliciting your
proxy for the Special Meeting of Shareholders to be held on November 24, 1998
(the "Meeting"), at the principal office of MasterWorks at 111 Center Street,
Little Rock, Arkansas, 72201, at 11:00 a.m., Central time, and at all
adjournments thereof. You may revoke a proxy at
17
<PAGE>
any time at or before the Meeting by giving notice to the Secretary of
MasterWorks, at 111 Center Street, Little Rock, Arkansas, 72201, by signing
another proxy of a later date or by personally voting at the Meeting. Unless
revoked, all valid proxies will be voted in accordance with the specification
thereon. In the absence of a specification, valid proxies will be voted for
approval of the Consolidation Plan and the Liquidation Plan. If Growth Stock's
shareholders approve the Consolidation Plan, Norwest Trust and MasterWorks will
deem that approval to constitute approval by Growth Stock's shareholders of a
temporary amendment to any investment objective, policy or restriction that
would otherwise be inconsistent with or violated upon Growth Stock holding
shares of Large Company prior to distributing the shares to the shareholders of
Growth Stock in accordance with the Consolidation Plan. If you wish for Growth
Stock to liquidate rather than consolidate, you should vote for the Liquidation
Plan and against the Consolidation Plan.
Approval of the Consolidation Plan requires the affirmative vote of the
holders of a majority of the outstanding shares of Growth Stock. Approval of the
Liquidation Plan also requires the affirmative vote of the holders of a majority
of the outstanding shares of Growth Stock. If Growth Stock shareholders approve
both the Consolidation Plan and the Liquidation Plan, MasterWorks and Norwest
Trust will proceed with the Consolidation, even if a larger proportion of
shareholders approve the Liquidation Plan than approve the Consolidation Plan.
You may vote at the Meeting or any adjournments thereof if you held shares
of record of Growth Stock at the close of business on October 9, 1998 (the
"Record Date"). The holders of one-third of the shares outstanding of Growth
Stock at the close of business on the Record Date present in person or
represented by proxy will constitute a quorum for purposes of voting on the
proposals at the Meeting.
The election inspectors will count your vote at the Meeting if cast by
proxy or in person. The election inspectors will count:
o votes cast "for" approval of a proposal to determine whether sufficient
affirmative votes have been cast;
o shares represented by proxies that reflect abstentions as shares that
are present and entitled to vote for purposes of determining the
presence of a quorum at the Meeting;
o an abstention on a proposal as a vote against the proposal; and
o a broker non-vote as a share present for purposes of determining
whether a quorum is present but not as a vote for or against any
adjournment or as a vote cast for purposes of determining whether
sufficient votes have been received to approve a proposal.
Broker non-votes are shares held in street name for which the broker indicates
that instructions have not been received from the beneficial owners or other
persons entitled to vote and for which the broker lacks discretionary voting
authority. Dissenting shareholders do not have any appraisal rights in
connection with the Consolidation.
Each share held entitles you to one vote. A fractional share entitles
you to a proportionate fractional vote. As of the Record Date, Growth Stock had
13,691,788.879 shares outstanding.
In the event that MasterWorks does not receive sufficient votes in
favor of either of the proposals set forth in the Notice of Special Meeting by
the time scheduled for the Meeting, the persons named as proxies may authorize
one or more adjournments of the Meeting with respect to that proposal to permit
further solicitation of proxies with respect to that proposal. Any adjournment
will require the affirmative vote of a majority of the votes cast on the
question in person or by proxy at the session of the Meeting to be adjourned.
The persons named as proxies will vote in favor of the adjournment those proxies
which they are entitled to vote in favor of the proposal. They will vote against
any such adjournment those proxies required to be voted against the proposal.
Norwest Trust is not soliciting votes of Large Company's shareholders
in connection with the Consolidation, since their approval or consent is not
necessary for the consummation of the Consolidation.
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<PAGE>
In addition to the solicitation of proxies by mail or expedited
delivery service, the Board of Directors of MasterWorks and employees and agents
of SCC and Barclays Global Investors, N.A. may solicit proxies in person or by
telephone. Persons holding shares as nominees will be reimbursed upon request
for their reasonable expenses in sending soliciting material to their
principals. MasterWorks has engaged the proxy solicitation firm of Shareholder
Communication Corp. which, for its solicitation services, will receive a fee
estimated at $3,000 to $5,000, including reimbursement of out of pocket
expenses.
SHARE OWNERSHIP. As of September 1, 1998, the officers and Trustees of
Norwest Trust as a group beneficially owned less than one percent of each class
of Large Company's outstanding shares. As of September 1, 1998, to the knowledge
of Norwest Trust, no person owned of record or beneficially five percent or more
of the outstanding shares of the Large Company. As of September 1, 1998, to the
knowledge of MasterWorks, the following persons owned of record or beneficially,
five percent or more of the outstanding shares of Growth Stock:
<TABLE>
<S> <C> <C> <C>
NAME AND ADDRESS PERCENTAGE NATURE OF
NAME OF FUND OF SHAREHOLDER OF FUND OWNERSHIP
------------ -------------- ------- ---------
Growth Stock Fund Fidelity Investments Institutional Operations 10.33% Record
Co. As Agent for Employee Benefit Plans
100 Magellan Way
Covington, KY 41015
Wells Fargo Bank 80.50% Record
401(K) MasterWorks Omnibus Account
420 Montgomery Street
San Francisco, CA 94104
</TABLE>
THE BOARD OF DIRECTORS OF MASTERWORKS UNANIMOUSLY RECOMMENDS APPROVAL OF
THE CONSOLIDATION PLAN AND, IN ORDER TO ENSURE THAT GROWTH STOCK
WILL BE LIQUIDATED IF THE CONSOLIDATION DOES NOT OCCUR, APPROVAL
OF THE LIQUIDATION PLAN.
19
<PAGE>
EXHIBIT A - AGREEMENT AND PLAN OF CONSOLIDATION
AGREEMENT AND
PLAN OF
CONSOLIDATION
FOR THE
GROWTH STOCK FUND
OF MASTERWORKS FUNDS INC.
AND THE
LARGE COMPANY GROWTH FUND
OF NORWEST ADVANTAGE FUNDS
OCTOBER __, 1998
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<PAGE>
This AGREEMENT AND PLAN OF CONSOLIDATION (the "Plan") is made as of
this _____ day of October, 1998, by and among MasterWorks Funds Inc.
("MasterWorks"), a Maryland corporation, for itself and on behalf of the Growth
Stock Fund (the "GS Fund"), Managed Series Investment Trust ("MSIT"), a Delaware
business trust, for itself and on behalf of the Growth Stock Master Portfolio
(the "GS Master Portfolio") in which the GS Fund invests and Norwest Advantage
Funds ("Norwest Trust"), a Delaware business trust, for itself and on behalf of
the Large Company Growth Fund (the "LCG Fund").
WHEREAS, each of MasterWorks, MSIT and Norwest Trust is an open-end
management investment company registered with the Securities and Exchange
Commission (the "SEC") under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the GS Fund pursues its investment objective by investing
substantially all of its assets in the GS Master Portfolio and the LCG Fund
pursues its investment objective by investing substantially all of its assets in
the Large Company Growth Portfolio, a series of Core Trust (Delaware), a
Delaware business trust;
WHEREAS, the parties desire that the assets and liabilities of the GS
Fund be conveyed to, and be acquired and assumed by, the LCG Fund, in exchange
for shares of equal value of the LCG Fund which shall thereafter promptly be
distributed to the shareholders of the GS Fund in connection with its
liquidation as described in this Plan (the "Consolidation"); and
WHEREAS, the parties intend that the Consolidation qualify as a
"reorganization," within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and the LCG Fund and GS Fund will each 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 mutual promises described
herein, the parties agree as follows:
1. Conveyance of Assets of GS Fund.
(a) MasterWorks agrees to endeavor to pay or make reasonable
provision to pay all of the liabilities, expenses, costs and charges of the GS
Fund that are known to MasterWorks and that are due and payable as of the
Closing Date (as defined in Section 9) on or prior to such date.
(b) At the Effective Time of the Consolidation (as defined in
Section 9), all assets of every kind, and all interests, rights, privileges and
powers of the GS Fund, whether or not determinable at the Effective Time of the
Consolidation and wherever located, subject to all the liabilities of the GS
Fund as of the Effective Time of the Consolidation (the "Fund Assets"), shall be
assigned, transferred, delivered and conveyed by the GS Fund to the LCG Fund and
shall be accepted and assumed by the LCG 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 GS Fund at or after the Effective Time of the Consolidation
shall become and be the assets of the LCG Fund and (ii) all liabilities of the
GS Fund shall attach to the LCG Fund, enforceable against the LCG Fund to the
same extent as if initially incurred by it.
(c) It is understood and agreed that the 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), contract rights and
receivables (including dividend and interest receivables) owned by the GS Fund,
and any deferred or prepaid expenses shown as an asset on the GS Fund's books,
and that the liabilities of the GS Fund shall include all liabilities, whether
known or unknown, accrued or unaccrued, absolute or contingent, in all cases,
existing at the Effective Time of the Consolidation.
(d) The GS Master Portfolio will liquidate the GS Fund's
interest in the GS Master Portfolio through an in-kind redemption, effective at
or before the Effective Time of the Consolidation, so that the Fund
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<PAGE>
Assets will consist primarily of the portfolio securities held by the GS Master
Portfolio immediately before the Effective Time of the Consolidation.
(e) At least fifteen (15) business days prior to the Closing
Date, the GS Master Portfolio will provide to the LCG Fund a list of the GS
Master Portfolio's securities and other assets and known liabilities (the
"Assets List"). It is understood and agreed that the GS Master Portfolio may
sell any of the securities or other assets shown on the Assets List prior to the
Effective Time of the Consolidation but, from and after the date the Assets List
is provided, will not, without the prior approval of the LCG Fund, acquire any
additional securities other than securities which Norwest Trust has determined
to be consistent with the investment objective, policies and restrictions of the
LCG Fund or permit to exist any encumbrances, rights, restrictions or claims not
reflected on the Assets List. At least ten (10) business days prior to the
Closing Date, the LCG Fund will advise the GS Master Portfolio of any
investments of the GS Master Portfolio shown on the Assets List that Norwest
Trust has determined are not consistent with the investment objective, policies
and restrictions of the LCG Fund. If requested by Norwest Trust, the GS Master
Portfolio will dispose of any such securities prior to the Closing Date to the
extent practicable and consistent with applicable legal requirements, including
the GS Master Portfolio's own investment objectives, policies and restrictions.
In addition, if Norwest Trust determines that the portfolios of the GS Master
Portfolio and the LCG Fund, when aggregated, would contain investments exceeding
certain percentage limitations applicable to the LCG Fund, the GS Master
Portfolio, if requested by Norwest Trust, will dispose of a sufficient amount of
such investments as may be necessary to avoid violating such limitations as of
the Effective Time of the Consolidation, to the extent practicable and
consistent with applicable legal requirements, including the GS Master
Portfolio's own investment objectives, policies and restrictions.
(f) MasterWorks shall assign, transfer, deliver, and convey the
Fund Assets to the LCG Fund on the following basis:
(1) In exchange for the transfer of the Fund Assets, the
LCG Fund shall simultaneously issue to the GS Fund at the Effective
Time of the Consolidation full and fractional A Shares of beneficial
interest in the LCG Fund having an aggregate net asset value equal to
the net value of the Fund Assets so conveyed, all determined as
provided in this Plan. In this regard, the number of full and
fractional shares of the LCG Fund delivered to the GS Fund shall be
determined by dividing the net value of the Fund Assets, computed in
the manner and as of the time and date set forth in this Plan, by the
net asset value of one LCG Fund A Share, computed in the manner and as
of the time and date set forth in this Plan.
(2) The net asset value of shares to be delivered by the
LCG Fund, and the net value of the Fund Assets to be conveyed by the GS
Fund, shall, in each case, be determined as of the Valuation Time (as
defined in Section 3). Each party shall make all computations to the
fourth decimal place or such other decimal place as the parties may
agree. Norwest Trust shall compute the net asset value of A Shares of
the LCG Fund and the net value of the Fund Assets in accordance with
its then current valuation procedures.
(3) MasterWorks shall transfer the Fund Assets to the LCG
Fund's custodian, for the account of the LCG Fund, with all securities
not in bearer or book-entry form duly endorsed, or accompanied by duly
executed separate assignments or stock powers, in proper form for
transfer, with any required signature guarantees, and with all
necessary stock transfer stamps, sufficient to transfer good and
marketable title thereto (including all accrued interest and rights
pertaining thereto) to the custodian for the account of the LCG Fund
free and clear of all liens, encumbrances, rights, restrictions and
claims, except those specifically identified to the LCG Fund's
custodian and disclosed on the Assets List. All cash transferred shall
be in the form of immediately available funds payable to the order of
the LCG Fund's custodian for the account of the LCG Fund.
2. Liquidation of GS Fund, Registration of Shares and Access to Records.
A-3
<PAGE>
(a) At the Effective Time of the Consolidation, the GS Fund
shall make a liquidating distribution to its shareholders as follows:
Shareholders of record of the GS Fund shall be credited with full and fractional
shares of the A Shares of beneficial interest that are issued by the LCG Fund in
connection with the Consolidation corresponding to the GS Fund shares that are
held of record by the shareholder at the Effective Time of the Consolidation.
Each such shareholder also shall have the right to receive any unpaid dividends
or other distributions that were declared before the Effective Time of the
Consolidation with respect to the GS Fund shares that are held of record by the
shareholder at the Effective Time of the Consolidation. Norwest Trust shall
record on its books the ownership of the respective LCG Fund shares by such
shareholders. All of the issued and outstanding shares of the GS Fund at the
Effective Time of the Consolidation shall be redeemed and canceled on the books
of MasterWorks at such time. Norwest Trust shall issue certificates representing
LCG Fund shares in accordance with the then current LCG Fund prospectuses;
provided, however, that Norwest Trust shall issue certificates representing LCG
Fund shares to replace certificates representing GS Fund shares only upon the
surrender of the certificates representing GS Fund shares. As soon as reasonably
possible after the Effective Time of the Consolidation, MasterWorks shall wind
up the affairs of the GS 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 GS Fund, and also shall take all other steps as are necessary and proper
to effect the termination or declassification of the GS Fund in accordance with
all applicable laws.
(b) If a request shall be made for a change of the registration
of shares of LCG Fund to a person other than the shareholder in which the name
of the shares are registered in the records of the GS Fund, it shall be a
condition of such registration of shares that there be furnished to the LCG Fund
an instrument of transfer properly endorsed, accompanied by any required
signature guarantees and otherwise in proper form for transfer and, if any of
such shares are outstanding in certificated form, the certificate representing
such shares, and that the person requesting such registration shall pay to the
LCG Fund any transfer or other taxes required by reason of such registration or
establish to the reasonable satisfaction of Norwest Trust that such tax has been
paid or is not applicable.
(c) At and after the Closing Date, MasterWorks shall provide
Norwest Trust and its transfer agent with immediate access to (a) all records
containing the names, addresses and taxpayer identification numbers of all of
the GS Fund's shareholders and the number and percentage ownership of the
outstanding GS Fund shares owned by each shareholder of the GS Fund, all as of
the Effective Time of the Consolidation, and (b) all original documentation
(including all applicable Internal Revenue Service forms, certificates,
certifications and correspondence) relating to the GS Fund's shareholders'
taxpayer identification numbers and their liability for or exemption from
back-up withholding.
3. Valuation Time. The "Valuation Time" shall be the time as of which
the net asset value of shares of each of the GS Fund and the LCG Fund is
determined pursuant to Norwest Trust's valuation procedures on the Closing Date
or such earlier or later time as may be mutually agreed to in writing by the
parties hereto.
4. Certain Representations, Warranties and Agreements of MasterWorks.
MasterWorks, on behalf of itself and, where appropriate, the GS Fund, represents
and warrants to, and agrees with, Norwest Trust and MSIT as follows:
(a) MasterWorks is a corporation duly created, validly existing
and in good standing under the laws of the State of Maryland. MasterWorks is
registered with the SEC as an open-end management investment company under the
1940 Act, and such registration is in full force and effect.
(b) MasterWorks has the power to own all of its properties and
assets, to carry on its business as now being conducted and described in its
currently effective Registration Statement on Form N-1A, to enter into this Plan
and to consummate the transactions contemplated herein, and has all necessary
federal, state and local qualifications and authorizations to own all of its
properties and assets, to carry on its business as now being
A-4
<PAGE>
conducted and described in its currently effective Registration Statement on
Form N-1A and to consummate the transactions contemplated herein.
(c) The execution and delivery of the Plan and the transactions
contemplated herein have been duly authorized by the Board of Directors of
MasterWorks. The Plan has been executed and delivered by duly authorized
officers of MasterWorks, 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, subject to the approval of shareholders referred to in Section 8, the
consummation of the transactions contemplated by this Plan will not, violate
MasterWorks' Amended and 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 or its properties or assets are bound. Except for the approval of
shareholders of the GS Fund, no other action by MasterWorks is necessary to
authorize its officers to effectuate this Plan and the transactions contemplated
herein.
(d) The GS Fund has qualified as a regulated investment company
under Part I of Subchapter M of Subtitle A, Chapter 1, of the Code, in respect
of each taxable year since the commencement of its operations and qualifies and
shall continue to qualify as a regulated investment company for its taxable year
ending upon its liquidation.
(e) MasterWorks has valued, and will continue to value, the
portfolio securities and other assets of the GS Fund in accordance with
applicable legal requirements.
(f) The materials included within the Form N-14 Registration
Statement (the "N-14 Registration Statement") from its effective date with the
SEC, through the time of the shareholders meeting referred to in Section 8 and
the Effective Time of the Consolidation, insofar as they relate to MasterWorks
and the GS Fund: (i) shall comply in all material respects with the applicable
provisions of the Securities Act of 1933, as amended (the "1933 Act"), the
Securities Exchange Act of 1934, as amended (the "1934 Act") 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) All of the issued and outstanding shares of the GS Fund have
been duly authorized and validly issued and are validly outstanding, 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.
There are no outstanding options, warrants or other rights to subscribe for or
purchase any GS Fund shares, nor are there any securities convertible into GS
Fund shares.
(h) MasterWorks shall operate the business of the GS Fund in the
ordinary course between the date hereof and the Effective Time of the
Consolidation, it being agreed 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 in anticipation of the
Consolidation.
(i) At the Effective Time of the Consolidation, the GS Fund will
have good and marketable title to the Fund Assets and full right, power and
authority to assign, transfer, deliver and convey such assets.
(j) The financial statements of the GS Fund for the year ended
February 28, 1998, which are audited (the "GS Fund Financial Statements"),
copies of which have been previously delivered to Norwest Trust and MSIT, fairly
present the financial position of the GS Fund as of the date thereof and the
results of its operations and changes in its net assets for the periods
indicated and are in accordance with generally accepted accounting principles
consistently applied.
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<PAGE>
(k) To the knowledge of MasterWorks, there are no liabilities of
the GS Fund, whether or not determined or determinable, other than the
liabilities disclosed or provided for in the GS Fund Financial Statements and
liabilities incurred in the ordinary course of business subsequent to February
28, 1998 or otherwise previously disclosed in writing to Norwest Trust and MSIT.
(l) To the knowledge of MasterWorks, there are no claims,
actions, suits, investigations or proceedings of any type pending against the GS
Fund or its assets or businesses. In addition, to the knowledge of MasterWorks,
there are no claims, actions, suits, investigations or proceedings of any type
threatened against the GS Fund or its assets or businesses that would materially
adversely affect the GS Fund or its assets or businesses or which would prevent
or hinder consummation of the transactions contemplated herein. MasterWorks does
not have knowledge of any facts that it currently has reason to believe are
likely to form the basis for the institution of any such claim, action, suit,
investigation or proceeding against the GS Fund. For purposes of this provision,
investment underperformance or negative investment performance shall not be
deemed to constitute such facts, provided all required performance disclosures
have been made. The GS Fund is not a party to or subject to the provisions of
any order, decree or judgment of any court or governmental body that materially
and adversely affects, or is reasonably likely to materially and adversely
affect, its business or its ability to consummate the transactions contemplated
herein.
(m) Except for contracts, agreements, franchises, licenses or
permits entered into or granted in the ordinary course of its business, in each
case under which no material default exists, MasterWorks, on behalf of the GS
Fund, is not a party to or subject to any material contract, debt instrument,
employee benefit plan, lease, franchise, license or permit of any kind or nature
whatsoever.
(n) The federal income tax returns of the GS Fund, copies of
which have been previously delivered to Norwest Trust and MSIT, have been filed
for all taxable years to and including the taxable year ended February 28, 1998,
and all taxes payable pursuant to such returns have been paid. To the best of
MasterWorks' knowledge, no such return is currently under audit and no
assessment has been asserted with respect to such returns. The federal income
tax return of GS Fund for the taxable year ended February 28, 1999 will be
filed, and any taxes payable pursuant thereto will be paid, on or before their
due date, as the same may be properly extended.
(o) Since February 28, 1998, there has been no material adverse
change in the financial condition, results of operations, business, properties
or assets of the GS Fund. For all purposes under this Plan, investment
underperformance, negative investment performance and/or investor redemptions
shall not be considered material adverse changes, provided all required
performance disclosures have been made.
5. Certain Representations, Warranties and Agreements of MSIT. MSIT, on
behalf of itself and, where appropriate, the GS Master Portfolio, represents and
warrants to, and agrees with, MasterWorks and Norwest Trust as follows:
(a) MSIT is a business trust, duly created, validly existing and
in good standing under the laws of the State of Delaware. MSIT is registered
with the SEC as an open-end management investment company under the 1940 Act,
and such registration is in full force and effect.
(b) MSIT has the power to own all of its properties and assets,
to carry on its business as now being conducted and described in its currently
effective Registration Statement on Form N-1A, to enter into this Plan and to
consummate the transactions contemplated herein, and has all necessary federal,
state and local qualifications and authorizations to own all of its properties
and assets, to carry on its business as now being conducted and described in its
currently effective Registration Statement on Form N-1A and to consummate the
transactions contemplated herein.
(c) The execution and delivery of the Plan have been duly
authorized by the Board of Trustees of MSIT. The Plan has been executed and
delivered by duly authorized officers of MSIT, and represents a valid and
binding contract, enforceable in accordance with its terms, subject as to
enforcement to bankruptcy, insolvency,
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<PAGE>
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 the
Declaration of Trust (as amended) or By-Laws of MSIT or any material agreement,
obligation, decree or arrangement to which it is a party or by which it or its
properties or assets are bound. No other action by MSIT is necessary to
authorize its officers to effectuate the Plan and the transactions contemplated
herein.
(d) MSIT has qualified the GS Master Portfolio as a partnership
under the Code, since its inception and the GS Master Portfolio will continue to
so qualify through the Effective Time of the Consolidation.
(e) MSIT has valued, and will continue to value, the portfolio
securities and other assets of the GS Master Portfolio in accordance with
applicable legal requirements.
(f) The materials included within the N-14 Registration
Statement from its effective date with the SEC, through the time of the
shareholders meeting referred to in Section 8 and the Effective Time of the
Consolidation, insofar as they relate to MSIT, (i) shall comply in all material
respects with the applicable provisions of the 1933 Act, the 1934 Act 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) All of the issued and outstanding interests in the GS Master
Portfolio have been duly authorized and validly issued and are validly
outstanding, 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, or available exemptions therefrom. There are no
outstanding options, warrants or other rights to subscribe for or purchase any
interests in the GS Master Portfolio, nor are there any securities convertible
into interests in the GS Master Portfolio.
(h) MSIT shall operate the business of the GS Master Portfolio
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 in anticipation of the
Consolidation.
(i) The financial statements of the GS Master Portfolio for the
year ended February 28, 1998, which are audited (the "GS Master Portfolio
Financial Statements"), copies of which have been previously delivered to
MasterWorks and Norwest Trust, fairly present the financial position of the GS
Master Portfolio as of the date thereof and the results of its operations and
changes in its net assets for the periods indicated and are in accordance with
generally accepted accounting principles consistently applied.
(j) To the knowledge of MSIT, there are no liabilities of the GS
Master Portfolio, whether or not determined or determinable, other than the
liabilities disclosed or provided for in the GS Master Portfolio Financial
Statements and liabilities incurred in the ordinary course of business
subsequent to February 28, 1998 or otherwise previously disclosed in writing to
MasterWorks and Norwest Trust.
(k) To the knowledge of MSIT, there are no claims, actions,
suits, investigations or proceedings of any type pending against the GS Master
Portfolio or its assets or businesses. In addition, to the knowledge of MSIT,
there are no claims, actions, suits, investigations or proceedings of any type
threatened against the GS Master Portfolio or its assets or businesses that
would materially adversely affect the GS Master Portfolio or its assets or
businesses or which would prevent or hinder consummation of the transactions
contemplated herein. MSIT is not aware of any facts that it currently has reason
to believe are likely to form the basis for the institution of any such claim,
action, suit, investigation or proceeding against the GS Master Portfolio. For
purposes of this provision, investment underperformance or negative investment
performance shall not be deemed to constitute such facts, provided all required
performance disclosures have been made. The GS Master Portfolio is not a party
to or subject to the provisions of any order, decree or judgment of any court or
governmental body that materially and adversely
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<PAGE>
affects, or is reasonably likely to materially and adversely affect, its
business or its ability to consummate the transactions contemplated herein.
(l) Except for contracts, agreements, franchises, licenses or
permits entered into or granted in the ordinary course of its business, in each
case under which no material default exists, MSIT, on behalf of the GS Master
Portfolio, is not a party to or subject to any material contract, debt
instrument, employee benefit plan, lease, franchise, license or permit of any
kind or nature whatsoever.
(m) The federal income tax returns of the GS Master Portfolio,
copies of which have been previously delivered to MasterWorks and Norwest Trust,
have been filed for all taxable years to and including the taxable year ended
February 28, 1998, and all taxes payable pursuant to such returns have been
paid. To the best of MSIT's knowledge, no such return is currently under audit
and no assessment has been asserted with respect to such returns. The federal
income tax return of the GS Master Portfolio for the taxable year ended February
28, 1999 will be filed, and any taxes payable pursuant thereto will be paid, on
or before their due date, as the same may be properly extended.
(n) Since February 28, 1998, there has been no material adverse
change in the financial condition, results of operations, business, properties
or assets of the GS Master Portfolio. For all purposes under this Plan,
investment underperformance, negative investment performance and/or investor
redemptions shall not be considered material adverse changes, provided all
required performance disclosures have been made.
6. Certain Representations, Warranties and Agreements of Norwest Trust.
Norwest Trust, on behalf of itself and, where appropriate, the LCG Fund,
represents and warrants to, and agrees with MasterWorks and MSIT as follows:
(a) Norwest Trust is a business trust duly formed, legally
existing and in good standing under the laws of the State of Delaware. Norwest
Trust is registered with the SEC as an open-end management investment company
under the 1940 Act and such registration is in full force and effect.
(b) Norwest Trust has the power to own all of its properties and
assets, to carry on its business as now being conducted and described in its
currently effective Registration Statement on Form N-1A, to enter into this Plan
and to consummate the transactions contemplated herein, and has all necessary
federal, state and local qualifications and authorizations to own all of its
properties and assets, to carry on its business as now being conducted and
described in its currently effective Registration Statement on Form N-1A and to
consummate the transactions contemplated herein.
(c) The execution and delivery of the Plan have been duly
authorized by the Board of Trustees of Norwest Trust. The Plan has been executed
and delivered by duly authorized officers of Norwest Trust, 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 the Amended and Restated Trust
Instrument or By-Laws of Norwest Trust or any material agreement, obligation,
decree or arrangement to which it is a party or by which it or its properties or
assets are bound. No other action by Norwest Trust is necessary to authorize its
officers to effectuate the Plan and the transactions contemplated herein.
(d) The LCG Fund has qualified as a regulated investment company
under Part I of Subchapter M of Subtitle A, Chapter 1, of the Code in respect of
each taxable year since the commencement of its operations and qualifies and
shall continue to qualify as a regulated investment company for its current
taxable year.
(e) Norwest Trust has valued, and will continue to value, the
portfolio securities and other assets of the LCG Fund in accordance with
applicable legal requirements.
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<PAGE>
(f) The N-14 Registration Statement, including the proxy
materials contained therein, from its effective date with the SEC through the
time of the shareholders meeting referred to in Section 8 and at the Effective
Time of the Consolidation, insofar as it relates to Norwest Trust, the LCG Fund,
the core portfolio in which the LCG Fund invests, or the A Shares of the LCG
Fund to be issued pursuant thereto (i) shall comply in all material respects
with the applicable provisions of the 1933 Act, the 1934 Act 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 LCG Fund to be issued and delivered to the
GS Fund for the account of the shareholders of the GS 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 LCG Fund shall
have any preemptive right of subscription or purchase in respect thereto.
(h) All of the issued and outstanding shares of the LCG Fund
have been duly authorized and validly issued and are validly outstanding, 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. There are no outstanding options, warrants or other rights to subscribe
for or purchase any LCG Fund shares, nor are there any securities convertible
into LCG Fund shares.
(i) Norwest Trust shall operate the business of the LCG Fund 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 in anticipation of the
Consolidation.
(j) The financial statements of the LCG Fund for the year ended
May 31, 1998, which are audited (the "LCG Fund Financial Statements"), copies of
which have been previously delivered to MasterWorks and MSIT, fairly present the
financial position of the LCG Fund as of the date thereof and the results of its
operations and changes in its net assets for the periods indicated and are in
accordance with generally accepted accounting principles consistently applied.
(k) To the knowledge of Norwest Trust, there are no liabilities
of the LCG Fund, whether or not determined or determinable, other than the
liabilities disclosed or provided for in the LCG Fund Financial Statements and
liabilities incurred in the ordinary course of business subsequent to May 31,
1998 or otherwise previously disclosed in writing to MasterWorks and MSIT.
(l) To the knowledge of Norwest Trust, there are no claims,
actions, suits, investigations or proceedings of any type pending against the
LCG Fund or its assets or businesses. In addition, to the knowledge of Norwest
Trust, there are no claims, actions, suits, investigations or proceedings of any
type threatened against the LCG Fund or its assets or businesses that would
materially adversely affect the LCG Fund or its assets or businesses or which
would prevent or hinder consummation of the transactions contemplated herein.
Norwest Trust does not have knowledge of any facts that it currently has reason
to believe are likely to form the basis for the institution of any such claim,
action, suit, investigation or proceeding against the LCG Fund. For purposes of
this provision, investment underperformance or negative investment performance
shall not be deemed to constitute such facts, provided all required performance
disclosures have been made. The LCG Fund is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental body
that materially and adversely affects, or is reasonably likely to materially and
adversely affect, its business or its ability to consummate the transactions
contemplated herein.
(m) Except for contracts, agreements, franchises, licenses or
permits entered into or granted in the ordinary course of its business, in each
case under which no material default exists, Norwest Trust, on behalf of the
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<PAGE>
LCG Fund, is not a party to or subject to any material contract, debt
instrument, employee benefit plan, lease, franchise, license or permit of any
kind or nature whatsoever.
(n) The federal income tax returns of the LCG Fund, copies of
which have been previously delivered to MasterWorks and MSIT, have been filed
for all taxable years to and including the taxable year ended May 31, 1998, and
all taxes payable pursuant to such returns have been paid. To the best of
Norwest Trust's knowledge, no such return is currently under audit and no
assessment has been asserted with respect to such returns. The federal income
tax return of the LCG Fund for the taxable year ended May 31, 1999 will be
filed, and any taxes payable pursuant thereto will be paid, on or before their
due date, as the same may be properly extended.
(o) Since May 31, 1998, there has been no material adverse
change in the financial condition, results of operations, business, properties
or assets of the LCG Fund. For all purposes under this Plan, investment
underperformance, negative investment performance and/or investor redemptions
shall not be considered material adverse changes, provided all required
performance disclosures have been made.
7. Regulatory Filings. Norwest Trust has prepared and filed, or will
promptly prepare and file, an N-14 Registration Statement, which shall include
all proxy materials required in connection with the GS Fund shareholder approval
referenced in Section 8, with the SEC and, where required, with appropriate
state securities regulatory authorities.
8. Shareholder Action. As soon as practicable after the effective date
of the N-14 Registration Statement, MasterWorks shall hold meeting(s) of the
shareholders of the GS Fund for the purpose of considering and voting upon:
(a) approval of this Plan and the Consolidation contemplated
hereby; and
(b) such other matters as may be determined by the Board of
Directors of MasterWorks.
9. Closing Date, Effective Time of the Consolidation. The "Closing
Date" shall be December 11, 1998, or such earlier or later date as may be
mutually agreed in writing by the parties hereto. Delivery of the Fund Assets
and the shares of the LCG Fund to be issued pursuant to Section 1 and the
liquidation of the GS Fund pursuant to Section 2 shall occur on the day
following the Closing Date, whether or not such day is a business day, or on
such other date, and at such place and time, as may be mutually agreed in
writing, by the parties hereto. 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 Fund Assets are, for any reason, not transferred to the LCG
Fund's custodian at the Effective Time of the Consolidation, MasterWorks shall
cause such Fund Assets to be transferred to the LCG Fund's custodian in
accordance with this Plan at the earliest practicable date thereafter.
10. Conditions to MasterWorks and MSIT Obligations. The obligations of
MasterWorks and MSIT hereunder shall be subject to the following conditions
precedent:
(a) This Plan and the Consolidation shall have been approved by
the Board of Trustees of Norwest Trust and by a majority of the shareholders of
the GS Fund in the manner required by applicable law and this Plan.
(b) All representations and warranties of Norwest Trust made in
this Plan shall be true and correct in all material respects as if made at and
as of the Valuation Time and the Effective Time of the Consolidation.
(c) Norwest Trust shall have delivered to MasterWorks a
certificate executed in its name by its President or Vice President and its
Treasurer or Assistant Treasurer, in a form reasonably satisfactory to
MasterWorks and dated as of the Closing Date, to the effect that the
representations and warranties of Norwest Trust in this Plan are true and
correct at and as of the Valuation Time and that it has approved the Fund Assets
as being
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<PAGE>
consistent with its investment objectives, policies and restrictions and that
the Fund Assets may otherwise be lawfully acquired by the LCG Fund.
(d) MasterWorks shall have received an opinion of Seward &
Kissel, as counsel to Norwest Trust, in a form reasonably satisfactory to
MasterWorks and dated as of the Closing Date, substantially to the effect that
(i) Norwest Trust is a business trust duly formed and legally existing under the
laws of the State of Delaware and is an open-end, management investment company
registered under the 1940 Act; (ii) the shares of the LCG Fund to be delivered
to the GS Fund as provided for by this Plan are duly authorized and upon
delivery will be validly issued, fully paid and non-assessable by Norwest Trust;
(iii) this Plan has been duly authorized, executed and delivered by Norwest
Trust, and represents a legal, valid and binding contract, enforceable in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
moratorium, fraudulent conveyance and similar laws relating to or affecting
creditors' rights generally and court decisions with respect thereto, and such
counsel shall express no opinion with respect to the application of equitable
principles in any proceeding whether at law or in equity; (iv) the execution and
delivery of this Plan did not, and the consummation of the transactions
contemplated by this Plan will not, violate the Amended and Restated Trust
Instrument or By-Laws of Norwest Trust or any material contract known to such
counsel to which Norwest Trust is a party or by which it is bound; and (v) no
consent, approval, authorization or order of any court or governmental authority
is required for the consummation by Norwest Trust of the transactions
contemplated by this Plan, except such as have been obtained under the 1933 Act,
the 1934 Act, the 1940 Act and the rules and regulations under those Acts, such
as may be required under state securities laws, such as may be required
subsequent to the Effective Time of the Consolidation and such as where the
failure to obtain the consent, approval, authorization or order would not have a
material adverse effect on the operation of the LCG Fund. 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 MasterWorks.
(e) MasterWorks shall have received an opinion of Seward &
Kissel addressed to Norwest Trust and MasterWorks in a form reasonably
satisfactory to them, and dated as of the Closing Date, with respect to the
matters specified in Subsection 11(h).
(f) MasterWorks shall have received (i) a memorandum addressed
to Norwest Trust and MasterWorks, in a form reasonably satisfactory to them,
prepared by Forum Administrative Services, LLC, or another person approved by
the parties, concerning the registration of shares to be issued by Norwest Trust
pursuant to this Plan under applicable state securities laws or the exemption
from registration under such laws, and (ii) assurance reasonably satisfactory to
it that all permits and other authorizations necessary under state securities
laws to consummate the transactions contemplated by this Plan have been
obtained.
(g) The N-14 Registration Statement shall have become effective
under the 1933 Act and no stop order suspending the effectiveness shall have
been instituted, or to the knowledge of Norwest Trust, contemplated by the SEC.
(h) 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.
(i) The SEC shall not have issued any unfavorable advisory
report under Section 25(b) of the 1940 Act nor instituted any proceeding seeking
to enjoin consummation of the transactions contemplated by this Plan under
Section 25(c) of the 1940 Act.
(j) Norwest Trust 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.
(k) MasterWorks shall have received from Norwest Trust a duly
executed instrument whereby the LCG Fund assumes all of the liabilities of GS
Fund.
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<PAGE>
(l) MasterWorks shall have received a letter from KPMG Peat
Marwick LLP addressed to Norwest Trust and MasterWorks in a form reasonably
satisfactory to them, and dated as of the Closing Date, to the effect that on
the basis of limited procedures as agreed to by Norwest Trust and MasterWorks
and described in such letter (but not an examination in accordance with
generally accepted auditing standards) (i) nothing came to their attention that
caused them to believe that the unaudited pro forma financial statements
included in the N-14 Registration Statement do not comply as to form in all
material respects with the applicable accounting requirements of Rule 11-02 of
Regulation S-X or that the pro forma adjustments have not properly been applied
to the historical amounts in the compilation of those amounts, (ii) the data
used in the calculation of the current and pro forma expense ratios of the GS
Fund and the LCG Fund appearing in the N-14 Registration Statement, including
the proxy materials, agree with the underlying accounting records of the GS Fund
and the LCG Fund, as appropriate, or to written estimates provided by officers
of Norwest Trust or MasterWorks, as appropriate, having responsibility for
financial and reporting matters and were found to be mathematically correct, and
(iii) the information relating to the GS Fund and the LCG Fund appearing in the
N-14 Registration Statement that is expressed in dollars or percentages of
dollars has been obtained from the accounting records of the GS Fund or the LCG
Fund, as appropriate, or from schedules prepared by officers of Norwest Trust or
MasterWorks, as appropriate, having responsibility for financial and reporting
matters and such information is in agreement with such records, schedules or
computations made therefrom.
(m) Except to the extent prohibited by Rule 19b-1 under the 1940
Act, the LCG Fund shall have declared a dividend or dividends that, together
with all previous such dividends, shall have the effect of distributing to the
LCG Fund shareholders substantially all of its investment company taxable income
earned prior to the Closing Date and substantially all of its net capital gain
realized prior to such date.
(n) No party shall have terminated this Plan pursuant to Section
13 hereof.
(o) Each of MasterWorks and MSIT shall have received such
further assurances, including, but not limited to, further assurances from
Norwest Trust or any other person, concerning the performance of its obligations
hereunder and the consummation of the Consolidation as it shall deem necessary,
advisable or appropriate.
11. Norwest Trust Conditions. The obligations of Norwest Trust
hereunder shall be subject to the following conditions precedent:
(a) This Plan and the Consolidation shall have been approved by
the Board of Trustees of MSIT, the Board of Directors of MasterWorks and by a
majority of the shareholders of the GS Fund in the manner required by applicable
law and this Plan.
(b) MSIT shall have delivered to Norwest Trust a statement of
assets and liabilities of the GS Master Portfolio, showing the tax costs of such
securities by lot and the holding periods of such securities, as of the
Valuation Time, certified by the Treasurer or Assistant Treasurer of MSIT as
having been prepared in accordance with generally accepted accounting principles
consistently applied. The statement of assets and liabilities shall indicate
which assets, if any, are or, after the Consolidation, will be subject to any
restrictions, legal or contractual, on the disposition thereof (including
restrictions as to the public offering or sale thereof under the 1933 Act) and
which assets, if any, are not readily marketable.
(c) MasterWorks shall have duly executed and delivered to
Norwest Trust such bills of sale, assignments, certificates and other
instruments of transfer (the "Transfer Documents") as Norwest Trust may deem
necessary or desirable to transfer all of the GS Fund's right, title and
interest in and to the Fund Assets.
(d) All representations and warranties of MasterWorks and MSIT
made in this Plan shall be true and correct in all material respects as if made
at and as of the Valuation Time and the Effective Time of the Consolidation.
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<PAGE>
(e) Each of MasterWorks and MSIT shall have delivered to Norwest
Trust a certificate executed in its name by its President or Vice President and
its Treasurer or Assistant Treasurer, in a form reasonably satisfactory to
Norwest Trust and dated as of the Closing Date, to the effect that the
representations and warranties of MasterWorks or MSIT, as appropriate, in this
Plan are true and correct at and as of the Valuation Time.
(f) Norwest Trust shall have received an opinion of Morrison &
Foerster LLP, as counsel to MasterWorks, in a form reasonably satisfactory to
Norwest Trust and dated as of the Closing Date, substantially to the effect that
(i) MasterWorks is a corporation duly established and validly existing under the
laws of the State of Maryland and is an open-end, management investment company
registered under the 1940 Act; (ii) this Plan and the Transfer Documents have
been duly authorized, executed and delivered by MasterWorks and represent legal,
valid and binding contracts, enforceable in accordance with their terms, subject
to the effect of bankruptcy, insolvency, moratorium, fraudulent conveyance and
similar laws relating to or affecting creditors' rights generally and court
decisions with respect thereto, and such counsel shall express no opinion with
respect to the application of equitable principles in any proceeding, whether at
law or in equity; (iii) the execution and delivery of this Plan did not, and the
consummation of the transactions contemplated by this Plan will not, violate the
Amended and Restated Articles of Incorporation or By-Laws of MasterWorks or any
material contract known to such counsel to which MasterWorks is a party or by
which it is bound; (iv) the only shareholder approvals required with respect to
the consummation of the transactions contemplated by this Plan are the approval
of a majority of the shareholders of the GS Fund; and (v) no consent, approval,
authorization or order of any court or governmental authority is required for
the consummation by MasterWorks of the transactions contemplated by this Plan,
except such as have been obtained under the 1933 Act, the 1934 Act, the 1940 Act
and the rules and regulations under those Acts, such as may be required under
state securities laws, such as may be required subsequent to the Effective Time
of the Consolidation and such as where the failure to obtain the consent,
approval, authorization or order would not have a material adverse effect on the
operation of the GS Fund. 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 Norwest Trust.
(g) Norwest Trust shall have received an opinion of Morrison &
Foerster LLP, as counsel to MSIT, in a form reasonably satisfactory to Norwest
Trust and dated as of the Closing Date, substantially to the effect that (i)
MSIT is a business trust duly created and validly existing under the laws of the
State of Delaware and is an open-end, management investment company registered
under the 1940 Act; (ii) this Plan has been duly authorized, executed and
delivered by MSIT and represents a legal, valid and binding contract,
enforceable in accordance with its terms, subject to the effect of bankruptcy,
insolvency, moratorium, fraudulent conveyance and similar laws relating to or
affecting creditors rights generally and to court decisions with respect
thereto, and such counsel shall express no opinion with respect to the
application of equitable principles in any proceeding, whether at law or in
equity; (iii) the execution and delivery of this Plan did not, and the
consummation of the transactions contemplated by this Plan will not, violate the
Declaration of Trust (as amended) or By-Laws of MSIT or any material contract
known to such counsel to which MSIT is a party or by which it is bound; and (iv)
no consent, approval, authorization or order of any court or governmental
authority is required for the consummation by MSIT of the transactions
contemplated by this Plan, except such as have been obtained under the 1933 Act,
the 1934 Act, the 1940 Act and the rules and regulations under those Acts and
such as may be required under state securities laws, such as may be required
subsequent to the Effective Time of the Consolidation and such as where failure
to obtain the consent, approval, authorization or order would not have a
material adverse effect on the operation of the GS Master Portfolio. 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 Norwest Trust.
(h) Norwest Trust shall have received an opinion of Seward &
Kissel addressed to Norwest Trust and MasterWorks in a form reasonably
satisfactory to them, based upon representations made in certificates provided
by Norwest and MasterWorks, their affiliates and/or principal shareholders and
dated as of the Closing Date, substantially to the effect that, for federal
income tax purposes: (i) the transfer by the GS Fund of all of the Fund Assets
to the LCG Fund in exchange for shares of the LCG Fund, and the distribution of
such shares to the shareholders of the GS Fund, as provided in this Plan, should
constitute a reorganization within the meaning of Section 368(a)(1)(C) of the
Code and the LCG Fund and the GS Fund should each be a "party to a
reorganization,"
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<PAGE>
within the meaning of Section 368(b) of the Code, with respect to this Plan;
(ii) in accordance with Sections 361(a), 361(c)(1) and 357(a) of the Code, no
gain or loss should be recognized by the GS Fund as a result of such
transactions; (iii) in accordance with Section 1032(a) of the Code, no gain or
loss should be recognized by the LCG Fund as a result of such transactions; (iv)
in accordance with Section 354(a)(1) of the Code, no gain or loss should be
recognized by the shareholders of the GS Fund on the distribution to them by the
GS Fund of shares of the LCG Fund in exchange for their shares of the GS Fund;
(v) in accordance with Section 358(a)(1) of the Code, the basis of the LCG Fund
shares received by each shareholder of the GS Fund should be the same as the
basis of the shareholder's GS Fund shares immediately prior to the transactions;
(vi) in accordance with Section 362(b) of the Code, the basis of the Fund Assets
received by the LCG Fund should be the same as the basis of such Fund Assets in
the hands of the GS Fund immediately prior to the transactions; (vii) in
accordance with Section 1223(l) of the Code, a shareholder's holding period for
the LCG Fund shares should be determined by including the period for which the
shareholder held the shares of the GS Fund exchanged therefor, provided that the
shareholder held such shares of the GS Fund as a capital asset at the Effective
Time of the Consolidation; (viii) in accordance with Section 1223(2) of the
Code, the holding period of the LCG Fund with respect to the Fund Assets should
include the period for which such Fund Assets were held by the GS Fund; and (ix)
in accordance with Section 381(a) of the Code, the LCG Fund should succeed to
the capital loss carryovers, if any, of the GS Fund, but the use by the LCG Fund
of any such capital loss carryovers maybe subject to limitation under Section
383 of the Code.
(i) The Fund Assets to be transferred to the LCG Fund under this
Plan shall include only assets that have been determined by Norwest Trust to be
in accordance with the LCG Fund's investment objective, policies and
restrictions and include no assets which the LCG Fund may not otherwise lawfully
acquire.
(j) 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 Norwest Trust, contemplated by the SEC.
(k) 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.
(l) The SEC shall not have issued any unfavorable advisory
report under Section 25(b) of the 1940 Act nor instituted any proceeding seeking
to enjoin consummation of the transactions contemplated by this Plan under
Section 25(c) of the 1940 Act.
(m) Each of MasterWorks and MSIT shall have performed and
complied in all material respects with each of its respective 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.
(n) Norwest Trust shall have received a letter from KPMG Peat
Marwick LLP addressed to Norwest Trust and MasterWorks described in Subsection
10(l).
(o) Except to the extent prohibited by Rule 19b-1 under the 1940
Act, the GS Fund shall have declared a dividend or dividends that, together with
all previous such dividends, shall have the effect of distributing to the GS
Fund shareholders substantially all of its investment company taxable income
earned prior to the Closing Date and substantially all of its net capital gain
realized prior to such date.
(p) No party shall have terminated this Plan pursuant to Section
13 hereof.
(q) Norwest Trust shall have received such further assurances,
including, but not limited to, further assurances from MasterWorks, MSIT or any
other person, concerning the performance of its obligations hereunder and the
consummation of the Consolidation as it shall deem necessary, advisable or
appropriate.
A-14
<PAGE>
12. Survival of Representations and Warranties. The representations and
warranties of the parties hereto shall survive the completion of the
transactions contemplated herein.
13. Termination of Plan. This Plan may be terminated by a party at or,
in the case of Subsection 13(c) below, at any time prior to, the Effective Time
of the Consolidation by a vote of a majority of its Board of Directors/Trustees
as provided below:
(a) By MasterWorks or MSIT if the conditions set forth in
Section 10 are not satisfied as specified in said Section;
(b) By Norwest Trust if the conditions set forth in Section 11
are not satisfied as specified in said Section; or
(c) By mutual consent of the parties.
In addition, MasterWorks or Norwest Trust may terminate this Plan at any time
prior to the Effective Date of the Consolidation if the party's Board of
Directors or Board of Trustees, as appropriate, determines that the consummation
of the transactions contemplated herein is not in the best interests of the
shareholders of the LCG Fund or the GS Fund, respectively, and gives notice to
the other parties hereto. It is understood and agreed that if Norwest Trust
terminates this Plan due to a determination by Norwest Trust's Board of Trustees
that the consummation of the transactions contemplated herein is not in the best
interest of the shareholders of the LCG Fund, Norwest Trust will take reasonable
steps to cooperate with MasterWorks in seeking a vote of the shareholders of the
GS Fund in favor of a plan of liquidation.
14. Governing Law. This Plan and the transactions contemplated hereby
shall be governed, construed and enforced in accordance with the laws of the
State of Delaware, except to the extent preempted by federal law.
15. Brokerage Fees and Expenses.
(a) Each of MasterWorks, MSIT and Norwest Trust represents and
warrants that there are no brokers or finders entitled to receive any payments
in connection with the transactions provided for herein.
(b) Each of the GS Fund, the GS Master Portfolio and the LCG
Fund shall be liable for its own expenses incurred in connection with entering
into and carrying out the provisions of this Plan, whether or not the
transactions contemplated hereby are consummated.
16. Amendments. The parties hereto may, by agreement in writing
authorized by their respective Boards of Trustees and Board of Directors, amend
this Plan at any time before or after approval hereof by the shareholders of the
GS Fund, but after such approval, no amendment shall be made that materially
alters the obligations of any party hereto. Nothing in this Section 16 shall be
deemed to preclude Norwest Trust and MasterWorks from changing the Closing Date
or the Effective Time of the Consolidation by mutual agreement.
17. Waivers. At any time prior to the Closing Date, any party may by
written instrument signed by it (i) waive the effect of any inaccuracies in the
representations and warranties made to it contained herein and (ii) waive
compliance with any of the agreements, covenants or conditions made for its
benefit contained herein.
18. Cooperation. Each party hereto will cooperate with the others in
fulfilling its obligations under this Plan and will provide such information and
documentation as is reasonably requested by the other in carrying out the terms
hereof.
19. Limitation on Liabilities. It is expressly agreed that (i) the
obligations of Norwest Trust and the LCG Fund hereunder shall not be binding
upon any of the Trustees, shareholders, nominees, officers, agents, or employees
of Norwest Trust personally, but shall bind only the assets and property of the
LCG Fund and not the
A-15
<PAGE>
other series of Norwest Trust; (ii) the obligations of MasterWorks and the GS
Fund hereunder shall not be binding upon any of the Directors, shareholders,
nominees, officers, agents or employees of MasterWorks personally, but shall
bind only the assets and property of the GS Fund and not the other series of
MasterWorks; and (iii) the obligations of MSIT and the GS Master Portfolio
hereunder shall not be binding upon any of the Trustees, interestholders,
nominees, officers, agents or employees of MSIT personally, but shall bind only
the assets and property of the GS Master Portfolio and not the other series of
MSIT. The execution and delivery by the parties' officers shall not be deemed to
have been made by any of them individually or to impose any liability on any of
them personally, but shall bind only the assets and the property of the GS Fund,
the GS Master Portfolio and the LCG Fund, respectively.
20. Notices. Any notice, report, statement, certificate or demand
required or permitted by any provision of this Plan shall be in writing and,
unless this Plan otherwise provides, shall be given by prepaid telegraph,
telecopy, certified mail or overnight express courier to:
For Norwest Trust:
David I. Goldstein, Esq.
Forum Financial Group
Two Portland Square
Portland, ME 04101
With copies to:
Anthony C.J. Nuland
Seward & Kissel
1200 G Street, N.W., Suite 350
Washington, DC 20005
For MasterWorks and MSIT:
Richard H. Blank, Jr.
Stephens Inc.
111 Center Street
Little Rock, AR 72201
With copies to:
Robert M. Kurucza
Marco E. Adelfio
Morrison & Foerster LLP
2000 Pennsylvania Avenue, N.W., Suite 5500
Washington, D.C. 20006
21. General. This Plan supersedes all prior agreements between the
parties (written or oral), is intended as a complete and exclusive statement of
the terms of the agreement between the parties and may not be changed or
terminated orally. This Plan may be executed in counterparts, which shall be
considered one and the same agreement, and shall become effective when the
counterparts have been executed by the parties hereto and delivered to each
party hereto. The headings contained in this Plan are for reference purposes
only and shall not affect in any way the meaning or interpretation of this Plan.
Nothing in this Plan, expressed or implied, is intended to confer upon any other
person any rights or remedies under or by reason of this Plan. No party hereto
may assign or transfer any right or obligation under this Plan without written
consent of the other party hereto.
A-16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Plan to be
executed by their duly authorized officers designated below as of the date first
written above.
<TABLE>
<CAPTION>
<S> <C>
MASTERWORKS FUNDS INC.
ATTEST:
____________________________________________ By: ______________________________________________
Michael W. Nolte Richard H. Blank, Jr.
Assistant Secretary Chief Operating Officer,
Secretary and Treasurer
MANAGED SERIES INVESTMENT
TRUST
ATTEST:
____________________________________________ By: ______________________________________________
Michael W. Nolte Richard H. Blank, Jr.
Assistant Secretary Chief Operating Officer,
Secretary and Treasurer
NORWEST ADVANTAGE FUNDS
ATTEST:
____________________________________________ By: ______________________________________________
Name: Name:
Title: Title:
</TABLE>
A-17
<PAGE>
EXHIBIT B - PERFORMANCE INFORMATION FOR LARGE COMPANY GROWTH FUND
THIS DISCUSSION WAS WRITTEN FOR THE SHAREHOLDERS OF LARGE COMPANY AND CONTAINED
IN LARGE COMPANY'S ANNUAL REPORT TO SHAREHOLDERS FOR THE FISCAL YEAR ENDED MAY
31, 1998. IT RELATES TO THE PERFORMANCE OF LARGE COMPANY'S I SHARES AND MARKET
ACTIVITY FOR THE PERIOD ENDED MAY 31, 1998. LARGE COMPANY DID NOT OFFER A SHARES
ON MAY 31, 1998.
For the fiscal year ended May 31, l998, the Large Company Growth Fund
gained 32.29%, outperforming both the S&P 500 Index return of 30.67% and the
Lipper Growth Average of 25.85%. Returns were spread across a number of
holdings. Portfolio leaders included Pfizer, Ericsson, Cisco, and Home Depot.
Excellent fundamental results drove the portfolio's returns. Company holdings
have grown average earnings per share in excess of 25% over the past twelve
months. Unit volume growth was the major factor behind these outstanding
earnings gains. Importantly, the portfolio's superior earnings growth gap
relative to the S&P 500 Index continued to widen over the past year -- leading
to strong relative investment results. The S&P 500 Index earnings growth rate
continues to moderate from unsustainably high levels toward a 5%-l0% trend-line.
The Large Company Growth Fund invests exclusively in dynamic, high quality
growth stocks. Companies that sustain rapid earnings growth for a long period
offer investors several advantages. Since earnings growth drives stock prices,
these companies should offer above average investment return potential. In
addition, due to the sustained growth, their investment cycle is longer than
average and these companies' fundamental risk is lower than average. The Fund
utilizes a disciplined approach to increase the probability of finding and
investing in this select group of growth companies. The portfolio team invests
for the long-term to fully participate in these great companies' success.
The "what you see is what you get" fundamental environment is here. For
the past several years (l991-l997) many otherwise average companies have been
able to grow earnings well in excess of underlying sales growth. This was
unsustainable, and therefore S&P 500 Index earnings growth has naturally been
moderating toward the underlying sales growth rate (5%-7%). The Fund's projected
20% long-term earnings growth rate should outshine this average and provide
above average long-term investment returns. The overall moderate U.S. economic
growth rate and benign inflationary environment should continue to benefit
stocks, in general, and superior growth stocks, in particular.
THE OPINIONS EXPRESSED REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY
THROUGH MAY 31, L998. THE MANAGER'S OPINIONS ARE SUBJECT TO CHANGE AT ANY TIME
BASED ON MARKET AND OTHER CONDITIONS. THE COMPOSITION, INDUSTRIES AND HOLDINGS
OF THE PORTFOLIO ARE SUBJECT TO CHANGE.
THE PERFORMANCE REPRESENTS INFORMATION OF I SHARES.
B-1
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
LARGE COMPANY GROWTH FUND VS. STANDARD & POOR'S 500 INDEX
("S&P INDEX") AND LIPPER GROWTH AVERAGE ("LIPPER AVERAGE")
The following chart reflects the value of a $10,000 investment in the
Fund, including reinvested dividends and distributions, over the past 10 fiscal
year periods or since inception (for funds lacking l0-year records). The result
is compared with a broad-based securities market index and a peer based average.
The Fund's total return includes operating expenses that reduce returns, while
the total return of the Index does not. The Lipper Average does not include
sales charges but does include management fees and expenses. The Lipper Average
is calculated by taking an arithmetic average of the returns of the funds in the
group. Investment return and principal value of an investment in the Fund will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. PAST PERFORMANCE IS NOT PREDICTIVE NOR A GUARANTEE OF
FUTURE RESULTS.
-------------------------------
[Chart reflects performance
indicated to left]
-------------------------------
- --------------------------------------------------------------------------------
Average Annual Total Return
as of May 31, 1998
- --------------------------------------------------------------------------------
- ------------------------------- -------------- ---------------- ----------------
I Shares* S&P Index Lipper Average**
- ------------------------------- -------------- ---------------- ----------------
One Year 32.39% 30.67% 25.85%
- ------------------------------- -------------- ---------------- ----------------
Five Year 20.39% 22.14% 18.16%
- ------------------------------- -------------- ---------------- ----------------
Ten Year 18.97% 18.59% 16.43%
- ------------------------------- -------------- ---------------- ----------------
Value May 31, l998 $56,861 $55,045 $45,823
- ------------------------------- -------------- ---------------- ----------------
*Prior to November 11, l994, Norwest Investment Management managed a collective
trust fund with investment objectives and policies that were, in all material
respects, equivalent to the Fund. The performance of the Fund includes the
performance of the predecessor collective investment fund for the periods before
it became a mutual fund on November 11, l994. The collective investment fund
performance was adjusted to reflect the Fund's l994 estimate of its expense
ratio for the first year of operations as a mutual fund, including any
applicable sales load (without giving effect to any fee waivers or expense
reimbursements). The collective investment fund was not registered under the
l940 Act, nor subject to certain investment limitations, diversification
requirements, and other restrictions imposed by the l940 Act and the Internal
Revenue Code, which if applicable, may have adversely affected the performance
results.
**Source: Lipper Analytical Services, Inc. is an independent mutual fund rating
service that ranks funds in various fund categories by making comparative
calculations using total returns. Although gathered from reliable sources, data
accuracy and completeness cannot be guaranteed.
TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN FEES AND EXPENSES NOT BEEN
VOLUNTARILY WAIVED AND/OR REIMBURSED.
THE FUND IS PROFESSIONALLY MANAGED WHILE THE INDEX IS UNMANAGED AND IS NOT
AVAILABLE FOR INVESTMENT.
B-2
<PAGE>
EXHIBIT C - PLAN OF LIQUIDATION OF GROWTH STOCK FUND
PLAN OF LIQUIDATION
OF THE GROWTH STOCK FUND
OF MASTERWORKS FUNDS INC.
MasterWorks Funds Inc., a Maryland corporation (the "Company"), on
behalf of its Growth Stock Fund (the "Fund"), shall proceed to a complete
liquidation of the Fund according to the procedures set forth in this Plan of
Liquidation (the "Plan"). The Fund invests all of its assets in the Growth Stock
Master Portfolio (the "Master Portfolio") of Managed Series Instrument Trust
("MSIT"). The Plan has been approved by the Board of Directors of the Company
(the "Board") as being advisable and in the best interests of the Fund and its
shareholders. The Board has directed that this Plan be submitted to the holders
of the outstanding voting shares of the Fund (each a "Shareholder" and,
collectively, the "Shareholders"), voting in the aggregate without regard to
class, for their approval or rejection at a special meeting of shareholders and
has authorized the distribution of a Proxy Statement (the "Proxy Statement") in
connection with the solicitation of proxies for such meeting. Upon Shareholder
approval of the Plan, and a determination by the appropriate officers of the
Company that the Plan of Consolidation approved by the Board (the "Consolidation
Plan") will not be consummated on or before December 11, 1998, the Fund shall
voluntarily dissolve and completely liquidate in accordance with the
requirements of the Maryland General Corporation Law (the "MGCL") and the
Internal Revenue Code of 1986, as amended (the "Code"), as follows:
1. ADOPTION OF PLAN. The Plan shall become effective on the date (the "Effective
Date"), when both (i) the appropriate officers of the Company determine that the
Consolidation Plan will not be consummated on or before December 11, 1998, and
(ii) the Plan is approved by the Shareholders. As soon as practicable after the
Effective Date, the Fund shall cease offering and selling its shares, except in
connection with preexisting automated investment arrangements.
2. LIQUIDATION AND DISTRIBUTION OF ASSETS. As soon as practicable after the
Effective Date and by December 11, 1998 (the "Liquidation Period"), or as soon
thereafter as practicable depending on market conditions and consistent with the
terms of this Plan, all assets of the Master Portfolio shall be converted to
cash or cash equivalents. During the Liquidation Period, Barclays Global Fund
Advisors and Wells Fargo Bank, N.A., as investment adviser and investment
subadviser, respectively, to the Master Portfolio, shall have the authority to
engage in such transactions as may be appropriate in anticipation of the Fund's
liquidation and dissolution, including liquidating investments on such terms as
they determine to be reasonable and in the best interests of the Fund and its
shareholders.
3. PROVISIONS FOR LIABILITIES. To the extent deemed advisable by the appropriate
Officers of the Company, the Fund shall pay or discharge or set aside a reserve
fund for, or otherwise provide for the payment or discharge of, any liabilities
and obligations of the Fund, including, without limitation, contingent
liabilities.
4. DISTRIBUTION TO SHAREHOLDERS. As soon as practicable after the Liquidation
Period, the Fund shall liquidate and distribute pro rata on the date of
liquidation (the "Liquidation Date") to its shareholders of record as of the
close of business on December 11, 1998 all of the assets of the Fund in complete
cancellation and redemption of all the outstanding shares of the Fund, except
for cash, bank deposits or cash equivalents in an estimated amount necessary to
(i) discharge any unpaid liabilities and obligations of the Fund on the Fund's
books on the Liquidation Date, including, but not limited to, income dividends
and capital gains distributions, if any, payable through the Liquidation Date,
and (ii) pay such contingent liabilities as the Board shall reasonably deem to
exist against the assets of the Fund on the Fund's books.
5. NOTICE AND FILINGS. As soon as practicable after the Effective Date, the
Company shall mail notice to the appropriate parties that this Plan has been
approved by the Board and the Shareholders and that the Fund will be liquidating
its assets, to the extent such notice is required under the MGCL, and file such
documents as may be
C-1
<PAGE>
required to effect the liquidation and dissolution of the Fund pursuant to the
MGCL. No shareholder shall have any appraisal or dissenters rights in connection
with this Plan.
6. AMENDMENT OR ABANDONMENT OF PLAN. The Board may modify or amend this Plan at
any time without Shareholder approval if it determines that such action would be
advisable and in the best interests of the Fund and its Shareholders. If any
amendment or modification appears necessary and in the judgment of the Board
will materially and adversely affect the interests of the Shareholders, such an
amendment or modification will be submitted to the Shareholders for approval. In
addition, the Board may abandon this Plan without Shareholder approval at any
time prior to the Liquidation Date if it determines that abandonment would be
advisable and in the best interests of the Fund and its Shareholders.
7. POWERS OF BOARD AND OFFICERS. The Board and the officers of the Fund are
authorized to approve such changes to the terms of any of the transactions
referred to herein, to interpret any of the provisions of this Plan, and to
make, execute and deliver such other agreements, conveyances, assignments,
transfers, certificates and other documents and take such other action as the
Board and the officers of the Fund deem necessary or desirable in order to carry
out the provisions of this Plan and effect the complete liquidation and
dissolution of the Fund in accordance with the Code and the MGCL.
8. TERMINATION OF BUSINESS OPERATIONS. As soon as practicable after the
Effective Date, the Fund shall cease to conduct business except as shall be
necessary in connection with the effectuation of its liquidation and
dissolution.
9. EXPENSES. The expenses of carrying out the terms of this Plan shall be borne
by the Fund, whether or not the liquidation contemplated by this Plan is
effected.
C-2
<PAGE>
TABLE OF CONTENTS
PAGE
Introduction.............................................................1
Proposal One: Approval of an Agreement
and Plan of Consolidation...........................................3
Summary........................................................3
Expense Information............................................3
Reasons for the Consolidation..................................5
Comparison of Investment Objectives, Policies
and Risk Considerations.....................................6
Information about the Consolidation............................9
Comparison of Investment Advisers.............................11
Comparison of Service Providers...............................12
Advisory, Distribution and Other Fees; Expense Ratios.........13
Comparison of Purchase and Redemption
Procedures and Exchange Rights.............................14
Comparison of Business Structures.............................14
Information about the Funds...................................15
Proposal Two: Approval of a Plan of Liquidation.........................16
Voting Information......................................................17
Exhibit A: Agreement and Plan of Consolidation.........................A-1
Exhibit B: Performance Information.....................................B-1
Exhibit C: Plan of Liquidation.........................................C-1
