MASTERWORKS FUNDS INC, 485BPOS, 1998-09-02

MASTERWORKS FUNDS INC
485BPOS, 1998-09-02

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<PAGE>

As filed with the Securities and Exchange Commission
on September 2, 1998
Registration No. 33-54126; 811-7332

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]

Post-Effective Amendment No. 17 [X]

And

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]

Amendment No. 21 [ ]

(Check appropriate box or boxes)
________________________

MASTERWORKS FUNDS INC.
(formerly, Stagecoach Inc.)

(Exact Name of Registrant as specified in Charter)
111 Center Street
Little Rock, Arkansas 72201
(Address of Principal Executive Offices, including Zip Code)

Registrant's Telephone Number, including Area code: (800) 643-9691

Richard H. Blank, Jr.
c/o Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
(Name and Address of Agent for Service)

With a copy to:
Robert M. Kurucza, Esq.
Marco E. Adelfio, Esq.
Morrison & Foerster LLP
2000 Pennsylvania Avenue, N.W.
Washington, D.C. 20006

It is proposed that this filing will become effective (check appropriate box):

[X] Immediately upon filing pursuant [ ] on _________ pursuant
to Rule 485(b), or to Rule 485(b)

[ ] 60 days after filing pursuant [ ] on _________ pursuant
to Rule 485(a)(1), or to Rule 485(a)(1)

[ ] 75 days after filing pursuant [ ] on ___________pursuant
to Rule 485(a)(2), or to Rule 485(a)(2)

If appropriate, check the following box:

[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

This Post-Effective Amendment to the Registrant's Registration Statement has
been executed by Master Investment Portfolio and Managed Series Investment Trust
(registered investment companies with separate series in which certain of the
Registrant's series invest substantially all of their assets) and their trustees
and principal officer.
<PAGE>

EXPLANATORY NOTE
----------------

This Post-Effective Amendment No. 17 (the "Amendment") to the
Registration Statement of MasterWorks Funds Inc. (the "Company") is being
filed to add to the Company's Registration Statement the effective forms of
prospectus and statement of additional information for the Money Market Fund,
and to make certain other non-material changes to the Registration Statement.
<PAGE>

Cross Reference Sheet
---------------------

MONEY MARKET FUND
-----------------

Form N-1A Item Number
- ---------------------

Part A Prospectus Captions
- ------ -------------------

1 Cover Page
2 Prospectus Summary; Summary of Fund Expenses
3 Financial Highlights
4 The Fund
Management of the Fund
General Information
Appendix - Additional Investment Policies
5 Prospectus Summary
Management of the Fund
6 Management of the Fund
Dividends and Distributions
Taxes
General Information
7 How to Buy Shares
Exchange Privilege
Share Value
8 How to Redeem Shares
9 Not Applicable

Part B Statement of Additional Information Captions
- ------ --------------------------------------------

10 Cover Page
11 Table of Contents
12 General Information
Other
13 Investment Restrictions
Additional Permitted Investment Activities
Appendix
14 Management
15 Management
16 Management
Independent Auditors
Counsel
17 Portfolio Transactions
18 Capital Stock
19 Determination of Net Asset Value
Purchase and Redemption of Shares
20 Taxes
21 Management
22 Performance Information
23 Financial Information

Part C General Information
- ------ -------------------

24-32 Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of this Document.
<PAGE>

MUTUAL FUND PROSPECTUS

September 1, 1998

[GRAPHIC APPEARS HERE]

MONEY MARKET FUND

Advised by Barclays Global Fund Advisors
Sponsored and distributed by Stephens Inc.,
Member NYSE/SIPC

MasterWorks(R) Funds

<PAGE>

MasterWorks Funds Inc. (the "Company") is an open-end, management investment
company. This Prospectus contains information about one of the Company's
funds -- the MONEY MARKET FUND (the "Fund"). The Fund seeks to provide invest-
ors with a high level of income, while preserving capital and liquidity, by
investing in high quality, short-term securities. The Fund seeks to achieve
its investment objective by investing substantially all of its assets in the
Money Market Master Portfolio (the "Master Portfolio") of Master Investment
Portfolio ("MIP"), an open-end management investment company, rather than in a
portfolio of securities. The Fund has the same investment objective as the
Master Portfolio and the investment experience of the Fund corresponds di-
rectly to the investment experience of the Master Portfolio. REFERENCES TO THE
INVESTMENTS, INVESTMENT POLICIES AND RISKS OF THE FUND UNLESS OTHERWISE INDI-
CATED, SHOULD BE UNDERSTOOD AS REFERENCES TO THE INVESTMENTS, INVESTMENT POLI-
CIES AND RISKS OF THE CORRESPONDING MASTER PORTFOLIO.

Please read this Prospectus before investing and retain it for future refer-
ence. It sets forth concisely the information about the Fund that an investor
should know before investing. A Statement of Additional Information ("SAI")
dated September 1, 1998 describing the Fund has been filed with the Securities
and Exchange Commission ("SEC") and is incorporated by reference into this
Prospectus. The SAI is available without charge by calling the Company at 1-
888-204-3956 or by writing the Company at the address printed on the back of
the Prospectus. The SAI and other information is also available on the SEC's
website (http://www.sec.gov).
-------------------
AS WITH ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAP-
PROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMIS-
SION OR ANY OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THESE AUTHORITIES
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------

FUND SHARES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR ISSUED, ENDORSED OR
GUARANTEED BY, BARCLAYS GLOBAL INVESTORS, N.A., INVESTORS BANK & TRUST CO. OR
ANY OF THEIR AFFILIATES. SUCH SHARES ARE NOT INSURED BY THE U.S. GOVERNMENT,
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THE FUND INVOLVES CERTAIN INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
MASTERWORKS FUNDS INC.

MONEY MARKET FUND

HOW THE FUND WORKS

The Fund invests in high-quality, short- term investments. These investments
include obligations of the U.S. Government, its agencies and instrumentalities
(including government-sponsored enterprises), high-quality debt obligations,
such as corporate debt, certain obligations of U.S. banks and certain repur-
chase agreements. The Fund's investments are expected to present minimal risks
because of their relatively short maturities and the high credit quality (fi-
nancial strength) of the issuers.

-------------------

BARCLAYS GLOBAL FUND ADVISORS IS THE INVESTMENT ADVISER TO THE MASTER PORT-
FOLIO AND TOGETHER WITH ITS AFFILIATES AND INVESTORS BANK & TRUST CO. PROVIDES
OTHER SERVICES TO THE FUND FOR WHICH IT IS COMPENSATED. STEPHENS INC., WHICH
IS NOT AFFILIATED WITH BARCLAYS GLOBAL FUND ADVISORS, IS THE SPONSOR AND CO-
ADMINISTRATOR AND SERVES AS THE DISTRIBUTOR FOR THE COMPANY.

THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A CONSTANT
$1.00 NET ASSET VALUE PER SHARE.

PROSPECTUS

SEPTEMBER 1, 1998
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary..................................................... 1
Summary of Fund Expenses............................................... 4
Explanation of the Tables.............................................. 4
Financial Highlights................................................... 6
The Fund............................................................... 7
Management of the Fund................................................. 10
How to Buy Shares...................................................... 13
How to Redeem Shares................................................... 17
Exchange Privilege..................................................... 20
Share Value............................................................ 21
Dividends and Distributions............................................ 21
Taxes.................................................................. 22
General Information.................................................... 23
<CAPTION>
APPENDIX
--------
<S> <C>
Additional Investment Policies......................................... A-1
</TABLE>
<PAGE>

PROSPECTUS SUMMARY

The following summary provides investors with basic information about the
Fund. For more information, please refer specifically to the identified Pro-
spectus sections and generally to the Prospectus and SAI.

Q. WHO CAN INVEST IN THE FUND?

A. Shares of the Fund are offered primarily to a select group of investors.
These include:

. Participants in employee benefit plans ("Benefit Plans"), including re-
tirement plans, who have appointed one of the Company's Selling Agents
as plan trustee, plan administrator or other agent, or whose plan trust-
ee, plan administrator or other agent has an arrangement with a Selling
Agent that permits investments in Fund shares, and individuals who in-
vest pursuant to an agreement between a Benefit Plan and a Selling
Agent.

. Investors using proceeds that are being rolled over directly from a
qualified Benefit Plan to an Individual Retirement Account ("IRA") pur-
suant to arrangements between the sponsor or other agent of the quali-
fied Benefit Plan and a Selling Agent, or who have established a tax-de-
ferred retirement plan with a Selling Agent.

. Investors who have an account arrangement with one of the Company's
Selling Agents that permits investments in Fund shares.

. Investors who have made arrangements with Barclays Global Investors,
N.A. ("BGI") and invest at least $1 million in the Fund.

See "How to Buy Shares."

Q. WHAT ARE SOME OF THE KEY FEATURES OF THE FUND?

A. The Fund seeks to provide investors with a high level of income, while
preserving capital and liquidity, by investing in high-quality, short-term
investments. These investments include obligations of the U.S. Government,
its agencies and instrumentalities (including government-sponsored enter-
prises), high-quality debt obligations, such as corporate debt, certain
obligations of U.S. banks and certain repurchase agreements. The Fund
seeks to achieve its investment objective by investing all of its assets
in the Master Portfolio of MIP, which has the same investment objective as
the Fund. The Fund seeks to maintain a net asset value of $1.00 per share;
however, there is no assurance that this will be achieved.

See "The Fund -- Investment Objective and Policies" and "Appendix -- Addi-
tional Investment Policies."

1
<PAGE>

Q. WHAT ARE SOME OF THE POTENTIAL RISKS ASSOCIATED WITH AN INVESTMENT IN THE
FUND?

A. An investment in the Fund is not a bank deposit or obligation of Barclays
Global Fund Advisors ("BGFA") or BGI, or any of their affiliates, and is
not insured by the Federal Deposit Insurance Corporation ("FDIC"). An in-
vestment in the Fund is not insured or guaranteed against loss of princi-
pal. Therefore, investors should be willing to accept some risk with the
money invested in the Fund. Although the Fund seeks to maintain a stable
net asset value of $1.00 per share, there is no assurance that it will be
able to do so. As with all mutual funds, there can be no assurance that
the Fund will achieve its investment objective.

See "The Fund -- Risk Considerations" and "Appendix -- Additional Invest-
ment Policies."

Q. HOW DO I INVEST IN THE FUND?

A. Shares of the Fund can be purchased by establishing an account arrangement
with a designated Selling Agent. Shares may be purchased at net asset
value on any day the Fund is open for business (a "Business Day"). The
Fund is open for business Monday through Friday and is closed on New York
Stock Exchange ("NYSE") and federal bank holidays.

To invest in the Fund, contact a Selling Agent to receive information and
an Account Application. An Account Application must be completed and
signed to open an account.

See "How to Buy Shares."

Q. WHO MANAGES MY INVESTMENTS?

A. The Master Portfolio is managed by BGFA. A separate investment adviser has
not been retained for the Fund because the Fund invests all of its assets
in the Master Portfolio. As of April 30, 1998, BGFA and its affiliates
provided investment advisory services for approximately $575 billion of
assets.

See "Management of the Fund."

Q. WHAT ARE THE FEES FOR INVESTING?

A. Unlike certain other mutual funds which charge sales loads or other trans-
action fees, the Fund does not impose shareholder transaction

2
<PAGE>

fees on the purchase, redemption or exchange of its shares. Selling
Agents, in accordance with the terms of their customer account arrange-
ments, may charge additional fees for maintaining customer accounts.

See "Management of the Fund."

Q. HOW ARE THE FUND'S INVESTMENTS VALUED?

A. The price per share or "net asset value" ("NAV") of the Fund is based on
the value of the Fund's total assets (net of liabilities) divided by the
number of Fund shares outstanding. The Fund's investments are valued on
the basis of the amortized cost method, which assumes receipt of a steady
rate of payment until maturity rather than actual changes in market value.

See "Share Value."

Q. DOES THE FUND PAY DIVIDENDS?

A. Dividends from net investment income are declared daily, paid monthly and
automatically reinvested in additional Fund shares at NAV unless payment
in cash is requested and your arrangement with a Selling Agent permits the
processing of cash payments. Each reinvestment increases the total number
of shares held by the shareholder. Any capital gains are distributed at
least annually.

See "Dividends and Distributions."

Q. ARE EXCHANGES TO OTHER FUNDS PERMITTED?

A. Yes. The exchange privilege enables an investor to exchange Fund shares
for shares of another fund offered by the Company, provided such shares
are offered for sale in the investor's state of residence.

See "Exchange Privilege."

Q. HOW DO I REDEEM SHARES?

A. Shares of the Fund may be redeemed at NAV without the imposition of a
sales charge or redemption fee on any Business Day by letter or by tele-
phone (provided you have completed the "Redemption by Telephone" portion
of your account application). For more information, contact your Selling
Agent.

See "How to Redeem Shares."

3
<PAGE>

SUMMARY OF FUND EXPENSES

ANNUAL FUND OPERATING EXPENSES/1/
(as a percentage of average daily net assets)

<TABLE>
<S> <C>
Management Fees........................................................... 0.10%
Co-Administration Fees.................................................... 0.35%
----
TOTAL FUND OPERATING EXPENSES............................................. 0.45%
</TABLE>

/1/ Includes expenses charged to the Fund and the Master Portfolio.

EXAMPLE OF EXPENSES

An investor would pay the following expenses on a $1,000 investment, assum-
ing (1) a 5% annual return and (2) redemption at the end of each time period:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$5 $14 $25 $57
</TABLE>

EXPLANATION OF THE TABLES

The purpose of the foregoing tables is to assist an investor in understand-
ing the various fees and expenses that an investor in the Fund will pay di-
rectly or indirectly. The tables do not reflect any charges that may be im-
posed by Selling Agents directly on customer accounts in connection with an
investment in the Fund. The following provides a general explanation of the
information provided in the tables.

ANNUAL FUND OPERATING EXPENSES reflect the level of ongoing fees expected to
be in effect during the current fiscal year and reflect the contractual level
of such fees currently payable by the Fund. BGFA, BGI and Stephens each may
elect, in its sole discretion, to waive or reimburse all or a portion of its
respective fees charged to, or expenses paid by, the Fund. Any waivers or re-
imbursements would reduce the Fund's total expenses. For more complete de-
scriptions of the various costs and expenses you can expect to incur as an in-
vestor in the Fund, see "Management of the Fund and Master Portfolio."

EXAMPLE OF EXPENSES is a hypothetical illustration of the expenses associ-
ated with a $1,000 investment in the Fund over stated periods, based on the
expenses in the table above and an assumed annual rate of return of 5%. This
annual rate of return should not be considered an indication of actual or ex-
pected Fund performance. In addition, the Example of Expenses should not be
considered a representation of past or future expenses; actual expenses and
returns may be greater or less than those shown above.

4
<PAGE>

With regard to the combined fees and expenses of the Fund and Master Portfo-
lio, the Company's Board of Directors has considered whether various costs and
benefits of investing all of the Fund's assets in the Master Portfolio rather
than directly in a portfolio of securities would be more or less than if the
Fund invested in portfolio securities directly. The Company's Board of Direc-
tors believes that the aggregate per share expenses of the Fund will not be
more than the expenses incurred by the Fund if the Fund invested directly in
the type of investments held by the Master Portfolio. The Company's Board of
Directors believes that if other investors invest their assets in the Master
Portfolio, certain economic efficiencies may be realized with respect to the
Master Portfolio. For example, fixed expenses that otherwise would have been
borne solely by the Fund would be spread across a larger asset base provided
by more than one fund investing in the Master Portfolio. There can be no as-
surance that these economic efficiencies will be achieved. In addition, the
Master Portfolio may sell its interests to other mutual funds or accredited
investors.

5
<PAGE>

FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING AS SHOWN)

The following information has been derived from the Financial Highlights in-
cluded in the Fund's financial statements for the fiscal year ended February
28, 1998. These financial highlights represent the Fund's operations as a
stand-alone fund prior to its reorganization as a feeder fund in a master
feeder structure. The financial statements are incorporated by reference into
the Fund's SAI and have been audited by KPMG Peat Marwick LLP, independent au-
ditors, whose report thereon dated April 3, 1998, also is incorporated by ref-
erence into the SAI. This information should be read in conjunction with the
financial statements and the notes thereto. The SAI has been incorporated by
reference into this Prospectus.

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
FEBRUARY 28, FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
1998 1997 1996 1995 1994*
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
beginning of period..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment
operations:
Net investment income.. 0.05 0.05 0.05 0.04 0.02
Net realized and
unrealized gain on
investments............ 0.00 0.00 0.00 0.00 0.00
-------- -------- -------- -------- -------
Total from investment
operations.............. 0.05 0.05 0.05 0.04 0.02
Less distributions:
From net investment
income................. (0.05) (0.05) (0.05) (0.04) (0.02)
From net realized
gains.................. 0.00 0.00 0.00 0.00 0.00
-------- -------- -------- -------- -------
Total distributions..... (0.05) (0.05) (0.05) (0.04) (0.02)
-------- -------- -------- -------- -------
Net Asset Value, end of
period.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== =======
Total return (not
annualized)............. 5.35% 5.10% 5.60% 4.40% 1.81%
Ratios/Supplemental
data:
Net assets, end of
period (000)........... $180,375 $177,046 $156,852 $147,269 $81,649
Number of shares
outstanding, end of
period (000)........... 180,437 177,103 156,910 147,280 81,648
Ratios to average net
assets (annualized):
Ratio of expenses to
average net assets(1).. 0.45% 0.45% 0.45% 0.45% 0.49%
Ratio of net investment
income to average net
assets(2).............. 5.23% 4.96% 5.44% 4.44% 2.77%
(1) Ratio of expenses to
average net assets
prior to waived fees
and reimbursed
expenses............ N/A 0.48% 0.49% 0.57% 0.50%
(2) Ratio of net
investment income to
average net assets
prior to waived fees
and reimbursed
expenses............ N/A 4.93% 5.40% 4.32% 2.76%
</TABLE>
- ----
* The Fund commenced operations on July 2, 1993.

6
<PAGE>

THE FUND

INVESTMENT OBJECTIVE AND POLICIES

The Fund seeks to provide investors with a high level of income, while pre-
serving capital and liquidity, by investing in high-quality, short-term in-
vestments. The Fund, which is a diversified portfolio, seeks to achieve its
investment objective by investing all of its assets in the Master Portfolio,
which has the same investment objective as the Fund. The Master Portfolio
seeks to achieve its investment objective by investing its assets only in U.S.
dollar-denominated, high-quality money market instruments, and may engage in
certain other investment activities as described in this Prospectus. Permitted
investments include U.S. Government short-term obligations, obligations of do-
mestic and foreign banks, commercial paper, corporate notes and repurchase
agreements. A more complete description of these investments and investment
activities is contained in "Appendix -- Additional Investment Policies."

RISK CONSIDERATIONS

General

Investments in the Fund are not bank deposits and are not insured or guaran-
teed against loss of principal. Although the Fund seeks to maintain a stable
net asset value of $1.00 per share, there is no assurance that it will be able
to do so. As with all mutual funds there is no assurance the Fund will achieve
its investment objective. Pursuant to the Investment Company Act of 1940, as
amended (the "1940 Act"), the Fund must comply with certain investment crite-
ria designed to provide liquidity, reduce risk and allow the Fund to maintain
a stable net asset value of $1.00 per share. The Fund seeks to reduce risk by
investing its assets in securities of various issuers. As such, the Fund is
considered to be diversified for purposes of the 1940 Act.

Since its inception, the Fund has emphasized safety of principal and high
credit quality. In particular, the internal investment policies of the Fund's
investment adviser, BGFA, have always prohibited the purchase by the Fund of
many types of floating-rate instruments commonly referred to as derivatives
that are considered to be potentially volatile.

The Fund may only invest in floating-rate securities that bear interest at a
rate that resets quarterly or more frequently, and that resets based on
changes in standard money market rate indices such as U.S. Government Treasury
bills and London Interbank Offered Rate, among others. For more information,
see "Additional Permitted Investment Activities -- Floating and Variable Rate
Obligations" in the SAI.

7
<PAGE>

Any investment that the Fund purchases must have a remaining maturity of not
more than 397 days (13 months). In addition, any investment that the Fund pur-
chases must present minimal credit risks and be of "high quality." "High qual-
ity" means to be rated in the top two rating categories by the requisite Na-
tionally Recognized Statistical Rating Organizations ("NRSRO") or, if unrated,
determined to be of comparable quality to such rated securities by BGFA, as
the Fund's investment adviser, under guidelines adopted by the Fund's Board of
Directors. The Fund may not achieve as high a level of current income as other
mutual funds that do not limit their investment to the high credit quality in-
struments in which the Fund invests.

The Fund may invest up to 10% of its assets in illiquid securities. Illiquid
securities, which may include certain restricted securities, may be difficult
to sell promptly at an acceptable price. Certain restricted securities may be
subject to legal restrictions on resale. Delay or difficulty in selling secu-
rities may result in a loss or be costly to the Fund.

Year 2000

Many computer software systems in use today cannot distinguish the Year 2000
from the Year 1900. Most of the services provided to the Fund and Master Port-
folio depend on the smooth functioning of computer systems. Any failure to
adapt these systems in time could hamper the Fund's and Master Portfolio's op-
erations and services. The Fund's and Master Portfolio's principal service
providers have advised the Fund and Master Portfolio that they are working on
necessary changes to their systems and that they expect their systems to be
adapted in time. There can, of course, be no assurance of success. In addi-
tion, because the Year 2000 issue affects virtually all organizations, the
companies or entities in which the Fund invests also could be adversely im-
pacted by the Year 2000 issue. The extent of such impact cannot be predicted.

PERFORMANCE

The Fund's performance may be advertised in terms of current yield or effec-
tive yield. These performance figures are based on historical results and are
not intended to indicate future performance. The Fund's current yield refers
to the income generated by an investment in the Fund over a seven- or thirty-
day period, expressed as an annual percentage rate. The effective yield is
calculated similarly, but assumes that the income earned from an investment is
reinvested at net asset value. The Fund's effective yield is slightly higher
than the current yield

8
<PAGE>

because of the compounding effect of the assumed reinvestment of income
earned.

Performance may vary from time to time, and past results are not necessarily
representative of future results. Investors should remember that performance
is a function of the type and quality of investments held by the Fund and is
affected by operating expenses. Performance information, such as that de-
scribed above, may not provide a basis for comparison with other investments
or other investment companies using a different method of calculating perfor-
mance.

Additional information about the performance of the Fund is contained in the
Annual Report for the Fund. The Annual Report may be obtained by calling the
Company at 1-888-204-3956.

9
<PAGE>

MANAGEMENT OF THE FUND

BOARD OF DIRECTORS -- The business and affairs of the Company are managed
under the direction of its Board of Directors and in conformity with Maryland
law. Additional information regarding the Officers and Directors of the Com-
pany is included in the SAI under "Management."

INVESTMENT ADVISER -- BGFA serves as investment adviser to the Master Port-
folio and provides investment guidance and policy direction in connection with
the management of the Master Portfolio's assets. BGFA is a direct subsidiary
of BGI (which, in turn, is an indirect subsidiary of Barclays Bank PLC) 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 ap-
proximately $575 billion of assets.

The Company has agreed to pay BGFA a monthly fee at the annual rate of 0.10%
of the Master Portfolio's average daily net assets (of which the Fund bears
its pro rata portion) as compensation for its advisory services. BGFA fur-
nishes investment guidance and policy direction in connection with the daily
portfolio management of the Master Portfolio. Prior to the conversion of the
Fund to a master/feeder structure (the "Reorganization"), BGFA received a
monthly fee at an annual rate of 0.35% of the Fund's average daily net assets,
out of which BGFA paid a sub-adviser, Wells Fargo Bank, N.A., an amount equal
to 0.05% of the average daily net assets of the Fund as compensation for its
sub-advisory services. For the fiscal year ended February 28, 1998, no advi-
sory or sub-advisory fees were waived. As of September 1, 1998, BFGA no longer
engages an investment sub-adviser, but instead will manage the Master Portfo-
lio's assets itself.

Morrison & Foerster LLP, counsel to the Company and MIP and special counsel
to BGFA, has advised the Company, BGFA, and MIP that BGFA and its affiliates
may perform the services contemplated by the Investment Advisory Contract and
this Prospectus without violation of the Glass-Steagall Act. Such counsel has
pointed out, however, that there are no controlling judicial or administrative
interpretations or decisions and that future judicial or administrative inter-
pretations of, or decisions relating to, present federal or state statutes,
including the Glass-Steagall Act, and regulations relating to the permissible
activities of banks and their subsidiaries or affiliates, as well as future
changes in such statutes, regulations and judicial or administrative decisions
or interpretations, could prevent such entities from continuing to perform, in

10
<PAGE>

whole or in part, such services. If any such entity were prohibited from per-
forming any such services, it is expected that new agreements would be pro-
posed or entered into with another entity or entities qualified to perform
such services.

CO-ADMINISTRATORS -- Stephens Inc. ("Stephens") and BGI are the Fund's co-
administrators. Stephens and BGI provide the Fund with administration servic-
es, including general supervision of the Fund's non-investment operations, co-
ordination of the other services provided to the Fund, compilation of informa-
tion for reports to the SEC and the state securities commissions, preparation
of proxy statements and shareholder reports, and general supervision of data
compilation in connection with preparing periodic reports to the Company's di-
rectors and officers. Stephens also furnishes office space and certain facili-
ties to conduct the Fund's business, and compensates the Company's directors,
officers and employees who are affiliated with Stephens. In addition, except
as outlined below under "Expenses," Stephens and BGI will be

responsible for paying all expenses incurred by the Fund other than the fees
payable to BGFA. For these services, Stephens and BGI are entitled to a
monthly fee, in the aggregate, at the annual rate of 0.35% of the Fund's aver-
age daily net assets. Prior to the Reorganization, Stephens and BGI were enti-
tled to receive 0.10% of the average daily net assets of the Fund for such
services. The Reorganization did not result in an increase in overall fee lev-
els of the Fund because the increase in administration fees is offset by the
reduction in advisory fees.

BGI has delegated certain of its duties as co-administrator to Investors
Bank & Trust Company ("IBT"). IBT, as sub-administrator, is compensated by BGI
for performing certain administration services. Prior to October 21, 1996,
Stephens was the Fund's sole administrator and received fees for its services
as described in the SAI.

DISTRIBUTOR -- Stephens is the distributor for the Fund's shares. Stephens
is a full service broker/dealer and investment advisory firm located at 111
Center Street, Little Rock, Arkansas 72201. Stephens and its predecessor have
been providing securities and investment services for more than 60 years. Ad-
ditionally, it has been providing discretionary portfolio management services
since 1983. Stephens currently manages investment portfolios for pension and
profit sharing plans, individual investors, foundations, insurance companies
and university endowments. Stephens, as the Company's sponsor and the princi-
pal underwriter of the Fund within the meaning of the 1940 Act, has entered
into a Distribution Agreement with the Company pursuant to which

11
<PAGE>

Stephens has the responsibility for distributing Fund shares. The Distribution
Agreement provides that Stephens shall act as agent for the Fund for the sale
of its shares, and may enter into Selling Agreements with selling agents that
wish to make available Fund shares to their respective customers ("Selling
Agents"). Stephens does not receive a fee for providing distribution services
to the Fund. BGI presently acts as a Selling Agent, but does not receive any
fee from the Fund for such activities.

CUSTODIAN -- IBT currently acts as the custodian to the Master Portfolio.
The principal business address of IBT is 200 Clarendon Street, Boston,
Massachusetts 02116. IBT is not entitled to receive compensation for its cus-
todial services so long as it is entitled to receive compensation for provid-
ing sub-administration services to the Fund.

TRANSFER AND DIVIDEND DISBURSING AGENT -- IBT also acts as the Company's
transfer and dividend disbursing agent.

EXPENSES -- Except for advisory and co-administration fees, extraordinary
expenses, brokerage and other expenses connected to the execution of portfolio
transactions and certain other expenses which are borne by the Fund, Stephens
and BGI have agreed to bear all costs of the Fund's and the Company's opera-
tions.

12
<PAGE>

HOW TO BUY SHARES

WHO MAY INVEST

The following types of investors are eligible to invest in Fund shares:

. Participants in Benefit Plans ("Plan Participants"), including retire-
ment plans, who have appointed one of the Company's Selling Agents as
plan trustee, plan administrator or other agent, or whose plan trustee,
plan administrator or other agent has an arrangement with a Selling
Agent that permits investments in Fund shares, and Plan Participants who
invest pursuant to an agreement between such a Benefit Plan and a Sell-
ing Agent.

. Investors who have an account arrangement with one of the Company's
Selling Agents that permits investments in Fund shares ("Qualified Buy-
ers").

. Investors who have made arrangements with BGI and invest at least $1
million in the Fund ("Direct Buyers").

Eligible investors may purchase Fund shares in one of the several ways de-
scribed below. For more information or additional forms, call 1-888-204-3956.
The Company or Stephens may make this Prospectus available in an electronic
format. Upon receipt of a request by an investor or the investor's representa-
tive, the Company or Stephens will transmit or cause to be transmitted prompt-
ly, without charge, a paper copy of the electronic Prospectus.

MINIMUM INVESTMENT AMOUNT

In most cases, investors in Fund shares are not required to establish or
maintain a minimum investment amount. However, Direct Buyers are required to
make an initial investment in Fund shares of at least $1 million (although
this requirement may be waived under certain conditions). All investments in
Fund shares are subject to a determination by the Company that the investment
instructions are complete. If shares are purchased by a check that does not
clear, the Company reserves the right to cancel the purchase and hold the in-
vestor responsible

13
<PAGE>

for any losses or fees incurred. The Company reserves the right in its sole
discretion to suspend the availability of the Fund's shares and to reject any
purchase requests. Certificates for Fund shares are not issued. Selling Agents
may establish investment amount and account balance requirements different
from those of the Funds and may charge fees in addition to those charged by
the Fund.

GENERAL

Shares of the Fund may be purchased on any Business Day at the net asset
value per share next determined after an order in proper form is received by
the Transfer Agent. Purchase orders that are received by the Transfer Agent
before the close of regular trading on the NYSE (currently 1:00 p.m., Pacific
time) will be executed at the NAV determined as of the close of regular trad-
ing on the NYSE on that Business Day. Orders received by the Transfer Agent
after the close of regular trading on the NYSE are executed on the next Busi-
ness Day. The investor's Selling Agent is responsible for the prompt transmis-
sion of the investor's purchase order to the Transfer Agent on the investor's
behalf. Under certain circumstances, a Selling Agent may establish an earlier
deadline for receipt of orders, or an investor's order transmitted to a Sell-
ing Agent may not be received by the Transfer Agent on the same day.

Federal regulations require that an investor provide a valid taxpayer iden-
tification number ("TIN"), which is usually the investor's social security
number or employee identification number, upon opening or reopening an ac-
count.

BENEFIT PLANS

Shares of the Fund are offered to Benefit Plans that have appointed one of
the Fund's Selling Agents as plan trustee, plan administrator or other agent,
or whose plan trustee, plan administrator or other agent has a servicing ar-
rangement with a Selling Agent that permits investments in Fund shares. Bene-
fit Plans include 401(k) plans and plans qualified under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), health and welfare
plans and executive deferred compensation plans. For additional information
about Benefit Plans that may be eligible to invest in Fund shares, prospective
investors should contact a Selling Agent.

Fund investments by participants in 401(k) plans are typically made by pay-
roll deductions arranged between participants and their employers.

14
<PAGE>

Participants also may make direct contributions to their accounts in special
circumstances such as the transfer of a rollover amount from another 401(k)
plan or from a rollover IRA. Investors should contact their employer's bene-
fits department for more information about contribution methods.

Plan Participants who have established an account with a Selling Agent may
purchase Fund shares in accordance with their account arrangements with such
Selling Agent. The Selling Agent is responsible for the prompt transmission of
purchase orders. Selling Agents may charge additional fees for maintaining
customer accounts other than those charged by the Fund.

IRAS, KEOGHS AND OTHER INDIVIDUAL RETIREMENT PLANS

An investor may be entitled to invest in shares of the Fund through a tax-
deferred retirement plan. In addition to offering investments in Fund shares
through IRA rollovers, a Selling Agent may offer other types of tax-deferred
or tax-advantaged plans, including a Keogh retirement plan for self-employed
professional persons, sole proprietors and partnerships. Contact a Selling
Agent for materials describing plans available through it, and their benefits,
provisions and fees.

Application materials for opening an IRA rollover, Keogh retirement plan or
other individual retirement plan can be obtained from a Selling Agent. Com-
pleted retirement plan applications should be returned to the investor's Sell-
ing Agent for approval and processing. If a retirement plan application is in-
complete or improperly filled out, there may be a delay before the Fund ac-
count is opened. Investors should consult their Selling Agent.

PURCHASES BY QUALIFIED BUYERS

Qualified Buyers may open a Fund account and make additional purchases
through a Selling Agent with whom they have an account arrangement. Selling
Agents may transmit purchase orders to the Transfer Agent on behalf of invest-
ors, including purchase orders for which payment is to be made by wire or by
transfer from an Approved Bank designated in an investor's Account Application
("Approved Bank Account").

PURCHASES BY DIRECT BUYERS

Direct Buyers may open a Fund account by completing an Account Application.
Direct Buyers may purchase Fund shares by contacting the

15
<PAGE>

Transfer Agent, by instructing the Transfer Agent to debit an Approved Bank
Account or by wire.

TO PURCHASE FUND SHARES:

By Check: Initial and subsequent investments should be sent to MasterWorks
Funds, Inc., c/o Investors Bank and Trust Co., P.O. Box 9130, Mail Code MFD23,
Boston, MA 02117-9130.

By Wire: Investors establishing new accounts should telephone Investors Bank
& Trust Co., at 1-888-204-3956 prior to sending the bank wire.

Investors should instruct their bank to wire funds as follows:

Investors Bank & Trust Co.
ABA #011-001-438
Attn: Transfer Agent
Account #DDA 555555535
For Further Credit to: MasterWorks Funds, Inc.
Shareholder Account Name:
Shareholder Account Number:

IN-KIND PURCHASES

Payment for shares of the Fund may, at the discretion of BGFA as investment
adviser, be made in the form of securities that are permissible investments
for such Fund. Shares purchased in exchange for securities can not be redeemed
until the exchange transaction has settled. For further information, see "Pur-
chase and Redemption of Shares" in the SAI.

16
<PAGE>

HOW TO REDEEM SHARES

GENERAL

Investors may redeem all or a portion of their Fund shares on any Business
Day without any charge by the Company. The redemption price of the shares is
the next determined net asset value of the Fund calculated after the Company
has received a redemption request in proper form. Although the Fund seeks to
maintain a $1.00 net asset value per share, redemption proceeds may be more or
less than that amount.

The Company generally remits redemption proceeds from the Fund within seven
days after a redemption order is received in proper form, absent extraordinary
circumstances. Such extraordinary circumstances could include a period during
which an emergency exists as a result of

which (a) disposal by the Master Portfolio in which such Fund invests of secu-
rities owned by the Master Portfolio is not reasonably practicable or (b) it
is not reasonably practicable for the Fund or the Master Portfolio to deter-
mine fairly the value of its net assets, or a period during which the SEC by
order permits deferral of redemptions for the protection of Fund shareholders.
In addition, the Company may defer payment of a shareholder's redemption until
reasonably satisfied that such shareholder's investments made by check have
been collected (which can take up to ten days from the purchase date). Payment
of redemption proceeds may be made in portfolio securities.

Redemption orders that are received by the Transfer Agent before the close
of regular trading on the NYSE (currently 1:00 p.m., Pacific time), will be
executed at the net asset value determined as of the close of regular trading
on the NYSE on that Business Day. Redemption orders that are received by the
Transfer Agent after the close of regular trading on the NYSE will be executed
on the next Business Day. The investor's Selling Agent is responsible for the
prompt transmission of redemption orders to the Transfer Agent on the invest-
or's behalf. Under certain circumstances, a Selling Agent may establish an
earlier deadline for receipt of orders, or an investor's order transmitted to
a Selling Agent may not be received by the Transfer Agent on the same day.

Unless the investor has made other arrangements with an appropriate Selling
Agent, and the Transfer Agent has been informed of such arrangements, proceeds
of a redemption order made by the investor through the investor's Selling
Agent are credited to the investor's Approved Bank Account. If no such account
is designated, a check for the proceeds is mailed to the investor's address of
record or, if such address is no longer valid, the proceeds are credited to
the investor's account with the investor's Selling Agent.

17
<PAGE>

REDEMPTIONS BY BENEFIT PLANS, IRAS, KEOGHS AND OTHER INDIVIDUAL RETIREMENT
PLANS

Investors in these types of plans are subject to restrictions on withdrawing
their money under the Code. Each type of plan has established procedures for
withdrawals, which are disclosed to investors at the time of purchase. Invest-
ors may obtain more information by contacting their employer and/or their
Selling Agent. The redemption procedures outlined in the remainder of this
section do not apply to investors in Benefit Plans or retirement plans. In-
vestors in these types of plans should contact their Selling Agent regarding
redemption procedures applicable to them.

REDEMPTIONS BY QUALIFIED BUYERS

Qualified Buyers should contact their Selling Agent regarding redemption
procedures applicable to them. The redemption procedures outlined in the re-
mainder of this section do not apply to Qualified Buyers.

REDEMPTIONS BY DIRECT BUYERS

Redemptions by Mail

1. Write a letter of instruction to the Transfer Agent. Indicate the dollar
amount or number of Fund shares to be redeemed, the Fund account number and
TIN (where applicable).

2. Sign the letter in exactly the same way the account is registered. If
there is more than one owner of the shares, all owners must sign.

Written requests for redemptions should be mailed to MasterWorks Funds Inc.,
c/o Investors Bank and Trust Co., P.O. Box 9130, Mail Code MFD23, Boston, MA
02117-9130.

Unless other instructions are given in proper form, a check for the redemp-
tion proceeds is sent to the investor's address of record.

Redemptions by Telephone

Telephone redemption or exchange privileges are made available to Direct
Buyers who have completed the "Redemption by Telephone" section when opening
their Fund account. These privileges authorize the Transfer Agent to act on
telephone instructions from any person representing himself or herself to be
the investor and reasonably believed by

18
<PAGE>

the Transfer Agent to be genuine. The Company requires the Transfer Agent to
employ reasonable procedures, such as requiring a form of personal identifica-
tion, to confirm that instructions are genuine and, if it does not follow such
procedures, the Company and the Transfer Agent may be liable for any losses
due to unauthorized or fraudulent instructions. Neither the Company nor the
Transfer Agent will be liable for following telephone instructions reasonably
believed to be genuine.

If you have completed the Redemption by Telephone portion of a Fund's ac-
count application, you may redeem Fund shares on any Business Day by calling
the Transfer Agent at 1-888-204-3956 before the close of regular trading on
the NYSE, generally 4:00p.m. Eastern Time.

During times of drastic economic or market conditions, investors may experi-
ence difficulty in contacting the Transfer Agent by telephone to request a re-
demption or exchange of Fund shares. In such cases, investors should consider
using the other redemption procedures made available to such investors. Use of
these other redemption procedures may result in the investor's redemption re-
quest being processed at a later time than it would have been if telephone re-
demption had been used. During the delay, the Fund's net asset value may fluc-
tuate.

Expedited Redemptions by Letter and Telephone

A Direct Buyer may request an expedited redemption of Fund shares by letter,
in which case the investor's receipt of redemption proceeds, but not the
Fund's receipt of the investor's redemption request, would be expedited. Tele-
phone redemption and exchange privileges are made available to a Direct Buyer
automatically upon the opening of an account unless the investor declines such
privileges. The investor also may request an expedited redemption of Fund
shares by telephone on any Business Day, in which case both the investor's re-
ceipt of redemption proceeds and the Fund's receipt of the investor's redemp-
tion request would be expedited.

Direct Buyers may request expedited redemption by telephone by calling the
Transfer Agent at 1-888-204-3956.

Direct Buyers may request expedited redemption by mailing an expedited re-
demption request to the Transfer Agent.

Upon request, proceeds of expedited redemptions are wired or credited to an
Approved Bank Account. The Company reserves the right to impose a charge for
wiring redemption proceeds. When proceeds of an

19
<PAGE>

individual and corporate investor's expedited redemption are to be paid to
someone else, to an address other than that of record, or to an account with
an approved bank that the investor has not predesignated in his or her Account
Application, the expedited redemption request must be made by letter and the
signature(s) on the letter must be guaranteed, regardless of the amount of the
redemption. If the investor's expedited redemption request is received by the
Transfer Agent on a Business Day, the investor's redemption proceeds are
transmitted to the investor's Approved Bank Account on the next Business Day
(assuming the investor's investment check has cleared as described above), ab-
sent extraordinary circumstances. Such extraordinary circumstances could in-
clude those described above as potentially delaying redemptions, and also
could include situations involving an unusually heavy volume of wire transfer
orders on a national or regional basis or communication or transmittal delays
that could cause a brief delay in the wiring or crediting of funds.

EXCHANGE PRIVILEGE

The exchange privilege enables an investor to exchange for shares of the
Fund, shares of another fund offered by the Company in the investor's state of
residence. Before undertaking an exchange into another fund, investors should
obtain and read a copy of the current prospectus of the fund into which the
exchange is being made. A prospectus may be obtained by calling MasterWorks
Funds at 1-888-204-3956.

Shares are exchanged at the next determined net asset value. No fees are
currently charged to shareholders directly in connection with exchanges, al-
though the Company reserves the right, upon not less than 60 days' written no-
tice, to charge shareholders a nominal exchange fee in accordance with rules
promulgated by the SEC. The Company reserves the right to limit the number of
times shares may be exchanged and to reject in whole or in part any exchange
request into a fund when management believes that such action would be in the
best interests of such fund's other shareholders, such as when management be-
lieves such action would be appropriate to protect a fund against disruptions
in portfolio management resulting from frequent transactions by those seeking
to time market fluctuations. Any such rejection is made by management on a
prospective basis only, upon notice to the shareholder given not later than 10
days following such shareholder's most recent exchanges. The exchange privi-
lege may be modified or terminated at any time upon 60 days' written notice to
shareholders.

20
<PAGE>

SHARE VALUE

Shares of the Fund are sold on a continuous basis at the applicable offering
price (net asset value per share) next determined after an order in proper
form is received by the Transfer Agent. Net asset value ("NAV") is determined
each Business Day as of the close of regular trading on the NYSE (currently,
1:00 p.m. Pacific time). On any day the trading markets for both U.S. Govern-
ment securities and money market instruments close early, the NAV calculation
time and the dividend, purchase and redemption cut-off times for the Fund may
be earlier than 1:00 p.m. (Pacific time).

The NAV of a share of the Fund or an interest in the Master Portfolio is
calculated by dividing the value of total assets, less liabilities, by the
number of outstanding shares. All expenses are accrued daily and taken into
account for the purposes of calculating NAV. The Master Portfolio's portfolio
investments are valued on the basis of amortized cost. This valuation method
is based on the receipt of a steady rate of payment from the date of purchase
until maturity rather than actual changes in market value. The Company's Board
of Directors and MIP's Board of Trustees believe that this valuation method
accurately reflects fair value. As noted above, the Fund seeks to maintain a
constant $1.00 NAV share price, although there can be no assurance that it
will be able to do so. The Fund's investments in the Master Portfolio are val-
ued at the NAV of the Master Portfolio's interests. The Master Portfolio cal-
culates the NAV of its interests on the same day and at the same time as the
Fund. For further information regarding the methods employed in valuing the
Fund's investments, see "Determination of Net Asset Value" in the SAI.

DIVIDENDS AND DISTRIBUTIONS

The Fund intends to declare dividends daily and pay dividends monthly. An
investor begins earning dividends on the day after the date such investor's
purchase order for shares is effective and continues to earn dividends through
the date the investor redeems such shares. Dividends for a Saturday, Sunday or
Holiday are credited on the preceding Business Day. If an investor redeems
shares before the dividend payment date, any dividends credited to such in-
vestor's account are paid on the following dividend payment date. The Fund de-
clares and distributes capital gains (if any) at least annually. Dividends and
capital gain distributions are automatically reinvested in additional Fund
shares at net asset value.

21
<PAGE>

TAXES

GENERAL

Distributions from the Fund's net investment income and net short-term capi-
tal gains, if any, are designated as dividend distributions and are taxable to
the Fund's shareholders as ordinary income. Distributions from the Fund's net
long-term capital gains are designated as capital gain distributions and are
taxable to the Fund's shareholders as long-term capital gains. Noncorporate
shareholders may be taxed on such gain at preferential rates. In general, your
distributions will be taxable when paid, whether you take such distributions
in cash or have them automatically reinvested in additional Fund shares. How-
ever, distributions declared in October, November and December, and distrib-
uted by the following January will be taxable as if they were paid by Decem-
ber 31.

Your redemptions (including redemptions in-kind) and exchanges of Fund
shares ordinarily will result in a taxable capital gain or loss, depending on
the amount you receive for your shares (or are deemed to receive in the case
of exchanges) and the cost of your shares. See "Taxes --Disposition of Fund
Shares" in the SAI.

Foreign shareholders may be subject to different tax treatment, including
withholding taxes. See "Federal Income Taxes -- Foreign Shareholders" in the
SAI. In certain circumstances, U.S. residents may be subject to withholding
taxes. See "Taxes -- Backup Withholding" in the SAI.

BENEFIT PLAN INVESTORS

As a general matter, benefit plans, their sponsors and their participants
are not subject to federal income taxes at the time of receipt of net invest-
ment income and capital gain distributions.

However, such tax-deferred investors may be subject to tax on certain unre-
lated business taxable income which could arise, for example, when such in-
vestors acquire shares in the Fund through the use of leverage. Tax-deferred
investors should consult their tax advisors regarding the unrelated business
taxable income rules.

The foregoing discussion regarding taxes is based on tax laws which were in
effect as of the date of this Prospectus and summarizes only some of the im-
portant federal tax considerations generally affecting the Fund and its share-
holders. It is not intended as a substitute for careful tax planning; you
should consult your tax advisor with respect to your specific tax situation as
well as with respect to foreign, state and local taxes. Further federal tax
considerations are discussed in the SAI.

22
<PAGE>

GENERAL INFORMATION

DESCRIPTION OF THE COMPANY

The Fund is a series of the Company. The Company was organized as a Maryland
corporation on October 15, 1992, and currently offers twelve series of shares.
The Company's principal office is located at 111 Center Street, Little Rock,
Arkansas 72201.

The Board of Directors of the Company supervises the Fund's activities and
monitors the Fund's contractual arrangements with various service providers.
Additional information about the Directors and Officers of the Company is in-
cluded in the Fund's SAI under "Management." Although the Company is not re-
quired to hold regular annual shareholder meetings, occasional annual or spe-
cial meetings may be required for purposes such as electing and removing Di-
rectors, approving advisory contracts, and changing the Fund's investment ob-
jective or fundamental investment policies.

VOTING

All shares of the Company have equal voting rights and will be voted in the
aggregate, rather than by fund, unless otherwise required by law (such as when
a matter affects only one fund). Shareholders of the Fund are entitled to one
vote for each share owned and fractional votes for fractional shares owned.
Depending on the terms of a particular Benefit Plan and the matter being sub-
mitted to a vote, a sponsor may request direction from individual participants
regarding a shareholder vote. The Directors of the Company will vote shares
for which they receive no voting instructions in the same proportion as the
shares for which they do receive voting instructions. A more detailed descrip-
tion of the voting rights and attributes of the shares is contained in the
"Capital Stock" section of the SAI.

THE MASTER PORTFOLIO

Whenever the Fund, as an interestholder of the Master Portfolio, is re-
quested to vote on any matter submitted to interestholders of the Master Port-
folio, the Fund will hold a meeting of its shareholders to consider such mat-
ters. The Fund will cast its votes in proportion to the votes received from
its shareholders. Shares for which the Fund receives no voting instructions
will be voted in the same proportion as the votes received from the other Fund
shareholder. If the Master Portfolio's

23
<PAGE>

investment objective or policies are changed, the Fund may elect to change its
objective or policies to correspond to those of the Master Portfolio. The Fund
may also elect to redeem its interests in the Master Portfolio and either seek
a new investment company with a matching objective in which to invest or re-
tain its own investment adviser to manage the Fund's portfolio in accordance
with its objective. In the latter case, the Fund's inability to find a substi-
tute investment company in which to invest or equivalent management services
could adversely affect shareholders' investments in the Fund.

INDEPENDENT AUDITORS

KPMG Peat Marwick LLP, Three Embarcadero Center, San Francisco, California
94111, serves as independent auditors for the Company.

LEGAL COUNSEL

Morrison & Foerster LLP, 2000 Pennsylvania Avenue, N.W., Washington, D.C.
20006, serves as counsel to the Company.

INFORMATION ON THE FUND

The Company provides annual and semi-annual reports to all shareholders. The
annual reports contain audited financial statements and other information
about the Fund including additional information on performance. Shareholders
may obtain a copy of the Company's most recent annual report without charge by
phoning 1-888-204-3956.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE COMPANY'S
OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S SHARES
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH OF-
FERING MAY NOT LAWFULLY BE MADE.

24
<PAGE>

APPENDIX -- ADDITIONAL INVESTMENT POLICIES

FUND INVESTMENTS

Set forth below is a description of certain investments and additional in-
vestment policies for the Fund, except where otherwise indicated. REFERENCES
TO THE INVESTMENTS AND INVESTMENT POLICIES AND RESTRICTIONS OF THE FUND, UN-
LESS OTHERWISE INDICATED, SHOULD BE UNDERSTOOD AS REFERENCES TO THE INVEST-
MENTS AND INVESTMENT POLICIES AND RESTRICTIONS OF THE MASTER PORTFOLIO IN
WHICH SUCH FUND INVESTS ITS ASSETS.

The Fund may invest in the following types of money market instruments:

U.S. GOVERNMENT OBLIGATIONS -- The Fund may invest in various types of U.S.
Government obligations. U.S. Government obligations include securities issued
or guaranteed as to principal and interest by the U.S. Government, its agen-
cies or instrumentalities. Payment of principal and interest on U.S. Govern-
ment obligations (i) may be backed by the full faith and credit of the United
States (as with U.S. Treasury obligations and GNMA certificates) or (ii) may
be backed solely by the issuing or guaranteeing agency or instrumentality it-
self (as with FNMA notes). In the latter case, the investor must look princi-
pally to the agency or instrumentality issuing or guaranteeing the obligation
for ultimate repayment, which agency or instrumentality may be privately
owned. There can be no assurance that the U.S. Government would provide finan-
cial support to its agencies or instrumentalities where it is not obligated to
do so. As a general matter, the value of debt instruments, including U.S. Gov-
ernment obligations, declines when market interest rates increase and rises
when market interest rates decrease. Certain types of U.S. Government obliga-
tions are subject to fluctuations in yield or value due to their structure or
contract terms.

ASSET-BACKED SECURITIES

The Fund may purchase asset-backed securities, which are securities backed
by installment contracts, credit-card receivables or other assets. Asset-
backed securities represent interests in "pools" of assets in which payments
of both interest and principal on the securities are made monthly, thus in ef-
fect "passing through" monthly payments made by the individual borrowers on
the assets that underlie the securities, net of any fees paid to the issuer or
guarantor of the securities. The average life of asset-backed securities var-
ies with the maturities of the underlying instruments and is likely to be sub-
stantially less than the original maturity of the assets underlying the secu-
rities as a result of

A-1
<PAGE>

prepayments. For this and other reasons, an asset-backed security's stated ma-
turity may be shortened, and the security's total return may be difficult to
predict precisely. The Fund may invest in such securities up to the limits
prescribed by Rule 2a-7 and other provisions of the 1940 Act.

BANK OBLIGATIONS -- The Fund may invest in bank obligations which include,
but are not limited to, negotiable certificates of deposit ("CDs"), bankers'
acceptances and fixed time deposits. The Fund also may invest in high-quality
short-term obligations of foreign branches of U.S. banks or U.S. branches of
foreign banks that are denominated in and pay interest in U.S. dollars.

Fixed time deposits are obligations of banks which are payable at a stated
maturity date and bear a fixed rate of interest. Generally fixed time deposits
may be withdrawn on demand by the investor, but they may be subject to early
withdrawal penalties which vary depending upon market conditions and the re-
maining maturity of the obligation. Although fixed time deposits do not have
an established market, there are no contractual restrictions on the Fund's
right to transfer a beneficial interest in the deposit to a third party. It is
the policy of the Fund not to invest in fixed time deposits subject to with-
drawal penalties, other than overnight deposits, or in repurchase agreements
with more than seven days to maturity or other illiquid securities, if more
than 10% of the value of its net assets would be so invested.

Obligations of foreign banks and foreign branches of U.S. banks involve
somewhat different investment risks from those affecting domestic obligations,
including the possibilities that liquidity could be impaired because of future
political and economic developments, that the obligations may be less market-
able than comparable obligations of U.S. banks, that a foreign jurisdiction
might impose withholding taxes on interest income payable on those obliga-
tions, that foreign deposits may be seized or nationalized, that foreign gov-
ernmental restrictions (such as foreign exchange controls) may be adopted
which might adversely affect the payment of principal and interest on those
obligations and that the selection of those obligations may be more difficult
because there may be less publicly available information concerning foreign
banks or the accounting, auditing and financial reporting standards, practices
and requirements applicable to foreign banks may differ from those applicable
to U.S. banks. In that connection, foreign banks are not subject to examina-
tion by any U.S. Government agency or instrumentality.

A-2
<PAGE>

COMMERCIAL PAPER AND SHORT-TERM CORPORATE DEBT INSTRUMENTS -- The Fund may
invest in commercial paper (including variable amount master demand notes),
which consists of short-term, unsecured promissory notes issued by corpora-
tions to finance short-term credit needs. Commercial paper is usually sold on
a discount basis and has a maturity at the time of issuance not exceeding nine
months. Variable amount master demand notes are demand obligations that permit
the investment of fluctuating amounts at varying market rates of interest pur-
suant to arrangements between the issuer and a commercial bank acting as agent
for the payee of such notes whereby both parties have the right to vary the
amount of the outstanding indebtedness on the notes. The investment adviser
and/or sub-adviser to each Fund monitors on an ongoing basis the ability of an
issuer of a demand instrument to pay principal and interest on demand.

The Fund also may invest in high quality non-convertible corporate debt se-
curities (e.g., bonds and debentures). Subsequent to its purchase by the Fund,
an issue of securities may cease to be rated or its rating may be reduced be-
low the minimum rating required for purchase by the Fund. The investment ad-
viser to the Master Portfolio will consider such an event in determining
whether the Master Portfolio should continue to hold the obligation. To the
extent the Master Portfolio continues to hold such obligations, it may be sub-
ject to additional risk of default.

REPURCHASE AGREEMENTS -- The Fund may enter into repurchase agreements
wherein the seller of a security to the Fund agrees to repurchase that secu-
rity from the Fund at a mutually-agreed upon time and price. The period of ma-
turity is usually quite short, often overnight or a few days, although it may
extend over a number of months. The Fund may enter into repurchase agreements
only with respect to securities that could otherwise be purchased by the Fund,
and all repurchase transactions must be collateralized. The Fund may incur a
loss on a repurchase transaction if the seller defaults and the value of the
underlying collateral declines or is otherwise limited or if receipt of the
security or collateral is delayed. The Fund may participate in pooled repur-
chase agreement transactions with other funds advised by BGFA.

LETTERS OF CREDIT -- Certain of the debt obligations, certificates of par-
ticipation, commercial paper and other short-term obligations which the Fund
is permitted to purchase may be backed by an unconditional and irrevocable
letter of credit of a bank, savings and loan association or insurance company
which assumes the obligation for payment

A-3
<PAGE>

of principal and interest in the event of default by the issuer. Letter of
credit-backed investments must, in the opinion of BGFA, as adviser, be of in-
vestment quality comparable to other permitted investments of the Fund.

INVESTMENT COMPANY SECURITIES -- The Master Portfolio may invest in securi-
ties issued by other investment companies which principally invest in securi-
ties of the type in which the Master Portfolio invests. Under the 1940 Act,
the Master Portfolio's investment in such securities currently is limited to,
subject to certain exceptions, (i) 3% of the total voting stock of any one in-
vestment company, (ii) 5% of the Master Portfolio's net assets with respect to
any one investment company and (iii) 10% of the Master Portfolio's net assets
in the aggregate. Investments in the securities of other investment companies
generally will involve duplication of advisory fees and certain other ex-
penses.

MUNICIPAL OBLIGATIONS -- The Fund may invest in municipal obligations. Mu-
nicipal bonds generally have a maturity at the time of issuance of up to 40
years. Medium-term municipal notes are generally issued in anticipation of the
receipt of tax funds, of the proceeds of bond placements, or of other reve-
nues. The ability of an issuer to make payments on notes is therefore espe-
cially dependent on such tax receipts, proceeds from bond sales or other reve-
nues, as the case may be. Municipal commercial paper is a debt obligation with
a stated maturity of 270 days or less that is issued to finance seasonal work-
ing capital needs or as short-term financing in anticipation of longer-term
debt.

The Fund will invest in high-quality (as defined in Rule 2a-7 of the 1940
Act) long-term municipal bonds, municipal notes and short-term municipal com-
mercial paper, with remaining maturities not exceeding 13 months.

FLOATING- AND VARIABLE-RATE OBLIGATIONS -- The Fund may purchase debt in-
struments with interest rates that are periodically adjusted at specified in-
tervals or whenever a benchmark rate or index changes. The floating- and vari-
able-rate instruments that the Fund may purchase include certificates of par-
ticipation in such instruments. These adjustments generally limit the increase
or decrease in the amount of interest received on the debt instruments. Float-
ing- and variable-rate instruments are subject to interest-rate risk and
credit risk.

PARTICIPATION INTERESTS -- The Fund may invest in participation interests in
any type of security in which the Fund may invest. A

A-4
<PAGE>

participation interest gives the Fund an undivided interest in the underlying
securities in the proportion that the Fund's participation interest bears to
the total principal amount of the underlying securities.

ILLIQUID SECURITIES -- The Fund may invest in securities not registered un-
der the 1933 Act and other securities subject to legal or other restrictions
on resale. Because such securities may be less liquid than other investments,
they may be difficult to sell promptly at an acceptable price. Delay or diffi-
culty in selling securities may result in a loss or be costly to the Fund.

INVESTMENT POLICIES

The Fund's investment objective, as set forth in the first paragraph of "The
Fund -- Investment Objective and Policies" section, is fundamental; that is,
it may not be changed without approval by the vote of the holders of a major-
ity of the Fund's outstanding voting securities, as described under "Capital
Stock" in the SAI. In addition, any fundamental investment policy may not be
changed without such shareholder approval. If the Company's Board of Directors
determines, however, that the Fund's investment objective can best be achieved
by a substantive change in a non-fundamental investment policy or strategy,
the Company's Board may make such change without shareholder approval and will
disclose any such material changes in the then-current prospectus.

As matters of fundamental policy, the Fund may: (i) borrow from banks up to
10% of the current value of its net assets only for temporary purposes in or-
der to meet redemptions, and these borrowings may be secured by the pledge of
up to 10% of the current value of its net assets (but investments may not be
purchased while any such outstanding borrowing in excess of 5% of its net as-
sets exists); (ii) make loans of portfolio securities or other assets, howev-
er, as a matter of current operating policy, the Fund does not loan its port-
folio securities and loans for purposes of this restriction will not include
the purchase of fixed-time deposits, repurchase agreements, commercial paper
and other short-term obligations, and other types of debt instruments commonly
sold in a public or private offering; loans for purposes of this restriction
will not include the Fund's purchase of interests in the Master Portfolio; and
(iii) not invest 25% or more of its total assets (i.e., concentrate) in any
particular industry, excluding: a) U.S. Government obligations and b) obliga-
tions of banks to the extent that the SEC, by rule or interpretation, permits
funds to reserve freedom to concentrate in such obligations.

A-5
<PAGE>

As a matter of non-fundamental policy:

1. The Fund may invest in shares of other open-end management investment com-
panies, subject to the limitations of Section 12(d)(1) of the 1940 Act. Under
the 1940 Act, the Fund's investment in such securities currently is limited,
subject to certain exceptions, to (i) 3% of the total voting stock of any one
investment company, (ii) 5% of the Fund's net assets with respect to any one
investment company, and (iii) 10% of the Fund's net assets in the aggregate.
Other investment companies in which the Fund invests can be expected to charge
fees for operating expenses, such as investment advisory and administration
fees, that would be in addition to those charged by the Fund.

2. The Fund may not invest more than 10% of its net assets in illiquid securi-
ties. For this purpose, illiquid securities include, among others, (i) securi-
ties that are illiquid by virtue of the absence of a readily available market
or legal or contractual restrictions on resale, (ii) fixed time deposits that
are subject to withdrawal penalties and that have maturities of more than
seven days, and (iii) repurchase agreements not terminable within seven days.

Notwithstanding any other investment policy or limitation (whether or not
fundamental), the Fund may invest all of its assets in the securities of a
single open-end management investment company with substantially the same fun-
damental investment objective, policies and limitations as the Fund.

A-6
<PAGE>

INVESTMENT RATINGS

STANDARD & POOR'S RATING

BOND RATINGS -- Bonds rated "AAA" have the highest rating assigned by S&P to
a debt obligation. Capacity to pay interest and repay principal is extremely
strong. Bonds rated "AA" have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in a small degree.
Bonds rated A have a strong capacity to pay interest and repay principal al-
though they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than obligations in higher rated catego-
ries.

COMMERCIAL PAPER AND LOAN PARTICIPATION RATINGS -- Commercial paper and loan
participations with the greatest capacity for timely payment are rated "A" by
S&P. Issues within this category are further defined with designations "1,"
"2" and "3" to indicate the relative degree of safety; "A-1," the highest of
the three, indicates the degree of safety is very high.

MOODY'S INVESTORS SERVICE RATINGS

BOND RATINGS -- Bonds rated "Aaa" by Moody's are judged to be the best qual-
ity. Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. Bonds rated "Aa" are judged to be of high
quality by all standards. They are rated lower than the best bonds because
margins of protection may not be as large or fluctuation of protective ele-
ments may be of greater amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than is the case with "Aaa"
securities. Bonds which are rated A possess many favorable investment attri-
butes and are to be considered as upper medium grade obligations. Factors giv-
ing security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.

COMMERCIAL PAPER AND LOAN PARTICIPATION RATINGS -- Moody's employs the des-
ignations of "Prime-1," "Prime-2" and "Prime-3" to indicate the relative ca-
pacity of the rated issuers or borrowers to repay punctually. "Prime-1" is the
highest rating assigned by Moody's. Issuers or makers of "Prime-1" obligations
must have a superior capacity for repayment of short-term promissory obliga-
tions, and will normally be evidenced by leading market positions in well es-
tablished industries, high rates of return on funds employed, conservative
capitalization

A-7
<PAGE>

structures with moderate reliance on debt and ample asset protection, broad
margins in earnings coverage of fixed financial charges and high internal cash
generation, and well established access to a range of financial markets and
assured sources of alternate liquidity.

ADDITIONAL RATINGS OF NRSRO'S ARE DESCRIBED IN THE APPENDIX TO THE SAI.

A-8
<PAGE>

SPONSOR, DISTRIBUTOR AND CO-ADMINISTRATOR
Stephens Inc.
Little Rock, Arkansas

CO-ADMINISTRATOR
Barclays Global Investors, N.A.
San Francisco, CA

INVESTMENT ADVISER
Barclays Global Fund Advisors
San Francisco, California

CUSTODIAN
Investors Bank & Trust Company
Boston, Massachusetts

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Investors Bank & Trust Company
Boston, Massachusetts

LEGAL COUNSEL
Morrison & Foerster LLP
Washington, D.C.

INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
San Francisco, California

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER
REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>

MasterWorks(R) Funds
c/o Investors Bank and Trust Co.
200 Clarendon Street
Boston, MA 02116

<PAGE>

MASTERWORKS FUNDS INC.

STATEMENT OF ADDITIONAL INFORMATION

MONEY MARKET FUND

SEPTEMBER 1, 1998

_______________________

MasterWorks Funds Inc. (the "Company") is an open-end, management investment
company. This Statement of Additional Information ("SAI") contains additional
information about the Company's MONEY MARKET FUND (the "Fund"). The Fund seeks
to achieve its investment objective by investing all of its assets in the Money
Market Master Portfolio (the "Master Portfolio") of Master Investment Portfolio
("MIP"). The Master Portfolio has the same investment objective as the Fund
as described in its Prospectus. See "The Fund--Investment Objective and
Policies."

Barclays Global Fund Advisors ("BGFA") serves as investment adviser to the
Master Portfolio. References to the investments, investment policies and risks
of the Fund, unless otherwise indicated, should be understood as references to
the investments, investment policies and risks of the Master Portfolio.

This SAI is not a prospectus and should be read in conjunction with the Fund's
current Prospectus, also dated September 1, 1998. All terms used in this SAI
that are defined in the Prospectus will have the meanings assigned in the
Prospectus. A copy of the Prospectus may be obtained without charge by writing
MasterWorks Funds Inc., c/o Investors Bank & Trust Co., --Transfer Agent, P.O.
Box 9130, Mail Code MFD23, Boston, MA 02117-9130, or by calling 1-888-204-3956.

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
---------
<S> <C>
General Information................................................................. 1
Investment Restrictions............................................................. 1
Additional Permitted Investment Activities.......................................... 3
Management.......................................................................... 7
Performance Information............................................................. 12
Determination of Net Asset Value.................................................... 14
Purchase and Redemption of Shares................................................... 15
Portfolio Transactions.............................................................. 16
Taxes............................................................................... 18
Capital Stock....................................................................... 22
Other............................................................................... 23
Counsel............................................................................. 23
Independent Auditors................................................................ 23
Financial Information............................................................... 23
SAI Appendix........................................................................ A-1
Financial Statements................................................................ F-1
</TABLE>

i
<PAGE>

GENERAL INFORMATION

The Company is a registered investment company which currently offers twelve
series, including the Fund. On or about December 30, 1993, the Company's Board
of Directors approved, primarily for marketing purposes, the change of its
corporate name from "WellsFunds Inc." to "Stagecoach Inc." On or about March 15,
1996, the Company changed its corporate name from "Stagecoach Inc." to
"MasterWorks Funds Inc." REFERENCES TO THE INVESTMENTS, INVESTMENT POLICIES AND
------------------------------------------------------
RISKS OF THE FUND UNLESS OTHERWISE INDICATED, SHOULD BE UNDERSTOOD AS REFERENCES
- --------------------------------------------------------------------------------
TO THE INVESTMENTS, INVESTMENT POLICIES AND RISKS OF THE MASTER PORTFOLIO.
- -------------------------------------------------------------------------

INVESTMENT RESTRICTIONS

FUNDAMENTAL INVESTMENT RESTRICTIONS. The Fund is subject to the following
investment restrictions, all of which are fundamental policies.

The Money Market Fund may not:

(1) purchase the securities of issuers conducting their principal business
activity in the same industry if, immediately after the purchase and as a result
thereof, the value of the Fund's investments in that industry would be 25% or
more of the current value of the Fund's total assets, provided that there is no
limitation with respect to investments in (i) obligations of the U.S.
Government, its agencies or instrumentalities; and (ii) obligations of banks to
the extent that the U.S. Securities and Exchange Commission ("SEC"), by rule or
interpretation, permits funds to reserve freedom to concentrate in such
obligations; and provided further, that the Fund may invest all its assets in a
diversified, open-end management investment company, or a series thereof, with
substantially the same investment objective, policies and restrictions as the
Fund, without regard to the limitations set forth in this paragraph (1);

(2) purchase or sell real estate or real estate limited partnerships (other
than securities secured by real estate or interests therein or securities issued
by companies that invest in real estate or interests therein);

(3) purchase commodities or commodity contracts (including futures contracts),
except that the Fund may purchase securities of an issuer which invests or deals
in commodities or commodity contracts;

(4) purchase interests, leases, or limited partnership interests in oil, gas,
or other mineral exploration or development programs;

(5) purchase securities on margin (except for short-term credits necessary for
the clearance of transactions and except for margin payments in connection with
options, futures and options on futures) or make short sales of securities;

(6) underwrite securities of other issuers, except to the extent that the
purchase of permitted investments directly from the issuer thereof or from an
underwriter for an issuer and the later disposition of such securities in
accordance with the Fund's investment program may be deemed to be an
underwriting; and provided further, that the purchase by the Fund of securities
issued by a diversified, open-end management investment company, or a series
thereof, with substantially the same investment objective, policies and
restrictions as the Fund shall not constitute an underwriting for purposes of
this paragraph (6);

(7) make investments for the purpose of exercising control or management;
provided that the Fund may invest all its assets in a diversified, open-end
management investment company, or a series thereof, with substantially the same
investment objective, policies and restrictions as the Fund, without regard to
the limitations set forth in this paragraph (7);

1
<PAGE>

(8) borrow money or issue senior securities as defined in the Investment
Company Act of 1940 (the "1940 Act"), except that the Fund may borrow from banks
up to 10% of the current value of its net assets for temporary purposes only in
order to meet redemptions, and these borrowings may be secured by the pledge of
up to 10% of the current value of its net assets (but investments may not be
purchased while any such outstanding borrowing in excess of 5% of its net assets
exists);

(9) write, purchase or sell puts, calls, straddles, spreads, warrants, options
or any combination thereof, except that the Fund may purchase securities with
put rights in order to maintain liquidity;

(10) purchase securities of any issuer (except securities issued or guaranteed
by the U.S. Government, its agencies and instrumentalities) if, as a result,
with respect to 75% of its total assets, more than 5% of the value of the Fund's
total assets would be invested in the securities of any one issuer or, with
respect to 100% of its total assets the Fund's ownership would be more than 10%
of the outstanding voting securities of such issuer, provided that the Fund may
invest all its assets in a diversified, open-end management investment company,
or a series thereof, with substantially the same investment objective, policies
and restrictions as the Fund, without regard to the limitations set forth in
this paragraph (10); or

(11) make loans, except that the Fund may purchase or hold debt instruments or
lend its portfolio securities in accordance with its investment policies, and
may enter into repurchase agreements.

NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. The Fund is subject to the following
investment restrictions, all of which are non-fundamental policies.

As a matter of non-fundamental policy:

(1) The Fund may invest in shares of other open-end management investment
companies, subject to the limitations of Section 12(d)(1) of the 1940 Act.
Under the 1940 Act, the Fund's investments in such securities currently is
limited, subject to certain exceptions, to (i) 3% of the total voting stock of
any one investment company, (ii) 5% of the Fund's net assets with respect to any
one investment company, and (iii) 10% of the Fund's net assets in the aggregate.
Other investment companies in which the Fund invests can be expected to charge
fees for operating expenses, such as investment advisory and administration
fees, that would be in addition to those charged by the Fund.

(2) The Fund may not invest more than 10% of its net assets in illiquid
securities. For this purpose, illiquid securities include, among others, (i)
securities that are illiquid by virtue of the absence of a readily available
market or legal or contractual restriction on resale, (ii) fixed time deposits
that are subject to withdrawal penalties and that have maturities of more than
seven days, and (iii) repurchase agreements not terminable within seven
days.

(3) The Fund may lend securities from its portfolio to brokers, dealers and
financial institutions, in amounts not to exceed (in the aggregate) one-third
of the Fund's total assets. Any such loans of portfolio securities will be fully
collateralized based on values that are marked to market daily. The Fund will
not enter into any portfolio security lending arrangement having a duration of
longer than one year.

Notwithstanding any other investment policy or limitation (whether or not
fundamental), the Fund may invest all of its assets in the securities of a
single open-end management investment company with substantially the same
fundamental investment objective, policies and limitations as the Fund.
<PAGE>

ADDITIONAL PERMITTED INVESTMENT ACTIVITIES

General. The assets of the Fund consist only of obligations maturing within
--------
thirteen months from the date of acquisition (as determined in accordance with
the regulations of the SEC), and the dollar-weighted average maturity of the
Fund may not exceed 90 days. The securities in which the Fund may invest will
not yield as high a level of current income as may be achieved from securities
with less liquidity and less safety. There can be no assurance that the Fund's
investment objective will be realized as described in the Fund's
Prospectus.

Unrated Investments. The Fund may purchase instruments that are not rated if,
-------------------
in the opinion of BGFA, as adviser, such obligations are of investment quality
comparable to other rated investments that are permitted for purchase by the
Fund, if they are purchased in accordance with the Fund's procedures adopted by
the Company's Board of Directors in accordance with Rule 2a-7 under the 1940
Act. Such procedures require approval or ratification by the Board of Directors
of the purchase of unrated securities. After purchase by the Fund, a security
may cease to be rated or its rating may be reduced below the minimum required
for purchase by the Fund. Neither event will require an immediate sale of such
security by the Fund provided that, when a security ceases to be rated, the
Company's Board of Directors determines that such security presents minimal
credit risks and, provided further that, when a security rating is downgraded
below the eligible quality for investment or no longer presents minimal credit
risks, the Board finds that the sale of such security would not be in the Fund's
shareholder's best interest. To the extent the ratings given by a nationally
recognized statistical ratings organization ("NRSRO")

3
<PAGE>

may change as a result of changes in such organizations or their rating systems,
the Fund will attempt to use comparable ratings as standards for investments in
accordance with the investment policies contained in the Prospectus and in this
SAI. The ratings of said NRSROs are more fully described in the SAI
Appendix.

Pass-Through Obligations. Certain of the debt obligations in which the Fund
------------------------
may invest may be pass-through obligations that represent an ownership interest
in a pool of mortgages and the resultant cash flow from those mortgages.
Payments by homeowners on the loans in the pool flow through to certificate
holders in amounts sufficient to repay principal and to pay interest at the
pass-through rate. The stated maturities of pass-through obligations may be
shortened by unscheduled prepayments of principal on the underlying mortgages.
Therefore, it is not possible to predict accurately the average maturity of a
particular pass-through obligation. Variations in the maturities of pass-through
obligations will affect the yield of any Fund investing in such obligations.
Furthermore, as with any debt obligation, fluctuations in interest rates will
inversely affect the market value of pass-through obligations.

Loans of Portfolio Securities. The Fund may lend its securities to brokers,
-----------------------------
dealers and financial institutions, provided (1) the loan is secured
continuously by collateral consisting of cash, U.S. Government securities or an
irrevocable letter of credit which is marked to market daily to ensure that each
loan is fully collateralized; (2) the Fund may at any time recall the loan and
obtain the return of the securities loaned within five business days; (3) the
Fund will receive any interest or dividends paid on the securities loaned; and
(4) the aggregate market value of securities loaned will not at any time exceed
one-third of the total assets of the Fund. The Fund may earn income in
connection with securities loans either through the reinvestment of the cash
collateral or the payment of fees by the borrower. The Fund does not currently
intend to lend its portfolio securities.

Repurchase Agreements. The Fund may engage in a repurchase agreement with
----------------------
respect to any security in which it is authorized to invest, although the
underlying security may mature in more than thirteen months. The Fund may enter
into repurchase agreements wherein the seller of a security to the Fund agrees
to repurchase that security from the Fund at a mutually agreed-upon time and
price that involves the acquisition by the Fund of an underlying debt
instrument, subject to the seller's obligation to repurchase, and the Fund's
obligation to resell, the instrument at a fixed price usually not more than one
week after its purchase. Securities acquired as collateral by the Fund under a
repurchase agreement will be held in a segregated account at a bank. Repurchase
agreements are considered by the staff of the SEC to be loans by the Fund. The
Fund may enter into repurchase agreements only with respect to securities of the
type in which it may invest, including government securities and mortgage-
related securities, regardless of their remaining maturities, and requires that
additional securities be deposited with the custodian if the value of the
securities purchased should decrease below resale price. BGFA monitors on an
ongoing basis the value of the collateral to assure that it always equals or
exceeds the repurchase price. Certain costs may be incurred by the Fund in
connection with the sale of the underlying securities if the seller does not
repurchase them in accordance with the repurchase agreement. In addition, if
bankruptcy proceedings are commenced with respect to the seller of the
securities, disposition of the securities by the Fund may be delayed or

4
<PAGE>

limited. While it does not presently appear possible to eliminate all risks from
these transactions (particularly the possibility of a decline in the market
value of the underlying securities, as well as delay and costs to the Fund in
connection with insolvency proceedings), it is the policy of the Fund to limit
repurchase agreements to selected creditworthy securities dealers or domestic
banks or other recognized financial institutions. The Fund considers on an
ongoing basis the creditworthiness of the institutions with which it enters into
repurchase agreements.

Floating- and Variable-Rate Obligations. The Fund may purchase floating- and
----------------------------------------
variable-rate obligations as described in the Prospectus. The Fund may purchase
floating- and variable-rate demand notes and bonds, which are obligations
ordinarily having stated maturities in excess of thirteen months, but which
permit the holder to demand payment of principal at any time, or at specified
intervals not exceeding thirteen months. Variable-rate demand notes include
master demand notes that are obligations that permit the Fund to invest
fluctuating amounts, which may change daily without penalty, pursuant to direct
arrangements between the Fund, as lender, and the borrower. The interest rates
on these notes fluctuate from time to time. The issuer of such obligations
ordinarily has a corresponding right, after a given period, to prepay in its
discretion the outstanding principal amount of the obligations plus accrued
interest upon a specified number of days' notice to the holders of such
obligations. The interest rate on a floating-rate demand obligation is based on
a known lending rate, such as a bank's prime rate, and is adjusted automatically
each time such rate is adjusted. The interest rate on a variable-rate demand
obligation is adjusted automatically at specified intervals. Frequently, such
obligations are secured by letters of credit or other credit support
arrangements provided by banks. Because these obligations are direct lending
arrangements between the lender and borrower, it is not contemplated that such
instruments generally will be traded, and there generally is no established
secondary market for these obligations, although they are redeemable at face
value. Accordingly, where these obligations are not secured by letters of
credit or other credit support arrangements, the Fund's right to redeem is
dependent on the ability of the borrower to pay principal and interest on
demand. Such obligations frequently are not rated by credit rating agencies and
the Fund may invest in obligations which are not so rated only if BGFA
determines that at the time of investment the obligations are of comparable
quality to the other obligations in which the Fund may invest. BGFA, on behalf
of the Fund, considers on an ongoing basis the creditworthiness of the issuers
of the floating- and variable-rate demand obligations in the Fund's portfolio.
The Fund will not invest more than 10% of the value of its total net assets in
floating- or variable-rate demand obligations whose demand feature is not
exercisable within seven days. Such obligations may be treated as liquid,
provided that an active secondary market exists.

The following types of derivative securities ARE NOT permitted investments for
the Fund:

* capped floaters (on which interest is not paid when market rates move above
a certain level);

* leveraged floaters (whose interest rate reset provisions are based on a
formula that magnifies changes in interest rates);

* range floaters (which do not pay any interest if market interest rates
move outside of a specified range);

* dual index floaters (whose interest rate reset provisions are tied to more
than one index so that a change in the relationship between these indices
may result in the value of the instrument falling below face value);
and

* inverse floaters (which reset in the opposite direction of their
index).

Additionally, the Fund may not invest in securities whose interest rate reset
provisions are tied to an index that materially lags short-term interest rates,
such as Cost of Funds Index floaters.

Forward Commitments, When-Issued Purchases and Delayed-Delivery Transactions.
----------------------------------------------------------------------------
The Fund may purchase securities on a when-issued or forward commitment
(sometimes called a delayed-delivery) basis, which means that the price is fixed
at the time of commitment, but delivery and payment ordinarily take place a
number of days after the date of the commitment to purchase. The Fund will make
commitments to purchase such securities only with the intention of actually
acquiring the securities, but the Fund may sell these securities before the
settlement date if it is

5
<PAGE>

deemed advisable. The Fund will not accrue income in respect of a security
purchased on a forward commitment basis prior to its stated delivery date.

Securities purchased on a when-issued or forward commitment basis and certain
other securities held in the Fund's investment portfolio are subject to changes
in value (both generally changing in the same way, i.e., appreciating when
---
interest rates decline and depreciating when interest rates rise) based upon the
public's perception of the creditworthiness of the issuer and changes, real or
anticipated, in the level of interest rates. Securities purchased on a when-
issued or forward commitment basis may expose the Fund to risk because they may
experience such fluctuations prior to their actual delivery. Purchasing
securities on a when-issued or forward commitment basis can involve the
additional risk that the yield available in the market when the delivery takes
place actually may be higher than that obtained in the transaction itself. A
segregated account of the Fund consisting of cash or U.S. Government obligations
or other high quality liquid debt securities at least equal at all times to the
amount of the when-issued or forward commitments will be established and
maintained at the Fund's custodian bank. Purchasing securities on a forward
commitment basis when the Fund is fully or almost fully invested may result in
greater potential fluctuation in the value of the Fund's total net assets and
its net asset value per share. In addition, because the Fund will set aside
cash and other high quality liquid debt securities as described above, the
liquidity of the Fund's investment portfolio may decrease as the proportion of
securities in the Fund's portfolio purchased on a when-issued or forward
commitment basis increases.

The value of the securities underlying a when-issued purchase or a forward
commitment to purchase securities, and any subsequent fluctuations in their
value, is taken into account when determining the Fund's net asset value
starting on the day the Fund agrees to purchase the securities. The Fund does
not earn interest on the securities it has committed to purchase until they are
paid for and delivered on the settlement date. When the Fund makes a forward
commitment to sell securities it owns, the proceeds to be received upon
settlement are included in the Fund's assets, and fluctuations in the value of
the underlying securities are not reflected in the Fund's net asset value as
long as the commitment remains in effect.

Rule 144A. It is possible that unregistered securities, purchased by the Fund
----------
in reliance upon Rule 144A under the Securities Act of 1933, could have the
effect of increasing the level of the Fund's illiquidity to the extent that
qualified institutional buyers become, for a period, uninterested in purchasing
these securities.

Foreign Obligations. Investments in foreign obligations involve certain
-------------------
considerations that are not typically associated with investing in domestic
obligations. There may be less publicly available information about a foreign
issuer than about a domestic issuer. Foreign issuers also are not generally
subject to uniform accounting, auditing and financial reporting standards or
governmental supervision comparable to those applicable to domestic issuers. In
addition, with respect to certain foreign countries, taxes may be withheld at
the source under foreign income tax laws, and there is a possibility of
expropriation or confiscatory taxation, political or social instability or
diplomatic developments that could adversely affect investments in, the
liquidity of,

6
<PAGE>

and the ability to enforce contractual obligations with respect to, securities
of issuers located in those countries.

MANAGEMENT

Directors and Officers. The following information supplements and should be
----------------------
read in conjunction with the Prospectus section entitled "Management of the
Fund." Directors and officers of the Company, together with information as to
their principal business occupations during the last five years, are shown
below. The address of each, unless otherwise indicated, is 111 Center Street,
Little Rock, Arkansas 72201. Directors who are deemed to be an "interested
person" of the Company, as defined in the 1940 Act, are indicated by an
asterisk.

<TABLE>
<CAPTION>
Principal Occupations
Name, Address and Age Position During Past 5 Years
- --------------------- -------- ---------------------
<S> <C> <C>
Jack S. Euphrat, 75 Director Private Investor.
415 Walsh Road
Atherton, CA 94027

*R. Greg Feltus, 46 Director, Executive Vice President of Stephens;
Chairman and President of Stephens Insurance Services Inc.;
President Senior Vice President of Stephens Sports Management Inc.;
and President of Investors Brokerage Insurance Inc.

Thomas S. Goho, 55 Director Associate Professor of Finance
P.O. Box 7285 Calloway School of Business and Accounting at
Reynolda Station Wake Forest University since 1982.
Winston-Salem, NC 27109

*W. Rodney Hughes, 71 Director Private Investor.
31 Dellwood Court
San Rafael, CA 94901
</TABLE>

7
<PAGE>

<TABLE>
<CAPTION>
Principal Occupations
Name, Address and Age Position During Past 5 Years
- --------------------- -------- ---------------------
<S> <C> <C>
*J. Tucker Morse, 53 Director Chairman of Home Account Network, Inc.;
4 Beaufain Street Real Estate Developer;
Charleston, SC 29401 Chairman of Renaissance Properties Ltd.;
President of Morse Investment Corporation;
and Co-Managing Partner of Main Street Ventures.

Richard H. Blank, Jr., 41 Chief Vice President of Stephens;
Operating Director of Stephens Sports Management Inc.;
Officer, and Director of Capo Inc.
Secretary and
Treasurer
</TABLE>

COMPENSATION TABLE
For the Fiscal Year Ended February 28, 1998

<TABLE>
<CAPTION>
Aggregate Total Compensation
Compensation from Registrant
Name and Position from Registrant and Fund Complex
- ----------------- --------------- ----------------
<S> <C> <C>
Jack S. Euphrat $11,250 $11,250
Director

*R. Greg Feltus
Director 0 0

Thomas S. Goho
Director $11,250 $11,250

*Zoe Ann Hines/1/
Director 0 0

*W. Rodney Hughes
Director $11,000 $11,000

Robert M. Joses/2/
Director $ 1,000 $ 1,000

*J. Tucker Morse
Director $11,000 $11,000
</TABLE>

- ---------------

/1/ Zoe Ann Hines retired as of January 28, 1998.

/2/ Robert M. Joses retired as of December 31, 1997.

8
<PAGE>

Directors of the Company are compensated annually by the Company and by all
the registrants in the fund complex for their services as indicated above and
also are reimbursed for all out-of-pocket expenses relating to attendance at
board meetings. The Company, Master Investment Portfolio and Managed Series
Investment Trust together form a separate "fund complex", as such term is
defined in Form N-1A under the 1940 Act (the "BGFA Fund Complex" ). Stagecoach
Funds, Inc., Stagecoach Trust and Life & Annuity Trust are considered to be
members of the same fund complex (the "Wells Fargo Fund Complex"). Prior to
December 15, 1997, the Wells Fargo Fund Complex also included Overland Express
Funds, Inc. and Master Investment Trust. On that date, Overland Express Funds,
Inc. was consolidated with and into Stagecoach Funds, Inc., and Master
Investment Trust was dissolved. Each of the Directors and Officers of the
Company serves in the identical capacity as Directors/Trustees and Officers of
each registered open-end management investment company in both the Wells Fargo
and BGFA Fund Complexes. The Directors are compensated by other companies and
trusts within a fund complex for their services as Directors/Trustees to such
companies and trusts. Currently the Directors do not receive any retirement
benefits or deferred compensation from the Company or any other member of each
fund complex. As of the date of this SAI, Directors and officers of the Company
as a group beneficially owned less than 1% of the outstanding shares of the
Company.

Master/Feeder Structure. The Fund seeks to achieve its investment objective
-----------------------
by investing all of its assets in the Money Market Master Portfolio of MIP. The
Fund and other entities investing in the Master Portfolio are each liable for
all obligations of the Master Portfolio. However, the risk of the Fund
incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance existed and MIP itself is
unable to meet its obligations. Accordingly, the Company's Board of Directors
believes that neither the Fund nor its shareholders will be adversely affected
by investing Fund assets in the Master Portfolio. However, if a mutual fund or
other investor withdraws its investment from the Master Portfolio, the economic
efficiencies (e.g., spreading fixed expenses among a larger asset base) that the
---
Company's Board believes may be available through investment in the Master
Portfolio may not be fully achieved. In addition, given the relative novelty of
the master/feeder structure, accounting or operational difficulties, although
unlikely, could arise.

The Fund may withdraw its investment in the Master Portfolio only if the
Company's Board of Directors determines that such action is in the best
interests of the Fund and its shareholders. Upon such withdrawal, the Company's
Board would consider alternative investments, including investing all of the
Fund's assets in another investment company with the same investment objective
as the Fund or hiring an investment adviser to manage the Fund's assets in
accordance with the investment policies described below with respect to the
Master Portfolio.

The investment objective and other fundamental policies of the Master
Portfolio cannot be changed without approval by the holders of a majority (as
defined in the 1940 Act) of the Master Portfolio's outstanding interests. See
"Investment Objectives and Policies." Whenever the Fund, as an interestholder of
the Master Portfolio, is requested to vote on any matter submitted to
interestholders of the Master Portfolio, the Fund will hold a meeting of its
shareholders to consider such matters. The Fund will cast its votes in
proportion to the votes received from its shareholders. Shares for which the
Fund receives no voting instructions will be voted in the same proportion as the
votes received from the other Fund shareholders.

Certain policies of the Master Portfolio which are non-fundamental may be
changed by vote of a majority of MIP's Trustees without interestholder approval.
If the Master Portfolio's investment objective or fundamental or non-fundamental
policies are changed, the Fund may elect to change its objective or policies to
correspond to those of the Master Portfolio. The Fund may also elect to redeem
its interests in the Master Portfolio and either seek a new investment company
with a matching objective in which to invest or retain its own investment
adviser to manage the Fund's portfolio in accordance with its objective. In the
latter case, the Fund's inability to find a substitute investment company in
which to invest or equivalent management services could adversely affect
shareholders' investments in the Fund. The Fund will provide shareholders with
30 days' written notice prior to the implementation of any change in the
investment objective of the Fund or the Master Portfolio, to the extent
possible. See "Investment Objective and Policies" for additional information
regarding the Fund's and the Master Portfolio's investment objectives and
policies. Additional information regarding the officers and Directors/Trustees
of the Company and MIP is located in the Fund's SAI under "Management."

Investment Adviser. At a special meeting held on August 14, 1998, the Fund's
------------------
Shareholders approved a plan to reorganize the Fund from its current
stand-alone structure to a master/feeder structure (the "Reorganization").
As a result the Fund will invest all of its assets in the Master Portfolio of
MIP. The Master Portfolio has the same investment objective and invests in the
same kinds of securities as the Fund. The Master Portfolio retained BGFA, the
investment adviser to the Fund, to manage its assets. The advisory fee level is
0.10% of average net assets per annum, compared to the previous level of 0.35%.
BFGA no longer engages an investment sub-adviser, but instead manages the Master
Portfolio's assets itself. Pursuant to the Advisory Contract, BGFA furnishes the
Company's Board of Directors with periodic reports on the investment strategy
and performance of the Master Portfolio.

The Investment Advisory Contract is subject to the annual approval by (i)
MIP's Board of Trustees or (ii) vote of a majority (as defined in the 1940 Act)
of the outstanding voting securities of the Fund or by MIP's Board of Trustees,
provided that in either event the continuance also is approved by a majority of
MIP's Board of Trustees who are not "interested persons" (as defined in the
1940 Act) of the Company or BGFA, by vote cast in person at a meeting called for
the purpose of voting on such approval. The Contracts are terminable without
penalty, on 60 days' written notice by the Company's Board of Directors or by
vote of the holders of a majority of the Fund's shares, or, after the Reapproval
Date, on not less than 60 days' written notice, by BGFA. The Contracts terminate
automatically in the event of an assignment (as defined in the 1940 Act).

For the period beginning January 1, 1996 and ended February 29, 1996, and
for the fiscal years ended February 28, 1997 and February 28, 1998, the Fund
paid the following advisory fees to BGFA, without waivers:

<TABLE>
1/1/96 - 2/29/96 FYE 2/28/97 FYE 2/28/98
Fees Paid Fees Paid Fees Paid
--------- --------- ---------
<S> <C> <C> <C>
Money Market Fund $89,609 $570,332 $630,279
</TABLE>

Prior to January 1, 1996, Wells Fargo Bank provided investment advisory
services to the Fund pursuant to an Investment Advisory Agreement, the terms of
which were identical in all material respects, other than the identity of the
parties, to the BGFA Advisory Contract.

For the fiscal year ended February 28, 1995 and for the period beginning March
1, 1995 and ended December 31, 1995, the Fund paid advisory fees to Wells Fargo
Bank and Wells Fargo Bank waived advisory fees as follows:

<TABLE>
FYE 2/28/95 3/1/95 - 12/31/95
Fees Paid Fees Waived Fees Paid Fees Waived
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Money Market Fund $371,199 0 $435,178 $51,320
</TABLE>

9
<PAGE>

As of the Conversion Date, BGFA no longer engages Wells Fargo Bank to
provide sub-investment advisory services pursuant to a Sub-Advisory Contract.
Wells Fargo Bank received fees at an annual rate of 0.05% of the Fund's average
daily net assets. For the period beginning January 1, 1996 and ended February
29, 1996, and for the fiscal years ended February 28, 1997 and February 28,
1998, BGFA paid to Wells Fargo Bank the sub-advisory fees indicated below,
without waivers:

<TABLE>
1/1/96-2/29/96 FYE 2/28/97 FYE 2/28/98
FEES PAID FEES PAID FEES PAID
--------- --------- ---------
<S> <C> <C> <C>
Money Market Fund $12,801 $80,773 $90,190
</TABLE>

Co-Administrators. The Company has engaged Stephens Inc. ("Stephens") and
-----------------
Barclays Global Investors, N.A. ("BGI") to provide certain administration
services to the Fund. Pursuant to a Co-Administration Agreement with the
Company, Stephens and BGI provide as administration services, among other
things: (i) general supervision of the operation of the Company and the Fund,
including coordination of the services performed by the investment adviser,
transfer and dividend disbursing agent, custodian, independent auditors
and legal counsel; (ii) general supervision of regulatory compliance matters,
including the compilation of information for documents such as reports to, and
filings with, the SEC and state securities commissions, and preparation of proxy
statements and shareholder reports for the Fund; and (iii) general supervision
relative to the compilation of data required for the preparation of periodic
reports distributed to the Company's officers and Board of Directors. Stephens
also furnishes office space and certain facilities required for conducting the
business of the Fund together with all other administrative services that are
not being furnished by the Fund's investment adviser. Stephens also pays the
compensation of the Company's Directors, officers and employees who are
affiliated with Stephens.
10
<PAGE>

In addition, except for advisory fees, extraordinary expenses, brokerage and
other expenses connected to the execution of portfolio transactions and certain
expenses which are borne by the Fund, Stephens and BGI have agreed to bear all
costs of the Fund's and the Company's operations. For providing such services,
Stephens and BGI are entitled to a fee of 0.35% of the Fund's average daily net
assets. Effective October 21, 1996, BGI contracted with Investors Bank & Trust
Company ("IBT") to provide certain sub-administrative services. Prior to
October 21, 1996, Stephens served as sole administrator to the Fund.

For the fiscal years ended February 29, 1996, February 28, 1997, and
February 28, 1998, the Fund paid the following administration fees:

<TABLE>
<CAPTION>
FYE 2/29/96 FYE 2/28/97 FYE 2/28/98
----------- ----------- -----------
<S> <C> <C> <C>
Money Market Fund $76,777 $111,048(1) $179,427(2)
</TABLE>
_______________

(1) This amount includes $75,738 paid to Stephens during the fiscal year and
$35,310 paid to BGI under the Co-Administration Agreement during the period
from October 21, 1996 to February 28, 1997.

(2) For this period all co-administration fees were paid jointly to Stephens and
BGI.

Distributor. Stephens acts as the exclusive distributor of the Fund's shares
-----------
pursuant to an Amended and Restated Distribution Agreement (the "Distribution
Agreement") with the Company. Shares are sold on a continuous basis by Stephens
as agent, although Stephens is not obligated to sell any particular amount of
shares. No compensation is payable by the Company to Stephens for its
distribution services. The term and termination provisions of the Distribution
Agreement are substantially similar to those of the Agreement with the Adviser
discussed above.

Custodian. IBT, concurrent with its appointment as sub-administrator for the
---------
Fund on October 21, 1996, also has been retained to act as Custodian for the
Fund and performs such services at 200 Clarendon Street, Boston, Massachusetts
02116. The custodian, among other things, maintains a custody account or
accounts in the name of the Fund; receives and delivers all assets for the Fund
upon purchase and upon sale or maturity and collects and receives all income and
other payments and distributions on account of the assets of the Fund. IBT shall
not be entitled to compensation for providing custody services to the Fund
pursuant to the Custody Agreement so long as it receives compensation from BGI
for providing sub-administration services to the Company, on behalf of the Fund.
Prior to October 21, 1996, BGI served as the Fund's custodian and was not
entitled to receive a fee. Prior to January 1, 1996, Wells Fargo Bank served as
the Fund's custodian. For the period beginning January 1, 1996 and ended
February 29, 1996, and for the fiscal year ended February 28, 1997, the Fund did
not pay any custody fees.

Transfer and Dividend Disbursing Agent. IBT also acts as the transfer
--------------------------------------
and dividend disbursing agent for the Fund. For its services as transfer and
dividend disbursing agent to the Fund, IBT is

11
<PAGE>

entitled to receive an annual maintenance fee computed on the basis of the
number of shareholder accounts that it maintains for the Fund and to be
reimbursed for out-of-pocket expenses or advances incurred by it in performing
its obligations under the agreement. The annual maintenance fee is paid as
follows:

ANNUAL FEE
------------------------------
Up to 200 accounts* $6,000 per feeder/class
From 201 to 250 accounts $8,500 per feeder/class
Over 250 accounts $10,000 per feeder/class

_______________
* Defined as each account that is set up for an individual or plan sponsor
on a fund by fund basis.

In addition, the agreement contemplates that IBT will be reimbursed for other
expenses incurred by it at the request or with the written consent of the Fund,
including, without limitation, any equipment or supplies which the Company
specifically orders or requires IBT to order.

Prior to March 2, 1998, Wells Fargo Bank served as transfer and dividend
disbursing agent to the Fund, and was entitled to receive a monthly fee at an
annual rate of 0.05% of the average daily net assets of each Fund for such
services.

PERFORMANCE INFORMATION

Generally. The yield for the Fund fluctuates from time to time, unlike bank
---------
deposits or other investments that pay a fixed yield for a stated period of
time, and does not provide a basis for determining future yields since it is
based on historical data. Yield is a function of portfolio quality, composition,
maturity and market conditions as well as the expenses allocated to the
Fund.

Current yield for the Fund is calculated based on the net changes, exclusive
of capital changes, over a seven day and/or thirty day period, in the value of a
hypothetical pre-existing account having a balance of one share at the beginning
of the period, subtracting a hypothetical charge reflecting deductions from
shareholder accounts, and dividing the difference by the value of the account at
the beginning of the base period to obtain the base period return, and then
multiplying the base period return by (365/7) with the resulting yield figure
carried to at least the nearest hundredth of one percent. The current yields
for the Fund for the seven-day and thirty day periods ended February 28, 1998
were 5.24% and 5.27%, respectively.

Effective yield for the Money Market Fund is calculated by determining the net
change exclusive of capital changes in the value of a hypothetical pre-existing
account having a balance of one share at the beginning of the period,
subtracting a hypothetical charge reflecting deductions from shareholder
accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
compounding the base period return by adding one, raising the sum to a power
equal to 365 divided by seven, and

12
<PAGE>

subtracting one from the result. The effective yield for the Fund for the seven-
day period ended February 28, 1998 was 5.38%.

In addition, investors should recognize that changes in the net asset values
of shares of the Money Market Fund affect the yield for any specified period,
and such changes should be considered together with the Fund's yield in
ascertaining the Fund's total return to shareholders for the period. Yield
information may be useful in reviewing the Fund's performance and for providing
a basis for comparison with investment alternatives. The yield of the Fund,
however, may not be comparable to the yields from investment alternatives
because of differences in the foregoing variables and differences in the methods
used to value portfolio securities, compute expenses and calculate yield.

Performance Comparisons. From time to time and only to the extent the
-----------------------
comparison is appropriate for the Fund, the Company may quote the performance of
the Fund in advertising and other types of literature and may compare the
performance of the Fund to the performance of various indices and investments
for which reliable performance data is available. The performance of the Fund
may be compared in advertising and other literature to averages, performance
rankings and other information prepared by recognized mutual fund statistical
services.

From time to time, the Company may quote the Fund's performance in advertising
and other types of literature as compared to the 91-Day Treasury Bill Average
(Federal Reserve), Lipper Money Market Fund Average, Donoghue Taxable Money
Market Fund Average, Salomon Three-Month Treasury Bill Index, or Bank Averages,
which are calculated from figures supplied by the U.S. League of Savings
Institutions based on effective annual rates of interest on both passbook and
certificate accounts. Savings accounts offer a guaranteed return of principal
and a fixed rate of interest. The Fund's performance also may be compared to the
Consumer Price Index, as published by the U.S. Bureau of Labor Statistics, which
is an established measure of change over time in the prices of goods and
services in major expenditure groups.

In addition, the Company also may use, in advertisements and other types of
literature, information and statements: (1) showing that bank savings accounts
offer a guaranteed return of principal and a fixed rate of interest, but no
opportunity for capital growth; and (2) describing Wells Fargo Bank, and its
affiliates and predecessors, as one of the first investment managers to advise
investment accounts using asset allocation and index strategies. The Company
also may include in advertising and other types of literature information and
other data from reports and studies prepared by the Tax Foundation, including
information regarding federal and state tax levels and the related "Tax Freedom
Day." The Company also may disclose in advertising and other types of sales
literature the level and categories of assets under management by the Fund's
investment adviser, sub-adviser or their affiliates.

The Fund's performance also may be compared to those of other mutual funds
having similar objectives. This comparative performance could be expressed as a
ranking prepared by Lipper Analytical Services, Inc., Donoghue's Money Fund
Report, including Donoghue's Taxable Money Market Fund Average or Morningstar,
Inc., independent services which monitor the

13
<PAGE>

performance of mutual funds. The Fund's performance will be calculated by
relating net asset value per share at the beginning of a stated period to the
net asset value of the investment, assuming reinvestment of all gains
distributions and dividends paid, at the end of the period. Any such comparisons
may be useful to investors who wish to compare the Fund's past performance with
that of its competitors. Of course, past performance cannot be a guarantee of
future results.

Other Advertising Items. The Company also may discuss in advertising and other
-----------------------
types of literature that the Fund has been assigned a rating by a nationally
recognized statistical rating organization ("NRSRO"), such as Standard & Poor's
Corporation. Such rating would assess the creditworthiness of the investments
held by the Fund. The assigned rating would not be a recommendation to purchase,
sell or hold the Fund's shares since the rating would not comment on the market
price of the Fund's shares or the suitability of the Fund for a particular
investor. In addition, the assigned rating would be subject to change,
suspension or withdrawal as a result of changes in, or unavailability of,
information relating to the Fund or its investments. The Company may compare the
Fund's performance with other investments which are assigned ratings by NRSROs.
Any such comparisons may be useful to investors who wish to compare the Fund's
past performance with other rated investments.

DETERMINATION OF NET ASSET VALUE

The Fund uses the amortized cost method to determine the value of its
portfolio securities pursuant to Rule 2a-7 under the 1940 Act. The amortized
cost method involves valuing a security at its cost and amortizing any discount
or premium over the period until maturity, regardless of the impact of
fluctuating interest rates on the market value of the security. While this
method provides certainty in valuation, it may result in periods during which
the value, as determined by amortized cost, is higher or lower than the price
that the Fund would receive if the security were sold. During these periods the
yield to a shareholder may differ somewhat from that which could be obtained
from a similar fund that uses a method of valuation based upon market prices.
Thus, during periods of declining interest rates, if the use of the amortized
cost method resulted in a lower value of the Fund's portfolio on a particular
day, a prospective investor in the Fund would be able to obtain a somewhat
higher yield than would result from investment in a fund using solely market
values, and existing Fund shareholders would receive correspondingly less
income. The converse would apply during periods of rising interest rates.

Rule 2a-7 provides that in order to value its portfolio using the amortized
cost method, the Fund must maintain a dollar-weighted average portfolio maturity
of 90 days or less, purchase securities having remaining maturities (as defined
in Rule 2a-7) of thirteen months or less and invest only in those high-quality
securities that are determined by MIP's Board of Trustees to present minimal
credit risks. The maturity of an instrument is generally deemed to be the period
remaining until the date when the principal amount thereof is due or the date on
which the instrument is to be redeemed. However, Rule 2a-7 provides that the
maturity of an instrument may be deemed shorter in the case of certain
instruments, including certain variable- and floating-rate instruments subject
to demand features. Pursuant to the Rule, MIP's Board of Trustees is required to
establish procedures designed to stabilize, to the extent reasonably possible,
the

14
<PAGE>

Fund's price per share as computed for the purpose of sales and redemptions at
$1.00. Such procedures include review of the Fund's portfolio holdings by MIP's
Board of Trustees, at such intervals as it may deem appropriate, to determine
whether the Fund's net asset value calculated by using available market
quotations deviates from the $1.00 per share based on amortized cost. The extent
of any deviation will be examined by the Board of Directors. If such deviation
exceeds 1/2 of 1%, the Board will promptly consider what action, if any, will be
initiated. In the event the Board determines that a deviation exists that may
result in material dilution or other unfair results to shareholders, the Board
will take such corrective action as it regards as necessary and appropriate,
including the sale of portfolio instruments prior to maturity to realize capital
gains or losses or to shorten average portfolio maturity, withholding dividends
or establishing a net asset value per share by using available market
quotations.

PURCHASE AND REDEMPTION OF SHARES

Terms of Purchase. The Fund is generally open Monday through Friday and closed
-----------------
on weekends, NYSE holidays and federal bank holidays. The holidays on which the
Fund is closed currently are: New Year's Day, Martin Luther King, Jr.'s,
Birthday, Presidents' Day, Good Friday, Memorial Day, Independence Day, Veterans
Day, Columbus Day, Labor Day, Thanksgiving Day and Christmas Day. The Company
reserves the right to reject any purchase order and to change the amount of the
minimum investment and subsequent purchases in the Funds.

Payment for shares of the Fund may, at the discretion of the adviser, be made
in the form of securities that are permissible investments for the Fund and must
meet the investment objective, policies and limitations of the Fund as described
in the Prospectus. In connection with an in-kind securities payment, a Fund may
require, among other things, that the securities (i) be valued on the day of
purchase in accordance with the pricing methods used by the Fund; (ii) are
accompanied by satisfactory assurance that the Fund will have good and
marketable title to such securities received by it; (iii) are not subject to any
restrictions upon resale by the Fund; (iv) be in proper form for transfer to the
Fund; (v) are accompanied by adequate information concerning the basis and other
tax matters relating to the securities. All dividends, interest, subscription or
other rights pertaining to such securities shall become the property of the Fund
engaged in the in-kind purchase transaction and must be delivered to the Fund by
the investor upon receipt from the issuer. Securities acquired through an in-
kind purchase will be acquired for investment and not for immediate resale.
Shares purchased in exchange for securities generally cannot be redeemed until
the transfer has settled.

Suspension of Redemptions. Under the 1940 Act, a Fund may suspend the right
-------------------------
of redemption or postpone the date of payment upon redemption for any period
during which the NYSE is closed (other than customary weekend and holiday
closings, or during which trading is restricted, or during which as determined
by the SEC by rule or regulation) an emergency exists as a result of which
disposal or valuation of portfolio securities is not reasonably practicable, or
for such periods as the SEC may permit.

15
<PAGE>

The Company may suspend redemption rights or postpone redemption payments for
such periods as are permitted under the 1940 Act. The Company also may redeem
shares involuntarily or make payment for redemption in securities or other
property if it appears appropriate to do so in light of the Company's
responsibilities under the 1940 Act.

In addition, the Company may redeem shares involuntarily to reimburse the Fund
for any losses sustained by reason of the failure of a shareholder to make full
payment for shares purchased or to collect any charge relating to a transaction
effected for the benefit of a shareholder which is applicable to shares of the
Fund as provided from time to time in the Prospectus.

PORTFOLIO TRANSACTIONS

Purchases and sales of debt securities generally are principal transactions.
Debt securities normally are purchased or sold from or to dealers serving as
market makers for the securities at a net price. Debt securities also may be
purchased in underwritten offerings and may be purchased directly from the
issuer. Generally, U.S. Government Obligations, municipal obligations and
taxable money market securities are traded on a net basis and do not involve
brokerage commissions. The cost of executing transactions in debt securities
consists primarily of dealer spreads and underwriting commissions. Under the
1940 Act, persons affiliated with the Company are prohibited from dealing with
the Company as a principal in the purchase and sale of securities unless an
exemptive order allowing such transactions is obtained from the SEC or an
exemption is otherwise available. The Fund may purchase municipal or other
obligations from underwriting syndicates of which Stephens or BGFA is a member
under certain conditions in accordance with the provisions of a rule adopted
under the 1940 Act and in compliance with procedures adopted by the Board of
Directors.

The Company has no obligation to deal with any dealer or group of dealers in
the execution of transactions in portfolio securities. Subject to policies
established by the Company's Board of Directors and BGFA, BGFA is responsible
for the Fund's investment decisions and the placing of portfolio transactions.
In placing orders, it is the policy of the Company to obtain the best overall
terms taking into account the dealer's general execution and operational
facilities, the type of transaction involved and other factors such as the
dealer's risk in positioning the securities involved. While BGFA generally
seeks reasonably competitive spreads or commissions, the Fund will not
necessarily be paying the lowest spread or commission available.

In assessing the best overall terms available for any transaction, BGFA
considers factors deemed relevant, including the breadth of the market in
the security, the price of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of the commission, if
any, both for the specific transaction and on a continuing basis. BGFA may
cause the Fund to pay a broker/dealer which furnishes brokerage and
research services a higher commission than that which might be charged by
another broker/dealer for effecting the same transaction, provided that BGFA
determines in good faith that such commission is reasonable in relation to the
value of the brokerage and research services

16
<PAGE>

provided by such broker/dealer, viewed in terms of either the particular
transaction or the overall responsibilities of BFGA. Such brokerage
and research services might consist of reports and statistics relating to
specific companies or industries, general summaries of groups of stocks or bonds
and their comparative earnings and yields, or broad overviews of the stock,
bond, and government securities markets and the economy.

Supplementary research information so received is in addition to, and not in
lieu of, services required to be performed by BGFA and does not reduce the
advisory fees payable by the Fund. The Board of Directors will periodically
review the commissions paid by the Fund to consider whether the commissions paid
over representative periods of time appear to be reasonable in relation to the
benefits inuring to the Fund. It is possible that certain of the supplementary
research or other services received will primarily benefit one or more other
investment companies or other accounts for which BFGA exercises investment
discretion. Conversely, the Fund may be the primary beneficiary of the research
or services received as a result of portfolio transactions effected for such
other account or investment company.

Under Section 28(e) of the Securities Exchange Act of 1934, an adviser shall
not be "deemed to have acted unlawfully or to have breached its fiduciary duty"
solely because under certain circumstances it has caused the account to pay a
higher commission than the lowest available. To obtain the benefit of Section
28(e), an adviser must make a good faith determination that the commissions paid
are "reasonable in relation to the value of the brokerage and research services
provided . . . viewed in terms of either that particular transaction or its
overall responsibilities with respect to the accounts as to which it exercises
investment discretion and that the services provided by a broker provide an
adviser with lawful and appropriate assistance in the performance of its
investment decision-making responsibilities." Accordingly, the price to the Fund
in any transaction may be less favorable than that available from another
broker/dealer if the difference is reasonably justified by other aspects of the
portfolio execution services offered.

Broker/dealers utilized by BFGA may furnish statistical, research and other
information or services which are deemed by BFGA to be beneficial to the Fund's
investment programs. Research services received from brokers supplement BFGA's
own research and may include the following types of information: statistical and
background information on industry groups and individual companies; forecasts
and interpretations with respect to U.S. and foreign economies, securities,
markets, specific industry groups and individual companies; information on
political developments; portfolio management strategies; performance information
on securities and information concerning prices of securities; and information
supplied by specialized services to BFGA and to the Company's Directors with
respect to the performance, investment activities and fees and expenses of other
mutual funds. Such information may be communicated electronically, orally or in
written form. Research services may also include the providing of equipment used
to communicate research information, the arranging of meetings with management
of companies and the providing of access to consultants who supply research
information.

The outside research assistance is useful to BFGA since the brokers utilized
by BFGA as a group tend to follow a broader universe of securities and other
matters than the

17
<PAGE>

staff of BGFA can follow. In addition, this research provides BGFA
with a diverse perspective on financial markets. Research services which are
provided to BGFA by brokers are available for the benefit of all accounts
managed or advised by BGFA. It is the opinion of BGFA that this material is
beneficial in supplementing their research and analysis; and, therefore, it may
benefit the Fund by improving the quality of BGFA's investment advice.

Portfolio Turnover. Because the portfolio of the Fund consists of securities
------------------
with relatively short-term maturities, the Fund expects to experience high
portfolio turnover. A high portfolio turnover rate should not adversely affect
the Fund, however, because portfolio transactions ordinarily will be made
directly with principals on a net basis, and, consequently, the Fund usually
will not incur excessive transaction costs.

Securities of Regular Broker/Dealers. As of February 28, 1998 the Fund owned
------------------------------------
no securities of its "regular brokers or dealers" or their parents, as defined
in the 1940 Act.

TAXES

The following information supplements and should be read in conjunction with
the Prospectus section entitled "Taxes." The Prospectus describes generally the
tax treatment of distributions by the Fund. This section of the SAI includes
additional information concerning federal income taxes.

General. The Company intends to qualify the Fund as a regulated investment
-------
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), as long as such qualification is in the best interest of the Fund's
shareholders. The Fund will be treated as a separate entity for tax purposes
and thus the provisions of the Code applicable to regulated investment companies
will generally be applied individually to the Fund, rather than to the Company
as a whole. Accordingly, net capital gain, net investment income, and operating
expenses will be determined separately for the Fund. As a regulated investment
company, the Fund will not be taxed on its net investment income and net
realized capital gains distributed to its shareholders.

Qualification as a regulated investment company under the Code requires, among
other things, that (a) the Fund derive at least 90% of its annual gross income
from dividends, interest, certain payments with respect to securities loans,
gains from the sale or other disposition of stock or securities or foreign
currencies (to the extent such currency gains are directly related to the
regulated investment company's principal business of investing in stock or
securities) and other income (including but not limited to gains from options,
futures or forward contracts) derived with respect to its business of investing
in such stock, securities or currencies; and (b) the Fund diversify its holdings
so that, at the end of each quarter of the taxable year, (i) at least 50% of the
market value of the Fund's assets is represented by cash, government securities
and other securities limited in respect of any one issuer to an amount not
greater than 5% of the Fund's assets and 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its assets
is invested in the securities of any one issuer (other than U.S. Government
obligations and the securities of other regulated investment companies), or in
two or more issuers

18
<PAGE>

which the Fund controls and which are determined to be engaged in the same or
similar trades or businesses.

The Fund also must distribute or be deemed to distribute to its shareholders
at least 90% of its net investment income (which, for this purpose includes net
short-term capital gains) earned in each taxable year. In general, these
distributions must actually, or be deemed to be, made in the taxable year.
However, in certain circumstances, such distributions may be made in the 12
months following the taxable year. Furthermore, distributions declared in
October, November or December of one taxable year and paid by January 31 of the
following taxable year will be treated as paid by December 31 of the first
taxable year. The Fund intends to pay out substantially all of its net
investment income and net realized capital gains, if any, for each year.

In addition, a regulated investment company must, in general, derive less than
30% of its gross income for a taxable year from the sale or other disposition of
securities or options thereon held for less than three months. However, this
restriction has been repealed with respect to a regulated investment company's
taxable years beginning after August 5, 1997.

The Fund seeks to invest substantially all of its assets in the Master
Portfolio. Under the Code, the Master Portfolio will be treated as a non-
publicly traded partnership rather than as a regulated investment company or a
corporation. The Fund will be treated as owning the Master Portfolio's assets in
the proportion of the Fund's ownership interest in the Master Portfolio. The
Master Portfolio's assets, income and distributions will be managed in a manner
that enables the Fund to satisfy the requirements, set forth above, imposed on
regulated investment companies. Furthermore, any interest, dividends, gains and
losses of the Master Portfolio shall be deemed to have been "passed through" to
the Fund (and the Master Portfolio's other investors) in proportion to the
Fund's ownership interest in the Master Portfolio. Therefore, to the extent that
the Master Portfolio were to accrue but not distribute any interest, dividends
or gains, the Fund would be deemed to have realized and recognized its
proportionate share of interest, dividends or gains without receipt of any
distribution. However, the Master Portfolio will seek to minimize recognition by
its investors (such as the Fund) of interest, dividends, gains or losses without
a distribution.

Excise Tax. A 4% nondeductible excise tax will be imposed on the Fund (other
----------
than to the extent of its tax-exempt interest income) to the extent it does not
meet certain minimum distribution requirements by the end of each calendar year.
The Fund intends to actually or be deemed to distribute substantially all of its
net investment income and net realized capital gains by the end of each calendar
year and, thus, expects not to be subject to the excise tax.

Taxation of Master Portfolio Investments. Except as otherwise provided
----------------------------------------
herein, gains and losses realized by the Master Portfolio on the sale of
portfolio securities generally will be capital gains and losses. Such gains and
losses ordinarily will be long-term capital gains and losses if the securities
have been held by the Master Portfolio for more than one year at the time of
disposition of the securities.

Gains recognized on the disposition of a debt obligation (including tax-exempt
obligations purchased after April 30, 1993) purchased by the Master Portfolio at
a market discount (generally at a price less than its principal amount) will be
treated as ordinary income to the extent of the portion of market discount which
accrued, but was not previously recognized pursuant to an available election,
during the term the Master Portfolio held the debt obligation.

If the Master Portfolio enters into a "constructive sale" of any appreciated
position in stock, a partnership interest, or certain debt instruments, the
Master Portfolio must recognize gain (but not loss) with respect to that
position. For this purpose, a constructive sale occurs when the Master Portfolio
enters into one of the following transactions with respect to the same or
substantially identical property: (i) a short sale; (ii) an offsetting notional
principal contract; or (iii) a futures or forward contract.

Capital Gain Distributions. Distributions which are designated by the Fund as
--------------------------
capital gain distributions will be taxed to shareholders as long-term capital
gain (to the extent such dividends do not exceed the Fund's actual net capital
gain for the taxable year), regardless of how long a shareholder has held Fund
shares. Such distributions will be designated as capital gain distributions in
a written notice mailed by the Fund to its shareholders not later than 60 days
after the close of the Fund's taxable year.

19
<PAGE>

Other Distributions. For federal income tax purposes, the Fund's earnings and
--------------------
profits will be determined at the end of each taxable year and will be allocated
pro rata over the entire year. For federal income tax purposes, only amounts
paid out of earnings and profits will qualify as dividends. Thus, if during a
taxable year the Fund's declared dividends (as declared daily throughout the
year) exceed the Fund's net income (as determined at the end of the year), only
that portion of the year's distributions which equals the year's earnings and
profits will be deemed to have constituted a dividend. It is expected that the
Fund's net income, on an annual basis, will equal the dividends declared during
the year.

Disposition of Fund Shares. A disposition of Fund shares pursuant to a
--------------------------
redemption (including a redemption in-kind) or an exchange ordinarily will
result in a taxable capital gain or loss, depending on the amount received for
the shares (deemed to be received in the case of an exchange) and the cost of
the shares.

If a shareholder exchanges or otherwise disposes of Fund shares within 90 days
of having acquired such shares and if, as a result of having acquired those
shares, the shareholder subsequently pays a reduced sales charge on a new
purchase of shares of the Fund or a different regulated investment company, the
sales charge previously incurred acquiring the Fund's shares will not be taken
into account (to the extent such previous sales charges do not exceed the
reduction in sales charges on the new purchase) for the purpose of determining
the amount of gain or loss on the disposition, but will be treated as having
been incurred in the acquisition of such other shares. Also, any loss realized
on a redemption or exchange of shares of the Fund will be disallowed to the
extent that substantially identical shares are acquired within the 61-day period
beginning 30 days before and ending 30 days after the shares are disposed
of.

If a shareholder receives a designated capital gain distribution (to be
treated by the shareholder as long-term capital gain) with respect to any Fund
share and such Fund share is held for six months or less, then (unless otherwise
disallowed) any loss on the sale or exchange of that Fund share will be treated
as long-term capital loss to the extent of the designated capital gain
distribution. In addition, if a shareholder holds Fund shares for six months or
less, any loss on the sale or exchange of those shares will be disallowed to the
extent of the amount of exempt-interest dividends received with respect to those
shares. The Treasury Department is authorized to issue regulations reducing the
six-month holding requirement to a period of not less than the greater of 31
days or the period between regular dividend distributions where the Fund
regularly distributes at least 90% of its net tax-exempt interest, if any. No
such regulations have been issued as of the date of this SAI. The loss
disallowance rules described in this paragraph does not apply to losses realized
under a periodic redemption plan.

20
<PAGE>

Federal Income Tax Rates. As of the printing of this SAI, the maximum
------------------------
individual tax rate applicable to ordinary income is 39.6% (marginal tax rates
may be higher for some individuals to reduce or eliminate the benefit of
exemptions and deductions); the maximum individual marginal tax rate applicable
to net capital gain is 20%; and the maximum corporate tax rate applicable to
ordinary income and net capital gain is 35% (marginal tax rates may be higher
for some corporations to reduce or eliminate the benefit of lower marginal
income tax rates). The amount of tax payable by any taxpayer will be
affected by a combination of tax laws covering, for example, deductions,
credits, deferrals, exemptions, sources of income and other matters.

Backup Withholding. The Company may be required to withhold, subject to
------------------
certain exemptions, at a rate of 31% ("backup withholding") on dividends,
capital gain distributions, and redemption proceeds (proceeds from
exchanges and redemptions in-kind) paid or credited to an individual Fund
shareholder, if the shareholder fails to certify that the taxpayer
identification number ("TIN"), which usually is the individual shareholder's
social security number, provided to the Company is correct and that the
shareholder is not subject to backup withholding, or if the IRS notifies the
Company 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 credit
against the shareholder's federal income tax liability, if any, or otherwise
will be refundable. An investor must provide a valid TIN to the Company upon
opening or reopening an account. Failure to furnish a valid TIN to the Company
also could subject the investor to penalties imposed by the IRS. Foreign
shareholders of the Fund (described below) generally are not subject to backup
withholding.

Foreign Shareholders. Under the Code, distributions of net investment income
--------------------
by the Fund to a nonresident alien individual, foreign trust (i.e., trust which
a U.S. court is able to exercise primary supervision over administration of that
trust and one or more U.S. persons have authority to control substantial
decisions of that trust), foreign estate (i.e., the income of which is not
subject to U.S. tax regardless of source), foreign corporation, or foreign
partnership (a "foreign shareholder") will be subject to withholding tax (at a
rate of 30% or a lower treaty rate, if applicable). Withholding will not apply
if a dividend distribution paid by the Fund to a foreign shareholder is
"effectively connected" with a U.S. trade or business (or, if an income tax
treaty applies, is attributable to a U.S. permanent establishment of the foreign
shareholder), in which case the reporting and withholding requirements
applicable to U.S. residents will apply. Distributions of net capital gain
generally are not subject to federal income tax withholding.

New Regulations. On October 6, 1997, the Treasury Department issued new
---------------
regulations (the "New Regulations") which make certain modifications to the
backup withholding, U.S. income tax withholding and information reporting rules
applicable to foreign shareholders. The New Regulations generally will be
effective for payments made after December 31, 1999, subject to certain
transition rules. Among other things, the New Regulations will permit the Fund
to estimate the portion of its distributions qualifying as capital gain
distributions for purposes of determining the portion of such distributions paid
to foreign shareholders which will be subject to federal

21
<PAGE>

income tax withholding. Prospective investors are urged to consult their own tax
advisors regarding the application of the New Regulations.

Foreign Taxes. Income and dividends received by a Fund from foreign
-------------
securities and gains realized by the Fund on the disposition of foreign
securities may be subject to withholding and other taxes imposed by foreign
countries. Tax conventions between certain countries and the United States may
reduce or eliminate such taxes. Although in some circumstances a regulated
investment company can elect to "pass through" foreign tax credits to its
shareholders, the Fund does not expect to be able to make such an election.

Tax-Deferred Plans. The shares of the Fund are available for a variety of
------------------
tax-deferred retirement and other plans, including Individual Retirement
Accounts. Investors should contact their selling agents for details concerning
retirement and other plans.

Other Matters. Investors should be aware that the investments to be made by
-------------
the Fund may involve sophisticated tax rules that may result in income or gain
recognition by the Fund without corresponding current cash receipts. Although
the Fund will seek to avoid significant noncash income, such noncash income
could be recognized by the Fund, in which case the Fund may distribute cash
derived from other sources in order to meet the minimum distribution
requirements described above.

The foregoing discussion and the discussions in the Prospectus applicable to
each shareholder address only some of the federal income tax considerations
generally affecting investments in the Fund. Each investor is urged to consult
his or her tax advisor regarding specific questions as to federal, state, local
and foreign taxes.

CAPITAL STOCK

The Company, an open-end, management investment company, was incorporated in
Maryland on October 15, 1992. The authorized capital stock of the Company
consists of 12,100,000,000 shares having a par value of $.001 per share. As of
the date of this SAI, the Company's Board of Directors has authorized the
issuance of twelve series of shares. The Board of Directors may, in the future,
authorize the issuance of other series of capital stock representing shares of
additional investment portfolios.

All shares of the Company have equal voting rights and will be voted in the
aggregate, and not by series, except where voting by a series is required by law
or where the matter involved only affects one series. For example, a change in
the Fund's fundamental investment policy would be voted upon only by
shareholders of the Fund. Additionally, approval of an advisory contract is a
matter to be determined separately by fund. Approval by the shareholders of a
fund is effective as to that fund whether or not sufficient votes are received
from the shareholders of the other investment portfolios to approve the proposal
as to those investment portfolios. As used in the Money Market Fund's Prospectus
and in this SAI, the term "majority," when referring to approvals to be obtained
from shareholders of the Fund, means the vote of the lesser of (i) 67% of the
shares of the Fund represented at a meeting if the holders of more than 50% of
the outstanding shares of the Fund are present in person or by proxy, or (ii)
more than 50% of the outstanding shares of the Fund. The term "majority," when
referring to the approvals to be obtained from shareholders of the Company as a
whole, means the vote of the lesser of (i) 67% of the Company's shares
represented at a meeting if the holders of more than 50% of the Company's
outstanding shares are present in person or by proxy, or (ii) more than 50% of
the Company's outstanding shares. Shareholders are entitled to one vote for each
full share held and fractional votes for fractional shares held.

The Company may dispense with an annual meeting of shareholders in any year in
which it is not required to elect Directors under the 1940 Act. However, the
Company has undertaken to hold a special meeting of its shareholders for the
purpose of voting on the question of removal of

22
<PAGE>

a Director or Directors if requested in writing by the holders of at least 10%
of the Company's outstanding voting securities, and to assist in communicating
with other shareholders as required by Section 16(c) of the 1940 Act.

Each share of the Fund represents an equal proportional interest in the Fund
with each other share and is entitled to such dividends and distributions out of
the income earned on the assets belonging to the Fund as are declared in the
discretion of the Directors. In the event of the liquidation or dissolution of
the Company, shareholders of the Fund are entitled to receive the assets
attributable to the Fund that are available for distribution, and a distribution
of any general assets not attributable to a particular investment portfolio that
are available for distribution in such manner and on such basis as the Directors
in their sole discretion may determine.

Shareholders are not entitled to any preemptive rights. All shares, when
issued, will be fully paid and non-assessable by the Company.

MIP is an open-end, series of management investment companies organized as a
Delaware business trust. MIP was organized on October 21, 1993. In accordance
with Delaware law and in connection with the tax treatment sought by MIP, MIP's
Declaration of Trust provides that its investors would be personally responsible
for Trust liabilities and obligations, but only to the extent MIP's property is
insufficient to satisfy such liabilities and obligations. The Declaration of
Trust also provides that MIP shall maintain appropriate insurance (for example,
fidelity bonding and errors and omissions insurance) for the protection of the
Trust, its investors, Trustees, officers, employees and agents covering possible
tort and other liabilities, and that investors will be indemnified to the extent
they are held liable for a disproportionate share of Trust obligations. Thus,
the risk of an investor incurring financial loss on account of investor
liability is limited to circumstances in which both inadequate insurance existed
and MIP itself was unable to meet its obligations.

The Declaration of Trust further provides that obligations of MIP are not
binding upon its Trustees individually but only upon the property of the Trust
and that the Trustees will not be liable for any action or failure to act, but
nothing in the Declaration of Trust protects a Trustee against any liability to
which the Trustee would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties involved in the
conduct of the Trustee's office.

The interests in the Master Portfolio of MIP have substantially identical
voting and other rights as those rights enumerated above for shares of the
Fund. MIP also intends to dispense with annual meetings, but is required by
Section 16(c) of the 1940 Act to hold a special meeting and assist investor
communications under the circumstances described above with respect to the
Company. Whenever the Fund is requested to vote on a matter with respect to its
Master Portfolio, the Fund will hold a meeting of Fund shareholders and will
cast its votes as instructed by such shareholders.

In a situation where the Fund does not receive instruction from certain of its
shareholders on how to vote the corresponding shares of the Master Portfolio,
the Fund will vote such shares in the same proportion as the shares for which
the Fund does receive voting instructions.

As of May 30, 1998, Merrill Lynch Trust Co. FSB, FBO Various 401(K) Plans,
P.O. Box 62000, San Francisco, CA 94162, was the record owner of approximately
97.09% of the outstanding voting securities of the Fund, and may be
presumed to "control" the Fund as that term is defined in the 1940 Act.

OTHER

The Registration Statement, including the Prospectus for the Fund, the SAI and
the exhibits filed therewith, may be examined at the office of the SEC in
Washington, D.C. Statements contained in the Prospectus or the SAI as to the
contents of any contract or other document referred to herein or in the
Prospectus are not necessarily complete, and, in each instance, reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
COUNSEL

Morrison & Foerster LLP, 2000 Pennsylvania Avenue, NW, Suite 5500, Washington,
D.C. 20006-1812, as counsel for the Company, has rendered its opinion as to
certain legal matters regarding the due authorization and valid issuance of the
shares being sold pursuant to the Fund's Prospectus.

INDEPENDENT AUDITORS

KPMG Peat Marwick LLP, Three Embarcadero Center, San Francisco, California
94111, has been selected as the independent auditors for the Company. KPMG Peat
Marwick LLP provides audit services, tax return preparation and assistance and
consultation in connection with review of certain SEC filings.

23
<PAGE>

FINANCIAL INFORMATION

The audited financial statements, including the portfolio of investments and
independent auditors' report for the fiscal year ended February 28, 1998 for the
Fund are hereby incorporated by reference to the MasterWorks Funds Inc. Annual
Report, as filed with the SEC on May 1, 1998. The audited financial statements
are attached to all SAIs delivered to shareholders or prospective
shareholders.

24
<PAGE>

SAI APPENDIX

Description of certain ratings assigned by Standard & Poor's
Corporation ("S&P"), Moody's Investors Service, Inc. ("Moody's"), Fitch
Investors Service, Inc. ("Fitch"), Duff & Phelps, Inc. ("Duff"), IBCA Inc.
and IBCA Limited ("IBCA"), and BankWatch:

S&P

BOND RATINGS

"AAA"

Bonds rated AAA have the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.

"AA"

Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.

"A"

Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in higher
rated categories.

"BBB"

Bonds rated "BBB" are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.

S&P's letter ratings may be modified by the addition of a plus (+) or
minus (-) sign designation, which is used to show relative standing within the
major rating categories, except in the AAA (Prime Grade) category.

COMMERCIAL PAPER RATING

The designation A-1 by S&P indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are denoted with a
plus sign (+) designation. Capacity for timely payment on issues with an A-2
designation is strong. However, the relative degree of safety is not as high as
for issues designated A-1.

MOODY'S

BOND RATINGS

"Aaa"

Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

"Aa"

A-1
<PAGE>

Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what generally are known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.

"A"

Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.

"Baa"

Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Moody's applies the numerical modifiers "1", "2" and "3" to show
relative standing within the major rating categories, except in the "Aaa"
category. The modifier "1" indicates a ranking for the security in the higher
end of a rating category; the modifier "2" indicates a mid-range ranking; and
the modifier "3" indicates a ranking in the lower end of a rating category.

COMMERCIAL PAPER RATING

The rating ("P-1") Prime-1 is the highest commercial paper rating
assigned by Moody's. Issuers of "P-1" paper must have a superior capacity for
repayment of short-term promissory obligations, and ordinarily will be evidenced
by leading market positions in well established industries, high rates of return
on funds employed, conservative capitalization structures with moderate reliance
on debt and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation, and well established access
to a range of financial markets and assured sources of alternate liquidity.

Issuers (or relating supporting institutions) rated ("P-2") Prime-2
have a strong capacity for repayment of short-term promissory obligations. This
ordinarily will be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.

FITCH

BOND RATINGS

The ratings represent Fitch's assessment of the issuer's ability to
meet the obligations of a specific debt issue or class of debt. The ratings take
into consideration special features of the issue, its relationship to other
obligations of the issuer, the current financial condition and operative
performance of the issuer and of any guarantor, as well as the political and
economic environment that might affect the issuer's future financial strength
and credit quality.

"Aaa"

Bonds rated "AAA" are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events.

A-2
<PAGE>

"AA"

Bonds rated "AA" are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated "AAA". Because bonds
rated in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short- term debt of these issuers is generally
rated "F-1+".

"A"

Bonds rated "A" are considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.

"BBB"

Bonds rated "BBB" are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to have an adverse impact on these
bonds and, therefore, impair timely payment. The likelihood that the ratings of
these bonds will fall below investment grade is higher than for bonds with
higher ratings.

Plus (+) and minus (-) signs are used with a rating symbol to indicate
the relative position of a credit within the rating category.

SHORT-TERM RATINGS

Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.

Although the credit analysis is similar to Fitch's bond rating
analysis, the short-term rating places greater emphasis than bond ratings on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.

"F-1+"

Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.

"F-1"

Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F-1+.

"F-2"

Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payments, but the margin of safety is not as
great as the F-1+ and F-1 categories.

A-3
<PAGE>

DUFF

BOND RATINGS

"AAA"

Bonds rated AAA are considered highest credit quality. The risk factors
are negligible, being only slightly more than for risk-free U.S. Treasury debt.

"AA"

Bonds rated AA are considered high credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to time because of
economic conditions.

"A"

Bonds rated A have protection factors which are average but adequate.
However, risk factors are more variable and greater in periods of economic
stress.

"BBB"

Bonds rated BBB are considered to have below average protection factors
but still considered sufficient for prudent investment. Considerable variability
in risk during economic cycles.

Plus (+) and minus (-) signs are used with a rating symbol (except AAA)
to indicate the relative position of a credit within the rating category.

COMMERCIAL PAPER RATING

The rating "Duff-1" is the highest commercial paper rating assigned by
Duff. Paper rated Duff-1 is regarded as having very high certainty of timely
payment with excellent liquidity factors which are supported by ample asset
protection. Risk factors are minor. Paper rated "Duff-2" is regarded as having
good certainty of timely payment, good access to capital markets and sound
liquidity factors and company fundamentals. Risk factors are small.

IBCA

BOND AND LONG-TERM RATINGS

Obligations rated AAA by IBCA have the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial,
such that adverse changes in business, economic or financial conditions are
unlikely to increase investment risk significantly. Obligations for which there
is a very low expectation of investment risk are rated AA by IBCA. Capacity for
timely repayment of principal and interest is substantial. Adverse changes in
business, economic or financial conditions may increase investment risk albeit
not very significantly.

COMMERCIAL PAPER AND SHORT-TERM RATINGS

The designation A1 by IBCA indicates that the obligation is supported
by a very strong capacity for timely repayment. Those obligations rated A1+ are
supported by the highest capacity for timely repayment. Obligations rated A2 are
supported by a strong capacity for timely repayment, although such capacity may
be susceptible to adverse changes in business, economic or financial conditions.

INTERNATIONAL AND U.S. BANK RATINGS

A-4
<PAGE>

An IBCA bank rating represents IBCA's current assessment of the
strength of the bank and whether such bank would receive support should it
experience difficulties. In its assessment of a bank, IBCA uses a dual rating
system comprised of Legal Ratings and Individual Ratings. In addition, IBCA
assigns banks Long- and Short-Term Ratings as used in the corporate ratings
discussed above. Legal Ratings, which range in gradation from 1 through 5,
address the question of whether the bank would receive support provided by
central banks or interestholders if it experienced difficulties, and such
ratings are considered by IBCA to be a prime factor in its assessment of credit
risk. Individual Ratings, which range in gradations from A through E, represent
IBCA's assessment of a bank's economic merits and address the question of how
the bank would be viewed if it were entirely independent and could not rely on
support from state authorities or its owners.

BANK WATCH

BankWatch ratings are based upon a qualitative and quantitative
analysis of all segments of the organization including, where applicable,
holding company and operating subsidiaries. BankWatch ratings do not constitute
a recommendation to buy or sell securities of any of these companies. Further,
BankWatch does not suggest specific investment criteria for individual clients.

BankWatch long-term ratings apply to specific issues of long-term debt
and preferred stock. The long-term ratings specifically assess the likelihood of
untimely payment of principal or interest over the term to maturity of the rated
instrument. The following are the three highest investment grade ratings used by
BankWatch for long-term debt:

AAA -- The highest category; indicates ability to repay principal and
interest on a timely basis is extremely high.

AA -- The second highest category; indicates a very strong ability to
repay principal and interest on a timely basis with limited incremental
risk versus issues rated in the highest category.

A -- The third highest category; indicates the ability to repay
principal and interest is strong. Issues rated "A" could be more
vulnerable to adverse developments (both internal and external) than
obligations with higher ratings.

The BankWatch short-term ratings apply to commercial paper, other
senior short-term obligations and deposit obligations of the entities to which
the rating has been assigned. The BankWatch short-term ratings specifically
assess the likelihood of an untimely payment of principal or interest.

TBW-1 -- The highest category; indicates a very high likelihood that
principal and interest will be paid on a timely basis.

TBW-2 -- The second highest category; while the degree of safety
regarding timely repayment of principal and interest is strong, the
relative degree of safety is not as high as for issues rated "TBW-1".

A-5
<PAGE>

MASTERWORKS FUNDS INC.
FILE NO. 33-54126; 811-7332

PART C

OTHER INFORMATION

Item 24. Financial Statements and Exhibits.
---------------------------------

(a) Financial Statements:

The portfolio of investments, audited financial statements and
independent auditors' report for the fiscal year ended February 28, 1998 for
the Asset Allocation, Bond Index, Growth Stock, LifePath 2000, LifePath 2010,
LifePath 2020, LifePath 2030, LifePath 2040, Money Market, Short-Intermediate
Term, S&P 500 Stock and U.S. Treasury Allocation Funds are hereby
incorporated by reference to the Company's Annual Report, as filed with the
SEC on May 1, 1998.

The portfolio of investments, audited financial statements and
independent auditors' report for the fiscal year ended February 28, 1998 for
the Asset Allocation, Bond Index, LifePath 2000, LifePath 2010, LifePath
2020, LifePath 2030, LifePath 2040, S&P 500 Index and U.S. Treasury
Allocation Master Portfolios of Master Investment Portfolio ("MIP"), and for
the Growth Stock and Short-Intermediate Term Master Portfolios of Managed
Series Investment Trust ("MSIT") are hereby incorporated by reference to the
Company's Annual Report, as filed with the SEC on May 1, 1998.

(b) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>

1 - Restated Articles of Incorporation dated October 31, 1995, incorporated by reference to
Post-Effective Amendment No. 11, filed December 1, 1995.

2 - By-Laws, incorporated by reference to Post-Effective Amendment No. 8, filed June 27, 1995.

3 - Not applicable

4 - Not applicable

5 - Not applicable

</TABLE>

C-1
<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
6 - Amended and Restated Distribution Agreement with Stephens Inc. on behalf of the Funds, dated
February 16, 1996, incorporated by reference to Post-Effective Amendment No. 13, filed June 28,
1996.

7 - Not applicable.

8 - Custody Agreement with Investors Bank & Trust Company on behalf of the Funds, dated October 21,
1996, incorporated by reference to Post-Effective Amendment No. 14, filed June 30, 1997.

9(a) - Transfer Agency and Service Agreement with Investors Bank & Trust Company on behalf of the Funds,
dated February 27, 1998, filed July 2, 1998.

9(b) - Shareholder Servicing Plan and Form of Shareholder Servicing Agreement for the Growth, Growth
Stock, Short-Intermediate Term, Asset Allocation, U.S. Treasury Allocation, Bond Index, S&P 500
Stock and Money Market Funds, filed July 2, 1998.

9(b)(i) - Shareholder Servicing Plan and Form of Shareholder Servicing Agreement for the LifePath 2000,
LifePath 2010, LifePath 2020, LifePath 2030 and LifePath 2040 Funds, incorporated by reference to
Post-Effective Amendment No. 11, filed December 1, 1995.

9(c)(i) - Co-Administration Agreement with Stephens Inc. and Barclays Global Investors, N.A. on behalf of
the Funds, dated October 21, 1996, as amended on June 11, 1998, filed herewith.

9(c)(ii) - Sub-Administration Agreement by and among Barclays Global Investors, N.A. and Investors Bank &
Trust Company on behalf of the Funds, dated October 21, 1996, incorporated by reference to Post-
Effective Amendment No. 14, filed June 30, 1997 (previously listed as exhibit 5(b)(ii)).

9(d) _ Service Agreement with Merrill Lynch, Pierce, Fenner & Smith Incorporated on behalf of the Funds,
dated December 31, 1997, July 2, 1998.

9(e) - Financial Services Agreement with Merrill Lynch, Pierce, Fenner & Smith Incorporated on behalf of
the Funds, dated December 31, 1997, filed July 2, 1998.

10 - Opinion and Consent of Counsel, filed herewith.

11 - Consent of Independent Auditors, filed herewith.

12 - Not applicable

13 - Not applicable

14 - Not applicable

15 - Not applicable

16 - Not applicable
</TABLE>

C-2
<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
17 - See Exhibit 27

18 - Not applicable

19 - Powers of Attorney for Jack S. Euphrat, R. Greg Feltus, Thomas S. Goho, Zoe Ann Hines, W. Rodney
Hughes, Robert M. Joses and J. Tucker Morse, incorporated by reference to Post-Effective Amendment
No. 14, filed June 30, 1997.

27 - Financial Data Schedules for the fiscal period ended February 28, 1998, incorporated by reference
to the Form N-SAR filed on April 28, 1998.
</TABLE>

Item 25. Persons Controlled by or under
Common Control with Registrant
------------------------------

As of June 1, 1998, each Fund owned the following percentages of the
outstanding beneficial interests of the corresponding Master Portfolios of MIP
or MSIT. As such, each Fund could be considered a controlling person of the
corresponding Master Portfolio for purposes of the 1940 Act.

<TABLE>
<CAPTION> Percentage
Corresponding of beneficial
Fund Master Portfolio interests held
- -------------------------------------- -------------------------------------------------- -------------------
<S> <C> <C>
LifePath 2000 Fund LifePath 2000 Master Portfolio (MIP) 43.13%
LifePath 2010 Fund LifePath 2010 Master Portfolio (MIP) 54.90%
LifePath 2020 Fund LifePath 2020 Master Portfolio (MIP) 45.87%
LifePath 2030 Fund LifePath 2030 Master Portfolio (MIP) 41.10%
LifePath 2040 Fund LifePath 2040 Master Portfolio (MIP) 32.68%
Asset Allocation Fund Asset Allocation Master Portfolio (MIP) 99.99%
Bond Index Fund Bond Index Master Portfolio (MIP) 99.99%
S&P 500 Stock Fund S&P 500 Index Master Portfolio (MIP) 88.41%
U.S. Treasury Allocation Fund U.S. Treasury Allocation Master Portfolio (MIP) 99.99%
Growth Stock Fund Growth Stock Master Portfolio (MSIT) 99.99%
Short-Intermediate Term Fund Short-Intermediate Term Master Portfolio (MSIT) 99.99%
</TABLE>

Item 26. Number of Holders of Securities.
-------------------------------

As of June 1, 1998, the number of record holders of each class of
securities of the Registrant for the following funds were as follows:

C-3
<PAGE>

Number of
Title of Class Record Holders
- --------------------------------------------------------- --------------------
<S> <C>
Asset Allocation Fund 14
Bond Index Fund 18
Growth Stock Fund 8
LifePath 2000 Fund 11
LifePath 2010 Fund 12
LifePath 2020 Fund 12
LifePath 2030 Fund 12
LifePath 2040 Fund 11
Money Market Fund 5
Short-Intermediate Term Fund 5
S&P 500 Stock Fund 66
U.S. Treasury Allocation Fund 8
</TABLE>

Item 27. Indemnification.
---------------

The following paragraphs of Article VIII of the Registrant's Articles
of Incorporation provide:

(h) The Corporation shall indemnify (1) its Directors and
officers, whether serving the Corporation or at its request any other
entity, to the full extent required or permitted by the General Laws of
the State of Maryland now or hereafter in force, including the advance of
expenses under the procedures and to the full extent permitted by law, and
(2) its other employees and agents to such extent as shall be authorized
by the Board of Directors or the Corporation's By-Laws and be permitted by
law. The foregoing rights of indemnification shall not be exclusive of
any other rights to which those seeking indemnification may be entitled.
The Board of Directors may take such action as is necessary to carry out
these indemnification provisions and is expressly empowered to adopt,
approve and amend from time to time such By-Laws, resolutions or contracts
implementing such provisions or such further indemnification arrangements
as may be permitted by law. No amendment of these Articles of
Incorporation of the Corporation shall limit or eliminate the right to
indemnification provided hereunder with respect to acts or omissions
occurring prior to such amendment or repeal. Nothing contained herein
shall be construed to authorize the Corporation to indemnify any Director
or officer of the Corporation against any liability to the Corporation or
to any holders of securities of the Corporation to which he is subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office. Any
indemnification by the Corporation shall be consistent with the
requirements of law, including the 1940 Act.

(i) To the fullest extent permitted by Maryland statutory and
decisional law and the 1940 Act, as amended or interpreted, no Director or
officer of the Corporation shall be personally liable to the Corporation
or its stockholders for money

C-4
<PAGE>

damages; provided, however, that nothing herein shall be construed to
protect any Director or officer of the Corporation against any liability
to which such Director or officer would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of his office. No amendment,
modification or repeal of this Article VIII shall adversely affect any
right or protection of a Director or officer that exists at the time of
such amendment, modification or repeal.

Item 28. Business and Other Connections
of Investment Adviser.
----------------------

The Funds currently do not retain an investment adviser. The
corresponding MIP Master Portfolios to the LifePath 2000, LifePath 2010,
LifePath 2020, LifePath 2030, LifePath 2040, Asset Allocation, Bond Index, Money
Market, S&P 500 Stock and U.S. Treasury Allocation Funds are advised by Barclays
Global Fund Advisors ("BGFA"), a wholly-owned subsidiary of Barclays Global
Investors, N.A. ("BGI", formerly, Wells Fargo Institutional Trust Company). The
corresponding MSIT Master Portfolios to the Growth Stock and Short-Intermediate
Term Funds are advised by BGFA and sub-advised by Wells Fargo Bank, N.A. ("Wells
Fargo Bank"), a wholly-owned subsidiary of Wells Fargo & Company.

BGFA's business is that of a registered investment adviser to certain
open-end, management investment companies and various other institutional
investors. Wells Fargo Bank's business is that of a national banking
association with respect to which it conducts a variety of commercial banking
and trust activities, including acting as investment adviser and/or sub-adviser
to certain open-end management investment companies and various other
institutional investors.

The directors and officers of BGFA consist primarily of persons who
during the past two years have been active in the investment management business
of the former sub-adviser to the Registrant, Wells Fargo Nikko Investment
Advisors ("WFNIA") and, in some cases, the service business of BGI. Each of the
directors and executive officers of BGFA will also have substantial
responsibilities as directors and/or officers of BGI. To the knowledge of the
Registrant, except as set forth below, none of the directors or executive
officers of BGFA is or has been at any time during the past two fiscal years
engaged in any other business, profession, vocation or employment of a
substantial nature.

<TABLE>
<CAPTION>
Name and Position Principal Business(es) During at
at BGFA Least the Last Two Fiscal Years
- ------------------------------- -----------------------------------------------------------------------------
<S> <C>
Frederick L.A. Grauer Director of BGFA and Co-Chairman and Director of BGI
Director 45 Fremont Street, San Francisco, CA 94105

Patricia Dunn Director of BGFA and C-Chairman and Director of BGI
Director 45 Fremont Street, San Francisco, CA 94105
</TABLE>

C-5
<PAGE>

<TABLE>
<CAPTION>
<S> <C>
Lawrence G. Tint Chairman of the Board of Directors of BGFA
Chairman and Director and Chief Executive Officer of BGI
45 Fremont Street, San Francisco, CA 94105

Geoffrey Fletcher Chief Financial Officer of BGFA and BGI since May 1997
Chief Financial Officer 45 Fremont Street, San Francisco, CA 94105
Managing Director and Principal Accounting Officer at
Bankers Trust Company from 1988 - 1997
505 Market Street, San Francisco, CA 94105
</TABLE>

To the knowledge of Registrant, none of the directors or executive
officers of Wells Fargo Bank, except those set forth below, is or has been at
any time during the past two fiscal years engaged in any other business,
profession, vocation or employment of a substantial nature, except that certain
executive officers also hold various positions with and engage in business for
Wells Fargo & Company. Set forth below are the names and principal businesses of
the directors and executive officers of Wells Fargo Bank who are or during the
past two fiscal years have been engaged in any other business, profession,
vocation or employment of a substantial nature for their own account or in the
capacity of director, officer, employee, partner or trustee. All the directors
of Wells Fargo Bank also serve as directors of Wells Fargo & Company.

<TABLE>
<CAPTION>
Name and Position Principal Business(es) and Address(es)
at Wells Fargo Bank During at Least the Last Two Fiscal Years
- ---------------------------- --------------------------------------------------------------------------------
<S> <C>
H. Jesse Arnelle Senior Partner of Arnelle, Hastie, McGee, Willis & Greene
Director 455 Market Street
San Francisco, CA 94105

Director of Armstrong World Industries, Inc.
5037 Patata Street
South Gate, CA 90280

Director of Eastman Chemical Corporation
12805 Busch Place
Santa Fe Springs, CA 90670

Director of FPL Group, Inc.
700 Universe Blvd.
P.O. Box 14000
North Palm Beach, FL 33408

Michael R. Bowlin Chairman of the Board of Directors, Chief Executive Officer,
Director Chief Operating Officer and President of
Atlantic Richfield Co. (ARCO)
Highway 150
Santa Paula, CA 93060

Edward Carson Chairman of the Board and Chief Executive Officer of
Director First Interstate Bancorp
633 West Fifth Street
Los Angeles, CA 90071
</TABLE>

C-6
<PAGE>

<TABLE>
<CAPTION>
<S> <C>
Director of Aztar Corporation
2390 East Camelback Road Suite 400
Phoenix, AZ 85016

Director of Castle & Cook, Inc.
10900 Wilshire Blvd.
Los Angeles, CA 90024

Director of Terra Industries, Inc.
1321 Mount Pisgah Road
Walnut Creek, CA 94596

William S. Davilla President (Emeritus) and a Director of
Director The Vons Companies, Inc.
618 Michillinda Ave.
Arcadia, CA 91007

Director of Pacific Gas & Electric Company
788 Taylorville Road
Grass Valley, CA 95949

Rayburn S. Dezember Director of CalMat Co.
Director 3200 San Fernando Road
Los Angeles, CA 90065

Director of Tejon Ranch Company
P.O. Box 1000
Lebec, CA 93243

Director of The Bakersfield Californian
1707 I Street
P.O. Box 440
Bakersfield, CA 93302

Trustee of Whittier College
13406 East Philadelphia Ave.
P.O. Box 634
Whittier, CA 90608

Paul Hazen Chairman of the Board of Directors of
Chairman of the Board of Wells Fargo & Company
Directors 420 Montgomery Street
San Francisco, CA 94105

Director of Phelps Dodge Corporation
2600 North Central Ave.
Phoenix, AZ 85004

Director of Safeway, Inc.
4th and Jackson Streets
Oakland, CA 94660
</TABLE>

C-7
<PAGE>

<TABLE>
<CAPTION>
<S> <C>
Robert K. Jaedicke Professor (Emeritus) of Accounting
Director Graduate School of Business at Stanford University
MBA Admissions Office
Stanford, CA 94305

Director of Bailard Biehl & Kaiser
Real Estate Investment Trust, Inc.
2755 Campus Dr.
San Mateo, CA 94403

Director of Boise Cascade Corporation
1111 West Jefferson Street
P.O. Box 50
Boise, ID 83728

Director of California Water Service Company
1720 North First Street
San Jose, CA 95112

Director of Enron Corporation
1400 Smith Street
Houston, TX 77002

Director of GenCorp, Inc.
175 Ghent Road
Fairlawn, OH 44333

Director of Homestake Mining Company
650 California Street
San Francisco, CA 94108

Thomas L. Lee Chairman and Chief Executive Officer of
Director The Newhall Land and Farming Company
10302 Avenue 7 1-2
Firebaugh, CA 93622

Director of Calmat Co.
501 El Charro Road
Pleasanton, CA 94588

Director of First Interstate Bancorp
633 West Fifth Street
Los Angeles, CA 90071

Ellen Newman President of Ellen Newman Associates
Director 323 Geary Street
Suite 507
San Francisco, CA 94102
</TABLE>

C-8
<PAGE>

<TABLE>
<CAPTION>
<S> <C>
Chair (Emeritus) of the Board of Trustees
University of California at San Francisco Foundation
250 Executive Park Blvd.
Suite 2000
San Francisco, CA 94143

Director of the California Chamber of Commerce
1201 K Street 12th Floor
Sacremento, CA 95814

Philip J. Quigley Chairman, President and Chief Executive Officer of
Director Pacific Telesis Group
130 Kearney Street Rm. 3700
San Francisco, CA 94108

Carl E. Reichardt Director of Columbia/HCA Healthcare Corporation
Director One Park Plaza
Nashville, TN 37203

Director of Ford Motor Company
The American Road
Dearborn, MI 48121

Director of Newhall Management Corporation
23823 Valencia Blvd.
Valencia, CA 91355

Director of Pacific Gas and Electric Company
77 Beale Street
San Francisco, CA 94105

Retired Chairman of the Board of Directors
and Chief Executive Officer of Wells Fargo & Company
420 Montgomery Street
San Francisco, CA 94105

Donald B. Rice President and Chief Executive Officer of Teledyne, Inc.
Director 2049 Century Park East
Los Angeles, CA 90067

Retired Secretary of the Air Force

Director of Vulcan Materials Company
One MetroPlex Drive
Birmingham, AL 35209

Richard J. Stegemeier Chairman (Emeritus) of Unocal Corp
Director 44141 Yucca Avenue
Lancaster, CA 93534

Director of Foundation Health Corporation
166 4th
Fort Irwin, CA 92310
</TABLE>

C-9
<PAGE>

<TABLE>
<CAPTION>
<S> <C>
Director of Halliburton Company
3600 Lincoln Plaza
500 North Alcard Street
Dallas, TX 75201

Director of Northrop Grumman Corp.
1840 Century Park East
Los Angeles, CA 90067

Director of Outboard Marine Corporation
100 SeaHorse Drive
Waukegan, IL 60085

Director of Pacific Enterprises
555 West Fifth Street
Suite 2900
Los Angeles, CA 90031

Director of First Interstate Bancorp
633 West Fifth Street
Los Angeles, CA 90071

Susan G. Swenson President and Chief Executive Officer of Cellular One
Director 651 Gateway Blvd.
San Francisco, CA 94080

David M. Tellep Retired Chairman of the Board and Chief Executive Officer of
Director Martin Lockheed Corp
6801 Rockledge Drive
Bethesda, MD 20817

Director of Edison International
and Southern California Edison Company
2244 Walnut Grove Ave.
Rosemead, CA 91770

Director of First Interstate
633 West Fifth Street
Los Angeles, CA 90071

Chang-Lin Tien Chancellor of the University of California at Berkeley
Director Berkeley, CA 94720

Director of Raychem Corporation
300 Constitution Drive
Menlo Park, CA 94025

John A. Young President, Chief Executive Officer and Director
Director of Hewlett-Packard Company
3000 Hanover Street
Palo Alto, CA 9434
</TABLE>

C-10
<PAGE>

<TABLE>
<CAPTION>
<S> <C>
Director of Chevron Corporation
225 Bush Street
San Francisco, CA 94104

Director of Lucent Technologies
25 John Glenn Drive
Amherst, NY 14228

Director of Novell, Inc.
11300 West Olympic Blvd.
Los Angeles, CA 90064

Director of Shaman Pharmaceuticals Inc.
213 East Grand Ave. South
San Francisco, CA 94080

William F. Zuendt Director of Wells Fargo & Company
President 420 Montgomery Street
San Francisco, CA 94105

Director of 3Com Corporation
5400 Bayfront Plaza
P.O. Box 58145
Santa Clara, CA 95052

Director of the California Chamber of Commerce
</TABLE>

Prior to January 1, 1996, WFNIA served as sub-adviser to the Asset
Allocation, U.S. Treasury Allocation, Bond Index and S&P 500 Stock Funds, and as
adviser or sub-adviser to various other open-end management investment
companies. For additional information, see "Management of the Funds" in the
Prospectuses and "Management" in the Statements of Additional Information. For
information as to the business, profession, vocation or employment of a
substantial nature of each of the officers and management committees of WFNIA,
reference is made to WFNIA's Form ADV and Schedules A and D filed under the
Investment Advisers Act of 1940, SEC File No. 801-36479, incorporated herein by
reference.

Item 29. Principal Underwriters.
----------------------

(a) Stephens Inc., distributor for the Registrant, does not presently
act as investment adviser for any other registered investment companies, but
does act as principal underwriter for MasterWorks Funds Inc., Stagecoach Funds,
Inc., Stagecoach Trust, Nations Fund, Inc., Nations Fund Trust, Nations Fund
Portfolios, Inc., Nations LifeGoal Funds, Inc. and Nations Institutional
Reserves, and is the exclusive placement agent for Life & Annuity Trust, Managed
Series Investment Trust and Master Investment Portfolio, all of which are
registered open-end management investment companies.

C-11
<PAGE>

(b) Information with respect to each director and officer of the
principal underwriter is incorporated by reference to Form ADV and Schedules A
and D filed by Stephens Inc. with the Securities and Exchange Commission
pursuant to The Investment Advisers Act of 1940 (SEC File No. 501-15510).

Item 30. Location of Accounts and Records.
--------------------------------

(a) The Registrant maintains accounts, books and other documents required
by Section 31(a) of the Investment Company Act of 1940 and the rules thereunder
(collectively, "Records") at the offices of Stephens Inc., 111 Center Street,
Little Rock, Arkansas 72201.

(b) BGFA and BGI maintain all Records relating to their services as
adviser and co-administrator, respectively, at 45 Fremont Street, San Francisco,
California 94105.

(c) Wells Fargo Bank maintains all Records relating to its services as
sub-adviser and, for the period prior to January 1, 1996, as investment adviser
and custodian and transfer and dividend disbursing agent at 525 Market Street,
San Francisco, California 94105.

(d) Stephens maintains all Records relating to its services as sponsor,
co-administrator and distributor at 111 Center Street, Little Rock, Arkansas
72201.

(e) IBT maintains all Records relating to its services as sub-
administrator and custodian at 89 South Street, Boston, Massachusetts 02111.

Item 31. Management Services.
-------------------

Other than as set forth under the caption "Management of the Fund(s)"
in the Prospectuses constituting Part A of this Registration Statement and
"Management" in the Statements of Additional Information constituting Part B of
this Registration Statement, the Registrant is not a party to any management-
related service contract.

Item 32. Undertakings.
------------

(a) Not Applicable

(b) Not Applicable

(c) Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions set forth above in response
to Item 27, or otherwise, the Registrant has been

C-12
<PAGE>

advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in such Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

(d) Registrant undertakes to hold a special meeting of its shareholders
for the purpose of voting on the question of removal of a director or directors
if requested in writing by the holders of at least 10% of the Company's
outstanding voting securities, and to assist in communicating with other
shareholders as required by Section 16(c) of the Investment Company Act of 1940.

(e) Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of its most current annual report to shareholders, upon
request and without charge.

C-13
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment to its Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Registration Statement on Form N-1A to be signed on its behalf by
the undersigned, thereto duly authorized, in the City of Little Rock, State of
Arkansas on the 2nd day of September, 1998.

MASTERWORKS FUNDS INC.

By /s/ Richard H. Blank, Jr.
-------------------------
Richard H. Blank, Jr.
Secretary and Treasurer
(Principal Financial Officer)

Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 17 to the Registration Statement on Form N-1A has been
signed below by the following persons in the capacities and on the date
indicated:

Signature Title
--------- -----

* Director, Chairman and President
------------------------
(R. Greg Feltus) (Principal Executive Officer)

/s/ Richard H. Blank, Jr. Secretary and Treasurer
-------------------------
(Richard H. Blank, Jr.) (Principal Financial Officer)

* Director
-------------------------
(Jack S. Euphrat)

* Director
-------------------------
(Thomas S. Goho)

* Director
-------------------------
(W. Rodney Hughes)

* Director
-------------------------
(J. Tucker Morse)

*By: /s/ Richard H. Blank, Jr.
-------------------------
Richard H. Blank, Jr.
As Attorney-in-Fact
September 2, 1998
<PAGE>

SIGNATURES

Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant has duly caused this Registration Statement on Form N-1A to be
signed on its behalf by the undersigned, thereto duly authorized, in the City
of Little Rock, State of Arkansas on the 2nd day of September, 1998.

MASTER INVESTMENT PORTFOLIO

By /s/ Richard H. Blank, Jr.
-------------------------
Richard H. Blank, Jr.
Secretary and Treasurer
(Principal Financial Officer)

Signature Title
--------- -----

* Trustee, Chairman and President
------------------------
(R. Greg Feltus) (Principal Executive Officer)

/s/ Richard H. Blank, Jr. Secretary and Treasurer
-------------------------
(Richard H. Blank, Jr.) (Principal Financial Officer)

* Trustee
-------------------------
(Jack S. Euphrat)

* Trustee
-------------------------
(Thomas S. Goho)

* Trustee
-------------------------
(W. Rodney Hughes)

* Trustee
-------------------------
(J. Tucker Morse)

*By: /s/ Richard H. Blank, Jr.
-------------------------
Richard H. Blank, Jr.
As Attorney-in-Fact
September 2, 1998

<PAGE>

MASTERWORKS FUNDS INC.
SEC FILE NOS. 33-54126; 811-7332

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION

<S> <C>
EX-99.B9(c)(i) * Co-Administration Agreement
EX-99.B10 * Opinion and Consent of Counsel - Morrison & Foerster LLP
EX-99.B11 * Consent of Independent Auditors - KPMG Peat Marwick LLP
</TABLE>

<PAGE>

EXHIBIT 99.B9(c)(i)

CO-ADMINISTRATION AGREEMENT

MASTERWORKS FUNDS INC.
111 Center Street
Little Rock, Arkansas 72201

October 21, 1996

Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201

Barclays Global Investors, N.A.
45 Fremont Street
San Francisco, CA 94105

Ladies and Gentlemen:

This will confirm the agreement among MasterWorks Funds Inc. (the
"Company") on behalf of its funds listed in the attached Appendix A, as such
Appendix may be amended from time to time (each, a "Fund" and, collectively, the
"Funds"), Barclays Global Investors, N.A. ("BGI") and Stephens Inc. ("Stephens",
together with BGI, the "Co-administrators") as follows:

1. The Company is a registered open-end, management investment company.
The Company engages in the business of investing and reinvesting the assets of
each Fund in the manner and in accordance with the applicable investment
objective, policies and restrictions specified in the Company's currently
effective prospectuses and statements of additional information incorporated
therein relating to the Funds and the Company (such prospectuses and such
statements of additional information being collectively referred to as the
"Prospectuses") included in the Company's Registration Statement, as amended
from time to time (the "Registration Statement"), filed by the Company under the
Investment Company Act of 1940 (the "Act") and the Securities Act of 1933.
Copies of the documents referred to in the preceding sentence have been
furnished to the Co-administrators. Any amendments to those documents shall be
furnished to the Co-administrators promptly.

2. The Company is engaging the Co-administrators to provide, or cause to
be provided, the administrative services specified elsewhere in this agreement,
subject to the overall supervision of the Company's Board of Directors.
Pursuant to an advisory contract between the Company and Barclays Global Fund
Advisors (the "Adviser") on behalf of the Money Market Fund, the Company has
engaged the Adviser to manage the

1
<PAGE>

investing and reinvesting of the assets of the Fund and to provide advisory
services as specified in such advisory contracts. MasterWorks' remaining Funds
are feeder funds that invest all of their assets in corresponding master
portfolios of other registered investment companies and, accordingly, have not
engaged an adviser to manage the investing and reinvesting of the assets of such
Funds.

3. The Co-administrators agree, at their expense, to supervise the
administrative operations and undertake to provide, or cause to be provided, the
services described on Appendix B, as such Appendix may be amended from time to
time by the mutual consent of the parties, the provision of, and liability
thereto, for certain of such services to be allocated on such Appendix, in
connection with the operations of the Company and the Funds, and take all
reasonable action in the performance of their obligations under this agreement
to assure that the necessary information is made available to other service
providers, as such may be required by the Company from time to time; and to
provide all other administrative services reasonably necessary for the operation
of the Funds, other than those services that are to be provided by the Adviser
pursuant to the advisory contracts and by the Company's transfer and dividend
disbursing agent and custodian.

4. Except as provided in the Money Market Fund's advisory contract and
this agreement, the Co-administrators agree to bear all costs of the operations
of each Fund, including a pro rata portion of the compensation of the Company's
directors who are not affiliated with the Co-administrators or any of their
affiliates; governmental fees; interest charges; fees and expenses of its
independent auditors, legal counsel (other than in connection with litigation),
transfer agent and dividend disbursing agent; fees paid to shareholder servicing
and other special purpose agents; expenses of preparing and printing any stock
certificates, prospectuses, statements of additional information, shareholders'
reports, notices, proxy statements and reports to regulatory agencies; travel
expenses of directors of the Company in connection with their attendance at
Board and other meetings relating to the Company; office supplies; premiums for
fidelity bonds and errors and omissions and/or officers and directors liability
insurance; trade association membership dues; pricing services, if any; fees and
expenses of any custodian and fund accountant, including those for keeping books
and accounts and calculating the net asset value per share in the Funds;
expenses of shareholders' meetings; expenses relating to the issuance,
registration, qualification and redemption of shares of the Funds; and
organizational expenses. Notwithstanding anything to the contrary, the Co-
administrators shall not be required to bear any portion of brokerage or other
expenses connected with the execution of portfolio securities transactions, fees
payable to the Adviser under its advisory contract with the Company, litigation
expenses, taxes (including income, excise, transfer and withholding taxes), or
cost or expense that a majority of the disinterested directors of the Company
deems to be an extraordinary expense. Expenses attributable to one or more,
but not all, of the Funds shall be charged against the assets of the relevant
Funds. General expenses of the Company shall be allocated among the Funds in a

2
<PAGE>

manner proportionate to the net assets of each Fund, on a transactional basis or
on such other basis as the Board of Directors deems equitable.

5. Each Co-administrator shall exercise reasonable care and shall give the
Company the benefit of the Co-administrator's best judgment and efforts in
rendering services under this agreement. As an inducement to the Co-
administrators' undertaking to render services hereunder, the Company agrees
that a Co-administrator shall not be liable under this agreement for any mistake
in judgment or in any other event whatsoever, provided that nothing in this
agreement shall be deemed to protect or purport to protect the Co-administrators
against any liability to the Company or its shareholders to which the Co-
administrator would otherwise be subject by reason of willful misfeasance, bad
faith or negligence in the performance of the Co-administrators' duties under
this agreement or by reason of reckless disregard of its obligations and duties
hereunder.

6. In consideration of the services to be provided by the Co-
administrators under this agreement, the Company shall pay the Co-
administrators' a monthly fee on behalf of each Fund on the first business day
of each month at the applicable annual rates specified on Appendix C attached to
this agreement. If the fees payable to the Co-administrators under this
paragraph begin to accrue after the beginning of any month or if this agreement
terminates before the end of any month, the fee for the period from the
effective date to the end of the month or from the beginning of the month to the
termination date, respectively, shall be prorated according to the proportion
that the period bears to the full month in which the effectiveness or
termination occurs. For purposes of calculating each such monthly fee, the
value of each Fund's net assets shall be computed in the manner specified in the
Prospectus and the Company's Articles of Incorporation as amended and
supplemented from time to time (the "Articles") for the computation of the value
of the Fund's net assets in connection with the determination of the net asset
value of a Fund's shares. For purposes of this agreement, a "business day" is
any day the Company is open for business.

7. If in any fiscal year the total expenses incurred by, or allocated to,
a Fund, excluding extraordinary expenses of the Fund but including the fees
provided for in paragraph 6 and those fees payable under the Advisory Contract
for the Money Market Fund or the corresponding master portfolio in which a Fund
invests, as applicable, exceed the most restrictive expense limitation
applicable to a Fund imposed by state securities laws or regulations thereunder,
as these limitations may be raised or lowered from time to time, the Co-
administrators agree to waive or reimburse a pro rata portion of such fees, but
only to the extent of the fee hereunder for the fiscal year. For purposes of
computing the excess, if any, over the most restrictive applicable expense
limitation, the value of each Fund's net assets shall be computed in the manner
specified in the last sentence of paragraph 6, and any reimbursements required
to be made by the Co-administrators shall be made once a year promptly after the
end of the Company's fiscal year.

3
<PAGE>

8. This agreement shall become effective on its execution date.
Thereafter, this agreement shall continue with respect to a Fund for successive
annual periods only so long as the continuance is specifically approved at least
annually (a) by the vote of a majority of the Fund's outstanding voting
securities (as defined in the Act) or by the Company's Board of Directors and
(b) by the vote, cast in person at a meeting called for the purpose, of a
majority of the Company's Directors who are not parties to this contract or
"interested persons" (as defined in the Act) of any such party. This contract
may be terminated at any time, without the payment of any penalty, by the
Company by a vote of a majority of the Company's outstanding voting securities
(as defined in the Act) or by a vote of a majority of the Company's Board of
Directors on 60 days' written notice to the Co-administrators, or by the Co-
administrators on 60 days' written notice to the Company. This contract shall
terminate automatically in the event of its assignment (as defined in the Act).

9. Except to the extent necessary to perform the Co-administrators'
obligations under this agreement, nothing herein shall be deemed to limit or
restrict the right of the Co-administrators, or any affiliate of the Co-
administrators, or any employee of the Co-administrators, to engage in any other
business or to devote time and attention to the management or other aspects of
any other business, whether of a similar or dissimilar nature, or to render
services of any kind to any other corporation, firm, individual or association.

10. This agreement shall be governed by and construed in accordance with
the laws of the State of Arkansas.

11. The Company hereby agrees and acknowledges that each Co-administrator
may allocate or further delegate responsibility for any or all of the services
to be provided hereunder between each Co-administrator; provided that the Co-
administrators shall have joint and several liability for the provision of the
services under this agreement, except that: BGI or Stephens each agree to
assumes sole responsibility, and related liability thereto, for providing the
duties and services identified as the sole responsibility of BGI or Stephens on
such Appendix B; and further provided that each Co-administrator agrees to
remain fully liable to the Company for the provision of any service that such
Co-administrator delegates to another entity.

12. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterpart shall, together,
constitute only one instrument.

4
<PAGE>

If the foregoing correctly sets forth the agreement between the Company and
the Co-administrators, please so indicate by signing and returning to the
Company the enclosed copy hereof.

Very truly yours,

MASTERWORKS FUNDS INC.,
on behalf of LifePath 2000, LifePath 2010,
LifePath 2020, LifePath 2030, LifePath 2040, Asset
Allocation, Bond Index, Growth Stock, Money
Market, S&P 500 Index, Short-Intermediate Term and
U.S. Treasury Allocation Funds

By: /s/ Richard H. Blank, Jr.
--------------------------
Name: Richard H. Blank, Jr.
Title: Chief Operating Officer,
Secretary and Treasurer

ACCEPTED as of the date
set forth above:

BARCLAYS GLOBAL INVESTORS, N.A.

By: /s/ Donald Luskin
-----------------
Name: Donald Luskin
Title: Vice Chairman

BARCLAYS GLOBAL INVESTORS, N.A.

By: /s/ Matthew Shelton
-------------------
Name: Matthew Shelton
Title: Principal

STEPHENS INC.

By: /s/ Richard H. Blank, Jr.
-------------------------
Name: Richard H. Blank, Jr.
Title: Vice President

5
<PAGE>

Appendix A

MasterWorks Funds Inc.
----------------------

LifePath 2000 Fund

LifePath 2010 Fund

LifePath 2020 Fund

LifePath 2030 Fund

LifePath 2040 Fund

Asset Allocation Fund

Bond Index Fund

Growth Stock Fund

Money Market Fund

S&P 500 Index Fund

Short-Intermediate Term Fund

U.S. Treasury Allocation Fund

Dated: October 21, 1996

A-1
<PAGE>

APPENDIX B

MasterWorks Funds Inc.
----------------------

LIST OF ADMINISTRATIVE SERVICES
-------------------------------

Stephens Inc.
- -------------

(1) Review agenda and assemble Board materials for quarterly Board meetings;
prepare supporting information when necessary; prepare minutes of Board
and committee meetings.

(2) Review and approve Board material.

(3) Provide expense budgets.

(4) Monitor actual expenses and update budgets/expense accruals as
necessary.

(5) Review and authorize filing of Forms N-SAR.

(6) Maintain records of sales and file appropriate registrations and
renewals, sales information and other required material for Blue Sky
purposes.

(7) Review and provide advice to the distributor and the Company and
investment adviser regarding sales literature and marketing plans to
assure regulatory compliance.

Barclays Global Investors
- -------------------------

(8) Continuously monitor portfolio activity and related functions in
conjunction with all applicable regulatory requirements. Take corrective
action as necessary.

(9) Identify the services to which the Funds report performance information.
Provide information as requested on performance questionnaires.

(10) Prepare appropriate management letter and coordinate production of
Management Discussion and Analysis, with respect to the preparation and
printing of shareholder reports.

B-1
<PAGE>

(11) Coordinate review and approval by portfolio managers of portfolio
listings to be included in financial statements, with respect to the
preparation and printing of shareholder reports.

(12) Prepare selected portfolio and financial information for inclusion in
Board material.

(13) Assist in presentation to Board as desired by Fund Officer(s).

(14) Calculate total return information and other statistical information
including undistributed income and capital gains with respect to
condensed financial information for review by management.

(15) Perform tests of specific portfolio activities against compliance
checklists designed from the Fund's current Prospectus and SAI.

(16) Calculate dividend amounts available for distribution.

(17) Coordinate review of dividend amounts by management and auditors.

(18) Notify fund accounting and transfer agent of authorized dividends rates.

(19) Prepare responses to various performance questionnaires; coordinate as
necessary, and submit responses to the appropriate agency;

(20) Prepare Forms N-SAR for filing; obtain any necessary supporting
documents; file with the SEC via EDGAR.

(21) Draft semi-annual and annual shareholder reports and coordinate auditor
and management review.

(22) Coordinate printing of reports and EDGAR conversion with outside printer
and filing with the SEC via EDGAR.

(23) Provide information for Financial Highlights and expense tables.

(24) Continuously monitor portfolio activity regarding diversification in
conjunction with IRS requirements to registered investment companies.

(25) Continuously monitor portfolio activity regarding "short short" income
and qualifying income in conjunction with IRS requirements to registered
investment companies.

B-2
<PAGE>

Stephens Inc. and Barclays Global Investors
- -------------------------------------------

(26) Prepare, or assist in the preparation, and file with the SEC and state
securities regulators, if applicable, registration statements, notices,
reports, and other material required to be filed under applicable laws.

(27) Review financial information and take any necessary action.

(28) Develop and implement procedures for monitoring compliance with
regulatory requirements and compliance with each Fund's investment
objective, policies and restrictions as established by the Company's
Board, perform compliance testing and approve resolution of compliance
issues.

(29) Approve dividend rates; obtain Board approval when required.

(30) Determine allocation of invoices among funds. Authorize and send to fund
accountants for payment of expenses.

(31) Coordinate activities of other vendors as necessary.

(32) Provide appropriate responses to Forms N-SAR.

(33) Provide marketing input of shareholder report style and graphics.

(34) Review and approve entire shareholder report.

(35) Review drafts and coordinate review process of Forms N-1A updates and
prospectus supplements.

(36) Coordinate printing, EDGAR conversion, and filing with the SEC with
outside printers of Forms N-1A.

(37) Maintain and preserve the corporate records of the Company, including
each Master Portfolio.

(38) Make appropriate representations in conjunction with audit.

(39) Review diversification test results and corrective actions taken, with
respect to qualifications as a registered investment company.

(40) Approve tax positions taken regarding qualification as a registered
investment company.

(41) Review "short short" income and qualifying income test results and
corrective actions taken, with respect to qualifications as a registered
investment company.

B-3
<PAGE>

(42) Approve tax positions taken regarding "short short" income and
qualifying income, with respect to qualifications as a registered
investment company.

(43) Approve tax accounting positions to be taken.

(44) Approve distributions.

(45) Review tax returns and coordinate signature thereof with a Fund Officer.

Approved: October 21, 1996

Signed: /s/ Donald Luskin Signed: /s/ Richard H. Blank, Jr.
----------------- -------------------------
By: Donald Luskin By: Richard H. Blank, Jr.
Vice Chairman Vice President
Barclays Global Investors, N.A. Stephens Inc

Signed: /s/ Matthew Shelton
-------------------
By: Matthew Shelton
Principal
Barclays Global Investors, N.A.

Signed: /s/ Richard H. Blank, Jr.
-------------------------
By: Richard H. Blank, Jr..
Chief Operating Officer,
Secretary and Treasurer
MasterWorks Funds, Inc.

B-4
<PAGE>

Appendix C

MasterWorks Funds Inc.
----------------------

FEE SCHEDULE
------------

Fund Fee
---- ---
(as a % age of daily net assets)

LifePath 2000 Fund 0.40%

LifePath 2010 Fund 0.40%

LifePath 2020 Fund 0.40%

LifePath 2030 Fund 0.40%

LifePath 2040 Fund 0.40%

Asset Allocation Fund 0.40%

Bond Index Fund 0.15%

Growth Stock Fund 0.18%

Money Market Fund 0.35%

S&P 500 Index Fund 0.15%

Short-Intermediate Term Fund 0.18%

U.S. Treasury Allocation Fund 0.40%

Dated: October 21, 1996
Approved as amended: June 11, 1998

C-1

<PAGE>

EXHIBIT 99.B10

[MORRISON & FOERSTER LLP LETTERHEAD]

September 2, 1998

MasterWorks Funds Inc.
111 Center Street
Little Rock, AR 72201

Re: Shares of Common Stock of MasterWorks Funds Inc.
------------------------------------------------

Ladies/Gentlemen:

We refer to Post-Effective Amendment No. 17 and Amendment No. 21 to the
Registration Statement on Form N-1A (SEC File Nos. 33-54126 and 811-7332) (the
"Registration Statement") of MasterWorks Funds Inc. (the "Company") relating to
the registration of an indefinite number of shares of common stock of the
Company (collectively, the "Shares").

We have been requested by the Company to furnish this opinion as Exhibit 10
to the Registration Statement.

We have examined documents relating to the organization of the Company and
its series and the authorization and issuance of shares of its series. We have
also verified with the Company's transfer agent the maximum number of shares
issued by the Company during the fiscal year ended February 28, 1998.

Based upon and subject to the foregoing, we are of the opinion that:

The issuance and sale of the Shares by the Company has been duly and
validly authorized by all appropriate corporate action, and assuming delivery by
sale or in accord with the Company's dividend reinvestment plan in accordance
with the description set forth in the Funds' current prospectuses, the Shares
will be validly issued, fully paid and nonassessable by the Company.

We consent to the inclusion of this opinion as an exhibit to the
Registration Statement.

In addition, we hereby consent to the description of advice rendered by our
firm under the heading "Management of the Fund(s)" in the Prospectuses and to
the use of our name and to the reference to our firm under the caption "Counsel"
in the Statements of Additional Information, which are included as part of this
Registration Statement.

Very truly yours,

/s/ MORRISON & FOERSTER LLP

MORRISON & FOERSTER LLP

<PAGE>

EXHIBIT 99.B11

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors
MasterWorks Funds Inc.

We consent to the use of our report dated April 3, 1998 for Money Market Fund of
MasterWorks Funds Inc. incorporated by reference herein.

We also consent to the reference to our Firm under the headings "Financial
Highlights" and "Independent Auditors" in the prospectus and "Independent
Auditors" in the Statement of Additional Information.

/s/ KPMG Peat Marwick LLP

San Francisco, California
September 1, 1998