BARCLAYS GLOBAL INVESTORS FUNDS INC, 485BPOS, 2000-06-30

BARCLAYS GLOBAL INVESTORS FUNDS INC
485BPOS, 2000-06-30

Previous: GARDNER LEWIS INVESTMENT TRUST, 485BPOS, EX-99.P, 2000-06-30

Next: BARCLAYS GLOBAL INVESTORS FUNDS INC, 485BPOS, EX-99.I, 2000-06-30

<PAGE>

As filed with the Securities and Exchange Commission on June 30, 2000
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. 23 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [_]
Amendment No. 27 [X]
(Check appropriate box or boxes)
________________________

BARCLAYS GLOBAL INVESTORS FUNDS, 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 (a registered investment company
with separate series in which certain of the Registrant's series invest
substantially all of their assets) and its trustees and principal officer.
<PAGE>

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

This Post-Effective Amendment No. 23 (the "Amendment") to the Registration
Statement of Barclays Global Investors Funds, Inc. (the "Company") is being
filed to add to the Company's Registration Statement audited financial
statements and certain related financial information for the Company's Asset
Allocation, Bond Index, Institutional Money Market, Money Market and S&P 500
Stock Funds and corresponding Master Portfolios for the period ended December
31, 1999 and audited financial statements and certain related financial
information for the Company's LifePath Income (formerly LifePath 2000), LifePath
2010, LifePath 2020, LifePath 2030, LifePath 2040 for the fiscal year ended
February 29, 2000. This amendment also makes certain other non-material changes
to the registration statement.
<PAGE>

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

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

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

1 Cover page
Back cover
2 Investment Objectives
Principal Investment Strategies
Principal Risk Factors
Investment Returns
3 Fees and Expenses
4 Fund Details
A Further Discussion of Risk
5 Not Applicable
6 Management of the Fund
7 Shareholder Information
8 Shareholder Information
9 Financial Highlights

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

10 Cover Page
Table of Contents
11 Fund History
12 Description of the Fund and Its Investments and Risks
Portfolio Securities
Risk Considerations
13 Management
14 Control Persons and Principal Holders of Securities
15 Investment Adviser and Other Service Providers
16 Investment Adviser and Other Service Providers
17 Capital Stock
18 Purchase, Redemption and Pricing of Shares
Determination of Net Asset Value
19 Dividends, Distributions and Taxes
20 Investment Adviser and Other Service Providers
21 Performance Information
22 Financial Statements

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

23-30 Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of this Document.
<PAGE>

PROSPECTUS/JULY 1, 2000
Like shares of all mutual funds, these securities have not been approved or
disapproved by the Securities and Exchange Commission nor has the Securities
and Exchange Commission passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal offense.

Index
Bond Index Fund
S&P 500 Stock Fund
Allocation
Asset Allocation Fund

Barclays Global Investors, N.A.
A pioneer in asset allocation
and index investing since 1971
BARCLAYS GLOBAL INVESTORS FUNDS, INC.
<PAGE>

<PAGE>

Table of Contents

<TABLE>
INDEX FUND BASICS
<C> <S>
2 Investment Objectives

3 Principal Investment Strategies

4 Principal Risk Factors

6 Investment Returns

8 Fees and Expenses

ALLOCATION FUND BASICS

9 Investment Objective

10 Principal Investment Strategy

11 Principal Risk Factors

12 Investment Returns

13 Fees and Expenses

FUND DETAILS

14 Index Funds

16 Allocation Fund

17 A Further Discussion of Risk

DETAILS IN COMMON

18 Management of the Funds

20 Shareholder Information

24 Financial Highlights
</TABLE>
<PAGE>

INDEX FUND BASICS

Investment Objectives/1/

[LOGO OF AUTO ICON APPEARS HERE]
--------------------------------------------------------------------------------
Defining Terms

The total rate
of return (also
referred to as
"total return")
takes into
account the two
elements of an
investment's
performance: the
amount of income
it earns from
interest or
dividend
payments and the
change in the
investment's
market price
during a given
time period (an
increase in the
price adds to
total return, a
decrease reduces
it). The
calculation
assumes the
reinvestment of
all dividends.

The Lehman
Brothers
Government/Corporate
Bond Index
tracks the
market for
high-quality
taxable US
bonds.
It consists of
roughly 6,500
different debt
issues, each
with an issue
size of at least
$150 million and
a remaining time
to maturity of
one year or
more. Issuers
include the
US government
and top-rated
"investment
grade"
corporations.

Bond Index Fund

The Fund seeks to approximate as closely as practicable, before fees and
expenses, the total rate of return of the US market for issued and outstanding
US government and high-grade corporate bonds as measured by the Lehman Brothers
Government/Corporate Bond Index./2/

S&P 500 Stock Fund

The Fund seeks to approximate as closely as practicable, before fees and
expenses, the capitalization-weighted total rate of return of the S&P 500
Index./3/

/1/ Each Fund invests all of its assets in a separate mutual fund, called a
Master Portfolio, that has a substantially identical investment objective.
For simplicity's sake, all discussion of investment objectives, strategies
and risks of a particular Fund refers also to the objectives, strategies
and risks of its Master Portfolio, unless otherwise indicated. A detailed
examination of the relationship of the Funds to their Master Portfolios
appears on page 24.
/2/ Lehman Brothers, Inc. does not sponsor the Bond Index Fund or the Bond Index
Master Portfolio, nor is it affiliated in any way with Barclays Global
Investors, N.A., Barclays Global Fund Advisors, the Bond Index Fund or the
Master Portfolio.
/3/ S&P does not sponsor, endorse, sell or promote the S&P 500 Stock Fund, the
S&P 500 Index Master Portfolio, the Asset Allocation Fund or the Asset
Allocation Master Portfolio, nor is it affiliated in any way with Barclays
Global Investors, N.A., Barclays Global Fund Advisors, the Funds or their
Master Portfolios. "Standard & Poor's(R)," "S&P(R)," and "S&P 500(R)" are
trademarks of McGraw-Hill, Inc., and have been licensed for use by the S&P
500 Stock Fund, the Asset Allocation Fund and their Master Portfolios. S&P
makes no representation or warranty, expressed or implied, regarding the
advisability of investing in the Funds or their Master Portfolios.

2 BARCLAYS GLOBAL INVESTORS FUNDS, INC.
<PAGE>

Principal Investment Strategies
[LOGO OF MAP ICON APPEARS HERE]
--------------------------------------------------------------------------------
Defining Terms

The S&P 500
Index is a
widely used
measure of large
US company stock
performance. It
consists of the
common stocks of
500 major
corporations
selected
according to:

size
frequency and
ease by which
their stocks
trade
.range and
diversity of the
American economy

The stocks in
the S&P 500
account for
nearly
three-quarters
of the value of
all US stocks.
In the
capitalization-
weighted total
rate of return,
each stock in an
index
contributes to
the index in the
same proportion
as the value of
its shares.
Thus, if the
shares of
Company A are
worth twice as
much as the
shares of
Company B, A's
return will
count twice as
much as B's in
calculating the
index's overall
return. This
method contrasts
with equal
weighted return,
by which A's
performance, B's
performance and
the performance
of every other
stock in the
index would
count the same.

Bond Index Fund

The Fund pursues its objectives by investing in a representative sample of
securities that make up the Lehman Brothers Government/Corporate Bond Index and
by investing in these securities in proportions that match their index weights.

S&P 500 Stock Fund

The Fund pursues its objectives by investing in all the securities that make up
the S&P 500 Index and by investing in these securities in proportions that
match their index weights.

INDEX FUND BASICS 3
<PAGE>

Principal Risk Factors

[LOGO OF SPEEDING AUTO APPEARS HERE]

As with any investment, your investment in the Index Funds could lose money or
the Funds' performance could trail that of other alternative investments.

Risks of Investing in the Bond Index Fund

The value of your investment in this Fund is based on the price of the bonds in
which the Fund invests.

value of the bonds in which this Fund invests may fall because of a rise in
interest rates, which generally reduces the value of bonds, even those issued
by the US government

value of individual bonds may fall with the decline in a borrower's real or
apparent ability to meet its financial obligations

prices of bonds may fall in response to economic events or trends

bonds that the Funds' investment adviser selects may not match the performance
of the market index

as with all mutual funds, the Fund must maintain cash balances to meet
redemption requests; this may lower overall Fund performance

issuer may be unable to make interest payments or repay principal on time and
the bond could lose all or some of its value, or pay less interest

no attempt is made to individually select bonds because the Bond Index Master
Portfolio is managed by determining which securities are to be purchased or
sold to maintain, to the extent feasible, a representative sample of securities
in the Lehman Brothers Government/Corporate Bond Index

4 BARCLAYS GLOBAL INVESTORS FUNDS, INC.
<PAGE>

Risks of Investing in the S&P 500 Stock Fund

The value of your investment in this Fund is based on the price of the stocks
in which the Fund invests.

prices of the stocks in which this Fund invests may decline

prices of stocks may fall in response to economic events or trends

as with all mutual funds, the Fund must maintain cash balances to meet
redemption requests; this may lower overall Fund performance

no attempt is made to individually select stocks because the S&P 500 Index
Master Portfolio is managed by determining which securities are to be purchased
or sold to replicate, to the extent feasible, the S&P 500 Index

Investments in the Index Funds are not bank deposits or obligations of Barclays
Global Fund Advisors (BGFA) or Barclays Global Investors, N.A. (BGI) or their
affiliates. They are not guaranteed or endorsed by the Federal Deposit
Insurance Corporation (FDIC) or any other government agency.

Who May Want to Invest in the Funds

The Index Funds are designed for investors who desire a convenient way to
invest either in a broad spectrum of US large-cap stocks (the S&P 500 Stock
Fund) or bonds issued in the United States (the Bond Index Fund). Although
these markets have increased in value over the long term, they have also
decreased over the short-term. This volatility is particularly characteristic
of stocks.

The Index Funds do not by themselves constitute a balanced investment program.
Diversifying your investments by buying shares in both Funds or in other funds
may improve your long-term return as well as reduce short-term volatility.

INDEX FUND BASICS 5
<PAGE>

Investment Returns

[SPEEDOMETER ICON]

Total Returns

[BOND INDEX FUND CHART APPEARS HERE]
<TABLE>
<S> <C>
FYE 1994 -3.76%
FYE 1995 18.80%
FYE 1996 2.13%
FYE 1997 9.77%
FYE 1998 9.34%
FYE 1999 -2.69%
</TABLE>
The highest and lowest quarterly returns for the Bond Index Fund for the
periods covered by the bar chart above are listed below:
<TABLE>
<CAPTION>
Highest Quarterly Lowest Quarterly
Return: 2nd Qtr '95 Return: 1st Qtr '94
<S> <C>
6.50% -2.87%
</TABLE>

<TABLE>
<CAPTION>
BOND INDEX FUND AVERAGE ANNUAL TOTAL RETURNS (AS OF DECEMBER 31, 1999)
SINCE INCEPTION
ONE YEAR FIVE YEARS (JULY 2, 1993*)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bond Index Fund -2.69% 7.21% 5.25%
-----------------------------------------------------------------------------------------
Lehman Brothers
Government/Corporate
Bond Index -2.15% 7.61% 5.70%
</TABLE>
*The Lehman Brothers Government/Corporate Bond Index is calculated from June
30, 1993.
BARCLAYS GLOBAL INVESTORS FUNDS, INC.

6
<PAGE>

[S&P 500 FUND CHART APPEARS HERE]
<TABLE>
<S> <C>
FYE 1994 0.78%
FYE 1995 37.15%
FYE 1996 22.62%
FYE 1997 33.07%
FYE 1998 28.41%
FYE 1999 20.59%
</TABLE>
The highest and lowest quarterly returns for the S&P Stock Fund for the periods
covered by the bar chart above are listed below:
<TABLE>
<CAPTION>
Highest Quarterly Lowest Quarterly
Return: 4th Qtr '98 Return: 3rd Qtr '98
<S> <C>
21.31% -9.93%
</TABLE>

<TABLE>
<CAPTION>
S&P 500 STOCK FUND AVERAGE ANNUAL TOTAL RETURNS (AS OF DECEMBER 31, 1999)
SINCE INCEPTION
ONE YEAR FIVE YEARS (JULY 2, 1993*)
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
S&P 500 Stock Fund 20.59% 28.21% 22.25%
----------------------------------------------------------------------------------------
S&P 500 Index 21.04% 28.51% 22.43%
</TABLE>
*The S&P 500 Index is calculated from June 30, 1993.
INDEX FUND BASICS

7
<PAGE>

Fees and Expenses

The table below describes the fees and expenses that you may pay if you buy
and hold shares in either the S&P 500 Stock Fund or the Bond Index Fund. The
expenses are deducted from Fund assets, which means you pay them indirectly.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED
FROM FUND ASSETS)
Bond Index Fund S&P 500 Stock Fund
------------------------------------------------------------
<S> <C> <C>
Management fees 0.08% 0.05%
------------------------------------------------------------
Other expenses 0.15% 0.15%
------------------------------------------------------------
Total annual fund
operating expenses* 0.23% 0.20%
</TABLE>

*Total annual Fund operating expenses in the above table and the following
example reflect the expenses of both the Funds and the Master Portfolios in
which they invest.

Example

The example below is intended to help you compare each Fund's costs with those
of other mutual funds. The example illustrates the costs you would have
incurred on an initial $10,000 investment in each of the Funds over the time
periods shown. It assumes your investment earns an annual return of 5% over the
periods and that the Funds' operating expenses remain the same.

The Funds do not charge a sales load or other fee upon redemption.

This means that your expenses for each period would be the same whether or not
you sell your shares at the end of a period. Your actual costs may be higher or
lower than this hypothetical example.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-----------------------------------------------------
<S> <C> <C> <C> <C>
Bond Index Fund $24 $74 $130 $293
-----------------------------------------------------
S&P 500 Stock Fund $20 $64 $113 $255
</TABLE>

8 BARCLAYS GLOBAL INVESTORS FUNDS, INC.
<PAGE>

ALLOCATION FUND BASICS

Investment Objective

[LOGO OF AUTO ICON APPEARS HERE]

Asset Allocation Fund

The Fund seeks a high level of long-term total return, consisting of capital
appreciation and current income, consistent with a reasonable level of risk.

ALLOCATION FUND BASICS 9
<PAGE>

Principal Investment Strategy

[LOGO OF MAP ICON APPEARS HERE]

--------------------------------------------------------------------------------
Defining Terms

Money market
investments
generally
consist of high-
quality debt
securities with
remaining
maturities of
397 days (about
13 months) or
less, and dollar
weighted average
maturity of
90 days or less,
including US
government
obligations,
domestic and
foreign bank
obligations,
short-term
corporate debt,
repurchase
agreements and
time deposits.

Long-term US
Treasury bonds
are Treasury
obligations with
maturities of at
least 20 years
from the issue
date.

Asset Allocation Fund

The Asset Allocation Fund attempts to improve on the markets' long-term risk-
and-return tradeoff by shifting its investments among markets in response to
changes in the investment environment.

The Fund invests in a changing mix of S&P 500 stocks, long-term US Treasury
bonds, and money market investments. In its stock investments, the
Asset Allocation Fund seeks to approximate the return of the S&P 500 Index,
before fees and expenses, by investing in all of the stocks that comprise the
S&P 500 Index in the same proportion as they are reflected in the index. In its
bond investments, the Fund seeks to approximate the return of the Lehman
Brothers 20-Year Treasury Index, a subset of the Lehman Brothers
Government/Corporate Bond Index, before fees and expenses.

The Fund attempts to benefit from the changing relative values of different
investment classes. If, for instance, the value of long-term Treasury bonds
appears low compared with its typical relationship to US stock values, the Fund
will emphasize Treasury bond investments over stocks in the expectation of
rising bond prices relative to stock prices--or of stock prices falling
relative to bonds prices.

10 BARCLAYS GLOBAL INVESTORS FUNDS, INC.
<PAGE>

Principal Risk Factors

[LOGO OF SPEEDING AUTO APPEARS HERE]

As with any investment, your investment in the Asset Allocation Fund could lose
money or the Fund's performance could trail that of other alternative
investments.

Risks of Investing in the Asset Allocation Fund

The value of your investment in the Fund is based on the price of the stocks
and bonds in which the fund invests.

prices of the stocks in which the Fund invests may decline

value of the bonds in which the Fund invests may fall because of a rise in
interest rates, which generally reduces the value of bonds, even those issued
by the US government

prices of stocks and bonds may fall in response to economic events or trends

the Fund's investment allocation may not perform in line with expectations

as with all mutual funds, the Fund must maintain cash balances to meet
redemption requests; this may lower overall Fund performance

no attempt is made to individually select investments because the Asset
Allocation Master Portfolio's asset mix is determined by its investment model

Investments in the Asset Allocation Fund are not bank deposits or obligations
of BGFA, BGI or their affiliates. They are not guaranteed or endorsed by the
FDIC or any other government agency.

Who May Want to Invest in the Fund

The Asset Allocation Fund is designed for longer-term investors. The Fund
operates on the premise that, over time, the allocation and reallocation of
capital across different classes of investments will produce better returns
than a static buy-and-hold allocation. The Fund may not be appropriate for
investors desiring above-market short-term returns.

ALLOCATION FUND BASICS 11
<PAGE>

Investment Returns

[SPEEDOMETER ICON]

Total Returns

The bar chart and table in this section provide some indication of the risks of
investing in the Fund by showing the changes in its performance from year to
year. The bar chart shows the returns for the Fund for each full calendar year
since the Fund's inception. The average annual total return table compares the
Fund's average annual total return with the return of its corresponding index
for one and five years and since the Fund's inception. How the Fund has
performed in the past is not necessarily an indication of how the Fund will
perform in the future.

[ASSET ALLOCATION FUND CHART APPEARS HERE]
<TABLE>
<S> <C>
FYE 1994 -2.65%
FYE 1995 29.16%
FYE 1996 11.84%
FYE 1997 22.32%
FYE 1998 25.64%
FYE 1999 9.64%
</TABLE>
The highest and lowest quarterly returns for the Asset Allocation Fund for the
periods covered by the bar chart above are listed below:

<TABLE>
<CAPTION>
Highest Quarterly Lowest Quarterly
Return: 4th Qtr '98 Return: 3rd Qtr '98
<S> <C>
15.97% -5.50%
</TABLE>

<TABLE>
<CAPTION>
ASSET ALLOCATION FUND AVERAGE ANNUAL TOTAL RETURNS (AS OF DECEMBER 31,
1999)
SINCE INCEPTION
ONE YEAR FIVE YEARS (JULY 2, 1993*)
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Asset Allocation
Fund 9.64% 19.47% 15.13%
----------------------------------------------------------------------------------------
S&P 500 Index 21.04% 28.51% 22.43%
----------------------------------------------------------------------------------------
Lehman Brothers
Long Government
Index -8.73% 9.12% 6.35%
----------------------------------------------------------------------------------------
Asset Allocation
Benchmark** 7.76% 20.84% 16.06%
</TABLE>
*The S&P 500 Index, the Lehman Brothers Long Government Index and the Asset
Allocation Benchmark are calculated from June 30, 1993.
**The Asset Allocation Benchmark represents the return of a blended index
consisting of 60% S&P 500 Index stocks and 40% Lehman Brothers Long Government
Index bonds.
BARCLAYS GLOBAL INVESTOR FUNDS, INC.

12
<PAGE>

Fees and Expenses

The table below describes the fees and expenses that you may pay if you buy and
hold shares in the Asset Allocation Fund. The expenses are deducted from Fund
assets, which means you pay them indirectly.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS)
Asset
Allocation Fund
------------------------------------------------------------
<S> <C> <C>
Management fees 0.35%
------------------------------------------------------------
Other expenses 0.40%
------------------------------------------------------------
Total annual Fund operating expenses* 0.75%
</TABLE>

*Total annual Fund operating expenses in the above table and the following
example reflect the expenses of both the Fund and the Master Portfolio in which
it invests.

Example

The example below is intended to help you compare the Fund's costs with those
of other mutual funds. The example illustrates the costs you would have
incurred on an initial $10,000 investment in the Fund over the time periods
shown. It assumes your investment earns an annual return of 5% over the
periods, and that the Fund's operating expenses remain the same.

The Fund does not charge a sales load or other fee upon redemption. Your
expenses for each period would be the same whether or not you sell your shares
at the end of a period. Your actual costs may be higher or lower than this
hypothetical example.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------
<S> <C> <C> <C> <C>
Asset Allocation Fund $77 $240 $417 $930
</TABLE>

ALLOCATION FUND BASICS 13
<PAGE>

FUND DETAILS

Index Funds
--------------------------------------------------------------------------------
Defining Terms

BGFA, a
subsidiary of
BGI, serves as
the Master
Portfolios'
Investment
Adviser. BGFA
makes the day-
to-day decisions
on buying and
selling
securities for
the Funds and
BGI conducts the
research leading
to those
decisions. BGI
manages over
$782 billion in
assets and is
the world's
largest asset
manager for
institutions,
such as major
endowments, and
corporate and
government
pension plans.
BGI has
pioneered
research in
asset
allocation,
indexed
investing and
investment
modeling since
1971. To make
this expertise
available to
individual
investors, BGFA
introduced its
first index and
asset allocation
mutual funds
in 1993.

A bond's coupon
rate is the
interest rate it
pays based on
its face value.

A Further Discussion of Investment Objectives

The Index Funds seek to come within 95% of a market index's total return,
before fees and expenses, in falling as well as rising markets. They do not
seek to "beat" the markets they track and do not seek temporary defensive
positions when markets appear overvalued. BGFA, the Master Portfolios'
Investment Adviser, makes no attempt to apply economic, financial or market
analysis when managing the Fund portfolios. BGFA selects securities because
they will help the Funds achieve returns corresponding to index returns.
Including a security among a Fund's holdings implies no opinion as to its
attractiveness as an investment.

Investing in Indexes

Investors look to indexes as a standard of market performance. Indexes are
model portfolios, that is, groups of stocks or bonds selected to represent an
entire market. One way an index fund seeks to match an index's performance,
before fees and expenses, is by buying and selling all of the index's
securities in the same proportion as they are reflected in the index. This is
what the S&P 500 Stock Fund does.

The Bond Index Fund has a more difficult task. As a practical matter, it would
be inefficient to hold each of the 6,500 securities included in the Lehman
Brothers Government/Corporate Bond Index. It can, however, substantially
replicate the index's profile by holding a representative sample of the 6,500
securities. It may, for example, hold US government obligations and corporate
bonds in a similar proportion to the index. And it can match such index
features as:

average time to maturity for both government and corporate debt

bonds' coupon rate

economic sectors represented by the bonds in the Fund's index are in roughly
the same proportion that they are represented in the entire index

14 BARCLAYS GLOBAL INVESTOR FUNDS, INC.
<PAGE>

--------------------------------------------------------------------------------
Defining Terms

Some corporate
bonds are
callable, which
means the
borrower has the
right to repay
them before
maturity. This
feature usually
benefits
borrowers, since
they can pay off
the bonds when
interest rates
have fallen. But
it puts
bondholders at a
disadvantage,
since they have
to reinvest the
proceeds of the
repayment at a
time when they
may earn less
interest income.
As a result,
lenders generally
demand a higher
interest rate
from callable
bonds.

creditworthiness of corporate bonds (matching the creditworthiness of
US government bonds is not a relevant consideration, since all US government
debt qualifies for the highest credit ratings)

whether or not corporate bonds that it holds are callable

Although this approach has proven an effective means of approximating index
performance in the past, the Bond Index Fund's holdings are not expected to
track index performance with the accuracy expected to be achieved by completely
replicating an index.

FUND DETAILS 15
<PAGE>

Allocation Fund

A Further Discussion of the Investment Objective
The Asset Allocation Fund seeks to achieve, over the long term, a high level of
total return consistent with reasonable risk.

Asset Allocation Fund Investment Model
The Asset Allocation Fund's asset mix is determined by a sophisticated
mathematical model developed in 1973 that has since been continually refined.
BGFA's investment professionals conduct ongoing research to enhance the model
and ensure that it is keeping pace with the constantly changing financial
markets. Using this model, BGFA gains a consistent and objective structure for
making investment decisions. Unlike traditional investment funds that employ
individual portfolio managers who make decisions on a more subjective basis,
BGFA applies a scientific approach to investing through the use of mathematical
models.

The model for the Asset Allocation Fund incorporates the following factors:

comprehensive data on stock, Treasury bond and money market expected returns

probable risk of losses in each of these markets

information on how these risks correlate: whether, for example, Treasury
bonds' cyclical ups and downs have tended to moderate or amplify the cyclical
ups and downs in S&P 500 stocks

The model generates a recommended asset mix that is evaluated by a team of
investment professionals. The allocation may shift significantly in response to
changing market and economic conditions.

16 BARCLAYS GLOBAL INVESTOR FUNDS, INC.
<PAGE>

A Further Discussion of Risk
--------------------------------------------------------------------------------
Defining Terms

Index futures
contracts are
standardized
agreements
between two
parties that
commit one party
to sell and the
other party to
buy a stipulated
quantity of a
market index at
a set price on
or before a
given date in
the future. The
seller never
actually
delivers
"shares" of the
index or shares
of all the
stocks in the
index. Instead,
the buyer and
the seller
settle the
difference in
cash between the
contract price
and the market
price on the
agreed-upon
date--the buyer
paying the
difference if
the actual price
is lower than
the contract
price and the
seller paying
the difference
if the actual
price is higher.

In addition to the principal risks of investing described above under Principal
Risk Factors, the Index and Allocation Funds have the following additional
risks.

Derivatives
A derivative is a financial contract whose value depends on, or is derived
from, the value of an underlying asset such as a security or an index. Index
futures contracts are considered derivatives because they derive their value
from the prices of the indexes. Each Fund may invest in index futures
contracts. This tactic can reduce the costs associated with direct investing.
It also allows the Funds to approach the returns of a fully invested portfolio
while keeping cash on hand, either in anticipation of shareholder redemptions
or because they have not yet invested new shareholder money. The floating rate
or variable rate bonds that the Funds may purchase are also considered
derivatives. Compared to conventional securities, derivatives can be more
sensitive to changes in interest rates or to sudden fluctuations in market
prices. This can affect the value of the Fund.

For a further discussion of Fund risks, please refer to the Funds' Statement
of Additional Information (SAI). The SAI is incorporated by reference and is
available free of charge from your shareholder servicing agent or by
calling 1 888 204 3956.

FUND DETAILS 17
<PAGE>

DETAILS IN COMMON

Management of the Funds

Investment Adviser

The Funds are feeder funds that invest all of their assets in similarly named
Master Portfolios with substantially identical investment objectives,
strategies and policies. BGFA provides investment guidance and policy direction
for each of the Master Portfolios. For its services to the Master Portfolios,
BGFA is entitled to receive annual fees based on the following annual rates of
each Master Portfolio's average daily net assets:

<TABLE>
<CAPTION>
FUND ANNUAL MANAGEMENT FEE
----------------------------------------------
<S> <C>
Asset Allocation Fund 0.35%
----------------------------------------------
Bond Index Fund 0.08%
----------------------------------------------
S&P 500 Stock Fund 0.05%
</TABLE>
--------------------------------------------------------------------------------

Unlike many traditional actively managed investment funds, there is no single
portfolio manager who makes investment decisions for the Funds. Instead, Index
Funds track their respective indexes. A team of investment professionals
evaluates recommendations made by BGFA's mathematical models for the Asset
Allocation Fund. The process reflects BGFA's commitment to an objective and
consistent investment management structure.

BGFA is located at 45 Fremont Street, San Francisco, California 94105. It is a
wholly owned subsidiary of BGI, which in turn is an indirect subsidiary of
Barclays Bank PLC. BGI, including its affiliates, is the world's largest
manager of institutional investment assets. As of December 31, 1999, BGI and
its affiliates, including BGFA, provided investment advisory services for over
$782 billion in assets. BGI, BGFA, Barclays Bank and their affiliates deal,
trade and invest for their own accounts in the types of securities in which the
Funds' Master Portfolios may also invest.

18 BARCLAYS GLOBAL INVESTOR FUNDS, INC.
<PAGE>

Administrative Services

The Funds' co-administrators, BGI and Stephens Inc., a full service
broker/dealer, provide services related to:

. management of the Funds' non-investment operations

. preparation of reports for each Fund's Board of Directors

. preparation of reports required by the Securities and Exchange Commission and
required filings with state securities commissions

. preparation of proxy statements and shareholder reports

BGI and Stephens are entitled to receive a combined annual fee based on the
following rates of each Fund's average daily net assets. In return for this
fee, BGI and Stephens have also agreed to absorb all expenses of the Funds and
the Master Portfolios other than the investment advisory fee, extraordinary
expenses, brokerage and other expenses connected to the execution of portfolio
transactions and certain expenses which are borne by the Fund.

<TABLE>
<CAPTION>
FUND ANNUAL ADMINISTRATIVE FEE
--------------------------------------------------
<S> <C>
Asset Allocation Fund 0.40%
--------------------------------------------------
Bond Index Fund 0.15%
--------------------------------------------------
S&P 500 Stock Fund 0.15%
</TABLE>

DETAILS IN COMMON 19
<PAGE>

Shareholder Information
--------------------------------------------------------------------------------
Defining Terms

The Funds have
appointed
shareholder
servicing agents
to service
individual Fund
accounts. In
addition to
buying and
selling shares
on behalf of
eligible
investors,
shareholder
servicing agents
may answer
shareholder
inquiries, keep
records, and
provide reports
on the status of
individual
accounts. The
Funds do not
charge extra for
these services,
but compensate
shareholder
servicing agents
as part of their
operating expenses.

Investors Bank &
Trust is the
Funds'
custodian,
transfer agent
and dividend
disbursing
agent.

The amortized
cost method
marks down any
premium, or
marks up any
discount, on
short-term debt
that the Funds
buy at a
constant rate
until maturity.
It does not
reflect daily
fluctuations in
market value.

Additional shareholder information, including how to buy and sell shares of a
Fund, is available free of charge by calling toll-free 1 888 204 3956.

Who is Eligible to Invest
To be eligible to purchase Fund shares, you must:

invest through an employer-sponsored or individual retirement savings plan

invest the proceeds rolled over from such plan into an Individual
Retirement Account

maintain an account with BGI or one of the Funds' shareholder servicing agents
authorized to sell and service Fund shares, or

invest a minimum of $1 million directly through BGI

Calculating the Funds' Share Price
Investors Bank & Trust (IBT) calculates each Fund's share price (also known as
a Fund's net asset value) in accordance with the standard formula for valuing
mutual fund shares at the close of regular trading (normally 4pm Eastern time)
every day the New York Stock Exchange is open. The formula calls for deducting
all of a Fund's liabilities from the total value of its assets--the market
value of the securities it holds, plus cash reserves--and dividing the result
by the number of shares outstanding. IBT values most of the securities in the
Funds at their current market prices. If such prices are not readily available,
IBT uses estimates of the securities' fair value in accordance with guidelines
approved by the Master Portfolios' Board of Trustees. Debt securities maturing
in 60 days or less are valued according to the amortized cost method.

The price at which a purchase or redemption is made is based on the next
calculation of net asset value after the order is received in proper form. An

20 BARCLAYS GLOBAL INVESTOR FUNDS, INC.
<PAGE>

exchange of a Fund's shares for shares of another BGI Fund will be treated as a
sale of the Fund's shares and any gain on the transaction may be subject to
federal income tax.

Dividends and Distributions
The S&P 500 Stock Fund pays out dividends of net investment income to investors
every quarter. The Bond Index Fund and the Asset Allocation Fund pay dividends
of net investment income to investors every month. All the Funds distribute
their capital gains, if any, to shareholders annually. Dividends and
distributions payable to you will be automatically reinvested in additional
shares of your Fund, unless you request payment in cash.

Taxes
As with all mutual funds, you may be required to pay taxes on the Funds' net
investment income and capital gains through distribution of such income and
gains by the Funds to their shareholders. You will owe the taxes whether you
choose to receive distributions in cash or have them automatically reinvested
in Fund Shares.

The amount of taxes you owe on your share of Fund income and gains will vary
from year to year, based on the amount of dividends of net investment income
and capital gain distributions the Funds pay out and your tax rate. Normally,
dividends and distributions are taxable to you when paid. However, when
dividends and distributions are declared in the last three months of a year and
paid in January of the next year, they are taxable as if paid on December 31 of
the prior year.

Dividends and capital gain distributions usually create the followingtax
liability:

<TABLE>
<CAPTION>
TRANSACTION TAX STATUS
<S> <C>
Income dividends Ordinary income
----------------------------------------------
Short-term capital gain
distribution Ordinary income
----------------------------------------------
Long-term capital gain
distribution Capital gain
</TABLE>

A portion of dividends paid to corporate shareholders of the S&P 500 Stock Fund
and the Asset Allocation Fund may qualify for the dividends-received deduction
available to corporations.

DETAILS IN COMMON 21
<PAGE>

In addition, if you sell or exchange your Fund shares you may have a taxable
gain or loss, depending on what you paid for your shares and what you receive
for them (or are treated as receiving in the case of exchanges).

<TABLE>
<CAPTION>
TRANSACTION TAX STATUS
<S> <C>
You sell shares owned for more Long-term capital gain or
than one year loss
------------------------------------------------------------
You sell shares owned for one Short-term capital gain or
year or less loss
</TABLE>

If you buy Fund shares shortly before it makes a distribution, you will, in
effect, receive part of your purchase back in the distribution, which is
subject to tax. Similarly, if you buy shares of a Fund that holds appreciated
securities, you will, in effect, receive part of your purchase back in a
taxable distribution if and when the Fund sells the securities and realizes
gain on the sale. All of the Funds have built up, or have the potential to
build up, high levels of unrealized appreciation in their investments.

After December 31 of a year, the Funds will send you a notice that tells you
how much you've received in dividends and distributions during the year and
their federal tax status. You could also be subject to foreign, state and local
taxes on such dividends and distributions.

The Funds are required to withhold 31% as "backup withholding" on any payments
to you by them (including amounts deemed paid in the case of exchanges) if you
haven't given us a correct Taxpayer Identification Number (TIN) and certified
that the TIN is correct and withholding doesn't apply, the Internal Revenue
Service (IRS) notifies the Funds that your TIN given to us is incorrect or the
IRS informs us that you are otherwise subject to backup withholding. You may
also be subject to IRS penalties if you give us an incorrect TIN. Any amounts
withheld can be applied against your federal income tax liability.

In general, the Funds are also required to withhold 30% from dividends paid to
foreign shareholders.

Tax considerations for tax-deferred accounts, such as benefit plans or non-
taxable entities, will be different.

Because each investor's tax circumstances are unique and because tax laws are
subject to change, we recommend that you consult your tax advisor about
your investment.

22 BARCLAYS GLOBAL INVESTOR FUNDS, INC.
<PAGE>

Master/Feeder Mutual Fund Structure
The Funds do not have their own investment adviser. Instead, each Fund invests
all of its assets in a separate mutual fund, called a Master Portfolio, that
has substantially identical investment objectives, strategies and policies as
the individual Funds. BGFA serves as investment adviser to each Master
Portfolio. The Master Portfolios may accept investments from other feeder
funds. Certain actions involving other feeder funds, such as a substantial
withdrawal, could affect the Master Portfolio.

Feeder Fund Expenses. The feeders bear the Master Portfolio's expenses in
proportion to the amount of assets each invests in the Master Portfolio. Each
feeder can set its own transaction minimums, fund-specific expenses and
conditions.

Feeder Fund Rights. Under the master/feeder structure, each Fund's Board of
Directors retains the right to withdraw the Fund's assets from the Master
Portfolio if it believes doing so is in the shareholders' best interests. If
the Directors withdraw the Fund's assets, they would then consider whether the
Fund should hire its own investment adviser, invest in another master portfolio
or take other action.

DETAILS IN COMMON 23
<PAGE>

Financial Highlights

The tables below provide a picture of each Fund's financial
performance. The per share information reflects financial results
for a single Fund share. The total returns in the tables represent
the rates of return that an investor would have earned or lost on
an investment in each of the Funds, assuming reinvestment of all
dividends and distributions. The information has been audited by
KPMG LLP, independent auditors, whose report, along with the Funds'
financial statements, is included in the Funds' annual reports. You
may obtain copies of the annual reports at no cost by calling toll-
free 1 888 204 3956, 8am to 5pm Eastern time, Monday through
Friday.

<TABLE>
<CAPTION>
ASSET ALLOCATION FUND
Ten-Month Period Year Ended Year Ended Year Ended Year Ended Year Ended
Ended 12/31/99** 2/28/99 2/28/98 2/28/97 2/29/96 2/28/95
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $14.07 $13.50 $12.12 $11.83 $9.93 $10.19
---------------------------------------------------------------------------------------------------
Income From Investment
Operations:
Net Investment Income 0.29 0.26 0.44 0.47 0.40 0.44
Net Realized and
Unrealized Gain (Loss)
on Investments 1.08 2.07 2.68 1.02 1.90 (0.14)
---------------------------------------------------------------------------------------------------
Total From Investment
Operations 1.37 2.33 3.12 1.49 2.30 0.30
---------------------------------------------------------------------------------------------------
Less Distributions:
From Net Investment
Income (0.29) (0.26) (0.44) (0.47) (0.40) (0.44)
From Net Realized Gains (2.58) (1.50) (1.30) (0.73) -- (0.12)
---------------------------------------------------------------------------------------------------
Total Distributions (2.87) (1.76) (1.74) (1.20) (0.40) (0.56)
---------------------------------------------------------------------------------------------------
Net Asset Value, End of
Period $12.57 $14.07 $13.50 $12.12 $11.83 $9.93
---------------------------------------------------------------------------------------------------
Total Return 9.95% 17.83% 27.10% 13.09% 23.54% 3.28%
---------------------------------------------------------------------------------------------------
Ratios/Supplemental
Data:
Net Assets, End of
Period (000) $562,523 $599,093 $534,746 $431,585 $397,930 $293,696
---------------------------------------------------------------------------------------------------
Portfolio Turnover
Rate++ 39% 33% 57% 43% 40% 24%*
---------------------------------------------------------------------------------------------------
Ratios to Average Net
Assets:+
Ratio of Expenses to
Average Net Assets(/1/) 0.75% 0.75% 0.75% 0.75% 0.75% 0.75%
Ratio of Net Investment
Income (Loss) to Average
Net Assets(/2/) 2.36% 1.84% 3.37% 3.95% 3.62% 4.62%
---------------------------------------------------------------------------------------------------
(/1/)Ratio of expenses
to average net assets
prior to waived fees and
reimbursed expenses N/A N/A N/A N/A N/A 0.76%
(/2/)Ratio of net
investment income (loss)
to average net assets
prior to waived fees and
reimbursed expenses N/A N/A N/A N/A N/A 4.61%
</TABLE>
*This rate includes the period from March 1, 1994 to May 25, 1994 when the Fund
was a stand-alone Fund, and the period from May 26, 1994 to February 28, 1995
when the Fund invested all of its assets in the corresponding Master Portfolio.
Portfolio turnover after May 26, 1994 is reported by the Master Portfolio.
**The Fund changed its fiscal year end from February 28 to December 31.
+These ratios include expenses charged to the corresponding Master Portfolio.
++Represents the portfolio turnover of each Fund's corresponding Master
Portfolio.

24 BARCLAYS GLOBAL INVESTOR FUNDS, INC.
<PAGE>

<TABLE>
<CAPTION>
BOND INDEX FUND

Ten-Month Period Year Ended Year Ended Year Ended Year Ended Year Ended
Ended 12/31/99** 2/28/99 2/28/98 2/28/97 2/29/96 2/28/95
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $9.73 $9.73 $9.43 $9.66 $9.20 $9.76
---------------------------------------------------------------------------------------------------
Income From Investment
Operations:
Net Investment Income 0.50 0.60 0.64 0.63 0.64 0.64
Net Realized and
Unrealized Gain (Loss)
on Investments (0.58) -- 0.30 (0.23) 0.46 (0.56)
---------------------------------------------------------------------------------------------------
Total From Investment
Operations (0.08) 0.60 0.94 0.40 1.10 0.08
---------------------------------------------------------------------------------------------------
Less Distributions:
From Net Investment
Income (0.50) (0.60) (0.64) (0.63) (0.64) (0.64)
From Net Realized Gains -- -- -- -- -- --
---------------------------------------------------------------------------------------------------
Total Distributions (0.50) (0.60) (0.64) (0.63) (0.64) (0.64)
---------------------------------------------------------------------------------------------------
Net Asset Value, End of
Period $9.15 $9.73 $9.73 $9.43 $9.66 $9.20
---------------------------------------------------------------------------------------------------
Total Return (0.82%) 6.24% 10.36% 4.32% 12.17% 1.12%
---------------------------------------------------------------------------------------------------
Ratios/Supplemental
Data:
Net Assets, End of
Period (000) $133,385 $126,733 $93,776 $129,469 $58,090 $18,593
---------------------------------------------------------------------------------------------------
Portfolio Turnover
Rate++ 25% 28% 59% 39% 21% 14%*
---------------------------------------------------------------------------------------------------
Ratios to Average Net
Assets:+
Ratio of Expenses to
Average Net Assets(/1/) 0.23% 0.23% 0.23% 0.23% 0.23% 0.23%
Ratio of Net Investment
Income (Loss) to Average
Net Assets(/2/) 6.30% 6.10% 6.66% 6.69% 6.67% 7.08%
---------------------------------------------------------------------------------------------------
(/1/)Ratio of expenses
to average net assets
prior to waived fees and
reimbursed expenses N/A N/A N/A 0.32% 0.53% 0.71%
(/2/)Ratio of net
investment income (loss)
to average net assets
prior to waived fees
and reimbursed expenses N/A N/A N/A 6.60% 6.37% 6.61%
</TABLE>
*This rate includes the period from March 1, 1994 to May 25, 1994 when the Fund
was a stand-alone Fund, and the period from May 26, 1994 to February 28, 1995
when the Fund invested all of its assets in the corresponding Master Portfolio.
Portfolio turnover after May 26, 1994 is reported by the Master Portfolio.
**The Fund changed its fiscal year end from February 28 to December 31.
+These ratios include expenses charged to the corresponding Master Portfolio.
++Represents the portfolio turnover of each Fund's corresponding Master
Portfolio.

DETAILS IN COMMON 25
<PAGE>

<TABLE>
<CAPTION>
S&P 500 STOCK FUND
Ten-Month Period Year Ended Year Ended Year Ended Year Ended Year Ended
Ended 12/31/99** 2/28/99 2/28/98 2/28/97 2/29/96 2/28/95
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $24.80 $22.08 $17.03 $14.02 $10.83 $10.50
------------------------------------------------------------------------------------------------------
Income From Investment
Operations:
Net Investment Income
(Loss) 0.29 0.34 0.33 0.32 0.31 0.27
Net Realized and
Unrealized Gain (Loss)
on Investments 4.47 3.87 5.46 3.23 3.36 0.41
------------------------------------------------------------------------------------------------------
Total From Investment
Operations 4.76 4.21 5.79 3.55 3.67 0.68
------------------------------------------------------------------------------------------------------
Less Distributions:
From Net Investment
Income (0.34) (0.34) (0.33) (0.32) (0.30) (0.27)
From Net Realized Gains (2.19) (1.15) (0.41) (0.22) (0.18) (0.08)
------------------------------------------------------------------------------------------------------
Total Distributions (2.53) (1.49) (0.74) (0.54) (0.48) (0.35)
------------------------------------------------------------------------------------------------------
Net Asset Value, End of
Period $27.03 $24.80 $22.08 $17.03 $14.02 $10.83
------------------------------------------------------------------------------------------------------
Total Return 19.67% 19.50% 34.62% 25.82% 34.35% 6.71%
------------------------------------------------------------------------------------------------------
Ratios/Supplemental
Data:
Net Assets, End of
Period (000) $2,844,438 $2,543,456 $2,292,433 $1,423,024 $882,696 $448,776
------------------------------------------------------------------------------------------------------
Portfolio Turnover
Rate++ 7% 11% 6% 4% 2% 8%*
------------------------------------------------------------------------------------------------------
Ratios to Average Net
Assets:+
Ratio of Expenses to
Average Net Assets(/1/) 0.20% 0.20% 0.20% 0.20% 0.20% 0.21%
Ratio of Net Investment
Income to Average Net
Assets(/2/) 1.29% 1.45% 1.73% 2.15% 2.52% 2.93%
------------------------------------------------------------------------------------------------------
(/1/)Ratio of expenses
to average net assets
prior to waived fees and
reimbursed expenses N/A N/A N/A 0.22% 0.26% 0.25%
(/2/)Ratio of net
investment income to
average net assets prior
to waived fees and
reimbursed expenses N/A N/A N/A 2.13% 2.46% 2.88%
</TABLE>
*This rate includes the period from March 1, 1994 to May 25, 1994 when the Fund
was a stand-alone Fund, and the period from May 26, 1994 to February 28, 1995
when the Fund invested all of its assets in the corresponding Master Portfolio.
Portfolio turnover after May 26, 1994 is reported by the Master Portfolio.
**The Fund changed its fiscal year end from February 28 to December 31.
+These ratios include expenses charged to the corresponding Master Portfolio.
++Represents the portfolio turnover of each Fund's corresponding Master
Portfolio.

26 BARCLAYS GLOBAL INVESTOR FUNDS, INC.
<PAGE>

[This page intentionally left blank.]

DETAILS IN COMMON 27
<PAGE>

[This page intentionally left blank.]

28 BARCLAYS GLOBAL INVESTOR FUNDS, INC.
<PAGE>

<PAGE>

For more detailed information on the Funds, request a copy of their annual and
semi-annual reports to shareholders and their Statement of Additional
Information (SAI). The annual and semi-annual reports discuss Fund investments
over the last fiscal year. They also review the market conditions and
investment strategies that materially affectedFund performance.

The SAI provides detailed information on the Funds. BGFA has electronically
filed the SAI, dated July 1, 2000, with the Securities and Exchange Commission.
It is incorporated by reference into this prospectus.

The Barclays Global Investors Funds "Shareholder Guide," also incorporated by
reference into this prospectus, provides information on how to buy and sell
shares of the Funds.

If you have any questions about the Funds or wish to obtain both the reports
and SAI free of charge, please call the Funds'toll-free number:
1 888 204 3956

Or you may write Barclays Global Investors Funds, Inc.:
c/o Investors Bank & Trust Co.
P.O. Box 9130
Mail Code MFD23
Boston, MA 02117-9130

You can also obtain this information through the Internet on the Securities
and Exchange Commission's Website:
http://www.sec.gov

The Securities and Exchange Commission will furnish hard copies of the
documents, upon payment of a duplicating fee, through the Public Reference
Section. Address your request to:
Public Reference Section of the SEC
Washington, D.C. 20549-6009

You can also review and copy the documents at the Securities and Exchange
Commission's Public Reference Room in Washington, D.C. Call the Commission at
1 800 SEC 0330 for further details.

Investment Company Act File No.:
811-7332

BARCLAYS GLOBAL INVESTORS FUNDS, INC.
<PAGE>

PROSPECTUS/JULY 1, 2000

Like shares of all
mutual funds, these
securities have not been
approved or disapproved
by the Securities and
Exchange Commission nor
has the Securities and
Exchange Commission
passed upon the accuracy
or adequacy of this
prospectus.
Any representation to
the contrary is a
criminal offense.
Money Market Fund

Providing income and preserving capital

BARCLAYS GLOBAL INVESTORS FUNDS, INC.
<PAGE>

<PAGE>

Table of Contents
FUND BASICS

<TABLE>
<C> <S>
2 Investment Objective

2 Principal Investment Strategy

3 Principal Risk Factors

4 Investment Returns

5 Fees and Expenses

FUND DETAILS

6 Principal Investments

7 Management of the Fund

8 Shareholder Information

12 Financial Highlights
</TABLE>
<PAGE>

FUND BASICS
Investment Objective/1/
[LOGO OF AUTO ICON APPEARS HERE]
Principal Investment Strategy
[LOGO OF MAP APPEARS HERE]
The Fund seeks a high level of income consistent with liquidity and the
preservation of capital.
The Fund invests in high-quality, short-term government and corporate debt.

/1/The Money Market Fund invests all of its assets in a Master Portfolio that
has a substantially identical investment objective. For simplicity's sake, all
discussion of investment objectives, strategies and risks of the Fund refer
also to the objectives, strategies and risks of its Master Portfolio, unless
otherwise indicated. A detailed examination of the relationship of the Fund to
its Master Portfolio appears on page 11.
BARCLAYS GLOBAL INVESTORS FUNDS, INC.

2
<PAGE>

Principal Risk Factors
[LOGO OF SPEEDING AUTO APPEARS HERE]
--------------------------------------------------------------------------------
Defining Terms

Short-term
securities have
a remaining
maturity of 397
days or less.
The Fund's
portfolio will
maintain an
average-weighted
maturity of
90 days or less.

.The value of the short-term securities in which the Fund invests may fall
because of an increase in interest rates. Increasing interest rates reduce the
value of debt securities generally, even the value of debt securities issued by
the US government.

.The value of individual securities held by the Fund may fall with the decline
in a borrower's real or apparent ability to meet its financial obligations.

An investment in the Fund is not a deposit of the bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Fund seeks to preserve the value of your investment at $1
per share, it is possible to lose money by investing in the Fund.

Who May Want to Invest in the Fund
The Fund may be appropriate for investors who:

.seek income comparable to money market rates

.wish to maintain the value of their investment in the long and short term

.desire an investment that can be readily converted to cash

For a complete analysis of Fund risks, please refer to the Fund's Statement of
Additional Information (SAI). The SAI is incorporated by reference in this
prospectus and is available free of charge from your shareholder servicing
agent or by calling 1 888 204 3956.
FUND BASICS

3
<PAGE>

Investment Returns
[SPEEDOMETER ICON]
-------------------
Defining Terms

The Fund's
seven-day yield,
also called the
current yield,
annualizes the
amount of income
the Fund
generates over a
seven-day period
by projecting
the amount for
an entire year.

Total Returns
The bar chart and the table in this section provide some indication of the
risks of investing in the Money Market Fund by showing changes in the Fund's
performance from year to year. The bar chart shows the returns for the Fund for
each full calendar year since the Fund's inception. The average annual total
return table compares the Fund's average annual total return with the return of
its corresponding index for one and five years and since the Fund's inception.
How the Fund performed in the past is not necessarily an indication of how the
Fund will perform in the future.

Money Market Fund
Year-By-Year Returns

1994 3.93%
1995 5.66%
1996 5.10%
1997 5.33%
1998 5.26%
1999 4.92%

The highest and lowest quarterly returns for the Money Market Fund for the
periods covered by the bar chart above are listed below:
<TABLE>
<CAPTION>
Highest Quarterly Lowest Quarterly
Return: 1st Qtr. '95 Return: 1st Qtr. '94
<S> <C>
1.42% 0.73%
</TABLE>

<TABLE>
<CAPTION>
MONEY MARKET FUND AVERAGE ANNUAL TOTAL RETURNS (AS OF
DECEMBER 31, 1999)
SINCE INCEPTION
ONE YEAR FIVE YEARS (JULY 2, 1993)*
--------------------------------------------------------------------
<S> <C> <C> <C>
Money Market Fund 4.92% 5.24% 4.85%
--------------------------------------------------------------------
Salomon 3 Month Treasury Bill 4.74% 5.24% 4.90%
</TABLE>
*The Salomon 3-Month Average is calculated from June 30, 1993.

To learn the Fund's current seven-day yield, call the Fund's transfer agent,
Investors Bank & Trust Co. (IBT), at 1 888 204 3956.
BARCLAYS GLOBAL INVESTORS FUNDS, INC.

4
<PAGE>

Fees and Expenses

The table below describes the fees and expenses that you may pay if you buy and
hold shares in the Fund. The expenses are deducted from Fund assets, which
means you pay them indirectly.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<S> <C>
Management fees 0.10%
------------------------------------------------------------------------------
Other expenses 0.35%
------------------------------------------------------------------------------
Total annual Fund operating expenses* 0.45%
</TABLE>
*Total annual Fund operating expenses in the above table and the following
example reflect the expenses of both the Fund and the Master Portfolio in which
it invests.

Example
The example below is intended to help you compare the Fund's costs with those
of other mutual funds. The example illustrates the costs you would have
incurred on an initial $10,000 investment in the Fund over the time periods
shown. It assumes your investment earns an annual return of 5% over the periods
and that the Fund's operating expenses remain the same.

The Fund does not charge a sales load or other fee upon redemption. This means
that your expenses for each period would be the same whether or not you sell
your shares at the end of a period. Your actual costs may be higher or lower
than this hypothetical example.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------------------
<S> <C> <C> <C> <C>
Money Market Fund $46 $144 $252 $567
</TABLE>

FUND BASICS

5
<PAGE>

FUND DETAILS
Principal Investments
--------------------------------------------------------------------------------
Defining Terms:

Floating rate
and variable
rate debt
securities are
instruments with
interest rates
that are
adjusted either
on a schedule or
when an index
orbenchmark
changes.

Bank obligations
are backed by
funds of a
financial
institution. In
addition to
domestic bank
obligations, the
Fund may invest
in obligations
of foreign bank
branches located
inside and
outside the
United States
and US bank
branches located
outside the
United States.

Corporate
obligations
include
unsecured debt
instruments,
such as
commercial paper
and corporate
notes, issued by
financial
institutions,
insurance
companies
andindustrial
corporations.

Repurchase
agreements
obligate a
person selling
US government or
other high-
quality
securities to
buy them back
within a
specified period
of time (usually
one week or
less) at an
agreed-upon
price.

Asset-backed
securities are
financial
instruments
collateralized
by one or more
types of assets,
including loans
and receivables.
The Money Market Fund invests in fixed rate, floating rate and variable rate
debt securities that meet the following requirements:

.They have remaining maturities of 397 days (about 13 months) or less.

.They are rated in the top two quality short-term categories, according to
credit rating agencies such as Moody's Investors Services or Standard & Poor's
Corp.

.If the securities are unrated, BGFA must have determined that their credit
compares with the credit of the rated securities it is permitted to buy. BGFA
must make this comparison in accordance with guidelines adopted by the Master
Portfolio's Board of Trustees./1/

.The principal and interest of all securities in the Master Portfolio are
payable in US dollars.

Within these guidelines, the Fund may invest in US and foreign government debt,
including the debt of agencies and instrumentalities, such as Fannie Mae and
the Student Loan Marketing Association, US and foreign bank obligations,
corporate obligations, repurchase agreements, and asset-backed securities.

/1/A detailed examination of the relationship of the Fund to its Master
Portfolio appears on page 11.
BARCLAYS GLOBAL INVESTORS FUNDS, INC.

6
<PAGE>

Management of the Fund
Investment Adviser
The Fund is a feeder fund that invests all of its assets in a similarly named
Master Portfolio with substantially identical investment objectives, strategies
and policies. Barclays Global Fund Advisors ("BGFA") provides investment
guidance and policy direction for the Master Portfolio. For its services to the
Master Portfolio, BGFA is entitled to receive an annual fee of 0.10% of the
Master Portfolio's average daily net assets.

BGFA is located at 45 Fremont Street, San Francisco, California 94105. It is a
wholly owned subsidiary of Barclays Global Investors, N.A. ("BGI"), which in
turn is an indirect subsidiary of Barclays Bank PLC. BGI, including its
affiliates, is the world's largest manager of institutional investment assets.
As of December 31, 1999, BGI and its affiliates, including BGFA, provided
investment advisory services for over $782 billion in assets.

Administrative Services
BGI and Stephens Inc., a full service broker/dealer, provide the following
services as the Money Market Fund's co-administrators:

.management of the Fund's non-investment operations

.preparation of reports for the Fund's Board of Directors

.preparation of required reports for the Securities and Exchange Commission and
state securities commissions

.preparation of proxy statements and shareholder reports

BGI and Stephens are entitled to receive a combined annual fee of 0.35% of the
Fund's average daily net assets. In return for this fee, BGI and Stephens have
agreed to absorb all expenses for the Fund other than the investment advisory
fee, extraordinary expenses, brokerage and other expenses connected to the
execution of portfolio transactions and certain expenses which are borne by the
Fund.
FUND DETAILS

7
<PAGE>

Shareholder Information
--------------------------------------------------------------------------------
Defining Terms

The Fund has
appointed
shareholder
servicing agents
to service
individual Money
Market Fund
accounts. In
addition to
buying and
selling shares
on behalf of
eligible
investors,
shareholder
servicing agents
may answer
shareholder
inquiries, keep
records and
provide reports
on the status of
individual
accounts. The
Money Market Fund
does not charge
extra for these
services, but
compensates
shareholder
servicing agents
as part of their
operating expenses.

The amortized
cost method
marks down any
premium, or
marks up any
discount, on
short-term debt
that the Fund
buys at a
constant rate
until maturity.
It does not
reflect daily
fluctuations in
market value.

Investors Bank &
Trust is the
Fund's
custodian,
transfer agent
and dividend
disbursing
agent.
Additional shareholder information, including how to buy and sell shares of the
Fund, is available free of charge by calling toll-free 1 888 204 3956.

Who is Eligible
To be eligible to purchase Money Market Fund shares, you must:

.invest through an employer-sponsored or individual retirement savings plan

.invest the proceeds rolled over from such a plan into an
Individual Retirement Account

.maintain an account with one of the Fund's shareholder servicing agents
authorized to sell and service Fund shares or

.invest a minimum of $1 million directly through Barclays Global Investors
(BGI).

Calculating the Fund's Share Price
Investors Bank & Trust (IBT) calculates the Fund's share price (also known as a
Fund's net asset value) in accordance with the standard formula for valuing
mutual fund shares at the close of regular trading (normally 4pm Eastern time)
every day the New York Stock Exchange is open. The formula calls for deducting
all of the Fund's liabilities from the total value of its assets--the market
value of the securities it holds, plus cashreserves--and dividing the result by
the number of shares outstanding. IBT uses the amortized cost method to account
for any premiums or discounts above or below the face value of the securities
it buys.

The Fund seeks to maintain a constant price of $1 per share, although it can
offer no assurance that it will do so.

The price at which a purchase or redemption is made is based on the next
calculation of net asset value after the order is received in proper form.
BARCLAYS GLOBAL INVESTORS FUNDS, INC.

8
<PAGE>

Dividends and Distributions
The Fund declares dividends daily and pays them out to investors every month.
It distributes capital gains, if any, to the investors annually. Dividends and
distributions payable to you will be automatically reinvested in additional
shares of the Fund.

You begin earning dividends on your shares the day after your purchase order
takes effect. You continue earning daily dividends on the shares until the date
you sell them.

Please Note:
.The Fund credits dividends earned on weekends and holidays to the preceding
business day.

.If you sell shares before the monthly dividend payment date, the Fund remits
to the investor any dividends declared but not yet paid to the investor on the
next dividend payment date.

Taxes
As with all mutual funds, you may be required to pay taxes on the Fund's net
income and capital gains through distribution of such income and gains by the
Fund to its shareholders. You will owe taxes even though your dividends and
distributions are reinvested in Fund shares.

The amount of taxes you owe on your share of the Fund's income and gains will
vary from year to year, based on the amount of dividends of net investment
income and capital gain distributions the Fund pays out and your tax rate.
Normally, dividends and distributions are taxable to you when paid. However,
when dividends and distributions are declared in the last three months of a
year and paid in January of the next year, they are taxable as if paid on
December 31 of the prior year.
FUND DETAILS

9
<PAGE>

Dividends and capital gain distributions usually create the following tax
liability:

<TABLE>
<CAPTION>
TRANSACTION TAX STATUS
<S> <C>
Income dividends Ordinary income
----------------------------------------------
Short-term capital gain
distributions Ordinary income
----------------------------------------------
Long-term capital gain
distributions Capital gain
</TABLE>

Dividends and distributions from the Fund paid to corporate shareholders will
not qualify for the dividends-received deduction generally available to
corporate taxpayers.

As long as the Fund maintains a $1.00 net asset value per share, your sales and
exchanges of Fund shares should not be taxable.

After December 31 of a year, the Fund will send you a notice that tells you how
much you've received in dividends and distributions during the year and their
federal tax status. You could also be subject to foreign, state and local taxes
on such dividends and distributions.

The Fund is required to withhold 31% as "backup withholding" on any payments to
you by it (including amounts deemed paid in the case of exchanges) if you
haven't given us a correct Taxpayer Identification Number (TIN) and certified
that the TIN is correct and withholding doesn't apply, the Internal Revenue
Service (IRS) notifies the Fund that your TIN given to us is incorrect or the
IRS informs us that you are otherwise subject to backup withholding. You may
also be subject to IRS penalties if you give us an incorrect TIN. Any amounts
withheld can be applied against your federal income tax liability.

In general, the Fund is also required to withhold 30% from dividends paid to
foreign shareholders.

Because each investor's tax circumstances are unique and because tax laws are
subject to change, we recommend that you consult your tax adviser about
your investment.
BARCLAYS GLOBAL INVESTORS FUNDS, INC.

10
<PAGE>

Master/Feeder Mutual Fund Structure
The Fund does not have its own investment adviser. Instead, the Fund invests
all of its assets in a separate mutual fund, called a Master Portfolio, that
has a substantially identical investment objective as the Fund. BGFA serves as
Investment Adviser to the Master Portfolio. The Master Portfolio may accept
investments from other feeder funds.

Feeder Fund Rights. Under the master/feeder structure, the Fund's Board of
Directors retains the right to withdraw the Fund's assets from the Master
Portfolio if it believes doing so is in the shareholders' best interests. If
the Fund's Board of Directors withdraws the Money Market Fund's assets, it
would then consider whether the Fund should hire its own investment adviser,
invest in another master portfolio or take other action.
FUND DETAILS

11
<PAGE>

Financial Highlights
The table below provides a picture of the Money Market Fund's
financial performance. The information selected reflects financial
results for a single Fund share. The total returns in the table
represent the rates of return that an investor would have earned or
lost on an investment in the Fund, assuming reinvestment of all
dividends and distributions. The information has been audited by
KPMG LLP, independent auditors, whose report, along with the Fund's
financial statements, is included in the Fund's annual report. You
may obtain copies of the annual report at no cost by calling 1 888
204 3956 toll-free, 8am to 5pm Eastern time, Monday through Friday.

<TABLE>
<CAPTION>
Ten-Month Period Year Ended Year Ended Year Ended Year Ended Year Ended
Ended 12/31/99* 2/28/99+ 2/28/98 2/28/97 2/29/96 2/28/95
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---------------------------------------------------------------------------------------------------
Income from Investment
Operations:
Net Investment Income 0.04 0.05 0.05 0.05 0.05 0.04
Net Realized and
Unrealized Gain on
Investments -- -- -- -- -- --
---------------------------------------------------------------------------------------------------
Total from Investment
Operations 0.04 0.05 0.05 0.05 0.05 0.04
---------------------------------------------------------------------------------------------------
Less Distributions:
From Net Investment
Income (0.04) (0.05) (0.05) (0.05) (0.05) (0.04)
From Net Realized Gains -- -- -- -- -- --
---------------------------------------------------------------------------------------------------
Total Distributions (0.04) (0.05) (0.05) (0.05) (0.05) (0.04)
---------------------------------------------------------------------------------------------------
Net Asset Value, End of
Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---------------------------------------------------------------------------------------------------
Total Return 4.14% 5.15% 5.35% 5.10% 5.60% 4.40%
---------------------------------------------------------------------------------------------------
Supplemental Data:
Net Assets, End of
Period (000) $143,258 $205,317 $180,375 $177,046 $156,852 $147,269
---------------------------------------------------------------------------------------------------
Ratios to Average Net
Assets:++
Ratio of Expenses to
Average Net Assets(/1/) 0.45% 0.45% 0.45% 0.45% 0.45% 0.45%
Ratios of Net
Investment Income to
Average Net Assets(/2/) 4.86% 4.62% 5.23% 4.96% 5.44% 4.44%
---------------------------------------------------------------------------------------------------
(/1/)Ratio of Expenses
to Average Net Assets
Prior to Waived Fees and
Reimbursed Expenses N/A N/A N/A 0.48% 0.49% 0.57%
(/2/)Ratio of Net
Investment Income to
Average Net Assets Prior
to Waived Fees and
Reimbursed Expenses N/A N/A N/A 4.93% 5.40% 4.32%
</TABLE>
*The Fund changed its fiscal year end from February 28 to December 31.
+The Money Market Fund converted to a master/feeder structure on September 1,
1998.
++Annualized for periods of less than one year. These ratios include expenses
charged to the corresponding Master Portfolios.
BARCLAYS GLOBAL INVESTORS FUNDS, INC.

12
<PAGE>

<PAGE>

For more detailed information on the Fund, request a copy of its annual and
semi-annual reports to shareholders and its Statement of Additional Information
(SAI). The annual and semi-annual reports discuss the Fund's investments over
the last fiscal year. They also review the market conditions and investment
strategies that materially affectedFund performance.

The SAI provides detailed information on the Fund. BGFA has electronically
filed the SAI, dated July 1, 2000, with the Securities and Exchange Commission.
It is incorporated by reference into this prospectus.

The Barclays Global Investors Funds "Shareholder Guide," also incorporated by
reference into this prospectus, provides information on how to buy and sell
shares of the Fund.

If you have any questions about the Fund or wish to obtain both the reports and
SAI free of charge, please call the Fund's toll-free number:
1 888 204 3956

Or you may write Barclays Global Investors Funds, Inc.:
c/o Investors Bank & Trust Co.
P.O. Box 9130
Mail Code MFD23
Boston, MA 02117-9130

You can also obtain this information through the Internet on the Securities and
Exchange Commission's Website:
http://www.sec.gov

You can also review and copy the documents at the Securities and Exchange
Commission's Public Reference Room in Washington, D.C. Call the Commission at
1 800 SEC 0330 for further details.

Investment Company Act File No.:

811-7332
BARCLAYS GLOBAL INVESTORS FUNDS, INC.
<PAGE>

PROSPECTUS/JULY 1, 2000

Institutional
Money Market Fund

Institutional Shares

Providing income and
preserving capital

BARCLAYS GLOBAL INVESTORS FUNDS, INC.
<PAGE>

<PAGE>

Table of Contents

FUND BASICS

<TABLE>
<C> <S>
2 Investment Objective

2 Principal Investment Strategy

3 Principal Risk Factors

4 Investment Returns

6 Fees and Expenses

FUND DETAILS

7 Principal Investments

8 Management of the Fund

9 Shareholder Information

14 Financial Highlights
</TABLE>
<PAGE>

FUND BASICS

[LOGO OF AUTO ICON]

[LOGO OF MAP]

Investment Objective/1/

The Fund seeks a high level of income consistent with liquidity and the
preservation of capital.

Principal Investment Strategy

The Fund invests in high-quality, short-term government and corporate debt.

/1/The Institutional Money Market Fund invests all of its assets in a Master
Portfolio that has a substantially identical investment objective. For
simplicity's sake, all discussion of investment objectives, strategies and
risks of the Fund refer also to the objectives, strategies and risks of its
Master Portfolio, unless otherwise indicated. A detailed examination of the
relationship of the Fund to its Master Portfolio appears on page 13.

BARCLAYS GLOBAL INVESTORS FUNDS, INC.

2
<PAGE>

Principal Risk Factors

[LOGO OF SPEEDING AUTO]
--------------------------------------------------------------------------------
Defining Terms

Short-term
securities have
a remaining
maturity of 397
days or less.
The Fund's
portfolio will
maintain an
average-weighted
maturity of
90 days or less.

.The value of individual securities held by the Fund may fall with the decline
in a borrower's real or apparent ability to meet its financial obligations.

Who May Want to Invest in the Fund
The Fund may be appropriate for investors who:

.seek income comparable to money market rates

.wish to maintain the value of their investment in the long and short term

.desire an investment that can be readily converted to cash

3
<PAGE>

Investment Returns

[lOGO OF SPEEDOMETER]
Total Returns
The bar chart and table in this section provide some indication of the risks of
investing in the Institutional Money Market Fund. Because the Institutional
Money Market Fund has been in existence for less than one calendar year, the
bar chart and table show changes in the performance of the Money Market Fund of
Barclays Global Investors Funds, Inc. ("BGIF") from year to year. The Money
Market Fund is a separate fund from the Institutional Money Market Fund, but
both Funds invest all of their assets in the same master portfolio. The returns
of the Funds would differ due to differences in their respective operating
expenses.

The bar chart shows the returns for the Money Market Fund for each full
calendar year since its inception. The average annual total return table
compares the Money Market Fund's average annual total return with the return of
the Institutional Money Market Fund's corresponding index for one and five
calendar years and since the Money Market Fund's inception. How the Money
Market Fund performed in the past is not necessarily an indication of how the
Institutional Money Market Fund will perform in the future.

Money Market Fund
Year-By-Year Return
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
3.93% 5.66% 5.10% 5.33% 5.26% 4.92%
</TABLE>
The total annual fund operating expenses for the periods reflected in the bar
chart above for the Money Market Fund are 0.45%, but the Institutional Money
Market Fund's annual fund operating expenses are 0.12% for the Institutional
Class shares.

4
<PAGE>

-------------------
Defining Terms

The Fund's
seven-day yield,
also called the
current yield,
annualizes the
amount of income
the Fund
generates over a
seven-day period
by projecting
the amount for
an entire year.

<TABLE>
<CAPTION>
MONEY MARKET FUND AVERAGE ANNUAL TOTAL RETURNS (AS OF DECEMBER 31, 1999)
SINCE INCEPTION
ONE YEAR FIVE YEARS (July 2, 1993)**
--------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market Fund 4.92% 5.24% 4.85%
--------------------------------------------------------------------------
iMoneyNet, Inc.* 4.94% 5.34% 4.93%
</TABLE>

* The Institutional Money Market Fund is tracked against the iMoneyNet, Inc.
First Tier Institutional Taxable Money Market Fund Average. iMoneyNet, Inc. was
formerly IBC Financial Data, Inc.
** The iMoneyNet, Inc. average is calculated from June 30, 1993.

To learn the Fund's current seven-day yield, call the Fund's Transfer Agent,
Investors Bank & Trust Co. (IBT), at 1 888 204 3956.
FUND BASICS

5
<PAGE>

Fees and Expenses

The table below describes the fees and expenses that you may pay if you buy and
hold Institutional Class shares in the Fund. The expenses are deducted from
Fund assets, which means you pay them indirectly.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<S> <C>
Management fees 0.10%
------------------------------------------------------------------------------
Other expenses* 0.02%
------------------------------------------------------------------------------
Total annual Fund operating expenses** 0.12%
</TABLE>
* "Other expenses" are based on estimated amounts for the current fiscal year.
** Total annual Fund operating expenses in the above table and the following
example reflect the expenses of both the Fund and the Master Portfolio in which
it invests.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional
Money Market
Fund
(Institutional
Class shares) $12 $39 $68 $154
</TABLE>

BARCLAYS GLOBAL INVESTORS FUNDS, INC.

6
<PAGE>

FUND DETAILS

Principal Investments
--------------------------------------------------------------------------------
Defining Terms:

Floating rate
and variable
rate debt
securities are
instruments with
interest rates
that are
adjusted either
on a schedule or
when an index or
benchmark changes.

Corporate
obligations
include
unsecured debt
instruments,
such as
commercial paper
and corporate
notes, issued by
financial
institutions,
insurance
companies and
industrial corporations.

Repurchase
agreements
obligate a
person selling
US government or
other high-
quality
securities to
buy them back
within a
specified period
of time (usually
one week or
less) at an
agreed-upon
price.

Asset-backed
securities are
financial
instruments
collateralized
by one or more
types of assets,
including loans
and receivables.
The Institutional Money Market Fund invests in fixed rate, floating rate and
variable rate debt securities that meet the following requirements:

.They have remaining maturities of 397 days (about 13 months) or less.

.They are rated in the top two quality short-term categories, according to
credit rating agencies such as Moody's Investors Services or Standard &
Poor's Corp.

.The principal and interest of all securities in the Master Portfolio are
payable in US dollars.

/1/A detailed examination of the relationship of the Fund to its Master
Portfolio appears on page 13.
FUND DETAILS

7
<PAGE>

Management of the Fund

Investment Adviser
The Fund is a feeder fund that invests all of its assets in a Master Portfolio
with substantially identical investment objectives, strategies and policies.
Barclays Global Fund Advisors ("BGFA") provides investment guidance and policy
direction for the Master Portfolio. For its services to the Master Portfolio,
BGFA is entitled to receive an annual fee of 0.10% of the Master Portfolio's
average daily net assets.

Administrative Services
BGI and Stephens Inc., a full service broker/dealer, provide the following
services as the Institutional Money Market Fund's co-administrators:

.management of the Fund's non-investment operations

.preparation of reports for the Fund's Board of Directors

.preparation of required reports for the Securities and Exchange Commission and
state securities commissions

.preparation of proxy statements and shareholder reports

BGI and Stephens are entitled to receive a combined annual fee of 0.02% of the
Fund's average daily net assets. In return for this fee, BGI and Stephens have
agreed to absorb all expenses for the Fund other than the investment advisory
fee, extraordinary expenses, brokerage and other expenses connected to the
execution of portfolio transactions and certain expenses which are borne by the
Fund.

BARCLAYS GLOBAL INVESTORS FUNDS, INC.

8
<PAGE>

Shareholder Information
--------------------------------------------------------------------------------
Defining Terms

Investors Bank &
Trust is the
Fund's
custodian,
transfer agent
and dividend
disbursing
agent.

Additional shareholder information, including how to buy and sell shares of the
Fund is available free of charge by calling toll-free 1 888 204 3956.

Who is Eligible
To be eligible to purchase Institutional Money Market Fund shares, you must be
an institutional investor and invest a minimum initial investment amount for
the Institutional Class shares which is generally $25 million. Institutional
Class shares must typically be purchased directly through BGI.

Contacting BGI Funds
Call the Fund's Transfer Agent, Investors Bank & Trust (IBT), at 1 888 204
3956, toll-free, Monday through Friday, 8am to 4pm Eastern time.

Buying Shares
You must submit your purchase order by the close of regular trading on the New
York Stock Exchange (normally 4pm Eastern time) to purchase shares at that
day's net asset value. Orders received after the close of regular trading on
the New York Stock Exchange will be executed on the next business day. IBT must
receive a completed application before it can open an account and receive wire
orders.

You should instruct your bank to wire funds as follows:

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

9
<PAGE>

Selling Shares
You must submit your redemption order by the close of regular trading on the
New York Stock Exchange (normally 4pm Eastern time) to redeem shares at that
day's net asset value. Orders received after the close of regular trading on
the New York Stock Exchange will be executed on the next business day.

IBT will employ procedures designed to confirm that your order is valid, but
neither IBT nor the Fund may be held liable for acting on telephone
instructions IBT reasonably believes to be valid. IBT will wire proceeds
directly to your designated bank account.*

Important Notes:
It is important that you call the Fund before executing a large transaction. In
consideration of the interests of all shareholders, the Fund reserves the right
to reject any purchase orders or delay delivery of your redemption proceeds--up
to seven days--if the amount will disrupt the Fund's operation or performance.
Please contact IBT for further clarification.

Federal regulations require you to furnish a valid taxpayer identification
number when you open your account.

*If you wish to change your bank wire instructions, you must make your request
in writing and include a signature guarantee to help prevent fraud. You can
obtain a signature guarantee from most banks and securities dealers. A
signature guarantee is not a notarized signature.

BARCLAYS GLOBAL INVESTORS FUNDS, INC.

10
<PAGE>

--------------------------------------------------------------------------------
Defining Terms

Calculating the Fund's Share Price
IBT calculates the Fund's share price (also known as a Fund's net asset value)
in accordance with the standard formula for valuing mutual fund shares at the
close of regular trading (normally 4pm Eastern time) every day the New York
Stock Exchange is open. The formula calls for deducting all of the Fund's
liabilities from the total value of its assets--the market value of the
securities it holds, plus cash reserves--and dividing the result by the number
of shares outstanding. IBT uses the amortized cost method to account for any
premiums or discounts above or below the face value of the securities it buys.

The Fund seeks to maintain a constant price of $1 per share, although it can
offer no assurance that it will do so.

The price at which a purchase or redemption is made is based on the next
calculation of net asset value after the order is received in proper form.

You begin earning dividends on your shares the day your purchase order
takes effect. You continue earning daily dividends on the shares up to but not
including the date you sell them.

Please Note:
.The Fund credits dividends earned on weekends and holidays to the preceding
business day.

.If you sell shares before the monthly dividend payment date, the Fund remits
to the investor any dividends declared but not yet paid to the investor on the
next dividend payment date.

.If you sell all shares before the monthly dividend payment date, the Fund
remits to the investor all dividends accrued with the sale proceeds.

FUND DETAILS

11
<PAGE>

Dividends and capital gain distributions usually create the following
tax liability:

<TABLE>
<CAPTION>
TRANSACTION TAX STATUS
<S> <C>
Income dividends Ordinary income
----------------------------------------------
Short-term capital gain
distributions Ordinary income
----------------------------------------------
Long-term capital gain
distributions Capital gain
</TABLE>

Dividends and distributions from the Fund paid to corporate shareholders will
not qualify for the dividends-received deduction generally available to
corporate taxpayers.

As long as the Fund maintains a $1.00 net asset value per share, your sales
and exchanges of Fund shares should not be taxable.

After December 31 of a year, the Fund will send you a notice that tells you
how much you've received in dividends and distributions during the year and
their federal tax status. You could also be subject to foreign, state and
local taxes on such dividends and distributions.

Please provide the correct Taxpayer Identification Number (TIN) and note if
you are subject to backup withholding. If the Internal Revenue Service (IRS)
notifies the Fund that the TIN provided is incorrect or that you are otherwise
subject to backup withholding, the Fund is required to withhold

BARCLAYS GLOBAL INVESTORS FUNDS, INC.

12
<PAGE>

31% as "backup withholding" on any payments made to you by the Fund, including
exchanges. Any amounts withheld can be applied against your federal income tax
liability.

In general, the Fund is also required to withhold 30% from dividends paid to
foreign shareholders.

Because each investor's tax circumstances are unique and because tax laws are
subject to change, we recommend that you consult your tax adviser about
your investment.

Feeder Fund Rights. Under the master/feeder structure, the Fund's Board of
Directors retains the right to withdraw the Fund's assets from the Master
Portfolio if it believes doing so is in the shareholders' best interests. If
the Fund's Board of Directors withdraws the Institutional Money Market Fund's
assets, it would then consider whether the Fund should hire its own investment
adviser, invest in another master portfolio or take other action.

Share Class. The Fund offers an additional share class with different expenses
and expected returns than those described here. Call IBT for additional
information, at 1 888 204 3956.
FUND DETAILS

13
<PAGE>

Financial Highlights

The table below provides a picture of the Institutional Money
Market Fund's Institutional Class Shares' financial performance.
The information selected reflects financial results for a single
Fund share. The total returns in the table represent the rates of
return that an investor would have earned or lost on an investment
in the Fund, assuming reinvestment of all dividends and
distributions. The information has been audited by KPMG LLP,
independent auditors, whose report, along with the Fund's financial
statements, is included in the Fund's annual report. You may obtain
copies of the annual report at no cost by calling 1 888 204 3956
toll-free, 8am to 5pm Eastern time, Monday through Friday.

<TABLE>
<CAPTION>
Period Ended
12/31/99(/1/)
--------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period $1.00
--------------------------------------------------------------------
Income from Investment Operations:
Net Investment Income 0.02
--------------------------------------------------------------------
Total from Investment Operations 0.02
--------------------------------------------------------------------
Less Distributions:
From Net Investment Income (0.02)
--------------------------------------------------------------------
Total Distributions (0.02)
--------------------------------------------------------------------
Net Asset Value, End of Period $1.00
--------------------------------------------------------------------
Total Return 2.26%
--------------------------------------------------------------------
Supplemental Data:
Net Assets, End of Period $5,062
--------------------------------------------------------------------
Ratios to Average Net Assets:(/2/)
Ratio of Expenses to Average Net Assets 0.07%
Ratios of Net Investment Income to Average Net Assets 2.97%
</TABLE>
(/1/)The Fund commenced operations on August 1, 1999.
(/2/)These ratios are annualized and include expenses charged to
the corresponding Master Portfolio.

BARCLAYS GLOBAL INVESTORS FUNDS, INC.

14
<PAGE>

[This page intentionally left blank.]
<PAGE>

<PAGE>

For more detailed information on the Fund, request a copy of the annual and
semi-annual reports to shareholders and the Statement of Additional Information
(SAI). The annual and semi-annual reports discuss the Fund's investments over
the last fiscal year. They also review the market conditions and investment
strategies that materially affected Fund performance.

If you have any questions about the Fund or wish to obtain both the reports and
SAI free of charge, please call the Fund's toll-free number:

1 888 204 3956

Or you may write Barclays Global Investors Funds, Inc.:

c/o Investors Bank & Trust Co.
P.O. Box 9130
Mail Code MFD23
Boston, MA 02117-9130

You can also obtain this information through the Internet on the Securities and
Exchange Commission's Website:

http://www.sec.gov

The Securities and Exchange Commission will furnish hard copies of the
documents, upon payment of a duplicating fee, through the Public Reference
Section. Address your request to:

Public Reference Section of the SEC
Washington, D.C. 20549-6009

You can also review and copy the documents at the Securities and Exchange
Commission's Public Reference Room in Washington, D.C. Call the Commission at
1 800 SEC 0330 for further details.

Investment Company Act File No.:

811-7332
BARCLAYS GLOBAL INVESTORS FUNDS, INC.
<PAGE>

PROSPECTUS/JULY 1, 2000

Like shares of all
mutual funds, these
securities have not been
approved or disapproved
by the Securities and
Exchange Commission nor
has the Securities and
Exchange Commission
passed upon the accuracy
or adequacy of this
prospectus. Any
representation to the
contrary is a criminal
offense.

Institutional
Money Market Fund

Distributor Shares

Providing income and
preserving capital

BARCLAYS GLOBAL INVESTORS FUNDS, INC.
<PAGE>

<PAGE>

Table of Contents

FUND BASICS

<TABLE>
<C> <S>
2 Investment Objective

2 Principal Investment Strategy

3 Principal Risk Factors

4 Investment Returns

6 Fees and Expenses

FUND DETAILS

7 Principal Investments

8 Management of the Fund

10 Shareholder Information

15 Financial Highlights
</TABLE>
<PAGE>

FUND BASICS

Investment Objective/1/

[LOGO OF AUTO ICON]

[LOGO OF MAP]

The Fund seeks a high level of income consistent with liquidity and the
preservation of capital.

Principal Investment Strategy

The Fund invests in high-quality, short-term government and corporate debt.

BARCLAYS GLOBAL INVESTORS FUNDS, INC.

2
<PAGE>

Principal Risk Factors

[LOGO OF SPEEDING AUTO APPEARS HERE]
--------------------------------------------------------------------------------
Defining Terms

Short-term
securities have
a remaining
maturity of 397
days or less.
The Fund's
portfolio will
maintain an
average-weighted
maturity of
90 days or less.

.The value of individual securities held by the Fund may fall with the decline
in a borrower's real or apparent ability to meet its financial obligations.

Who May Want to Invest in the Fund

The Fund may be appropriate for investors who:

.seek income comparable to money market rates

.wish to maintain the value of their investment in the long and short term

.desire an investment that can be readily converted to cash

3
<PAGE>

Investment Returns

[SPEEDOMETER ICON]
Total Returns

The bar chart and table in this section provide some indication of the risks of
investing in the Distributor Shares of the Institutional Money Market Fund.
Because the Institutional Money Market Fund has been in existence for less than
one calendar year the bar-chart and table show changes in the performance of
the Money Market Fund of Barclays Global Investors Funds, Inc. ("BGIF") from
year to year. The Money Market Fund is a separate fund from the Institutional
Money Market Fund, but both Funds invest all of their assets in the same master
portfolio. The returns of the Funds would differ due to differences in their
respective operating expenses.

The bar chart shows the returns for the Money Market Fund for each full
calendar year since its inception. The average annual total return table
compares the Money Market Fund's average annual total return with the return of
the Institutional Money Market Fund's corresponding index for one and five
calendar years and since the Money Market Fund's inception. How the Money
Market Fund performed in the past is not necessarily an indication of how the
Distributor Shares of the Institutional Money Market Fund will perform in
the future.

[BAR GRAPH APPEARS HERE]
<TABLE>
<S> <C>
FYE 1994 3.93%
FYE 1995 5.66%
FYE 1996 5.10%
FYE 1997 5.33%
FYE 1998 5.26%
FYE 1999 4.92%
</TABLE>
The total annual fund operating expenses for the periods reflected in the bar
chart above for the Money Market Fund are 0.45%, but the Institutional Money
Market Fund's annual fund operating expenses are 0.22% for the Distributor
Class shares.
The highest and lowest quarterly returns for the Money Market Fund for the
periods covered by the bar chart above are listed below:
<TABLE>
<CAPTION>
Highest Quarterly Lowest Quarterly
Return: 1st Qtr. '95 Return: 1st Qtr. '94
<S> <C>
1.42% 0.73%
</TABLE>
BARCLAYS GLOBAL INVESTORS FUNDS, INC.

4
<PAGE>

-------------------
Defining Terms

The Fund's
seven-day yield,
also called the
current yield,
annualizes the
amount of income
the Fund
generates over a
seven-day period
by projecting
the amount for
an entire year.

<TABLE>
<CAPTION>
MONEY MARKET FUND AVERAGE ANNUAL TOTAL RETURNS (AS OF DECEMBER 31, 1999)
SINCE INCEPTION
(July 2,
ONE YEAR FIVE YEARS 1993)**
-------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market Fund 4.92% 5.24% 4.85%
-------------------------------------------------------------------------------------------
iMoneyNet, Inc.* 4.94% 5.34% 4.93%
</TABLE>

*The Institutional Money Market Fund is tracked against the iMoneyNet, Inc.'s
First Tier Institutional Taxable Money Market Fund Average. iMoneyNet, Inc. was
formerly IBC Financial Data, Inc.
**The iMoneyNet, Inc. Average is calculated from June 30, 1993.

To learn the Fund's current seven-day yield, call the Fund's Transfer Agent,
Investors Bank & Trust Co. (IBT), at 1 888 204 3956.

FUND BASICS

5
<PAGE>

Fees and Expenses

The table below describes the fees and expenses that you may pay if you buy and
hold Distributor Class shares in the Fund. The expenses are deducted from Fund
assets, which means you pay them indirectly.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<S> <C>
Management fees 0.10%
------------------------------------------------------------------------------
Rule 12b-1 fees 0.10%
------------------------------------------------------------------------------
Other expenses* 0.02%
------------------------------------------------------------------------------
Total annual Fund operating expenses** 0.22%
</TABLE>
*"Other expenses" are based on estimated amounts for the current fiscal year.
**Total annual Fund operating expenses in the above table and the following
example reflect the expenses of both the Fund and the Master Portfolio in which
it invests.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional Money Market Fund
(Distributor Class shares) $23 $71 $124 $280
</TABLE>
BARCLAYS GLOBAL INVESTORS FUNDS, INC.

6
<PAGE>

FUND DETAILS
Principal Investments
--------------------------------------------------------------------------------
Defining Terms:

Floating rate
and variable
rate debt
securities are
instruments with
interest rates
that are
adjusted either
on a schedule
or when an index
or
benchmark changes.

Corporate
obligations
include
unsecured debt
instruments,
such as
commercial paper
and corporate
notes, issued
by financial
institutions,
insurance companies
and
industrial corporations.

Repurchase
agreements
obligate a
person selling
US government or
other high-
quality
securities to
buy them back
within a
specified period
of time (usually
one week or
less) at an
agreed-upon
price.

Asset-backed
securities are
financial
instruments
collateralized
by one or more
types of assets,
including loans
and receivables.

The Institutional Money Market Fund invests in fixed rate, floating rate and
variable rate debt securities that meet the following requirements:

.They have remaining maturities of 397 days (about 13 months) or less.

.They are rated in the top two quality short-term categories, according to
credit rating agencies such as Moody's Investors Services or Standard & Poor's
Corp.

.The principal and interest of all securities in the Master Portfolio are
payable in US dollars.

/1/A detailed examination of the relationship of the Fund to its Master
Portfolio appears on page 14.
FUND DETAILS

7
<PAGE>

Management of the Fund

Investment Adviser

The Fund is a feeder fund that invests all of its assets in a Master Portfolio
with substantially identical investment objectives, strategies and policies.
Barclays Global Fund Advisors ("BGFA") provides investment guidance and policy
direction for the Master Portfolio. For its services to the Master Portfolio,
BGFA is entitled to receive an annual fee of 0.10% of the Master Portfolio's
average daily net assets.

Administrative Services

BGI and Stephens Inc., a full service broker/dealer, provide the following
services as the Institutional Money Market Fund's co-administrators:

.management of the Fund's non-investment operations

.preparation of reports for the Fund's Board of Directors

.preparation of required reports for the Securities and Exchange Commission and
state securities commissions

.preparation of proxy statements and shareholder reports

8
<PAGE>

Distribution Plan
We have adopted a Distribution Plan pursuant to Rule 12b-1 under the Investment
Company Act of 1940 for the Distributor Class shares of the Fund. This plan is
used to pay for distribution-related services, including ongoing compensation
to selling agents. The fees are paid out of the Fund's assets on an ongoing
basis. Over time, these fees will increase the cost of your investment and may
cost you more than paying other types of sales charges. The fees paid under the
plan are at an annual rate of 0.10% of the average daily net assets of the
Distributor Class shares of the Fund.
FUND DETAILS

9
<PAGE>

Shareholder Information
--------------------------------------------------------------------------------
Defining Terms

Investors Bank &
Trust is the
Fund's
custodian,
transfer agent
and dividend
disbursing
agent.

Additional shareholder information, including how to buy and sell shares of the
Fund is available free of charge by calling toll-free 1 888 204 3956.

Who is Eligible

To be eligible to purchase Institutional Money Market Fund shares, you must be
an institutional investor and invest a minimum initial investment amount for
the Distributor Class shares which is generally $10 million. Distributor Class
shares may be purchased through BGI or through third party distributors of the
Fund's Shares.

Contacting BGI Funds

Call the Fund's Transfer Agent, Investors Bank & Trust (IBT), at 1 888 204
3956, toll-free, Monday through Friday, 8am to 4pm Eastern time.

Buying Shares

You must submit your purchase order by the close of regular trading on the New
York Stock Exchange (normally 4pm Eastern time) to purchase shares at that
day's net asset value. Orders received after the close of regular trading on
the New York Stock Exchange will be executed on the next business day. IBT must
receive a completed application before it can open an account and receive wire
orders.
BARCLAYS GLOBAL INVESTORS FUNDS, INC.

10
<PAGE>

You should instruct your bank to wire funds as follows:

Important Notes:

It is important that you call the Fund before executing a large transaction. In
consideration of the interests of all shareholders, the Fund reserves the right
to reject any purchase orders or delay delivery of your redemption proceeds--up
to seven days--if the amount will disrupt the Fund's operation or performance.
Please contact IBT for further clarification.

Federal regulations require you to furnish a valid taxpayer identification
number when you open your account.

11
<PAGE>

--------------------------------------------------------------------------------
Defining Terms

Calculating the Fund's Share Price

IBT calculates the Fund's share price (also known as a Fund's net asset value)
in accordance with the standard formula for valuing mutual fund shares at the
close of regular trading (normally 4pm Eastern time) every day the New York
Stock Exchange is open. The formula calls for deducting all of the Fund's
liabilities from the total value of its assets--the market value of the
securities it holds, plus cash reserves--and dividing the result by the number
of shares outstanding. IBT uses the amortized cost method to account for any
premiums or discounts above or below the face value of the securities it buys.

The Fund seeks to maintain a constant price of $1 per share, although it can
offer no assurance that it will do so.

The price at which a purchase or redemption is made is based on the next
calculation of net asset value after the order is received in proper form.

Dividends and Distributions

The Fund declares dividends daily and pays them out to investors every month.
It distributes capital gains, if any, to the investors annually. Dividends and
distributions payable to you will be automatically reinvested in additional
shares of the Fund.

You begin earning dividends on your shares the day your purchase order
takes effect. You continue earning daily dividends on the shares up to but not
including the date you sell them.

Please Note:

.The Fund credits dividends earned on weekends and holidays to the preceding
business day.

.If you sell shares before the monthly dividend payment date, the Fund remits
to the investor any dividends declared but not yet paid to the investor on the
next dividend payment date.

.If you sell all shares before the monthly dividend payment date, the Fund
remits to the investor all dividends accrued with the sale proceeds.
BARCLAYS GLOBAL INVESTORS FUNDS, INC.

12
<PAGE>

Taxes

As with all mutual funds, you may be required to pay taxes on the Fund's net
income and capital gains through distribution of such income and gains by the
Fund to its shareholders. You will owe taxes even though your dividends and
distributions are reinvested in Fund shares.

Dividends and capital gain distributions usually create the following
tax liability:

<TABLE>
<CAPTION>
TRANSACTION TAX STATUS
<S> <C>
Income dividends Ordinary income
----------------------------------------------
Short-term capital gain
distributions Ordinary income
----------------------------------------------
Long-term capital gain
distributions Capital gain
</TABLE>

Dividends and distributions from the Fund paid to corporate shareholders will
not qualify for the dividends-received deduction generally available to
corporate taxpayers.

As long as the Fund maintains a $1.00 net asset value per share, your sales and
exchanges of Fund shares should not be taxable.

Please provide the correct Taxpayer Identification Number (TIN) and note if you
are subject to backup withholding. If the Internal Revenue Service (IRS)
notifies the Fund that the TIN provided is incorrect or that you are otherwise
subject to backup withholding, the Fund is required to withhold
FUND DETAILS

13
<PAGE>

31% as "backup withholding" on any payments made to you by the Fund, including
exchanges. Any amounts withheld can be applied against your federal income tax
liability.

In general, the Fund is also required to withhold 30% from dividends paid to
foreign shareholders.

Because each investor's tax circumstances are unique and because tax laws are
subject to change, we recommend that you consult your tax adviser about
your investment.

Master/Feeder Mutual Fund Structure

The Fund does not have its own investment adviser. Instead, the Fund invests
all of its assets in a separate mutual fund, called a Master Portfolio, that
has a substantially identical investment objective as the Fund. BGFA serves as
Investment Adviser to the Master Portfolio. The Master Portfolio may accept
investments from other feeder funds.

Feeder Fund Rights. Under the master/feeder structure, the Fund's Board of
Directors retains the right to withdraw the Fund's assets from the Master
Portfolio if it believes doing so is in the shareholders' best interests. If
the Fund's Board of Directors withdraws the Institutional Money Market Fund's
assets, it would then consider whether the Fund should hire its own investment
adviser, invest in another master portfolio or take other action.

Share Class. The Fund offers an additional share class with different expenses
and expected returns than those described here. Call IBT for additional
information, at 1 888 204 3956.
BARCLAYS GLOBAL INVESTORS FUNDS, INC.

14
<PAGE>

Financial Highlights

The table below provides a picture of the Institutional Money
Market Fund's Distributor Class shares' financial performance since
inception. The information selected reflects financial results for
a single Fund share. The total returns in the table represent the
rates of return that an investor would have earned or lost on an
investment in the Fund, assuming reinvestment of all dividends and
distributions. The information has been audited by KPMG LLP,
independent auditors, whose report, along with the Fund's financial
statements, is included in the Fund's annual report. You may obtain
copies of the annual report at no cost by calling 1 888 204 3956
toll-free, 8am to 5pm Eastern time, Monday through Friday.

<TABLE>
<CAPTION>
Period Ended
12/31/99(/1/)
--------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period $1.00
--------------------------------------------------------------------
Income from Investment Operations:
Net Investment Income 0.02
--------------------------------------------------------------------
Total from Investment Operations 0.02
--------------------------------------------------------------------
Less Distributions:
From Net Investment Income (0.02)
--------------------------------------------------------------------
Total Distributions (0.02)
--------------------------------------------------------------------
Net Asset Value, End of Period $1.00
--------------------------------------------------------------------
Total Return 2.22%
--------------------------------------------------------------------
Supplemental Data:
Net Assets, End of Period $5,062
--------------------------------------------------------------------
Ratios to Average Net Assets:(/2/)
Ratio of Expenses to Average Net Assets 0.09%
Ratios of Net Investment Income to Average Net Assets 2.95%
</TABLE>
(/1/)Fund commenced operations on August 1, 1999.
(/2/)These ratios are annualized and include expenses charged to
the corresponding Master Portfolio.
FUND DETAILS

15
<PAGE>

[This page intentionally left blank.]

BARCLAYS GLOBAL INVESTORS FUNDS, INC.

16
<PAGE>

<PAGE>

If you have any questions about the Fund or wish to obtain both the reports and
SAI free of charge, please call the Fund's toll-free number:

1 888 204 3956

Or you may write Barclays Global Investors Funds, Inc.:

c/o Investors Bank & Trust Co.
P.O. Box 9130
Mail Code MFD23
Boston, MA 02117-9130

You can also obtain this information through the Internet on the Securities and
Exchange Commission's Website:

http://www.sec.gov

The Securities and Exchange Commission will furnish hard copies of the
documents, upon payment of a duplicating fee, through the Public Reference
Section. Address your request to:

Public Reference Section of the SEC
Washington, D.C. 20549-6009

You can also review and copy the documents at the Securities and Exchange
Commission's Public Reference Room in Washington, D.C. Call the Commission at
1 800 SEC 0330 for further details.

Investment Company Act File No.:

811-7332
BARCLAYS GLOBAL INVESTORS FUNDS, INC.
<PAGE>

PROSPECTUS/JULY 1, 2000

Like shares of all mutual funds, these securities have not been approved or
disapproved by the Securities and Exchange Commission nor has the Securities
and Exchange Commission passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
2040
2030
2020
2010
Income
LifePath

LifePath

--------------------------------------------------------------------------------
LIFEPATH FUNDS
--------------------------------------------------------------------------------

The first mutual funds designed to provide comprehensive asset allocation
strategies that adjust over time for the individual investor

BARCLAYS GLOBAL INVESTORS FUNDS, INC.
<PAGE>

<PAGE>

Table of Contents
LIFEPATH BASICS

<TABLE>
<C> <S>
2 LifePath Overview

3 LifePath Investment Objectives

4 Principal Investment Strategies Common to All LifePath Funds

7 Principal Investment Strategies for Each LifePath Fund

8 Principal Risk Factors

12 Investment Returns

17 Fees and Expenses

LIFEPATH DETAILS

18 The LifePath Investment Mission

19 The LifePath Investment Model

21 Principal Investments

26 A Further Discussion of Risk

27 Management of the Funds

29 Shareholder Information

33 Financial Highlights
</TABLE>
<PAGE>

LIFEPATH BASICS

LifePath Overview

[LOGO OF AUTO ICON APPEARS HERE]
--------------------------------------------------------------------------------
Defining Terms

Your asset allocation, or investment mix, is the distribution of your
investments among broad classes of assets: stocks, bonds and money market
instruments.

The LifePath Funds/1/ offer investors comprehensive asset allocation investment
strategies tailored to the time when they expect to begin withdrawing assets.
Each Fund invests in a combination of stocks, bonds and short-term money market
instruments in proportions suggested by its own comprehensive asset allocation
strategy that gradually becomes more conservative as the year in the Fund's name
approaches, except for the LifePath Income Fund (formerly the LifePath 2000
Fund) that is already in its most conservative phase.

/1/Each LifePath Fund invests all of its assets in a separate mutual fund,
called a Master Portfolio, that has a substantially identical investment
objective as the Fund. For simplicity's sake, all discussion of investment
objectives, strategies and risks of a particular LifePath Fund refers also to
the objectives, strategies and risks of its Master Portfolio, unless otherwise
indicated. A detailed description of the relationship of the Funds to their
Master Portfolios appears on page 31.

2 BARCLAYS GLOBAL INVESTORS FUNDS, INC.
<PAGE>

LifePath Investment Objectives
--------------------------------------------------------------------------------
Defining Terms

Quantitatively measured risk gauges both the frequency and degree to which an
asset class will perform below the long-term expected average.

An investment's time horizon marks the point when investors plan to start making
net withdrawals. As a general rule, investors with a longer time horizon have a
greater tolerance for risk than investors with a shorter time horizon. Long-term
investors are more likely to accept a greater risk of short-term loss for the
opportunity of achieving greater long-term gains.

Each Fund seeks to maximize assets for retirement or other purposes, consistent
with the quantitatively measured risk that investors on average may be willing
to accept given their investment time horizon. Each Fund has its own time
horizon which affects the acceptable risk level of the Fund and, in turn, its
asset allocation.

Specifically:

LifePath Income Fund is managed for investors planning to retire (or begin to
withdraw substantial portions of their investment) in the near future.

LifePath 2010 Fund is managed for investors planning to retire (or begin to
withdraw substantial portions of their investment) approximately in the year
2010.

LifePath 2020 Fund is managed for investors planning to retire (or begin to
withdraw substantial portions of their investment) approximately in the year
2020.

LifePath 2030 Fund is managed for investors planning to retire (or begin to
withdraw substantial portions of their investment) approximately in the year
2030.

LifePath 2040 Fund is managed for investors planning to retire (or begin to
withdraw substantial portions of their investment) approximately in the year
2040.

LIFEPATH BASICS 3
<PAGE>

Principal Investment Strategies Common to All LifePath Funds

[LOGO OF MAP ICON APPEARS HERE]
--------------------------------------------------------------------------------
Defining Terms

Indexes are composed of groups of securities chosen to represent an entire stock
or bond market, or a major market segment. Indexes may include securities that
meet objective criteria, such as foreign, industry sector or company size.
Including a security in an index means merely that it has satisfied the
selection criteria. It implies no expectation about performance.

The LifePath Funds pursue a common strategy of allocating and reallocating
investments among stocks, bonds and money market instruments. The Funds with
longer time horizons invest more of their assets in stocks to provide a greater
opportunity for capital appreciation over the long-term. The Funds with shorter
time horizons invest more heavily in bonds and money market instruments to
reduce risk and price volatility. The Funds with shorter time horizons also have
lower expected returns than the Funds with longer time horizons.

The strategies go further, allocating assets among 16 indexes within investment
classes. Some of the indexes are well-known broad-based market indexes, such as
the S&P 500 Index of large company stocks. Others were specifically created by
Barclays Global Investors to reflect a particular market segment, such as the
smallest 5% of publicly traded companies. Some of these indexes consist of
intermediate- and long-term bonds, including investment grade, corporate debt
and government obligations. And some of these indexes include foreign
securities. The Funds also may invest in money market instruments. This broad

4 BARCLAYS GLOBAL INVESTORS FUNDS, INC.
<PAGE>

diversification is designed to produce the highest expected returns for a given
level of risk. Expected returns do not necessarily translate into
actual returns.

Asset Allocation Decisions

In buying securities for each Fund, Barclays Global Fund Advisors (BGFA), the
Funds' Investment Adviser, does not select individual companies. Instead, BGFA
uses an investment model that focuses on selecting a mix of indexes by
measuring their risk level and expected returns based on a proprietary set of
criteria that analyzes extensive financial and economic data (such as market
interest rates and inflation data), as well as risk correlation and expected
return statistics. The Funds then allocate a portion of their assets to money
market instruments and to each index appropriate for each individual Fund.
Where feasible, the Funds buy all the securities that comprise the index;
otherwise the Funds buy a representative sample of the securities. The Funds
seek to match the index's return as closely as possible. The Funds focus on the
selection of indexes or asset classes and do not try to avoid individual
underperforming securities investments nor do they try to pick individual
investments that might outperform the index.

This strategy stems from the belief that asset allocation decisions--for
example, choosing between stocks and bonds--matter more to overall investment
performance than individual security selection--which particular stock or bond
you choose.

Risk Tolerance

Two general rules of investing have shaped the Funds' strategies:

Higher investment returns usually go hand-in-hand with higher risk. Put another
way, the greater an investment's potential return, the greater its potential
loss. Historically, for example, stocks have out performed bonds, but the worst
year for stocks on record was much worse than the worst year for bonds.

The longer the investors' time horizon, the greater their risk tolerance; their
investments have more time to recoup potential losses.

LIFEPATH BASICS 5
<PAGE>

The LifePath Funds with longer time horizons take more risks. This assumption
of greater risks is linked with these Funds' pursuit of greater returns. As
each Fund approaches its time horizon, and its investors have less time to
recover from market declines, the Fund systematically reduces the level of
risk. This systematic shift toward more conservative investments is designed to
help stabilize the value of your LifePath investment as the time nears for you
to begin drawing on it.

BGFA's investment model does not limit the analysis to long-term expectations.
The Funds also take into account short-term market conditions. If conditions in
a market have increased risk levels of an investment class or index to a point
that its risk levels do not justify its expected returns, the Funds will not
allocate as much of their assets to it as they otherwise might. Additionally,
the Funds may reduce their allocation to an investment class or index, even
when risks have not increased, because its expected return has fallen. This
usually happens because prices have risen to the point that the potential for
further gains appears limited.

After a Fund Reaches Its Time Horizon

By the time a Fund reaches the decade identified by its name, it has reached
its least aggressive state in terms of building capital (the LifePath Income
Fund has already entered this state). This does not mean that it invests
exclusively in money market instruments. Rather, because BGFA believes that
most investors are still willing to take some risks in pursuing returns even
while drawing on their investments, the Fund continues to allocate a portion of
its assets to stocks and bonds, in addition to money market instruments. On
average, BGFA expects that about 20% of the Fund's assets will be invested in
stocks, with the rest in bonds and money market instruments.

6 BARCLAYS GLOBAL INVESTORS FUNDS, INC.
<PAGE>

Principal Investment Strategies for Each LifePath Fund

LifePath Income Fund is designed to maintain the lowest risk levels of all the
LifePath Funds. On average, BGFA expects that about 20% of this Fund's assets
will be invested in stocks, with the rest in bonds and money market
instruments. The LifePath Income Fund continues to allocate a portion of its
assets to stocks and bonds in addition to money market instruments, because we
believe that most investors are still willing to take some risks in pursuing
returns even while drawing on their investments.

LifePath 2010 Fund is designed to produce high total return for investors
expecting to begin withdrawing assets around the year 2010. The LifePath 2010
Fund currently holds about 45% of its assets in stocks, 49% of its assets in
bonds, and the rest of its assets in money market instruments. As the year 2010
approaches, the Fund will increasingly resemble the LifePath Income Fund.

LifePath 2020 Fund is designed to produce high total return for investors
expecting to begin withdrawing assets around the year 2020. The LifePath 2020
Fund currently holds about 67% of its assets in stocks, 29% of its assets in
bonds, and the rest of its assets in money market instruments. As the stated
time horizon approaches, the allocation will become less risky and have lower
expected returns.

LifePath 2030 Fund is designed to produce high total return for investors
expecting to begin withdrawing assets around the year 2030. The LifePath 2030
Fund currently holds about 83% of its assets in stocks, 15% of its assets in
bonds, and the rest of its assets in money market instruments. As the stated
time horizon approaches, the allocation will become less risky and have lower
expected returns.

LifePath 2040 Fund is designed to produce high total return for investors
expecting to begin withdrawing assets around the year 2040. The LifePath 2040
Fund currently holds about 99% of its assets in stocks, 1% of its assets in
bonds, and a small portion of its assets in money market instruments. As the
stated time horizon approaches, the allocation will become less risky and have
lower expected returns.

LIFEPATH BASICS 7
<PAGE>

Principal Risk Factors
[LOGO OF SPEEDING AUTO APPEARS HERE]

Each Fund has a different level of risk and the amount of risk is reflected in
its name. The Funds with shorter time horizons (LifePath Income and LifePath
2010, for instance) will tend to be less risky and have lower expected returns
than the Funds with longer time horizons (LifePath 2030 and LifePath 2040).

Each of the LifePath Funds presents each of the Risk Factors described below.
Depending on the LifePath Fund's time horizon, it presents these Risk Factors
to varying degrees. For example, to the extent a Fund emphasizes stocks, such
as the LifePath 2040 Fund, it presents a higher degree of Stock Investment
Risk. Conversely, to the extent a Fund emphasizes bonds, such as the LifePath
Income Fund, it presents a higher degree of Bond Investment Risk. The value of
your investment in a fund is based, in large part, on the price of the stocks
and bonds in which the fund invests.

Stock Investment Risk

The LifePath Funds are subject to the risks of stock investing. These include
both short-term and prolonged price declines. Mid- to small-cap stocks tend to
present greater risks than large-cap stocks because they are generally more
volatile and can be less liquid. Because the Funds do not select individual
companies within each index, the Funds may hold stocks in companies that
present risks that an investment adviser researching individual stocks might
seek to avoid.

8 BARCLAYS GLOBAL INVESTORS FUNDS, INC.

<PAGE>

--------------------------------------------------------------------------------
Defining Terms

Credit Risk is the risk that the borrowers that issued a bond may not repay
principal or interest when due.

Interest Rate Risk is the chance that bond prices will decline over short or
even long periods due to rising interest rates.

Mortgage-backed securities represent interests in a pool of loans secured by
mortgages, and the resulting cash flow is used to pay principal and interest on
the securities.

Bond Investment Risk

The bonds held by the Funds are subject to the risks of fixed income investing.
Although these risks include short-term and prolonged price declines, such
price declines in the bond market have historically been less severe than stock
declines. Because the Funds do not select individual bonds within each index,
the Funds may hold bonds that an investment adviser researching individual bond
issuers might seek to avoid.

Credit Risk. Bonds also face credit risk. US Treasury bonds have minimal credit
risk because they are backed by the US government's full faith and credit.
However, not all securities issued by government agencies are backed by the
government's full faith and credit. Additionally, corporate bonds are subject
to greater credit risk than US government bonds.

Interest Rate Risk. All bonds, including those issued by the government and its
agencies, are subject to interest rate risk. Their prices tend to move in the
opposite direction from market interest rate movements. When interest rates go
up, bond prices tend to fall; when rates fall, prices tend to rise. Bonds with
longer maturities are affected more by interest rate movements than bonds with
shorter maturities, bonds with interest rate reset provisions, notes or money
market instruments. Each Fund may also invest in mortgage-backed securities,
which are also subject to prepayment risk. The ability of an issuer of such a
security to repay principal prior to a security's maturity can cause duration
changes and greater price volatility in response to interest rate changes.

Risks of Foreign Investment

The Funds invest in foreign securities, including emerging market investments,
which are subject to additional risks. Foreign securities often trade on
markets that have less reliable information available and lower transaction
volumes than markets in the United States. Foreign stock and bond prices can be
more volatile as a result of these and other factors. Investing in foreign
markets can also be more expensive due to currency exchange costs, foreign
withholding and other taxes, higher commissions on trades and higher custodial
fees. Currencies may weaken relative to the US dollar, eroding the dollar value
of investments denominated in foreign currencies.

LIFEPATH BASICS 9
<PAGE>

Model Risk

Although the model used to manage the Funds' assets has been developed and
refined over many years, neither the Funds nor BGFA can offer any assurance
that the recommended allocation will either maximize returns or minimize risks.
Nor can the Funds or BGFA offer assurance that a recommended allocation will
prove the ideal allocation in all circumstances for every investor with a
particular time horizon.

LifePath Fund investments are not bank deposits or obligations of BGFA or BGI.
They are not guaranteed or endorsed by the Federal Deposit Insurance
Corporation or any other government agency.

Differences Among Funds

The LifePath Income and the LifePath 2010 Funds are currently subject to the
highest levels of Bond Investment Risk of all of the LifePath Funds. The
LifePath 2020 Fund is currently subject to a significant level of Bond
Investment Risk, but less than the LifePath Income and LifePath 2010 Funds. The
LifePath 2030 and the LifePath 2040 Funds currently have the lowest levels of
Bond Investment Risk, although they are not free of such risk altogether.

The LifePath 2040, LifePath 2030 and the LifePath 2020 Funds, in descending
order, are subject to the highest levels of Stock Investment Risk and Foreign
Investment Risk. The LifePath 2010 Fund also currently has a significant level
of Stock Investment Risk and Foreign Investment Risk, but less than the
LifePath 2040, LifePath 2030 and the LifePath 2020 Funds. The
LifePath Income Fund currently has the lowest level of Stock Investment Risk
and Foreign Investment Risk, although it is not free of such risks altogether.

All of the Funds are subject to Model Risk and the additional risks described
below under A Further Discussion of Risk and in the Funds' Statement of
Additional Information (SAI).

10 BARCLAYS GLOBAL INVESTORS FUNDS, INC.

<PAGE>

Who May Want to Invest in LifePath Funds

Which Fund to Consider

In making your investment decision, you should keep in mind:

each Fund's investment strategy derives from the risk tolerance of average
investors with a particular time horizon

the Fund's time horizon is based on the year in its name, except for the
LifePath Income Fund that is designed for investors with short-term time
horizons.

Based strictly on statistical considerations, you would want to invest in the
LifePath Fund corresponding to the year when you expect to begin withdrawing
your investment (2010, 2020, etc.). But statistical considerations alone may
not govern your investment decision, and the five LifePath Funds allow for
that, too. If you are willing to assume greater risk in exchange for the
possibility of higher returns, you might direct some or all of your assets to a
LifePath Fund with a longer time horizon. If you desire a more conservative
investment, and are willing to forego some potential returns, you might direct
some or all of your assets to a LifePath Fund with a shorter time horizon. The
final choice is yours.

LIFEPATH BASICS 11
<PAGE>

Investment Returns

Total Returns

The bar charts and tables in this section provide some indication of the risks
of investing in the Funds by showing the changes in their performance from year
to year. The bar charts show the returns for each Fund for each full calendar
year since inception. The average annual total return tables compare each
Fund's average annual total return with the return of a corresponding index for
one and five years and since inception. The performance information shown in
both the bar charts and tables for periods before March 26, 1996 (the date the
Barclays Global Investors Funds' LifePath Funds commenced operations) shows the
performance of the Institutional Class shares of the predecessor funds*. The
LifePath Funds are successors to the assets of the predecessor funds. The
predecessor funds commenced operations on March 1, 1994, invested in the
LifePath Master Portfolios and had the same investment objectives, strategies,
risks considerations, fee levels, annual fund operating expenses, policies and
investment techniques as the Funds.

How the Funds and the predecessor funds performed in the past is not an
indication of how the LifePath Funds will perform in the future.

*The predecessor funds were the Stagecoach Trust LifePath Funds, which are now
known as the Wells Fargo Funds Trust LifePath Funds.

12 BARCLAYS GLOBAL INVESTORS FUNDS, INC.

<PAGE>

[LifePath Income Bar Chart Appears Here]
<TABLE>
<S> <C>
FYE 1995 17.38%
FYE 1996 6.33%
FYE 1997 10.71%
FYE 1998 10.49%
FYE 1999 4.85%
</TABLE>

The LifePath Income Fund's year-to-date return as of March 31, 2000 was 1.64%.
The highest and lowest quarterly returns for the LifePath Income Fund for the
calendar years above are listed below:

<TABLE>
<CAPTION>
Highest Quarterly Lowest Quarterly
Return: 2nd Qtr '97 Return: 3rd Qtr '99
<S> <C>
5.54% --0.38%
</TABLE>

[LifePath 2010 Bar Chart Appears Here]
<TABLE>
<S> <C>
FYE 1995 23.98%
FYE 1996 10.74%
FYE 1997 16.60%
FYE 1998 16.04%
FYE 1999 9.48%
</TABLE>

The LifePath 2010 Fund's year-to-date return as of March 31, 2000 was 1.85%.
The highest and lowest quarterly returns for the LifePath 2010 Fund for the
calendar years above are listed below:

<TABLE>
<CAPTION>
Highest Quarterly Lowest Quarterly
Return: 4th Qtr '98 Return: 3rd Qtr '98
<S> <C>
10.12% --3.50%
</TABLE>

LIFEPATH BASICS 13
<PAGE>

[LifePath 2020 Bar Chart Appears Here]
<TABLE>
<S> <C>
FYE 1995 27.50%
FYE 1996 13.57%
FYE 1997 21.21%
FYE 1998 19.97%
FYE 1999 14.12%
</TABLE>

The LifePath 2020 Fund's year-to-date return as of March 31, 2000 was 2.16%.
The highest and lowest quarterly returns for the LifePath 2020 Fund for the
calendar years above are listed below:

<TABLE>
<CAPTION>
Highest Quarterly Lowest Quarterly
Return: 4th Qtr '98 Return: 3rd Qtr '98
<S> <C>
14.61% --6.70%
</TABLE>

[LifePath 2030 Bar Chart Appears Here]

The LifePath 2030 Fund's year-to-date return as of March 31, 2000 was 2.65%.
The highest and lowest quarterly returns for the LifePath 2030 Fund for the
calendar years above are listed below:

<TABLE>
<CAPTION>
Highest Quarterly Lowest Quarterly
Return: 4th Qtr '98 Return: 3rd Qtr '98
<S> <C>
18.02% --9.15%
</TABLE>

14 BARCLAYS GLOBAL INVESTORS FUNDS, INC.

<PAGE>

[LifePath 2040 Bar Chart Appears Here]
<TABLE>
<S> <C>
FYE 1995 32.54%
FYE 1996 18.65%
FYE 1997 26.85%
FYE 1998 25.58%
FYE 1999 21.38%
</TABLE>

The LifePath 2040 Fund's year-to-date return as of March 31, 2000 was 2.58%.
The highest and lowest quarterly returns for the LifePath 2040 Fund for the
calendar years above are listed below:

<TABLE>
<CAPTION>
Highest Quarterly Lowest Quarterly
Return: 4th Qtr '98 Return: 3rd Qtr '98
<S> <C>
21.72% --11.61%
</TABLE>

<TABLE>
<CAPTION>
-------------------------------------------------------------------------
LIFEPATH INCOME AVERAGE ANNUAL TOTAL RETURNS (AS OF DECEMBER 31, 1999)
-------------------------------------------------------------------------
SINCE INCEPTION
ONE YEAR FIVE YEAR (MARCH 1, 1994)*
-------------------------------------------------------------------------
<S> <C> <C> <C>
LifePath Income 4.85% 9.86% 8.06%
-------------------------------------------------------------------------
Lehman Brothers
Aggregate Index --0.82% 7.73% 6.23%
-------------------------------------------------------------------------
LifePath Income
Benchmark** 5.15% 11.38% 9.45%
-------------------------------------------------------------------------
</TABLE>

* The "since inception" date refers to the inception date of the predecessor
fund. This column combines the performance of the predecessor fund since
inception with the performance of the Fund since its inception date (i.e.,
the commencement of its operations on 3/26/96).
** The LifePath Income Benchmark represents a custom mix of the Lehman Brothers
Aggregate Index, MSCI EAFE Index, BGI's US Equity Market Fund Index and US
Treasury Bills.

<TABLE>
<CAPTION>
-------------------------------------------------------------------------
LIFEPATH 2010 AVERAGE ANNUAL TOTAL RETURNS (AS OF DECEMBER 31, 1999)
-------------------------------------------------------------------------
SINCE INCEPTION
ONE YEAR FIVE YEAR (MARCH 1, 1994)*
-------------------------------------------------------------------------
<S> <C> <C> <C>
LifePath 2010 9.48% 15.25% 12.63%
-------------------------------------------------------------------------
Lehman Brothers
Aggregate Index --0.82% 7.73% 6.23%
-------------------------------------------------------------------------
Wilshire 5000
Index 23.56% 27.06% 22.59%
-------------------------------------------------------------------------
LifePath 2010
Benchmark** 8.93% 14.10% 11.76%
-------------------------------------------------------------------------
</TABLE>

* The "since inception" date refers to the inception date of the predecessor
fund. This column combines the performance of the predecessor fund since
inception with the performance of the Fund since its inception date (i.e.,
the commencement of its operations on 3/26/96).
** The LifePath 2010 Benchmark represents a custom mix of the Lehman Brothers
Aggregate Index, MSCI EAFE Index, BGI's US Equity Market Fund Index and US
Treasury Bills.

LIFEPATH BASICS 15
<PAGE>

<TABLE>
<CAPTION>
-------------------------------------------------------------------------
LIFEPATH 2020 AVERAGE ANNUAL TOTAL RETURNS (AS OF DECEMBER 31, 1999)
-------------------------------------------------------------------------
SINCE INCEPTION
ONE YEAR FIVE YEAR (MARCH 1, 1994)*
-------------------------------------------------------------------------
<S> <C> <C> <C>
LifePath 2020 14.12% 19.15% 15.95%
-------------------------------------------------------------------------
Lehman Brothers
Aggregate Index --0.82% 7.73% 6.23%
-------------------------------------------------------------------------
Wilshire 5000
Index 23.56% 27.06% 22.59%
-------------------------------------------------------------------------
LifePath 2020
Benchmark** 12.79% 16.84% 14.07%
-------------------------------------------------------------------------
</TABLE>

* The "since inception" date refers to the inception date of the predecessor
fund. This column combines the performance of the predecessor fund since
inception with the performance of the Fund since its inception date (i.e., the
commencement of its operations on 3/26/96).
**The LifePath 2020 Benchmark represents a custom mix of the Lehman Brothers
Aggregate Index, MSCI EAFE Index, BGI's US Equity Market Fund Index and US
Treasury Bills.

<TABLE>
<CAPTION>
-------------------------------------------------------------------------
LIFEPATH 2030 AVERAGE ANNUAL TOTAL RETURNS (AS OF DECEMBER 31, 1999)
-------------------------------------------------------------------------
SINCE INCEPTION
ONE YEAR FIVE YEAR (MARCH 1, 1994)*
-------------------------------------------------------------------------
<S> <C> <C> <C>
LifePath 2030 16.85% 22.03% 18.31%
-------------------------------------------------------------------------
Lehman Brothers
Aggregate Index --0.82% 7.73% 6.23%
-------------------------------------------------------------------------
Wilshire 5000
Index 23.56% 27.06% 22.59%
-------------------------------------------------------------------------
LifePath 2030
Benchmark** 16.72% 19.56% 16.36%
-------------------------------------------------------------------------
</TABLE>

* The "since inception" date refers to the inception date of the predecessor
fund. This column combines the performance of the predecessor fund since
inception with the performance of the Fund since its inception date (i.e., the
commencement of its operations on 3/26/96).
**The LifePath 2030 Benchmark represents a custom mix of the Lehman Brothers
Aggregate Index, MSCI EAFE Index, BGI's US Equity Market Fund Index and US
Treasury Bills.

<TABLE>
<CAPTION>
-------------------------------------------------------------------------
LIFEPATH 2040 AVERAGE ANNUAL TOTAL RETURNS (AS OF DECEMBER 31, 1999)
-------------------------------------------------------------------------
SINCE INCEPTION
ONE YEAR FIVE YEAR (MARCH 1, 1994)*
-------------------------------------------------------------------------
<S> <C> <C> <C>
LifePath 2040 21.38% 24.89% 20.90%
-------------------------------------------------------------------------
Wilshire 5000
Index 23.56% 27.06% 22.59%
-------------------------------------------------------------------------
LifePath 2040
Benchmark** 20.75% 22.30% 18.66%
-------------------------------------------------------------------------
</TABLE>

* The "since inception" date refers to the inception date of the predecessor
fund. This column combines the performance of the predecessor fund since
inception with the performance of the Fund since its inception date (i.e., the
commencement of its operations on 3/26/96).
**The LifePath 2040 Benchmark represents a custom mix of the Lehman Brothers
Aggregate Index, MSCI EAFE Index, BGI's US Equity Market Fund Index and US
Treasury Bills.

16 BARCLAYS GLOBAL INVESTORS FUNDS, INC.

<PAGE>

Fees and Expenses

The table below describes the fees and expenses that you may pay if you buy and
hold LifePath Fund shares. The expenses are deducted from Fund assets, which
means you pay them indirectly.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
LIFEPATH FUNDS ANNUAL OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
--------------------------------------------------------------------------------------
LifePath LifePath LifePath LifePath LifePath
Income 2010 2020 2030 2040
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Management Fees 0.55% 0.55% 0.55% 0.55% 0.55%
--------------------------------------------------------------------------------------
Other Expenses 0.40% 0.40% 0.40% 0.40% 0.40%
--------------------------------------------------------------------------------------
Total Annual
Fund Operating
Expenses* 0.95% 0.95% 0.95% 0.95% 0.95%
--------------------------------------------------------------------------------------
</TABLE>
*Information on total annual fund operating expenses in the above table and the
following example reflects the expenses of both the Funds and the Master
Portfolios in which they invest.

Example

The example below is intended to help you compare the Funds' costs with those
of other mutual funds. The example illustrates the costs you would have
incurred on an initial $10,000 investment in the LifePath Funds over the time
periods shown. It assumes your investment earns an annual return of 5% over the
periods and that the Funds' operating expenses remain the same.

The Funds do not charge a sales load or other fee upon redemption. This means
that your expenses for each period would be the same whether or not you sell
your shares at the end of a period. Your actual costs may be higher or lower
than this hypothetical example.

<TABLE>
<CAPTION>
------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------------------------------------------------
<S> <C> <C> <C> <C>
LifePath Income $97 $303 $525 $1,166
------------------------------------------------------------------
LifePath 2010 $97 $303 $525 $1,166
------------------------------------------------------------------
LifePath 2020 $97 $303 $525 $1,166
------------------------------------------------------------------
LifePath 2030 $97 $303 $525 $1,166
------------------------------------------------------------------
LifePath 2040 $97 $303 $525 $1,166
------------------------------------------------------------------
</TABLE>

LIFEPATH BASICS 17
<PAGE>

LIFEPATH DETAILS

The LifePath Investment Mission

With their comprehensive and methodical allocation strategies, the LifePath
Funds can serve as the core of an investor's portfolio.

The Funds seek to maximize assets for retirement or other purposes consistent
with the quantitatively measured risk that investors, on average, may be
willing to accept given their investment time horizons. The Funds (other than
the LifePath Income Fund) attempt to manage the investment risk in each
strategy for investors whose time horizons correspond to the decade in the
Fund's name. For example, LifePath 2010 is designed for investors who plan to
begin withdrawing a substantial portion of their investment in the decade
beginning in the year 2010. Similarly, LifePath 2040 is designed for investors
who plan to begin withdrawing a substantial portion of their investment in the
decade beginning in the year 2040. The LifePath Income Fund is designed for
investors who plan to begin withdrawing a substantial portion of their
investment in this decade.

18 BARCLAYS GLOBAL INVESTORS FUNDS, INC.

<PAGE>

The LifePath Investment Model
--------------------------------------------------------------------------------
Defining Terms

BGFA, a subsidiary of Barclays Global Investors, N.A. (BGI), serves as the
Master Portfolios' Investment Adviser. BGFA makes the day-to-day decisions on
buying and selling securities for the Funds and BGI conducts the research
leading to those decisions. BGI manages over $782 billion in assets and is the
world's largest asset manager for institutions such as major endowments and
corporate and government pension plans. BGI pioneered research in asset
allocation, indexed investing and investment modeling.

Each LifePath Fund seeks to achieve its objective through an investment strategy
that relies on one of BGFA's proprietary investment models. The model, developed
in the early 1990s and continuously refined, combines:

comprehensive data on the returns of the world's equity and bond markets

the statistical risk of losses in each of these markets

information on how these risks correlate: whether, for example, the cyclical
ups and downs in one market, such as bonds, tend to moderate or amplify the
cyclical ups and downs in another, such as stocks of large US companies

The model sets the Funds' strategic allocation targets. From an extensive
database, it calculates the expected return over time for a range of asset
allocations. Then the model selects the allocation, or investment mix, with the
highest expected return for a statistically determined risk of loss.

A Fund's allocation may shift significantly in response to changing market
conditions-since the Funds' investment approach allows the Funds to adjust the
strategic allocation according to short-term investment considerations.

Long-term strategic considerations generally account for about 75% of a
LifePath Fund's asset allocation, and the short-term outlook accounts for about
25%.

LIFEPATH DETAILS 19
<PAGE>

How It Works: Spending Your "Risk Budget" Wisely

One way to understand how the LifePath Funds adjust their asset allocation is
to regard the statistically determined risk in each Fund as its "risk budget."
Each Fund's analysis of investor needs begins with a statistical determination
of how much its investors, on average, can afford to lose. This tolerance for
loss can be viewed as the Fund's risk budget.

Different investment allocations can have the same risk of loss but with
different expected returns. BGFA seeks the Fund allocations that offer the
highest expected return while keeping within a Fund's statistically determined
risk of loss. In other words, the Funds seek the highest expected return in
exchange for the various levels of risk most investors that share the Funds'
time horizons are willing to take.

Remember, expected returns are not guaranteed returns. They are average
projections based on comprehensive research and accepted principles of market
behavior. Likewise, statistically determined risk covers the most likely
scenarios, but it does not cover all possible losses.

20 BARCLAYS GLOBAL INVESTORS FUNDS, INC.

<PAGE>

Principal Investments

LifePath Asset Weightings (as of February 29, 2000)

The charts below illustrate the actual asset allocation as of the fiscal year-
end 2000 for each LifePath Fund.

LifePath Income LifePath 2010

[2000 PIE CHART APPEARS HERE] [2010 PIE CHART APPEARS HERE]

LifePath 2020 LifePath 2030

[2020 PIE CHART APPEARS HERE] [2030 PIE CHART APPEARS HERE]

LifePath 2040

[2040 PIE CHART APPEARS HERE]

LIFEPATH DETAILS 21
<PAGE>

The LifePath Funds invest in the following widely recognized asset classes:

money market instruments

bonds

stocks, including:

stocks of the largest US companies

stocks of all other publicly traded US corporations

stocks of issuers located outside the US

Within stocks and bonds are sub-categories of securities:

US stocks can be separated according to the value of their outstanding stock
(or capitalization), into large-cap, mid-cap and small-cap groupings.

Each of the stock capitalization categories can be separated according to their
price-to-book ratios: the ratio of the value of a company's traded stock to the
book value of its plant, equipment and other tangible assets. The companies with
the higher price-to-book ratios are considered growth stocks, and the companies
with the lower price-to-book ratios are value stocks.

Utilities-closely regulated power generating companies-are generally mid-size,
but their performance differs enough from other mid-cap stocks to warrant a
distinct grouping.

Micro-cap stocks-the smallest 5% of publicly traded companies-also constitute
their own grouping apart from the rest of the small-cap universe.

US government bonds, bonds issued by corporations, mortgage-backed securities
and foreign bonds form four separate sub-categories of bond investments. The
first two sub-categories are further subdivided by maturity: long-term and
intermediate-term.

22 BARCLAYS GLOBAL INVESTORS FUNDS, INC.

<PAGE>

--------------------------------------------------------------------------------
Defining Terms

Investment-grade bonds rank in the four highest categories, according to the
statistical criteria established by rating services such as Moody's Investors
Services and Standard & Poor's Corp. to determine a bond's credit-worthiness and
a bond issuer's financial strength.

Maturity measures the number of years from the time a borrower issues a bond to
the date when the borrower must fully repay the loan, interest included.

Model-Driven Decisions

The Funds' assets are allocated across investment classes and indexes according
to a sophisticated mathematical model that was developed in the early 1990s and
is continually refined. BGFA's investment professionals conduct ongoing
research to enhance the model and to ensure it is keeping pace with the world's
constantly changing financial markets. Using this model, BGFA relies on a
consistent and objective structure for making investment decisions. Unlike
traditional investment funds that employ individual portfolio managers who make
decisions on a more subjective basis, BGFA applies a scientific approach to
investing through the use of the model.

Indexes

Conventional asset allocation strategies target only the three broadest asset
classes--money market investments, bonds and stocks. Comprehensive asset
allocation strategies distribute investments methodically among the full range
of asset classes. The charts below list the indexes adopted or constructed to
track the performance of each of the asset classes in which the LifePath Funds
may invest.

<TABLE>
<CAPTION>
-------------------------------------------------------------
INVESTMENT-GRADE BOND MARKET INDEXES
-------------------------------------------------------------
SUB-CATEGORY MATURITY RANGE INDEX PROVIDER
-------------------------------------------------------------
<S> <C> <C>
Long-term government 10 years or more Lehman Brothers*
-------------------------------------------------------------
Intermediate-term More than 1 Lehman Brothers
government year/
less than 10
years
-------------------------------------------------------------
Long-term corporate 10 years or more Lehman Brothers
-------------------------------------------------------------
Intermediate-term More than 1 Lehman Brothers
corporate year/
less than 10
years
-------------------------------------------------------------
Mortgage-backed** More than 1 year Lehman Brothers
-------------------------------------------------------------
Non-US world government One year or more Salomon Smith
Barney*
-------------------------------------------------------------
</TABLE>
* Lehman Brothers, Inc. and Salomon Smith Barney do not sponsor the LifePath
Funds or their Master Portfolios, nor are they affiliated in any way with BGI
or BGFA.
**All fixed-coupon mortgage pass-throughs issued or guaranteed by the Federal
National Mortgage Association, the Government National Mortgage Association
and the Federal Home Loan Mortgage Corporation.

LIFEPATH DETAILS 23
<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
STOCK MARKET INDEXES
------------------------------------------------------------------------------------
CAPITALIZATION GROWTH/VALUE STOCK MARKET INDEX PROVIDER
------------------------------------------------------------------------------------
<S> <C> <C> <C>
Large Value United States S&P/BARRA*
------------------------------------------------------------------------------------
Large Growth United States S&P/BARRA
------------------------------------------------------------------------------------
Large Both Major world markets, Morgan Stanley
excluding Japan Capital International**
------------------------------------------------------------------------------------
Large Both Japan Morgan Stanley
Capital International
------------------------------------------------------------------------------------
Medium Value United States BGI
------------------------------------------------------------------------------------
Medium Growth United States BGI
------------------------------------------------------------------------------------
Medium Electrical power and United States BGI
utility companies
------------------------------------------------------------------------------------
Small Value United States BGI
------------------------------------------------------------------------------------
Small Growth United States BGI
------------------------------------------------------------------------------------
Smallest 5% Both United States BGI
------------------------------------------------------------------------------------
</TABLE>
* BARRA does not sponsor the LifePath Funds or their Master Portfolios, nor are
they affiliated in any way with BGFA.
**Morgan Stanley Capital International does not sponsor the LifePath Funds or
their Master Portfolios, nor are they affiliated in any way with BGFA.

The LifePath Funds may not invest in the constituent securities or asset
categories of every available index. In fact, until a LifePath Fund's Master
Portfolio has reached a net asset level of $100 million to $150 million, it is
unlikely to invest in all the asset classes. More importantly, every asset
category may not be appropriate for every Fund. Some may be too volatile for
the LifePath Funds with relatively short time horizons. Others may not offer
enough expected return for the LifePath Funds with relatively distant time
horizons.

Optimizing the Funds' Investments

In the case of some asset categories, most notably US large-capitalization
growth and value stocks, the LifePath Funds can own every stock listed in the
index. Many of the other indexes consist of thousands of securities. As a
practical matter, the Funds do not hold them all. Instead, the Funds employ a
technique known as optimization. The Funds select a group of securities whose
diversity, fundamental characteristics and typical risks and returns will
closely match the index as a whole. Including a particular security in one of
the LifePath Funds in no way implies an opinion as to its attractiveness as an
investment on its own.

24 BARCLAYS GLOBAL INVESTORS FUNDS, INC.

<PAGE>

--------------------------------------------------------------------------------
Defining Terms

Depositary Receipts are receipts for shares of foreign stocks held on deposit in
US banks or banks of major European countries. The receipts trade on the US or
local European stock markets as would normal stocks, entitling their owners to
the dividends and capital gains earned by the real shares stored in bank vaults.

Index futures contracts are standardized agreements between two parties that
commit one party to sell and the other to buy a stipulated quantity of a market
index at a set price on or before a given date in the future. The seller never
actually delivers "shares" of the index or shares of all the stocks in the
index. Instead, the buyer and the seller settle the difference between the
contract price and the market price in cash on the agreed-upon date--the buyer
paying the difference if the actual price is lower than the contract price and
the seller paying the difference if the actual price is higher.

Repurchase agreements obligate a person selling US government or other high-
quality securities to buy them back within a specified period of time (usually
one week or less) at an agreed-upon price.

For reasons related to optimization, the Funds also may invest in securities
not included in any of the indexes. They may, for instance, invest in American
and Global Depositary Receipts to gain exposure to foreign stock markets. They
may also invest in index futures contracts. These tactics can permit the Funds
to avoid some of the costs associated with direct investing. Investing in index
future contracts also allows the Funds to more closely match the returns of a
fully invested portfolio while keeping enough liquidity to meet the Funds'
anticipated cash needs.

The Funds' Money Market Investments

The Funds' money market investments consist of high-quality short-term debt
obligations selected for their credit quality and ability to maintain value.
They all must have remaining maturities of 397 days (about 13 months) or less.
The Funds will hold money market instruments that have anaverage-weighted
maturity of 90 days or less. They include:

US government debt securities

foreign and domestic bank obligations

corporate borrowings

repurchase agreements

LIFEPATH DETAILS 25
<PAGE>

A Further Discussion of Risk

Besides the general risks described above under Principal Risk Factors, the
LifePath Funds are subject to additional specific risks.

Derivatives

A derivative is a financial contract whose value, or return, depends on, or is
derived from, the value of an underlying asset such as a security or index.
Index futures contracts are considered derivatives because they derive their
value from the prices of the indexes. The floating rate or variable rate bonds
and mortgage-backed securities that the Funds may purchase are also considered
derivatives. Compared to conventional securities, derivatives can be more
sensitive to changes in market interest rates or to sudden fluctuations in
market prices.

For a further discussion of LifePath Fund risks, please refer to the Funds'
SAI. The SAI is incorporated by reference in this prospectus and is
available free of charge from your shareholder servicing agent or by
calling 1 888 204 3956.

26 BARCLAYS GLOBAL INVESTORS FUNDS, INC.

<PAGE>

Management of the Funds

Investment Adviser

The LifePath Funds are feeder funds that invest all of their assets in
similarly named Master Portfolios with substantially identical investment
objectives, strategies and policies. BGFA provides investment guidance and
policy direction for each of the Master Portfolios. For its services to the
Master Portfolios, BGFA is entitled to receive an annual fee of 0.55% of each
Master Portfolio's average daily net assets.

Unlike many traditional actively managed funds, there is no single portfolio
manager who makes investment decisions for the LifePath Funds. Instead, a team
of investment professionals evaluates recommendations made by BGFA's
proprietary mathematical model. This process reflects BGFA's commitment to an
objective and consistent investment management structure.

LIFEPATH DETAILS 27
<PAGE>

Administrative Services

The Funds' co-administrators, BGI and Stephens Inc., a full service
broker/dealer, provide services related to:

management of the Funds' non-investment operations

preparation of reports for each Fund's Board of Directors

preparation of reports required by the Securities and Exchange Commission and
state securities commissions

preparation of proxy statements and shareholder reports

BGI and Stephens are entitled to receive a combined annual fee of 0.40% of each
Fund's average daily net assets. In return for this fee, BGI and Stephens have
agreed to absorb all expenses of each Fund and Master Portfolio other than the
investment advisory fee, extraordinary expenses, brokerage and other expenses
connected to the execution of portfolio transactions and certain expenses which
are borne by the Funds.

28 BARCLAYS GLOBAL INVESTORS FUNDS, INC.

<PAGE>

Shareholder Information
--------------------------------------------------------------------------------
Defining Terms

The LifePath Funds have appointed shareholder servicing agents to service
individual LifePath Fund accounts. In addition to buying and selling Fund shares
on behalf of eligible investors, shareholder servicing agents may answer
shareholder inquiries, keep records, and provide reports on the status of
individual accounts. The LifePath Funds do not charge extra for these services,
but compensate shareholder servicing agents as part of their operating expenses.

Investors Bank & Trust Company is the Funds' custodian, transfer agent and
dividend disbursing agent.

The amortized cost method marks down any premium, or marks up any discount,
onshort-term debt that the Funds buy at a constant rate until maturity. It does
not reflect daily fluctuations in market value.

Additional shareholder information, including how to buy and sell shares of a
Fund, is available free of charge by calling toll-free 1 888 204 3956.

Who is Eligible

The LifePath Funds are designed, in part, as vehicles for retirement savings.
To be eligible to purchase LifePath shares, you must:

invest through an employer-sponsored or individual retirement savings plan

invest the proceeds "rolled over" from such a plan into an Individual Retirement
Account

maintain an account with one of the shareholder servicing agents authorized to
sell and service LifePath shares, or

.invest a minimum of $1 million directly through BGI.

Calculating the Funds' Share Price

Investors Bank & Trust Company (IBT) calculates each Fund's share price (also
known as a Fund's net asset value) in accordance with the standard formula for
valuing mutual fund shares at the close of regular trading (normally 4pm
Eastern time) every day the New York Stock Exchange is open. The formula calls
for deducting all of a Fund's liabilities from the total value of its assets--
the market value of the securities it holds, plus cash reserves-and dividing
the result by the number of shares outstanding. IBT values most of the
securities in the Funds at their current market prices. If such prices are not
readily available, IBT uses an estimate of the securities' fair value in
accordance with guidelines approved by the Master Portfolios' Board of
Trustees. Debt securities maturing in 60 days or less are valued according to
the amortized cost method.

LIFEPATH DETAILS 29
<PAGE>

Prices for securities that trade on foreign exchanges can fluctuate when the
New York Stock Exchange is closed and you cannot buy or sell Fund shares. Such
price fluctuations may ultimately affect the price of Fund shares when
the Fund's shares are next priced.

The price which a purchase or redemption is made is based on the next
calculation of net asset value after the order is received in proper form. An
exchange of a Fund's shares for shares of another BGI Fund will be treated as a
sale of the Fund's shares and any gain on the transaction may be subject to
federal income tax.

Dividends and Distributions

The Funds pay out dividends of net investment income to investors every
quarter. The Funds distribute capital gains, if any, to shareholders annually.
Dividends and distributions payable to you will be automatically reinvested in
additional shares of your Fund, unless you request payment in cash.

Taxes

As with all mutual funds, you may be required to pay taxes on the Funds' net
investment income and capital gains through distribution of such income and
gains by the Funds to their shareholders. You will owe the taxes whether you
choose to receive distributions in cash or have them automatically reinvested
in Fund shares.

The amount of taxes you owe on your share of Fund income and gains will vary
from year to year, based on the amount of dividends of net investment income
and capital gain distributions the Funds pay out and your tax rate. Normally,
dividends and distributions are taxable to you when paid. However, when
dividends and distributions are declared in the last three months of a year and
paid in January of the next year they are taxable as if paid on December 31 of
the prior year.

30 BARCLAYS GLOBAL INVESTORS FUNDS, INC.
<PAGE>

Dividends and capital gain distributions usually create the following tax
liability:

<TABLE>
<CAPTION>
----------------------------------------------
TRANSACTION TAX STATUS
----------------------------------------------
<S> <C>
Income dividends Ordinary income
----------------------------------------------
Short-term capital gain
distribution Ordinary income
----------------------------------------------
Long-term capital gain
distribution Capital gain
----------------------------------------------
</TABLE>

A portion of dividends paid to corporate shareholders of the LifePath Funds may
qualify for the dividends-received deduction available to corporations.

<TABLE>
<CAPTION>
-------------------------------------------------------------
TRANSACTION TAX STATUS
-------------------------------------------------------------
<S> <C>
You sell shares owned for
more than one year Long-term capital gain or loss
-------------------------------------------------------------
You sell shares owned for Short-term capital gain or
one year or less loss
-------------------------------------------------------------
</TABLE>

LIFEPATH DETAILS 31
<PAGE>

given to us is incorrect or the IRS informs us that you are otherwise subject
to backup withholding. You may also be subject to IRS penalties if you give us
an incorrect TIN. Any amounts withheld can be applied against your federal
income tax liability.

In general, the Funds are also required to withhold 30% from dividends paid to
foreign shareholders.

Tax considerations for tax-deferred accounts, such as benefit plans, or
non-taxable entities will be different.

Because each investor's tax circumstances are unique and because tax laws are
subject to change, we recommend that you consult your tax advisor about
your investment.

Master/Feeder Mutual Fund Structure

The LifePath Funds do not have their own investment adviser. Instead, each
LifePath Fund invests all of its assets in a separate mutual fund, called a
Master Portfolio, that has substantially identical investment objectives,
strategies and policies as the Fund. BGFA serves as Investment Adviser to each
Master Portfolio. The Master Portfolios may accept investments from other
feeder funds. Certain actions involving other feeder funds, such as a
substantial withdrawal, could affect the Master Portfolio.

Feeder Fund Rights. Under the master/feeder structure, each Fund's Board of
Directors retains the right to withdraw the Fund's assets from the Master
Portfolio if it believes doing so is in shareholders' best interests. If the
Directors withdraw the Fund's assets, they would then consider whether the Fund
should hire its own investment adviser, invest in another master portfolio or
take other action.

32 BARCLAYS GLOBAL INVESTORS FUNDS, INC.
<PAGE>

Financial Highlights

The tables below provide a picture of each LifePath Fund's
financial performance since inception. The per share information
reflects financial results for a single Fund share. The total
returns in the tables represent the rates of return that an
investor would have earned or lost on an investment in each of the
Funds, assuming reinvestment of all dividends and distributions.
The information has been audited by KPMG LLP, independent auditors,
whose report, along with the Funds' financial statements, is
included in the Funds' annual report. You may obtain copies of the
annual reports at no cost by calling toll-free 1 888 204 3956, 8am
to 5pm Eastern time, Monday through Friday.

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
LIFEPATH INCOME FUND LIFEPATH 2010 FUND
---------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Period Ended Year Ended Year Ended Year Ended Period Ended
2/29/00 2/28/99 2/28/98 2/28/97(/1/) 2/29/00 2/28/99 2/28/98 2/28/97(/1/)
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period $11.53 $11.56 $10.97 $10.55 $14.29 $13.90 $12.46 $11.44
---------------------------------------------------------------------------------------------------------------
Income from
Investment
Operations:
Net Investment
Income 0.43 0.42 0.46 0.39 0.42 0.38 0.40 0.33
Net Realized and
Unrealized Gain on
Investments 0.12 0.34 0.85 0.35 0.71 1.01 1.87 0.96
---------------------------------------------------------------------------------------------------------------
Total from
Investment
Operations 0.55 0.76 1.31 0.74 1.13 1.39 2.27 1.29
---------------------------------------------------------------------------------------------------------------
Less
Distributions:
From Net
Investment Income (0.43) (0.42) (0.46) (0.32) (0.42) (0.38) (0.40) (0.27)
From Net Realized
Gain (0.47) (0.37) (0.26) (0.00) (1.51) (0.62) (0.43) 0.00
---------------------------------------------------------------------------------------------------------------
Total
Distributions (0.90) (0.79) (0.72) (0.32) (1.93) (1.00) (0.83) (0.27)
---------------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $11.18 $11.53 $11.56 $10.97 $13.49 $14.29 $13.90 $12.46
---------------------------------------------------------------------------------------------------------------
Total Return 4.82% 6.70% 12.32% 7.00% 7.92% 10.19% 18.73% 11.98%
---------------------------------------------------------------------------------------------------------------
Supplemental Data:
Net Assets,
End of Period
(000) $28,772 $51,281 $48,731 $46,578 $88,715 $132,798 $112,436 $87,204
Portfolio Turnover
Rate(/3/) 55% 66% 39% 108% 49% 38% 46% 73%
---------------------------------------------------------------------------------------------------------------
Ratios to Average
Net Assets:(/2/)
Ratio of Expenses
to Average Net
Assets 0.95% 0.95% 0.95% 0.95% 0.95% 0.95% 0.95% 0.95%
Ratio of Net
Investment Income
to Average Net
Assets 3.63% 3.55% 4.06% 4.21% 2.80% 2.73% 3.09% 3.26%
---------------------------------------------------------------------------------------------------------------
</TABLE>
(/1/)The Funds commenced operations on March 26, 1996.
(/2/)Annualized for periods of less than one year. These ratios
include expenses charged to the corresponding Master Portfolio.
(/3/)Represents the portfolio turnover of each Fund's corresponding
Master Portfolio.

LIFEPATH DETAILS 33
<PAGE>

<TABLE>
<CAPTION>
LIFEPATH 2020 FUND LIFEPATH 2030 FUND

Year Ended Year Ended Year Ended Period Ended Year Ended Year Ended Year Ended Period Ended Year Ended
2/29/00 2/28/99 2/28/98 2/28/97(/1/) 2/29/00 2/28/99 2/28/98 2/28/97(/1/) 2/29/00
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period $ 16.38 $ 15.73 $ 13.40 $ 11.97 $ 18.57 $ 17.39 $ 14.17 $ 12.39 $ 20.25
-----------------------------------------------------------------------------------------------------------------------------------
Income from
Investment
Operations:

Net Investment
Income 0.32 0.31 0.33 0.29 0.26 0.24 0.26 0.23 0.13

Net Realized and
Unrealized Gain
on Investments 1.47 1.58 2.84 1.40 2.22 2.06 3.65 1.79 3.18
-----------------------------------------------------------------------------------------------------------------------------------
Total from
Investment
Operations 1.79 1.89 3.17 1.69 2.48 2.30 3.91 2.02 3.31
-----------------------------------------------------------------------------------------------------------------------------------
Less
Distributions:

From Net
Investment
Income (0.32) (0.31) (0.33) (0.24) (0.26) (0.24) (0.26) (0.20) (0.13)

From Net
Realized Gains (1.67) (0.93) (0.51) (0.02) (2.95) (0.88) (0.43) (0.04) (2.79)
-----------------------------------------------------------------------------------------------------------------------------------
Total
Distributions (1.99) (1.24) (0.84) (0.26) (3.21) (1.12) (0.69) (0.24) (2.92)
-----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $ 16.18 $ 16.38 $ 15.73 $ 13.40 $ 17.84 $ 18.57 $ 17.39 $ 14.17 $ 20.64
-----------------------------------------------------------------------------------------------------------------------------------
Total Return 10.84% 12.42% 24.25% 15.06% 13.04% 13.55% 28.22% 17.37% 16.01%
-----------------------------------------------------------------------------------------------------------------------------------
Supplemental
Data:
Net Assets,
End of Period
(000) 143,052 $166,130 $148,197 $105,414 $84,016 $116,729 $95,309 $58,575 $122,683

Portfolio
Turnover
Rate(/3/) 43% 36% 41% 61% 26% 19% 27% 42% 29%
-----------------------------------------------------------------------------------------------------------------------------------
Ratios to
Average
Net Assets:(/2/)

Ratio of
Expenses to
Average Net
Assets 0.95% 0.95% 0.95% 0.95% 0.95% 0.95% 0.95% 0.95% 0.95%

Ratio of Net
Investment
Income to
Average Net
Assets 1.87% 1.91% 2.28% 2.57% 1.32% 1.35% 1.72% 2.05% 0.59%
-----------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
LIFEPATH 2040 FUND

Year Ended Year Ended Period Ended
2/28/99 2/28/98 2/28/97(/1/)
---------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value,
Beginning of
Period $ 18.77 $ 15.21 $12.91
---------------------------------------------------------------------
Income from
Investment
Operations:

Net Investment
Income 0.14 0.18 0.18

Net Realized and
Unrealized Gain
on Investments 2.67 4.41 2.27
---------------------------------------------------------------------
Total from
Investment
Operations 2.81 4.59 2.45
---------------------------------------------------------------------
Less
Distributions:

From Net
Investment
Income (0.14) (0.19) (0.15)

From Net
Realized Gains (1.19) (0.84) 0.00
---------------------------------------------------------------------
Total
Distributions (1.33) (1.03) (0.15)
---------------------------------------------------------------------
Net Asset Value,
End of Period $ 20.25 $ 18.77 $15.21
---------------------------------------------------------------------
Total Return 15.35% 30.95% 20.47%
---------------------------------------------------------------------
Supplemental
Data:
Net Assets,
End of Period
(000) $163,883 $126,601 $69,476
Portfolio
Turnover
Rate(/3/) 19% 34% 48%
---------------------------------------------------------------------
Ratios to
Average
Net Assets:(/2/)

Ratio of
Expenses to
Average Net
Assets 0.95% 0.95% 0.95%

Ratio of Net
Investment
Income to
Average Net
Assets 0.72% 1.04% 1.46%
---------------------------------------------------------------------
</TABLE>
(/1/)The Funds commenced operations on March 26, 1996.
(/2/)Annualized for periods of less than one year. These ratios include
expenses charged to the corresponding Master Portfolio.
(/3/)Represents the portfolio turnover of each Fund's corresponding Master
Portfolio.

34 BARCLAYS GLOBAL INVESTORS FUNDS, INC.

<PAGE>

[This page intentionally left blank.]

LIFEPATH DETAILS 35

<PAGE>

[This page intentionally left blank.]

36 BARCLAYS GLOBAL INVESTORS FUNDS, INC.
<PAGE>

<PAGE>

For more detailed information on the LifePath Funds, request a copy of the
Funds' annual and semi-annual reports to shareholders and their Statements of
Additional Information (SAI). The annual and semi-annual reports discuss Fund
investments over the last fiscal year. They also review the market conditions
and investment strategies that materially affected Fund performance.

The Barclays Global Investors Funds "Shareholder Guide," also incorporated by
reference into this prospectus, provides information on how to buy and sell
shares of the LifePath Funds.

If you have any questions about LifePath Funds or wish to obtain the
Shareholder Guide, the reports and SAI free of charge, please call the Funds'
toll-free number:
1 888 204 3956

Or you may write LifePath Funds:
c/o Investors Bank & Trust Co.
P.O. Box 9130
Mail Code MFD23
Boston, MA 02117-9130

You can also obtain this information through the Internet on the Securities
and Exchange Commission's Website:
http://www.sec.gov

You can also review and copy the documents at the Securities and Exchange
Commission's Public Reference Room in Washington, D.C. Call the Commission at
1 800 SEC 0330 for further details.

Investment Company Act File No.:

811-7332
BARCLAYS GLOBAL INVESTORS FUNDS, INC.
<PAGE>

Information designed to help
you manage your Barclays
Global Investors Funds
Investment

Shareholder Guide

The information disclosed is part of, and incorporated by reference into, the
prospectuses dated July 1, 2000 for the LifePath, Index, Asset Allocation and
Money Market Funds.

BARCLAYS GLOBAL INVESTORS FUNDS, INC.
<PAGE>

Owning Shares

Who is eligible

<TABLE>
<CAPTION>
IF YOU ARE A SPECIAL REQUIREMENTS INVESTOR'S PRIMARY CONTACT
<S> <C> <C>
Participant in an Plans must have appointed a shareholder Employer's benefits or human resources
employer-sponsored servicing agent as Plan Trustee or Plan department
benefit plan Administrator

Other tax-deferred IRA, Keogh or other individual retirement Shareholder servicing agent
investor plan maintained with a shareholder
servicing agent that offers the Funds

Other qualified buyer Maintain an account with a shareholder Shareholder servicing agent
through agent servicing agent that offers BGI Funds

Direct buyer Make prior arrangements with BGI and The Funds' Transfer Agent, Investors Bank
invest at least $1 million (may be waived & Trust (IBT)
in certain cases)
</TABLE>

Please Note

. The Funds have no investment minimums (except as indicated in the table
above).

. Shareholder servicing agents may have investment minimums or account
balance requirements that differ from those of the Funds.

. The Funds' Transfer Agent must receive a completed application before it
can open a direct account.

. Federal regulations require you to furnish a valid taxpayer identification
number when you open your account.

BARCLAYS GLOBAL INVESTORS FUNDS, INC.
<PAGE>

Buying Shares

How to buy shares

<TABLE>
<CAPTION>
IF YOU ARE A INVEST THROUGH
<S> <C>
Plan participant* Payroll deductions or make a direct contribution by rolling over an amount from another
401(k) plan or from a rollover IRA. (Make arrangements through your employer.)

Tax-deferred investor A shareholder servicing agent as provided in your benefit plan documents*

Qualified buyer An account set up with your shareholder servicing agent

Direct buyer The Funds' Transfer Agent (IBT)
</TABLE>

*Your shareholder servicing agent is responsible for supplying plan documents
itemizing account maintenance fees and describing the amount and nature of the
investments allowed by law.

Please Note

. You must submit your purchase order by the close of regular trading on the
New York Stock Exchange (4pm Eastern time) to purchase shares at that day's
net asset value.

. Your shareholder servicing agent is responsible for transmitting your
purchase order and may impose an earlier deadline.

. If you are a direct buyer and your check bounces, the Funds reserve the right
to cancel the purchase and hold you responsible for any losses or fees.

. The Funds reserve the right to suspend the availability of any Fund shares.
They also have the right to reject any purchase order.

. The Funds do not issue share certificates.

. Direct buyers can add to their Fund account by telephoned wire instructions
or through the mail.

- To invest by wire, just check that option on your account application when
you open your account. If you already have an account, call the toll-free
number to receive a bank-by-wire application.

- To invest by mail, make your check payable to the Fund of your choice.
Please include the Fund number and account number on your check. You will
find them on your monthly statements.
<PAGE>

Selling Shares

How to sell shares

<TABLE>
<CAPTION>
IF YOU ARE A RESTRICTIONS*
<S> <C>
Plan participant Contact your Plan Sponsor or shareholder servicing agent

Tax-deferred investor Contact your Plan Sponsor or shareholder servicing agent

Qualified buyer Contact your shareholder servicing agent

Direct buyer See information below
</TABLE>

*Under certain circumstances, the Funds reserve the right to send your sale
proceeds in the form of securities from their Master Portfolio.

Sales Instructions for Direct Buyers

By Phone

. Call the toll-free number any business day between 8am and 4pm, Eastern time.

. The Funds' Transfer Agent, IBT, will employ procedures designed to confirm
that your order is valid, but neither IBT nor the Funds may be held liable
for acting on telephone instructions IBT reasonably believes to be valid.

By Mail

. Indicate the dollar amount you wish to receive or the number of shares you
wish to sell in your sales order.

. Include your fund, account and taxpayer identification numbers.

. All account signatories must sign the order.

Please Note

. When a direct buyer purchases Fund shares and then quickly sells, the Funds
may delay the payment of proceeds up to ten days to ensure that purchase
checks have cleared.

. Direct buyers can ask IBT to wire proceeds directly to their designated bank
account.*

*If you direct the sale's proceeds to someone other than your account's owner of
record, to an address other than your account's address of record or to a bank
not designated previously, you must make your request in writing and include a
signature guarantee to help prevent fraud. You can obtain a signature guarantee
from most banks and securities dealers. A signature guarantee is not a notarized
signature.
<PAGE>

Managing Your Barclays Global
Investors Funds Investment

Important facts about Barclays Global Investors (BGI) Funds

Contacting BGI Funds
By Telephone
Call 1 888 204 3956, toll-free, Monday through Friday 8am to 4pm (Eastern
time).

By Mail
Send your correspondence to:
BGI Funds
c/o Investors Bank & Trust Co.
PO Box 9130
Mail Code MFD 23
Boston, MA 02117-9130

Exchanging Shares

The Funds allow investors to exchange shares free of charge between BGI Funds.
Before buying shares through an exchange, you should obtain a copy of that
Fund's prospectus and read it carefully. Prospectuses may be obtained by
calling the toll-free number listed above.

The Funds may limit the number of times you may exchange shares if they
believe doing so is in the best interest of other Fund shareholders. They may
also modify or terminate this exchange privilege by giving 60 days' written
notice.

Transaction Terms

. You may buy or sell Fund shares at any time without paying a sales charge.

. You may buy or sell Fund shares on any business day that the New York Stock
Exchange (NYSE) is open.

. You must submit your sales order by the close of regular trading on the NYSE
(4pm Eastern time) to receive that day's net asset value.

. Your shareholder servicing agent is responsible for transmitting your sales
order and may impose an earlier deadline.

. The Funds generally remit the proceeds from a sale the next business day
after receiving a properly executed order and no longer than seven business
days after the sale.
<PAGE>

The BGI Funds

LifePath Funds
The first mutual funds designed to
provide comprehensive asset allocation
strategies that adjust over time for
the individual investor

LifePath Income
LifePath 2010
LifePath 2020
LifePath 2030
LifePath 2040

Index and Allocation Funds
A pioneer in asset allocation and index investing since 1971

Index Funds
Bond Index Fund
S&P 500 Stock Fund

Allocation Fund
Asset Allocation Fund

Money Market Fund
Institutional Money Market Fund
Providing income and preserving capital

BARCLAYS GLOBAL INVESTORS FUNDS, INC.
<PAGE>

BARCLAYS GLOBAL INVESTORS FUNDS, INC.

STATEMENT OF ADDITIONAL INFORMATION

ASSET ALLOCATION FUND
BOND INDEX FUND
S&P 500 STOCK FUND

July 1, 2000

Barclays Global Investors Funds, Inc. (the "Company") is an open-end,
management investment company. This Statement of Additional Information ("SAI")
contains information about three funds of the Company -- the Asset Allocation
Fund, Bond Index Fund and S&P 500 Stock Fund (each, a "Fund" and collectively,
the "Funds").

Each of the Asset Allocation, Bond Index and S&P 500 Stock Funds seeks to
achieve its investment objective by investing substantially all of its assets in
the Asset Allocation, Bond Index and S&P 500 Index Master Portfolios
(collectively, the "Master Portfolios"), respectively, of Master Investment
Portfolio ("MIP," at times the "Trust"). Barclays Global Fund Advisors ("BGFA")
serves as investment adviser to the corresponding Master Portfolios. References
to the investments, investment policies and risks of the Funds unless otherwise
indicated, should be understood as references to the investments, investment
policies and risks of the corresponding Master Portfolios.

This SAI is not a prospectus and should be read in conjunction with the Funds'
current Prospectus, also dated July 1, 2000. 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 Barclays
Global Investors 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>
Fund History..................................................................................... 1
Description of the Funds and Their Investments and Risks......................................... 1
Portfolio Securities............................................................................. 5
Risk Considerations.............................................................................. 15
Management....................................................................................... 17
Control Persons and Principal Holders of Securities.............................................. 20
Investment Adviser and Other Service Providers................................................... 20
Performance Information.......................................................................... 25
Determination of Net Asset Value................................................................. 29
Purchase, Redemption and Pricing of Shares....................................................... 30
Portfolio Transactions........................................................................... 31
Dividends, Distributions and Taxes............................................................... 32
Capital Stock.................................................................................... 37
Additional Information on the Funds.............................................................. 39
Financial Statements............................................................................. 39
Appendix......................................................................................... A-1
</TABLE>

1
<PAGE>

FUND HISTORY

The Company, an open-end management investment company, was incorporated in
Maryland on October 15, 1992 and currently offers ten series including the
Funds. MIP, organized as a Delaware business trust on October 21, 1993, consists
of twelve series including the Asset Allocation, Bond Index and S&P 500 Index
Master Portfolios. The Company's principal office is located at 111 Center
Street, Little Rock, Arkansas 72201. Each Fund invests all of its assets in the
corresponding Master Portfolio of the Trust (as illustrated below), which has
the same or substantially the same investment objective as the related Fund.

Fund Corresponding Master Portfolio
---- ------------------------------
Asset Allocation Fund Asset Allocation Master Portfolio
Bond Index Fund Bond Index Master Portfolio
S&P 500 Stock Fund S&P 500 Index Master Portfolio

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."
On April 28, 1999, the Company's Board of Directors approved, primarily for
marketing purposes, the change of its corporate name from "MasterWorks Funds
Inc." to "Barclays Global Investors Funds, Inc."

On October 29, 1999, the Company's U.S. Treasury Allocation Fund was
consolidated into the Company's Bond Index Fund. As part of the consolidation,
U.S. Treasury Allocation Fund shareholders received shares of the Bond Index
Fund equal in value to their shares of the U.S. Treasury Allocation Fund.

DESCRIPTION OF THE FUNDS AND THEIR INVESTMENTS AND RISKS

Investment Restrictions. Each Fund and Master Portfolio has adopted
-----------------------
investment policies that may be fundamental or non-fundamental. Fundamental
policies cannot be changed without approval by the holders of a majority (as
defined in the Investment Company Act of 1940, as amended (the "1940 Act")) of
the outstanding voting securities of such Fund or Master Portfolio, as the case
may be. Non-fundamental policies may be changed without shareholder approval by
vote of a majority of the Directors of the Company or the Trustees of the Trust,
as the case may be, at any time.

Fundamental Investment Restrictions. The Funds are subject to the following
investment restrictions, all of which are fundamental policies.

The Funds 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 any Fund's investments in that industry would be 25% or
more of the current value of such 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; (ii) in the case of the S&P 500
Stock Fund, and the stock portion of the Asset Allocation Fund, any industry in
which the S&P 500 Index becomes concentrated to the same degree during the same
period (provided that, with respect to the stock and money market portions of
the Asset Allocation Fund, the Fund will be concentrated as specified above only
to the extent the percentage of its assets invested in those categories of
investments is sufficiently large that 25% or more of its total assets

1
<PAGE>

would be invested in a single industry); (iii) in the case of the Bond Index
Fund, any industry in which the Lehman Brothers Government/Corporate Bond Index
(the "LB Bond Index") becomes concentrated to the same degree during the same
period; and (iv) in the case of the money market portion of the Asset Allocation
Fund, its money market instruments may be concentrated in the banking industry
(but will not do so unless the SEC staff confirms that it does not object to the
Fund reserving freedom of action to concentrate investments in the banking
industry); and provided further, that a Fund may invest all its assets in a
diversified open-end management investment company, or series thereof, with
substantially the same investment objective, policies and restrictions as such
Fund, without regard for 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 a Fund may purchase securities of an issuer that invests
or deals in commodities or commodity contracts, and except that the Funds may
enter into futures and options contracts in accordance with their respective
investment policies;

(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 a Fund's investment program may be deemed to be an underwriting
and provided further, that the purchase by a 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 such
Fund shall not constitute an underwriter for purposes of this paragraph (6);

(7) make investments for the purpose of exercising control or management;
provided that a 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 such Fund, without regard to
the limitations set forth in this paragraph (7);

(8) borrow money or issue senior securities as defined in the 1940 Act,
except that the Bond Index 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), and
except that each of the Asset Allocation and S&P 500 Stock Funds may borrow up
to 20% of the current value of its net assets for temporary purposes only in
order to meet redemptions, and these borrowings may be secured by the pledge of
up to 20% of the current value of its net assets (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 each Fund may enter into futures
and options contracts in accordance with their respective

2
<PAGE>

investment policies, and except that the Asset Allocation Fund may purchase
securities with put rights in order to maintain liquidity, and except that the
S&P 500 Stock Fund may invest up to 5% of their net assets in warrants in
accordance with their investment policies stated below;

(10) purchase securities of any issuer (except securities issued or
guaranteed by the U.S. Government, its agencies and instrumentalities) if, as a
result, with respect to 75% of its total assets, more than 5% of the value of a
Fund's, total assets would be invested in the securities of any one issuer or,
with respect to 100% of its total assets a Fund's ownership would be more than
10% of the outstanding voting securities of such issuer; provided that a 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 such Fund, without regard to the limitations set
forth in this paragraph (10); or

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

Non-Fundamental Investment Restrictions. The Funds are subject to the
following investment restrictions, all of which are non-fundamental policies.

(1) The Funds 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, a 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 such Fund's net assets with respect to any one
investment company, and (iii) 10% of such Fund's net assets in the aggregate.
Other investment companies in which the Funds invest 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 a Fund.

(2) Each Fund may not invest more than 15% 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 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.

(3) Each Fund may lend securities from its portfolio to brokers, dealers
and financial institutions, in amounts not to exceed (in the aggregate) one-
third of a Fund's total assets. Any such loans of portfolio securities will be
fully collateralized based on values that are marked to market daily. The Funds
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), each 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. A
decision to so invest all of its assets may, depending on the circumstances
applicable at the time, require approval of shareholders.

The Master Portfolios to the Funds are subject to the following investment
restrictions.

Fundamental Investment Restrictions. The Master Portfolios are subject to
the following investment restrictions, all of which are fundamental policies.

3
<PAGE>

Each Master Portfolio may not:

(1) invest more than 5% of its assets in the obligations of any single
issuer, except that up to 25% of the value of its total assets may be invested,
and securities issued or guaranteed by the U.S. Government, or its agencies or
instrumentalities may be purchased, without regard to any such limitation.

(2) hold more than 10% of the outstanding voting securities of any single
issuer. This Investment Restriction applies only with respect to 75% of its
total assets.

(3) invest in commodities, except that each Master Portfolio may purchase
and sell (i.e., write) options, forward contracts, futures contracts, including
those relating to indexes, and options on futures contracts or indexes.

(4) purchase, hold or deal in real estate, or oil, gas or other mineral
leases or exploration or development programs, but each Master Portfolio may
purchase and sell securities that are secured by real estate or issued by
companies that invest or deal in real estate.

(5) borrow money, except that the Bond Index Master Portfolio may borrow
from banks up to 10% of the current value of its net assets for temporary
purposes only in order to meet redemptions, and these borrowings may be secured
by the pledge of up to 10% of the current value of its net assets (but
investments may not be purchased while any such outstanding borrowing in excess
of 5% of its net assets exists), and except that each of the Asset Allocation
and S&P 500 Index Master Portfolios may borrow up to 20% of the current value of
its net assets for temporary purposes only in order to meet redemptions, and
these borrowings may be secured by the pledge of up to 20% of the current value
of its net assets (but investments may not be purchased while any such
outstanding borrowing in excess of 5% of its net assets exists). For purposes of
this investment restriction, a Master Portfolio's entry into options, forward
contracts, futures contracts, including those relating to indexes, and options
on futures contracts or indexes shall not constitute borrowing to the extent
certain segregated accounts are established and maintained by such Master
Portfolio.

(6) make loans to others, except through the purchase of debt obligations
and the entry into repurchase agreements. However, each Master Portfolio may
lend its portfolio securities in an amount not to exceed one-third of the value
of its total assets. Any loans of portfolio securities will be made according to
guidelines established by the SEC and the Trust's Board of Trustees.

(7) act as an underwriter of securities of other issuers, except to the
extent that the Master Portfolios may be deemed an underwriter under the
Securities Act of 1933, as amended, by virtue of disposing of portfolio
securities.

(8) invest 25% or more of its total assets in the securities of issuers in
any particular industry or group of closely related industries except that, in
the case of each Master Portfolio, there shall be no limitation with respect to
investments in (i) obligations of the U.S. Government, its agencies or
instrumentalities; (ii) in the case of the S&P 500 Index Master Portfolio, and
the stock portion of the Asset Allocation Master Portfolio, any industry in
which the S&P 500 Index becomes concentrated to the same degree during the same
period (provided that, with respect to the stock and money market portions of
the Asset Allocation Master Portfolio, the Master Portfolio will be concentrated
as specified above only to the extent the percentage of its assets invested in
those categories of investments is sufficiently large that 25% or more of its
total assets would be invested in a single industry); (iii) in the case of the
Bond Index Master Portfolio, any industry in which the LB Bond Index becomes
concentrated to the same degree during the same period; and (iv) in the case of
the money market portion of the Asset Allocation Master

4
<PAGE>

Portfolio, its money market instruments may be concentrated in the banking
industry (but will not do so unless the SEC staff confirms that it does not
object to the Master Portfolio reserving freedom of action to concentrate
investments in the banking industry).

(9) issue any senior security (as such term is defined in Section 18(f) of
the 1940 Act), except to the extent the activities permitted in the Master
Portfolios' fundamental policies (3) and (5) may be deemed to give rise to a
senior security.

(10) purchase securities on margin, but each Master Portfolio may make
margin deposits in connection with transactions in options, forward contracts,
futures contracts, including those related to indexes, and options on futures
contracts or indexes.

Non-fundamental Investment Restrictions. The Master Portfolios are subject
to the following non-fundamental policies.

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

(2) Each Master Portfolio may not invest more than 15% 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 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.

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

PORTFOLIO SECURITIES

To the extent set forth in this SAI, each Fund through its investment in
the corresponding Master Portfolio may invest in the securities described below.
To avoid the need to refer to both the Funds and the Master Portfolios in every
instance, the following sections generally refer to the Funds only.

Asset Allocation Master Portfolio:

The Asset Allocation Fund invests in the Asset Allocation Master Portfolio
that uses an allocation model to select portfolio securities. A description of
the Asset Allocation Model follows.

Asset Allocation Model. A key component of the Asset Allocation Model is a
----------------------
set of assumptions concerning expected risk and return and investor attitudes
toward risk, which are incorporated into the asset allocation decision. The
principal inputs of financial data to the Asset Allocation Model for the

5
<PAGE>

Asset Allocation Master Portfolio currently are (i) consensus estimates of the
earnings, dividends and payout ratios on a broad cross-section of common stocks
as reported by independent financial reporting services that survey a broad
cross-section of Wall Street analysts; (ii) the estimated current yield to
maturity on new long-term corporate bonds rated "AA" by S&P; (iii) the present
yield on money market instruments; (iv) the historical statistical standard
deviation in investment return for each class of asset; and (v) the historical
statistical correlation of investment returns among the various asset classes in
which the Asset Allocation Master Portfolio invests.

All Master Portfolios:

Repurchase Agreements. Each 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. The period of maturity is usually quite short, often
overnight or a few days, although it may extend over a number of months. A 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 Funds may participate in pooled repurchase agreement
transactions with other funds advised by BGFA.

The Fund's custodian has custody of, and holds in a segregated account,
securities acquired as collateral by the Fund under a repurchase agreement. 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 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. Repurchase agreements are considered to be loans by a Fund under the
1940 Act.

Floating- and Variable-Rate Obligations. Each Fund may purchase debt
---------------------------------------
instruments with interest rates that are periodically adjusted at specified
intervals or whenever a benchmark rate or index changes. The floating- and
variable-rate instruments that a Fund may purchase include certificates of
participation in such instruments. These adjustments generally limit the
increase or decrease in the amount of interest received on the debt instruments.
Floating- and variable-rate instruments are subject to interest-rate risk and
credit risk.

6
<PAGE>

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 that 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.

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

Securities of Non-U.S. Issuers. The Funds may invest in certain
-------------------------------
securities of non-U.S. issuers as discussed below. Obligations of Foreign
Governments, Banks and Corporations -- Each Fund may invest in U.S. dollar-
denominated short-term obligations issued or guaranteed by one or more foreign
governments or any by BGFA to be of comparable quality to the other obligations
in which such Fund may invest. The Funds may also invest in debt obligations of
supranational entities. Supranational entities include international
organizations designated or supported by governmental entities to promote
economic reconstruction or development and international banking institutions
and related government agencies. Examples include the International Bank for
Reconstruction and Development (the World Bank), the European Coal and Steel
Community, the Asian Development Bank and the InterAmerican Development Bank.
The percentage of each Fund's assets invested in obligations of foreign
governments and supranational entities will vary depending on the relative
yields of such securities, the economic and financial markets of the countries
in which the investments are made and the interest rate climate of such
countries. Each Fund may invest a portion of its total assets in high-quality,
short-term (one year or less)

7
<PAGE>

debt obligations of foreign branches of U.S. banks or U.S. branches of foreign
banks that are denominated in and pay interest in U.S. dollars. The Funds also
may invest in U.S. dollar-denominated debt obligations issued by foreign
corporations.

Bonds. Certain of the debt instruments purchased by the Asset Allocation
------
and Bond Index Funds may be bonds. A bond is an interest-bearing security issued
by a company or governmental unit. The issuer of a bond has a contractual
obligation to pay interest at a stated rate on specific dates and to repay
principal (the bond's face value) periodically or on a specified maturity date.
An issuer may have the right to redeem or "call" a bond before maturity, in
which case the investor may have to reinvest the proceeds at lower market rates.
Most bonds bear interest income at a "coupon" rate that is fixed for the life
of the bond. The value of a fixed rate bond usually rises when market interest
rates fall, and falls when market interest rates rise. Accordingly, a fixed rate
bond's yield (income as a percent of the bond's current value) may differ from
its coupon rate as its value rises or falls. Other types of bonds bear income at
an interest rate that is adjusted periodically. Because of their adjustable
interest rates, the value of "floating-rate" or "variable-rate" bonds
fluctuates much less in response to market interest rate movements than the
value of fixed rate bonds. Also, the Funds may treat some of these bonds as
having a shorter maturity for purposes of calculating the weighted average
maturity of their investment portfolios. Bonds may be senior or subordinated
obligations. Senior obligations generally have the first claim on a
corporation's earnings and assets and, in the event of liquidation, are paid
before subordinated debt. Bonds may be unsecured (backed only by the issuer's
general creditworthiness) or secured (also backed by specified collateral).

Unrated, Downgraded and Below Investment Grade Investments. The Funds may
----------------------------------------------------------
purchase instruments that are not rated if, in the opinion of the investment
adviser, BGFA, such obligation is of investment quality comparable to other
rated investments that are permitted to be purchased by such Fund. After
purchase by a Fund, a security may cease to be rated or its rating may be
reduced below the minimum required for purchase by such Fund. Neither event will
require a sale of such security by a Fund provided that the amount of such
securities held by a Fund does not exceed 5% of the Fund's net assets. To the
extent the ratings given by Moody's or S&P may change as a result of changes in
such organizations or their rating systems, each Fund will attempt to use
comparable ratings as standards for investments in accordance with the
investment policies contained in its Prospectus and in this SAI. The ratings of
Moody's and S&P are more fully described in the SAI Appendix.

The Funds are not required to sell downgraded securities, and each Fund
could hold up to 5% of its net assets in debt securities rated below "Baa" by
Moody's or below "BBB" by S&P or if unrated, low quality (below investment
grade) securities.

Although they may offer higher yields than do higher rated securities, low
rated and unrated low quality debt securities generally involve greater
volatility of price and risk of principal and income, including the possibility
of default by, or bankruptcy of, the issuers of the securities. In addition, the
markets in which low rated and unrated low quality debt is traded are more
limited than those in which higher rated securities are traded. The existence of
limited markets for particular securities may diminish a Fund's ability to sell
the securities at fair value either to meet redemption requests or to respond to
changes in the economy or in the financial markets and could adversely affect
and cause fluctuations in the daily net asset value of a Fund's shares.

Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of low rated or
unrated low quality debt securities, especially in a thinly traded market.
Analysis of the creditworthiness of issuers of low rated or unrated low quality
debt securities may be more complex than for issuers of higher rated securities,
and the ability of a Fund to

8
<PAGE>

achieve its investment objective may, to the extent it holds low rated or
unrated low quality debt securities, be more dependent upon such
creditworthiness analysis than would be the case if the Fund held exclusively
higher rated or higher quality securities.

Low rated or unrated low quality debt securities may be more susceptible to
real or perceived adverse economic and competitive industry conditions than
investment grade securities. The prices of such debt securities have been found
to be less sensitive to interest rate changes than higher rated or higher
quality investments, but more sensitive to adverse economic downturns or
individual corporate developments. A projection of an economic downturn or of a
period of rising interest rates, for example, could cause a decline in low rated
or unrated low quality debt securities prices because the advent of a recession
could dramatically lessen the ability of a highly leveraged company to make
principal and interest payments on its debt securities. If the issuer of the
debt securities defaults, the Funds may incur additional expenses to seek
recovery.

Letters of Credit. Certain of the debt obligations (including municipal
-----------------
securities, certificates of participation, commercial paper and other short-term
obligations) that the Funds may purchase may be backed by an unconditional and
irrevocable letter of credit of a bank, savings and loan association or
insurance company that assumes the obligation for payment of principal and
interest in the event of default by the issuer. Only banks, savings and loan
associations and insurance companies that, in the opinion of BGFA, as investment
adviser, are of comparable quality to issuers of other permitted investments of
such Fund may be used for letter of credit-backed investments.

When-Issued Securities. Certain of the securities in which the Bond Index
----------------------
and Asset Allocation Funds may invest will be purchased on a when-issued basis,
in which case delivery and payment normally take place within 45 days after the
date of the commitment to purchase. These Funds only will make commitments to
purchase securities on a when-issued basis with the intention of actually
acquiring the securities, but may sell them before the settlement date if it is
deemed advisable. When-issued securities are subject to market fluctuation, and
no income accrues to the purchaser during the period prior to issuance. The
purchase price and the interest rate that will be received on debt securities
are fixed at the time the purchaser enters into the commitment. Purchasing a
security on a when-issued basis can involve a risk that the market price at the
time of delivery may be lower than the agreed-upon purchase price, in which case
there could be an unrealized loss at the time of delivery. None of the Funds
currently intend to invest more than 5% of its assets in when-issued securities
during the coming year. Each Fund will establish a segregated account in which
it will maintain cash or liquid, high-grade debt securities in an amount at
least equal in value to the Fund's commitments to purchase when-issued
securities. If the value of these assets declines, the Fund will place
additional liquid assets in the account on a daily basis so that the value of
the assets in the account is equal to the amount of such commitments.

Loans of Portfolio Securities. The Funds may lend securities from their
-----------------------------
portfolios to brokers, dealers and financial institutions (but not individuals)
if cash, U.S. Government securities or other high-quality debt obligations equal
to at least 100% of the current market value of the securities loan (including
accrued interest thereon) plus the interest payable to such Fund with respect to
the loan is maintained with the Fund. In determining whether to lend a security
to a particular broker, dealer or financial institution, the Fund's investment
adviser will consider all relevant facts and circumstances, including the size,
creditworthiness and reputation of the broker, dealer, or financial institution.
Any loans of portfolio securities will be fully collateralized based on values
that are marked to market daily. The Funds will not enter into any portfolio
security lending arrangement having a duration of longer than one year. Any
securities that a Fund may receive as collateral will not become part of the
Fund's investment portfolio at the time of the loan and, in the event of a
default by the borrower, the Fund will, if permitted by law, dispose of such
collateral except for such part thereof that is a security in which the Fund is
permitted to

9
<PAGE>

invest. During the time securities are on loan, the borrower will pay the Fund
any accrued income on those securities, and the Fund may invest the cash
collateral and earn income or receive an agreed-upon fee from a borrower that
has delivered cash-equivalent collateral. None of the Funds will lend securities
having a value that exceeds one-third of the current value of its total assets.
Loans of securities by any of the Funds will be subject to termination at the
Fund's or the borrower's option. The Fund may pay reasonable administrative and
custodial fees in connection with a securities loan and may pay a negotiated
portion of the interest or fee earned with respect to the collateral to the
borrower or the placing broker. Borrowers and placing brokers may not be
affiliated, directly or indirectly, with the Company, BGFA, or the Distributor.

The principal risk of portfolio lending is potential default or insolvency
of the borrower. In either of these cases, a Fund could experience delays in
recovering securities or collateral or could lose all or part of the value of
the loaned securities. The Funds may pay reasonable administrative and custodial
fees in connection with loans of portfolio securities and may pay a portion of
the interest or fee earned thereon the borrower or a placing broker.

Futures Contracts and Options Transactions. The Funds may use futures
------------------------------------------
contracts as a hedge against the effects of interest rate changes or changes in
the market value of the stocks comprising the index in which such Fund invests.
In managing their cash flows, these Funds also may use futures contracts as a
substitute for holding the designated securities underlying the futures
contract. A futures contract is an agreement between two parties, a buyer and a
seller, to exchange a particular commodity at a specific price on a specific
date in the future. An option transaction generally involves a right, which may
or may not be exercised, to buy or sell a commodity or financial instrument at a
particular price on a specified future date. At the time it enters into a
futures transaction, a Fund is required to make a performance deposit (initial
margin) of cash or liquid securities in a segregated account in the name of the
futures broker. Subsequent payments of "variation margin" are then made on a
daily basis, depending on the value of the futures position that is continually
"marked to market."

A Fund may engage only in futures contract transactions involving (i) the
sale of a futures contract (i.e., short positions) to hedge the value of
securities held by such Fund; (ii) the purchase of a futures contract when such
Fund holds a short position having the same delivery month (i.e., a long
position offsetting a short position); or (iii) the purchase of a futures
contract to permit the Fund to, in effect, participate in the market for the
designated securities underlying the futures contract without actually owning
such designated securities. When a Fund purchases a futures contract, it will
create a segregated account consisting of cash or other liquid assets in an
amount equal to the total market value of such futures contract, less the amount
of initial margin for the contract.

If a Fund enters into a short position in a futures contract as a hedge
against anticipated adverse market movements and the market then rises, the
increase in the value of the hedged securities will be offset, in whole or in
part, by a loss on the futures contract. If instead a Fund purchases a futures
contract as a substitute for investing in the designated underlying securities,
a Fund experiences gains or losses that correspond generally to gains or losses
in the underlying securities. The latter type of futures contract transactions
permits a Fund to experience the results of being fully invested in a particular
asset class, while maintaining the liquidity needed to manage cash flows into or
out of the Fund (e.g., from purchases and redemptions of Fund shares). Under
normal market conditions, futures contract positions may be closed out on a
daily basis. The Funds identified above expect to apply a portion of their cash
or cash equivalents maintained for liquidity needs to such activities.

Transactions by a Fund in futures contracts involve certain risks. One risk
in employing futures contracts as a hedge against cash market price volatility
is the possibility that futures prices will correlate

10
<PAGE>

imperfectly with the behavior of the prices of the securities in the Fund's
investment portfolio (the portfolio securities of the Bond Index Fund and the
bond portion of the Asset Allocation Fund will not be identical to the
securities underlying the futures contracts). Similarly, in employing futures
contracts as a substitute for purchasing the designated underlying securities,
there is a risk that the performance of the futures contract may correlate
imperfectly with the performance of the direct investments for which the futures
contract is a substitute. In addition, commodity exchanges generally limit the
amount of fluctuation permitted in futures contract prices during a single
trading day, and the existence of such limits may prevent the prompt liquidation
of futures positions in certain cases. Limits on price fluctuations are designed
to stabilize prices for the benefit of market participants; however, there could
be cases where the Fund could incur a larger loss due to the delay in trading
than it would have if no limit rules had been in effect.

Futures contracts and options are standardized and traded on exchanges,
where the exchange serves as the ultimate counterparty for all contracts.
Consequently, the primary credit risk on futures contracts is the
creditworthiness of the exchange. Futures contracts are subject to market risk
(i.e., exposure to adverse price changes). Although each of the indicated Funds
intends to purchase or sell futures contracts only if there is an active market
for such contracts, no assurance can be given that a liquid market will exist
for any particular contract at any particular time. Many futures exchanges and
boards of trade limit the amount of fluctuation permitted in futures contract
prices during a single trading day. Once the daily limit has been reached in a
particular contract, no trades may be made that day at a price beyond that limit
or trading may be suspended for specified periods during the trading day.
Futures contract prices could move to the limit for several consecutive trading
days with little or no trading, thereby preventing prompt liquidation of futures
positions and potentially subjecting a Fund to substantial losses. If it is not
possible, or if a Fund determines not to close a futures position in
anticipation of adverse price movements, the Fund will be required to make daily
cash payments on variation margin.

In order to comply with undertakings made by the Fund pursuant to Commodity
Futures Trading Commission ("CFTC") Regulation 4.5, the Funds will use futures
and option contracts solely for bona fide hedging purposes within the meaning
and intent of CFTC Reg. 1.3(z); provided, however, that in addition, with
respect to positions in commodity futures or commodity option contracts that do
not come within the meaning and intent of CFTC Reg. 1.3(z), the aggregate
initial margin and premiums required to establish such positions will not exceed
five percent of the liquidation value of the Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any such contract it has
entered into; and provided further, that in the case of an option that is in-
the-money at the time of purchase, the in-the-money amount as defined in CFTC
Reg. 190.01(x) may be excluded in computing such five percent.

Stock Index Futures and Options on Stock Index Futures. The S&P 500 Stock
-------------------------------------------------------
and Asset Allocation Funds may invest in stock index futures and options on
stock index futures as a substitute for a comparable market position in the
underlying securities. A stock index future obligates the seller to deliver (and
the purchaser to take), effectively, an amount of cash equal to a specific
dollar amount times the difference between the value of a specific stock index
at the close of the last trading day of the contract and the price at which the
agreement is made. No physical delivery of the underlying stocks in the index is
made. With respect to stock indices that are permitted investments, each Fund
intends to purchase and sell futures contracts on the stock index for which it
can obtain the best price with consideration also given to liquidity. There can
be no assurance that a liquid market will exist at the time when a Fund seeks to
close out a futures contract or a futures option position. Lack of a liquid
market may prevent liquidation of an unfavorable position.

Interest-Rate Futures Contracts and Options on Interest-Rate Futures
--------------------------------------------------------------------
Contracts. The Asset Allocation and Bond Index Funds may invest in interest-
----------
rate futures contracts and options on interest-rate

11
<PAGE>

futures contracts as a substitute for a comparable market position in the
underlying securities. The Funds may also sell options on interest-rate futures
contracts as part of closing purchase transactions to terminate their options
positions. No assurance can be given that such closing transactions can be
effected or the degree of correlation between price movements in the options on
interest rate futures and price movements in the Funds' portfolio securities
that are the subject of the transaction.

Interest-Rate and Index Swaps. The Asset Allocation and Bond Index Funds
------------------------------
may enter into interest-rate and index swaps in pursuit of their investment
objectives. Interest-rate swaps involve the exchange by a Fund with another
party of their respective commitments to pay or receive interest (for example,
an ex-change of floating-rate payments on fixed-rate payments). Index swaps
involve the exchange by a Fund with another party of cash flows based upon the
performance of an index of securities or a portion of an index of securities
that usually include dividends or income. In each case, the exchange commitments
can involve payments to be made in the same currency or in different currencies.
A Fund will usually enter into swaps on a net basis. In so doing, the two
payment streams are netted out, with a Fund receiving or paying, as the case may
be, only the net amount of the two payments. If a Fund enters into a swap, it
will maintain a segregated account on a gross basis, unless the contract
provides for a segregated account on a net basis. If there is a default by the
other party to such a transaction, a Fund will have contractual remedies
pursuant to the agreements related to the transaction. The use of interest-rate
and index swaps is a highly specialized activity that involves investment
techniques and risks different from those associated with ordinary portfolio
security transactions. There is no limit, except as provided below, on the
amount of swap transactions that may be entered into by a Fund. These
transactions generally do not involve the delivery of securities or other
underlying assets or principal. Accordingly, the risk of loss with respect to
swaps generally is limited to the net amount of payments that a Fund is
contractually obligated to make. There is also a risk of a default by the other
party to a swap, in which case a Fund may not receive net amount of payments
that a Fund contractually is entitled to receive.

Investment Company Securities. Each Fund may invest in securities issued
------------------------------
by other investment companies that principally invest in securities of the type
in which the Fund invests. Under the 1940 Act, a Fund's investment in such
securities currently is limited to, subject to certain exceptions, (i) 3% of the
total voting stock of any one investment company, (ii) 5% of the Fund's net
assets with respect to any one investment company and (iii) 10% of the Fund's
net assets in the aggregate. Investments in the securities of other investment
companies generally will involve duplication of advisory fees and certain other
expenses. The Funds may also purchase shares of exchange listed closed-end
funds.

Illiquid Securities. Each Fund may invest up to 15% of the value of its
--------------------
net assets in securities as to which a liquid trading market does not exist,
provided such investments are consistent with its investment objective. Such
securities may include securities that are not readily marketable, such as
certain securities that are subject to legal or contractual restrictions on
resale, participation interests that are not subject to the demand feature
described above, floating- and variable-rate demand obligations as to which the
Fund cannot exercise the related demand feature described above on not more than
seven days notice and as to which there is no secondary market and repurchase
agreements providing for settlement more than seven days after notice.

Short-Term Instruments and Temporary Investments. The Funds may invest in
-------------------------------------------------
high-quality money market instruments on an ongoing basis to provide liquidity,
for temporary purposes when there is an unexpected level of shareholder
purchases or redemptions or when "defensive" strategies are appropriate. The
instruments in which the Funds may invest include: (i) short-term obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities
(including government-sponsored enterprises); (ii) negotiable certificates of
deposit ("CDs"), bankers' acceptances, fixed time deposits and other
obligations of domestic banks (including foreign branches) that have more than
$1 billion in

12
<PAGE>

total assets at the time of investment and that are members of the Federal
Reserve System or are examined by the Comptroller of the Currency or whose
deposits are insured by the FDIC; (iii) commercial paper rated at the date of
purchase "Prime-1" by Moody's or "A-1+" or "A-1" by S&P, or, if unrated,
of comparable quality as determined by BGFA ; (iv) nonconvertible corporate debt
securities (e.g., bonds and debentures) with remaining maturities at the date of
purchase of not more than one year that are rated at least "Aa" by Moody's or
"AA" by S&P; (v) repurchase agreements; and (vi) short-term, U.S. dollar-
denominated obligations of foreign banks (including U.S. branches) that, at the
time of investment have more than $10 billion, or the equivalent in other
currencies, in total assets and in the opinion of BGFA are of comparable quality
to obligations of U.S. banks that may be purchased by the Fund.

Bank Obligations. Each Fund may invest in bank obligations, including
-----------------
certificates of deposit, time deposits, bankers' acceptances and other short-
term obligations of domestic banks, foreign subsidiaries of domestic banks,
foreign branches of domestic banks, and domestic and foreign branches of foreign
banks, domestic savings and loan associations and other banking institutions.
Certificates of deposit are negotiable certificates evidencing the obligation of
a bank to repay funds deposited with it for a specified period of time. Time
deposits are non-negotiable deposits maintained in a banking institution for a
specified period of time at a stated interest rate. Time deposits that may be
held by a Fund will not benefit from insurance from the Bank Insurance Fund or
the Savings Association Insurance Fund administered by the FDIC. Bankers'
acceptances are credit instruments evidencing the obligation of a bank to pay a
draft drawn on it by a customer. These instruments reflect the obligation both
of the bank and of the drawer to pay the face amount of the instrument upon
maturity. The other short-term obligations may include uninsured, direct
obligations, bearing fixed, floating- or variable-interest rates.

Commercial Paper and Short-Term Corporate Debt Instruments. Each Fund may
-----------------------------------------------------------
invest in commercial paper (including variable amount master demand notes),
which consists of short-term, unsecured promissory notes issued by corporations
to finance short-term credit needs. Commercial paper is usually sold on a
discount basis and has a maturity at the time of issuance not exceeding nine
months. Variable amount master demand notes are demand obligations that permit
the investment of fluctuating amounts at varying market rates of interest
pursuant to arrangements between the issuer and a commercial bank acting as
agent for the payee of such notes whereby both parties have the right to vary
the amount of the outstanding indebtedness on the notes. The investment adviser
to each Fund monitors on an on-going basis the ability of an issuer of a demand
instrument to pay principal and interest on demand. Each Fund also may invest in
non-convertible corporate debt securities (e.g., bonds and debentures) with not
more than one year remaining to maturity at the date of settlement. A Fund will
invest only in such corporate bonds and debentures that are rated at the time of
purchase at least "Aa" by Moody's or "AA" by S&P. Subsequent to its purchase
by the Fund, an issue of securities may cease to be rated or its rating may be
reduced below the minimum rating required for purchase by the Fund. The
investment adviser to each Fund will consider such an event in determining
whether the Fund should continue to hold the obligation. To the extent the Fund
continues to hold such obligations, it may be subject to additional risk of
default.

Forward Commitments, When-Issued Purchases and Delayed-Delivery
---------------------------------------------------------------
Transactions. Each Fund may purchase or sell securities on a when-issued or
------------
delayed-delivery basis and make contracts to purchase or sell securities for a
fixed price at a future date beyond customary settlement time. Securities
purchased or sold on a when-is-sued, delayed-delivery or forward commitment
basis involve a risk of loss if the value of the security to be purchased
declines, or the value of the security to be sold increases, before the
settlement date. Although a Fund will generally purchase securities with the
intention of acquiring them, a Fund may dispose of securities purchased on a
when-issued, delayed-delivery or a forward commitment basis before settlement
when deemed appropriate by the investment adviser.

13
<PAGE>

Borrowing Money. As a fundamental policy, each Fund is permitted to
----------------
borrow to the extent permitted under the 1940 Act. However, each Fund currently
intends to borrow money only for temporary or emergency (not leveraging)
purposes, and may borrow up to one-third of the value of its total assets
(including the amount borrowed) valued at the lesser of cost or market, less
liabilities (not including the amount borrowed) at the time the borrowing is
made. While borrowings exceed 5% of a Fund's total assets, the Fund will not
make any investments.

Investment in Warrants. The S&P 500 Stock Fund may invest up to 5% of net
----------------------
assets at the time of purchase in warrants (other than those that have been
acquired in units or attached to other securities), including not more than 2%
of each of their net assets in warrants that are not listed on the New York or
American Stock Exchange. A warrant is an instrument issued by a corporation that
gives the holder the right to subscribe to a specified amount of the
corporation's capital stock at a set price for a specified period of time. The
prices of warrants do not necessarily correlate with the prices of the
underlying securities. The S&P 500 Stock Fund may only purchase warrants on
securities in which the Fund may invest directly.

The S&P 500 Stock Fund and S&P 500 Index Master Portfolio:

Neither the Fund nor the Master Portfolio is sponsored, endorsed, sold or
promoted by Standard & Poor's ("S&P"). S&P makes no representation or warranty,
express or implied, to the Fund, the Master Portfolio or any member of the
public regarding the advisability of investing in securities generally or in the
Fund particularly or the ability of the S&P 500 Index to track general stock
market performance. S&P's only relationship to the Fund is the licensing of
certain trademarks and trade names of S&P and of the S&P 500 Index that is
determined, composed and calculated by S&P without regard to the Fund. S&P has
no obligation to take the needs of the Fund into consideration in determining,
composing or calculating the S&P 500 Index. S&P is not responsible for and has
not participated in the determination of the prices and amount of the Fund's
shares or the timing of the issuance or sale of the Fund's shares or in the
determination or calculation of the equation by which the Fund's shares are to
be converted into cash. S&P has no obligation or liability in connection with
the administration, marketing or trading of the Fund's shares.

S&P does not guarantee the accuracy and/or the completeness of the S&P 500
Index or any data included therein and S&P shall have no liability for any
errors, omissions, or interruptions therein. S&P makes no warranty, express or
implied, as to results to be obtained by the Fund, or any other person or entity
from the use of the S&P 500 Index or any data included therein. S&P makes no
express or implied warranties, and expressly disclaims all warranties of
merchantability or fitness for a particular purpose or use with respect to the
S&P 500 Index or any data included therein. Without limiting any of the
foregoing, in no event shall S&P have any liability for any special, punitive,
indirect, or consequential damages (including lost profits), even if notified of
the possibility of such damages.

RISK CONSIDERATIONS

General. Since the investment characteristics and, therefore, investment
-------
risks directly associated with such characteristics of each Fund correspond to
those of the Master Portfolio in which such Fund invests, the following is a
discussion of the risks associated with the investments of the Master
Portfolios. Once again, unless otherwise specified, references to the investment
policies and risks of a Fund also should be understood as references to the
investment policies and risks of the corresponding

14
<PAGE>

Master Portfolio. The NAV per share of each class of a Fund is neither insured
nor guaranteed, is not fixed and should be expected to fluctuate.

Equity Securities. The stock investments of the Funds are subject to
-----------------
equity market risk. Equity market risk is the possibility that common stock
prices will fluctuate or decline over short or even extended periods. The U.S.
stock market tends to be cyclical, with periods when stock prices generally rise
and periods when prices generally decline. Throughout 1999, the stock market, as
measured by the S&P 500 Index and other commonly used indices, was trading at or
close to record levels. There can be no guarantee that these performance levels
will continue.

Debt Securities. The debt instruments in which the Funds invest are
---------------
subject to credit and interest rate risk. Credit risk is the risk that issuers
of the debt instruments in which the Funds invest may default on the payment of
principal and/or interest. Interest-rate risk is the risk that increases in
market interest rates may adversely affect the value of the debt instruments in
which the Funds invest. The value of the debt instruments generally changes
inversely to market interest rates. Debt securities with longer maturities,
which tend to produce higher yields, are subject to potentially greater capital
appreciation and depreciation than obligations with shorter maturities. Changes
in the financial strength of an issuer or changes in the ratings of any
particular security may also affect the value of these investments. Although
some of the Funds' securities are guaranteed by the U.S. Government, its
agencies or instrumentalities, such securities are subject to interest rate risk
and the market value of these securities, upon which the Funds' daily NAV is
based, will fluctuate. No assurance can be given that the U.S. Government would
provide financial support to its agencies or instrumentalities where it is not
obligated to do so.

Foreign Securities. Investing in the securities of issuers in any foreign
------------------
country, including through American Depositary Receipts ("ADRs"), European
Depositary Receipts ("EDRs") and similar securities, involves special risks
and considerations not typically associated with investing in U.S. companies.
These include differences in accounting, auditing and financial reporting
standards; generally higher commission rates on foreign portfolio transactions;
the possibility of nationalization, expropriation or confiscatory taxation;
adverse changes in investment or exchange control regulations (which may include
suspension of the ability to transfer currency from a country); and political,
social and monetary or diplomatic developments that could affect U.S.
investments in foreign countries. Additionally, dispositions of foreign
securities and dividends and interest payable on those securities may be subject
to foreign taxes, including withholding taxes. Foreign securities often trade
with less frequency and volume than domestic securities and, therefore, may
exhibit greater price volatility. Additional costs associated with an investment
in foreign securities may include higher custodial fees than apply to domestic
custodial arrangements and transaction costs of foreign currency conversions.
Changes in foreign exchange rates also will affect the value of securities
denominated or quoted in currencies other than the U.S. dollar. A Fund's
performance may be affected either unfavorably or favorably by fluctuations in
the relative rates of exchange between the currencies of different nations, by
exchange control regulations and by indigenous economic and political
developments.

Other Investment Considerations. Because the Funds may shift investment
-------------------------------
allocations significantly from time to time, their performance may differ from
funds that invest in one asset class or from funds with a stable mix of assets.
Further, shifts among asset classes may result in relatively high turnover and
transaction (i.e., brokerage commission) costs. Portfolio turnover also can
generate short-term capital gains tax consequences. During those periods in
which a higher percentage of the Asset Allocation and Bond Index Funds' assets
are invested in long-term bonds, those Funds' exposure to interest-rate risk
will be greater because the longer maturity of such securities means they are
generally more sensitive to changes in market interest rates than short-term
securities. The Asset Allocation and Bond Index Funds may enter into futures
transactions, each of which involves risk. The futures contracts and options on

15
<PAGE>

futures contracts that these Funds may purchase may be considered derivatives.
Certain of the floating-and- variable-rate instruments that each Fund may
purchase also may be considered derivatives. Derivatives are financial
instruments whose values are derived, at least in part, from the prices of other
securities or specified assets, indices or rates. Each Fund may use some
derivatives as part of its short-term liquidity holdings and/or substitutes for
comparable market positions in the underlying securities. Some derivatives may
be more sensitive than direct securities to changes in interest rates or sudden
market moves. Some derivatives also may be susceptible to fluctuations in yield
or value due to their structure or contract terms. A Fund may not use
derivatives to create leverage without establishing adequate "cover" in
compliance with SEC leverage rules. Asset allocation and modeling strategies are
employed by BGFA for other investment companies and accounts advised or sub-
advised by BGFA. If these strategies indicate particular securities should be
purchased or sold, at the same time, by a Fund and one or more of these
investment companies or accounts, available investments or opportunities for
sales will be allocated equitably to each by BGFA. In some cases, this procedure
may adversely affect the size of the position obtained for or disposed of by a
Fund or the price paid or received by such Fund.

16
<PAGE>

MANAGEMENT

The business and affairs of the Company are managed under the direction of
its Board of Directors in conformity with Maryland law. The Board of Directors
of the Company supervises the Funds' activities and monitors the Funds'
contractual arrangements with various service providers. The Company's Directors
are also MIP's Trustees. The Company's Board, including a majority of the
Directors who are not "interested persons" (as that term is defined in the
1940 Act) of the Company, has adopted procedures to address potential conflicts
of interest that may arise as a result of the structure of the Boards.

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(s) During Past 5 Years
--------------------- ----------- ---------------------
<S> <C> <C>
Jack S. Euphrat, 78 Director Private Investor.
415 Walsh Road
Atherton, CA 94027

*R. Greg Feltus, 49 Director, Chairman Executive Vice President of Stephens Inc.;
and President President of Stephens Insurance Services Inc.;
Senior Vice President of Stephens Sports
Management Inc.; and President of Investors
Brokerage Insurance Inc.

W. Rodney Hughes, 74 Director Private Investor.
31 Dellwood Court
San Rafael, CA 94901

Leo Soong,/1/ 54 Director Managing Director of Crystal Geyser Roxane
Crystal Geyser Water Co. Water Co.; Co-Founder and President of Crystal
55 Francisco Street, Suite 410 Geyser Water Co.
San Francisco, CA 94133

Richard H. Blank, Jr., 44 Chief Operating Vice President of Stephens Inc.; Director of
Officer, Secretary Stephens Sports Management Inc.; and Director
and Treasurer of Capo Inc.
</TABLE>

____________________

/1/ Elected to the Board of Directors of the Company on February 9, 2000.

17
<PAGE>

Compensation Table
For the Calendar Year Ended December 31, 1999

<TABLE>
<CAPTION>
Aggregate Total Compensation
Compensation from Registrant
Name and Position from Registrant and Fund Complex
------------------ -------------------- -------------------------
<S> <C> <C>
Jack S. Euphrat $5,875 $11,750
Director

*R. Greg Feltus $ 0 $ 0
Director

Thomas S. Goho/1/ $1,500 $ 3,000
Director

W. Rodney Hughes $5,875 $11,750
Director

*J. Tucker Morse/1/ $1,500 $ 3,000
Director
</TABLE>
____________________
/1/ Retired from the Board of Directors of the Company on April 28, 1999.

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 and MIP are considered to be members of the same
fund complex, as such term is defined in Form N-1A under the 1940 Act. The
Directors are compensated by the Company and MIP for their services as
Directors/Trustees. Currently the Directors do not receive any retirement
benefits or deferred compensation from the Company or MIP. 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.

18
<PAGE>

Master/Feeder Structure. Each Fund seeks to achieve its investment objective
-----------------------
by investing all of its assets into the corresponding Master Portfolio of MIP.
The Funds and other entities investing in a Master Portfolio are each liable for
all obligations of such Master Portfolio. However, the risk of a Fund incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance exists and MIP itself is unable to meet its
obligations. Accordingly, the Company's Board of Directors believes that neither
a Fund nor its shareholders will be adversely affected by investing Fund assets
in a Master Portfolio. However, if a mutual fund or other investor withdraws its
investment from such 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.

A Fund may withdraw its investment in a Master Portfolio only if the
Company's Board of Directors determines that such action is in the best
interests of such Fund and its shareholders. Upon any 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 a 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. Whenever a Fund,
as an interestholder of the corresponding 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 that 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. A Fund also may elect to redeem its
interests in the corresponding 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, a 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 Funds 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.

19
<PAGE>

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

As of May 31, 2000, the shareholders identified below were known by the
Company to own 5% or more of the indicated Fund's outstanding shares in the
following capacity:

<TABLE>
<CAPTION>
Name and Address Percentage Nature of
Name of Fund of Shareholder of Fund Ownership
------------ ---------------- ---------- ----------
<S> <C> <C> <C>
Asset Allocation Merrill Lynch Pierce Fenner and Smith 79% Record
Qualified Retirement Plan
265 Davidson Ave., 4th Floor
Somerset, NJ 08873

Putnam Fiduciary Trust Co. TR 5% Record
FBO Kohl's Department Stores Inc.
Savings Plan
859 Willard Street
Quincy, MA 02269

Bond Index Fund Merrill Lynch Pierce Fenner and Smith 70% Record
Qualified Retirement Plan
265 Davidson Ave., 4th Floor
Somerset, NJ 08873

Norwest Bank Minnesota, N.A. 18% Record
P.O. Box 1533
Minneapolis, MN 55480

S&P 500 Stock Bankers Trust Co. TR 39% Record
FBO Betchel Master Trust for Qualified
Employee Benefit Plan
P.O. Box 1742
New York, NY 10008

Merrill Lynch Pierce Fenner and Smith 38% Record
Qualified Retirement Plan
265 Davidson Ave., 4th Floor
Somerset, NJ 08873
</TABLE>

For purposes of the 1940 Act, any person who owns directly or through one or
more controlled companies more than 25% of the voting securities of a company is
presumed to "control" such company. Accordingly, to the extent that a
shareholder identified in the foregoing table is identified as the beneficial
holder of more than 25% of a Fund, or is identified as the holder of record of
more than 25% of a Fund and has voting and/or investment powers, it may be
presumed to control such Fund.

INVESTMENT ADVISER AND OTHER SERVICES PROVIDERS

Investment Adviser. BGFA provides investment advisory services to each Master
------------------
Portfolio pursuant to separate Investment Advisory Contracts (each, a "BGFA
Advisory Contract") with MIP. Pursuant to the Advisory Contracts, BGFA furnishes
to the Trust's Board of Trustees periodic reports on the investment strategy and
performance of each Master Portfolio. BGFA has agreed to provide to the Master
Portfolios, among other things, money market security and fixed-income research,
analysis and statistical

20
<PAGE>

and economic data and information concerning interest rate and security market
trends, portfolio composition, credit conditions and average maturities of each
Master Portfolio's investment portfolio.

BGFA is entitled to receive monthly fees at the annual rate of 0.35%, 0.08%
and 0.05% of the average daily net assets of the Asset Allocation, Bond Index
and S&P 500 Index Master Portfolios, respectively, as compensation for its
advisory services to such Master Portfolios. The Advisory Contracts provide
that the advisory fee is accrued daily and paid monthly.

As to each Master Portfolio, the applicable BGFA Advisory Contract is subject
to annual approval by (i) MIP's Board of Trustees or (ii) vote of a majority (as
defined in the 1940 Act) of the outstanding voting securities of such Master
Portfolio, provided that in either event the continuance also is approved by a
majority of MIP's Board of Trustees who are not "interested persons" (as defined
in the 1940 Act) of MIP or BGFA, by vote cast in person at a meeting called for
the purpose of voting on such approval. As to each Master Portfolio, the
applicable BGFA Advisory Contract is terminable without penalty, on 60 days
written notice by MIP's Board of Trustees or by vote of the holders of a
majority of such Master Portfolio's shares, or, on not less than 60 days written
notice, by BGFA. The applicable BGFA Advisory Contract terminates automatically,
as to the relevant Master Portfolio, in the event of its assignment (as defined
in the 1940 Act).

For the fiscal years ended February 28, 1997, February 28, 1998, February 28,
1999, and for the ten-month period ended December 31, 1999, the corresponding
Master Portfolio of each Fund paid to BGFA the advisory fees indicated below,
without waivers:

<TABLE>
<CAPTION>
Ten-Month
Period Ended
FYE 2/28/97 FYE 2/28/98 FYE 2/28/99 12/31/99
Master Portfolio Fees Paid Fees Paid Fees Paid Fees Paid
---------------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Asset Allocation Master Portfolio $1,153,951 $1,616,380 $1,941,048 $1,667,200
Bond Index Master Portfolio $ 147,204 $ 147,755 $ 89,576 $ 277,850
S&P 500 Index Master Portfolio $ 577,637 $ 939,051 $1,353,414 $1,821,793
</TABLE>

Co-Administrators. The Company has engaged Stephens Inc. ("Stephens") and
-----------------
Barclays Global Investors, N.A. ("BGI") to provide certain administration
services to the Funds. 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 Funds, including
coordination of the services performed by the investment adviser, transfer and
dividend disbursing agent, custodian, shareholder servicing agent, 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 Funds; 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 Company together with those ordinary clerical and
bookkeeping 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.

21
<PAGE>

and printing prospectuses, SAIs and other Fund materials. For providing such
services, Stephens and BGI are entitled to 0.15% of the average daily net assets
of each of the Bond Index and S&P 500 Stock Funds and 0.40% of the average daily
net assets of the Asset Allocation Fund. Effective October 21, 1996, BGI
contracted with Investors Bank & Trust Company ("IBT") to provide certain sub-
administration services. Prior to October 21, 1996, Stephens served as sole
administrator to the Funds.

For the fiscal year ended February 28, 1997, the Funds paid administration
and co-administration fees to Stephens as follows:

Fund FYE 2/28/97
---- -----------
Asset Allocation Fund $572,552
Bond Index Fund $ 60,713
S&P 500 Stock Fund $713,041

For the period beginning October 21, 1996 and ended February 28, 1997, the
Funds paid co-administration fees to BGI as follows:

Fund 10/21/96 - 2/28/97
---- ------------------
Asset Allocation Fund $337,801
Bond Index Fund $ 32,155
S&P 500 Stock Fund $289,821

For the fiscal years ended February 28, 1998, February 28, 1999, and for the
ten-month period ended December 31, 1999, the Funds paid co-administration fees
jointly to Stephens and BGI as follows:

Ten-Month
Period Ended
Fund FYE 2/28/98 FYE 2/28/99 12/13/99
---- ----------- ----------- ------------
Asset Allocation Fund $1,844,243 $2,215,108 $1,900,856
Bond Index Fund $ 158,187 $ 159,900 $ 155,779
S&P 500 Stock Fund $2,698,151 $3,516,796 $3,439,216

Shareholder Servicing Plan. Each of the Funds has adopted a Shareholder
--------------------------
Servicing Plan (each a "Servicing Plan" and collectively the "Servicing Plans").
Under each Servicing Plan and pursuant to each Servicing Agreement, a Fund may
pay one or more servicing agents, as compensation for performing certain
services, monthly fees at the annual rate of up to 0.07% of the average daily
net assets of the S&P 500 Stock and Bond Index Funds, and 0.20% of the average
daily net assets of the Asset Allocation Fund. Payments to a servicing agent by
a Fund will be based upon the average daily net assets of the shares of the Fund
owned of record by the servicing agent on behalf of customers, or by its
customers directly, during the period for which payment is made.

The Servicing Plans will continue in effect from year to year if such
continuance is approved by a majority vote of both the Directors of the Company
and the Servicing Plan Qualified Directors. The Servicing Agreement may be
terminated automatically if assigned, or may be terminated at any time not more
than 60 days nor less than 30 days after notice, by a vote of a majority of the
Disinterested Directors or by a vote of the majority of the outstanding voting
securities of the Shares of a Fund of the Company or the affected Fund(s). The
Servicing Plans may not be amended to increase materially the amount payable
thereunder without the approval of a majority of the Company's Board of
Directors, including a majority of the Disinterested Directors cast at a meeting
called for that specific purpose.

22
<PAGE>

The Servicing Plans require that the servicing agent shall provide to the
Treasurer of the Company, at least quarterly, a written report of the amounts
expended by the servicing agent (and purposes therefor) under each Servicing
Plan, and shall provide to the Company's Board of Directors such information as
may reasonably be necessary to an informed determination of whether the
Agreement shall be implemented or continued.

Beginning October 21, 1996, shareholder servicing fees were paid out of co-
administration fees. For the fiscal year ended February 28, 1997 the Funds paid
shareholder servicing fees as follows and the indicated amounts were waived:

Fees Fees
Fund Paid Waived
---- ---- ------
Asset Allocation Fund $555,606 $ 0
Bond Index Fund $ 31,663 $ 31,663
S&P 500 Stock Fund $454,547 $287,325

Shareholder Servicing Agents. The Funds have adopted a Shareholder Servicing
----------------------------
Plan pursuant to which they have entered into Shareholder Servicing Agreements
with BGI and may enter into similar agreements with other entities
(collectively, "Shareholder Servicing Agents") for the provision of certain
services to Fund shareholders. The services provided may include personal
services relating to shareholder accounts, such as answering shareholder
inquiries, providing reports and other information, and providing services
related to the maintenance of shareholder accounts. For these services, each
Shareholder Servicing Agent is entitled to receive a monthly fee at the annual
rate of up to 0.20% of the average daily value of each Fund represented by
shares owned during the period for which payment is being made by investors with
whom the Shareholder Servicing Agent maintains a servicing relationship, or an
amount that equals the maximum amount payable to the Shareholder Servicing Agent
under applicable laws, regulations or rules, including the Conduct Rules of the
National Association of Securities Dealers, Inc., whichever is less. Stephens
and BGI as co-administrators have agreed to pay these shareholder servicing fees
out of the fees each receives for co-administration services.

A Shareholder Servicing Agent also may impose certain conditions on its
customers, subject to the terms of this Prospectus, in addition to or different
from those imposed by the Company, such as requiring a minimum initial
investment or payment of a separate fee for additional services. Each
Shareholder Servicing Agent is required to agree to disclose any fees it may
directly charge its customers who are Fund shareholders and to notify them in
writing at least 30 days before it imposes any transaction fees.

Distributor. Stephens is the distributor for the Funds' 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, including
discretionary portfolio management services since 1983. Stephens currently
manages investment portfolios for pension and profit sharing plans, individual
investors, foundations, insurance companies and university endowments. Stephens,
as the Company's sponsor and the principal underwriter of the Funds within the
meaning of the 1940 Act, has entered into a Distribution Agreement with the
Company pursuant to which Stephens has the responsibility for distributing Fund
shares. The Distribution Agreement provides that Stephens shall act as agent for
the Funds for the sale of Fund 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 Funds. BGI presently acts as a Selling Agent, but
does not receive any fee from the Funds for such activities.

23
<PAGE>

Custodian. IBT, concurrent with its appointment as sub-administrator for the
---------
Funds on October 21, 1996, also has been retained as custodian to each Fund and
Master Portfolio 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 each Fund; receives and delivers all assets
for each Fund upon purchase and upon sale or maturity; collects and receives all
income and other payments and distributions on account of the assets of each
Fund and pays all expenses of each Fund. IBT is not entitled to receive
compensation for its services as custodian so long as it is entitled to receive
fees from BGI for providing sub-administration services to the Funds.

Transfer and Dividend Disbursing Agent. IBT has been retained to act as the
--------------------------------------
transfer and dividend disbursing agent for the Funds. For its services as
transfer and dividend disbursing agent to the Fund, IBT is entitled to receive
an annual maintenance fee computed on the basis of the number of shareholder
accounts that it maintains for the Funds and to be reimbursed for out-of-pocket
expenses or advances incurred by it in performing its obligations under the
agreement. Stephens and BGI as co-administrators have agreed to pay these fees
and expenses out of the fees each receives for co-administration services. 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 Funds,
including, without limitation, any equipment or supplies that 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 Funds, and was entitled to receive a monthly fee at an
annual rate of 0.10% of the average daily net assets of the Asset Allocation
Fund and 0.03% of the average daily net assets of each of the Bond Index and S&P
500 Stock Funds for such services.

Independent Auditors. KPMG 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.

Expenses. Except for extraordinary expenses, brokerage and other expenses
---------
connected with the execution of portfolio transactions and certain other
expenses that are borne by the Funds, Stephens and BGI have agreed to bear all
costs of the Funds' and the Company's operations.

Brokerage Commissions. For the fiscal years ended February 28, 1997, February
---------------------
28, 1998, February 28, 1999 and for the ten-month period ended December 31,
1999, the corresponding Master Portfolio of each Fund paid the dollar amounts of
brokerage commissions indicated below. None of these brokerage commissions were
paid to affiliated brokers.

24
<PAGE>

<TABLE>
<CAPTION>
Commissions Paid
Ten-Month
Period Ended
Master Portfolio FYE 2/28/97 FYE 2/28/98 FYE 2/28/99 12/31/99
---------------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Asset Allocation Master Portfolio $28,606 $ 11,933 $ 35,317 $ 62,541
Bond Index Master Portfolio $ 0 $ 0 $ 0 $ 0
S&P 500 Index Master Portfolio $69,826 $112,100 $366,484 $271,962
</TABLE>

Securities of Regular Broker/Dealers. As of December 31, 1999, the
------------------------------------
corresponding Master Portfolio of each Fund owned securities of their "regular
brokers or dealers" or their parents, as defined in the 1940 Act, as follows:

<TABLE>
<CAPTION>
Master Portfolio Broker/Dealer Amount
---------------- ------------- ------
<S> <C> <C>
Asset Allocation Master Portfolio J.P. Morgan Co., Inc. $ 615,651
Lehman Brothers Holdings, Inc. $ 287,599
Merrill Lynch & Co., Inc. $ 865,144
Morgan Stanley Dean Witter Discover & Co. $ 2,228,899

Bond Index Master Portfolio Lehman Brothers Holdings, Inc. $ 2,469,758
Merrill Lynch & Co., Inc. $ 4,507,362
Morgan Stanley Dean Witter Discover & Co. $ 1,498,313

S&P 500 Index Master Portfolio J.P. Morgan Co., Inc. $ 8,419,170
Lehman Brothers Holdings, Inc. $ 3,838,461
Merrill Lynch & Co., Inc. $11,709,790
Morgan Stanley Dean Witter Discover & Co. $30,172,639
Paine Webber Group, Inc. $ 2,140,665
</TABLE>

PERFORMANCE INFORMATION

For purposes of advertising, the performance of the Funds may be calculated
on the basis of average annual total return and/or cumulative total return of
shares. Average annual total return of shares is calculated pursuant to a
standardized formula that assumes that an investment in shares of a Fund was
purchased with an initial payment of $1,000 and that the investment was redeemed
at the end of a stated period of time, after giving effect to the reinvestment
of dividends and distributions during the period. The return of shares is
expressed as a percentage rate that, if applied on a compounded annual basis,
would result in the redeemable value of the investment in shares at the end of
the period. Advertisements of the performance of shares of a Fund include the
Fund's average annual total return of shares for one, five and ten year periods,
or for shorter time periods depending upon the length of time during which such
Fund has operated. Cumulative total return of shares is computed on a per share
basis and assumes the reinvestment of dividends and distributions. Cumulative
total return of shares generally is expressed as a percentage rate that is
calculated by combining the income and principal charges for a specified period
and dividing by the NAV per share at the beginning of the period.

Advertisements may include the percentage rate of total return of shares or
may include the value of a hypothetical investment in shares at the end of the
period that assumes the application of the percentage rate of total return. The
performance of the Bond Index Fund may be advertised in terms of yield. The
yield on shares of these Funds is calculated by dividing each Fund's net
investment income per share earned during a specified period (usually 30 days)
by its NAV per share on the last day of such period and annualizing the result.
Performance figures are based on historical results and are not intended to

25
<PAGE>

indicate future performance. Investors should remember that performance is a
function of the type and quality of portfolio securities held by the Master
Portfolio in which the Fund invests and is affected by operating expenses.
Performance information, such as that described above, may not provide a basis
for comparison with other investments or other investment companies using a
different method of calculating performance.

As and to the extent required by the SEC, an average annual compound rate of
return ("T") will be computed by using the value at the end of a specified
period ("ERV") of a hypothetical initial investment ("P") over a period of years
("n") according to the following formula: P(1+T)/n/ = ERV. In addition, as
indicated in the Prospectus, the Funds, at times, also may calculate total
return based on net asset value per share (rather than the public offering
price) in which case the figures would not reflect the effect of any sales
charge that would have been paid by an investor, or based on the assumption that
a sales charge other than the maximum sales charge (reflecting a Volume
Discount) was assessed provided that total return data derived pursuant to the
calculation described above also are presented.

The average annual total returns on the Funds from July 2, 1993 (commencement
of operations) to December 31, 1999, for the five-year period ended December 31,
1999 and for the calendar year ended December 31, 1999 were as follows:

Commencement Five-Year One Year
Through Period Ended Period Ended
Fund 12/31/99 12/31/99 12/31/99
---- ------------ ------------ ------------
Asset Allocation Fund 15.13% 19.47% 9.64%
Bond Index Fund 5.25% 7.21% -2.69%
S&P 500 Stock Fund 22.25% 28.21% 20.59%

The cumulative total returns on the Funds from July 2, 1993 (commencement of
operations) to December 31, 1999 were as follows:

Commencement
Through
Fund 12/31/99
---- ------------
Asset Allocation Fund 146.96%
Bond Index Fund 39.17%
S&P 500 Stock Fund 267.31%

The Asset Allocation and Bond Index Funds may advertise certain yield
information. As, and to the extent required by the SEC, yield will be calculated
based on a 30-day (or one-month) period, computed by dividing the net investment
income per share earned during the period by the maximum offering price per
share on the last day of the period, according to the following formula: YIELD =
2[(((a-b)/cd)+1)6-1], where a = dividends and interest earned during the period;
b = expenses accrued for the period (net of reimbursements); c = the average
daily number of shares outstanding during the period that were entitled to
receive dividends; and d = the maximum offering price per share on the last day
of the period. The net investment income of a Fund includes actual interest
income, plus or minus amortized purchase discount (which may include original
issue discount) or premium, less accrued expenses. Realized and unrealized gains
and losses on portfolio securities are not included in a Fund's net investment
income. For purposes of sales literature, yield also may be calculated on the
basis of the net asset value per share rather than public offering price,
provided that the yield data derived pursuant to the calculation described above
also are presented.

The current yield of the Bond Index Fund for the 30-day period ended December
31, 1999 was 6.52%.

26
<PAGE>

The yield for a 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.

Yield information for a Fund may be useful in reviewing the performance of the
Fund and for providing a basis for comparison with investment alternatives. A
Fund's yield, 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.

In addition, investors should recognize that changes in the net asset value of
shares of a Fund affect the yield of such Fund 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 for
the Funds may be useful in reviewing the performance of such Funds and for
providing a basis for comparison with investment alternatives. The yield of a
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.
Additional information about the performance of each Fund is contained in the
Annual Report that may be obtained by calling the Company at 1-888-204-3956.

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

The performance information for the Bond Index Fund also may be compared, in
reports and promotional literature, to the Consumer Price Index, the Salomon One
Year Treasury Benchmark Index, Ten Year U.S. Government Bond Average, S&P's
Corporate Bond Yield Averages, Schabacker Investment Management Indices, Salomon
Brothers High Grade Bond Index, Lipper General Bond Fund Average, Lipper
Intermediate Investment Grade Debt Fund Average, Lehman Brothers
Government/Corporate Bond Index, Lehman Brothers Intermediate
Government/Corporate Bond Index, and Lehman Brothers Long-Term High Quality
Government/Corporate Bond Index. The performance information for the Bond Index
Fund also may be compared to the S&P 500 Index, the Dow Jones Industrial
Average, the Lehman Brothers 20+ Treasury Index, the Lehman Brothers 5-7 Year
Treasury Index, Bank Averages (which is 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), or to other indices of bonds,
stocks, or government securities, or by other services, companies, publications,
or persons who monitor mutual funds on overall performance or other criteria,
but not to money market mutual funds.

Performance information for the Asset Allocation Fund and the S&P 500 Stock
Fund may be compared, in reports and promotional literature, to the S&P 500
Index, the Wilshire 5000 Equity Index, the Lehman Brothers 20+ Treasury Index,
Donoghue's Money Fund Averages, the Lehman Brothers 5-7 Year Treasury Index,
Lehman Brothers Government Bond Index, Lehman Brothers Treasury Bond Index,
Lipper Balanced Fund Average, Lipper Growth Fund Average, Lipper Flexible
Portfolio Fund Average, Lehman Brothers Intermediate Treasury Index, 91-Day
Treasury Bill Average, or other appropriate managed or unmanaged indices of the
performance of various types of investments, so that investors may compare a
Fund's results with those of indices widely regarded by investors as
representative of the

27
<PAGE>

security markets in general. Unmanaged indices may assume the reinvestment of
dividends, but generally do not reflect deductions for administrative and
management costs and expenses. Managed indices generally do reflect such
deductions.

The Company also may use the following information in advertisements and other
types of literature, only to the extent the information is appropriate for a
Fund: (i) the Consumer Price Index may be used to assess the real rate of return
from an investment in a Fund; (ii) other government statistics, including, but
not limited to, The Survey of Current Business, may be used to illustrate
investment attributes of a Fund or the general economic, business, investment,
or financial environment in which a Fund operates; (iii) the effect of tax-
deferred compounding on the investment returns of a Fund, or on returns in
general, may be illustrated by graphs, charts, etc., where such graphs or charts
would compare, at various points in time, the return from an investment in a
Fund (or returns in general) on a tax-deferred basis (assuming reinvestment of
capital gains and dividends and assuming one or more tax rates) with the return
on a taxable basis; and (iv) the sectors or industries in which a Fund invests
may be compared to relevant indices of stocks or surveys (e.g., S&P Industry
Surveys) to evaluate a Fund's historical performance or current or potential
value with respect to the particular industry or sector.

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 BGFA, 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
assets and categories of assets under management by the Master Portfolios'
investment adviser or its affiliates.

A 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., (including the Lipper
General Bond Fund Average, the Lipper Intermediate Investment Grade Debt Fund
Average, the Lipper Bond Fund Average, the Lipper Growth Fund Average, the
Lipper Flexible Fund Average), Donoghue's Money Fund Report, including
Donoghue's Taxable Money Market Fund Average or Morningstar, Inc., independent
services that monitor the performance of mutual funds. A 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 a Fund's past
performance with that of its competitors. Of course, past performance cannot be
a guarantee of future results.

Other Advertising Items. From time to time, the Company also may include in
-----------------------
advertisements or other marketing materials a discussion of certain of the
objectives of the investment strategy of the Asset Allocation Fund and a
comparison of this strategy with other investment strategies. In particular, the
responsiveness of this Fund to changing market conditions may be discussed. For
example, the Company may describe the benefits derived by having BGFA, as
investment adviser, monitor and reallocate investments among the three asset
categories described in a Fund's Prospectus. The Company's advertising or other
marketing materials also might set forth illustrations depicting examples of
recommended allocations in different market conditions.

The Company also may discuss in advertising and other types of literature that
a Fund has been assigned a rating by a nationally recognized statistical rating
organization ("NRSRO"), such as Standard

28
<PAGE>

& 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
a Fund's performance with other investments that are assigned ratings by NRSROs.
Any such comparisons may be useful to investors who wish to compare a Fund's
past performance with other rated investments. Of course past performance cannot
be a guarantee of future results. The Company also may include from time to
time, a reference to certain marketing approaches of the Distributor, including,
for example, a reference to a potential shareholder being contacted by a
selected broker or dealer. General mutual fund statistics provided by the
Investment Company Institute may also be used.

DETERMINATION OF NET ASSET VALUE

Net asset value per share for a Fund is determined on each day the Fund is
open for trading. Each Fund's investment in the corresponding Master Portfolio
of the Trust is valued based on its ownership interest in the Master Portfolio's
net assets.

Because the Master Portfolios are closed on certain days when the NYSE is open
for business, shareholders would not be able to redeem their shares on certain
days when there may be significant changes in the value of a Master Portfolio's
portfolio securities.

Master Portfolio securities for which market quotations are available are
valued at latest prices. Securities of a Master Portfolio for which the primary
market is a national securities exchange or the National Association of
Securities Dealers Automated Quotations National Market System are valued at
last sale prices. In the absence of any sale of such securities on the valuation
date and in the case of other securities, including U.S. Government securities
but excluding money market instruments maturing in 60 days or less, the
valuations are based on latest quoted bid prices. Money market instruments
maturing in 60 days or less are valued at amortized cost with cost being the
value of the security on the preceding day (61st day). Futures contracts will be
marked to market daily at their respective settlement prices determined by the
relevant exchange. Options listed on a national exchange are valued at the last
sale price on the exchange on which they are traded at the close of the NYSE,
or, in the absence of any sale on the valuation date, at latest quoted bid
prices. Options not listed on a national exchange are valued at latest quoted
bid prices. Debt securities maturing in 60 days or less are valued at amortized
cost. In all cases, bid prices will be furnished by an independent pricing
service approved by the Board of Trustees. Prices provided by an independent
pricing service may be determined without exclusive reliance on quoted prices
and may take into account appropriate factors such as institutional-size trading
in similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics and other market data. Securities held under a
repurchase agreement will be valued at a price equal to the amount of the cash
investment at the time of valuation on the valuation date. The market value of
the underlying securities shall be determined in accordance with the applicable
procedures, as described above, for the purpose of determining the adequacy of
collateral. All other securities and other assets of the Funds for which current
market quotations are not readily available are valued at fair value as
determined in good faith by MIP's Board of Trustees and in accordance with
procedures adopted by the Trustees.

29
<PAGE>

PURCHASES, REDEMPTION AND PRICING OF SHARES

Terms of Purchase. The Funds are generally open Monday through Friday and are
-----------------
closed on weekends and NYSE holidays. The holidays on which the NYSE is closed
currently are: New Year's Day, Martin Luther King, Jr.'s Birthday, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. 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.

In-Kind Purchases. Payment for shares of a Fund may, at the discretion of the
------------------
investment 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 such 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. Each Fund immediately will transfer to its corresponding Master
Portfolio any and all securities received by it in connection with an in-kind
purchase transaction, in exchange for interests in such Master Portfolio.

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.

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 a 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 that is applicable to shares of a Fund
as provided from time to time in the Prospectus.

PORTFOLIO TRANSACTIONS

Since each Fund invests all of its assets in a corresponding Master Portfolio
of MIP, set forth below is a description of the Master Portfolios' policies
governing portfolio securities transactions.

30
<PAGE>

negotiations with the broker based on the quality and quantity of execution
services provided by the broker in light of generally prevailing rates. Orders
may be directed to any broker including, to the extent and in the manner
permitted by applicable law, Stephens or Barclays Global Investors Services. In
the over-the-counter market, securities are generally traded on a "net" basis
with dealers acting as principal for their own accounts without a stated
commission, although the price of the security usually includes a profit to the
dealer. In underwritten offerings, securities are purchased at a fixed price
that includes an amount of compensation to the underwriter, generally referred
to as the underwriter's concession or discount.

Under the 1940 Act, persons affiliated with a Master Portfolio are prohibited
from dealing with the Master Portfolio as a principal in the purchase and sale
of portfolio securities unless an exemptive order allowing such transactions is
obtained from the Commission or an exemption is otherwise available. A Master
Portfolio may purchase securities from underwriting syndicates of which Stephens
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 MIP's
Board of Trustees.

A Master Portfolio 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 Board of Trustees, BGFA is responsible for each
Master Portfolio's investment decisions and the placing of portfolio
transactions. In placing orders, it is the policy of each Master Portfolio 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. BGFA generally
seeks reasonably competitive spreads or commissions.

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. Certain of the
brokers or dealers with whom the Master Portfolios may transact business offer
commission rebates to the Master Portfolios. BGFA considers such rebates in
assessing the best overall terms available for any transaction. BGFA may cause
the Asset Allocation and S&P 500 Index Master Portfolios to pay a broker/dealer
that 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
provided by such broker/dealer, viewed in terms of either the particular
transaction or the overall responsibilities of BGFA. 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 Master Portfolio. MIP's Board of Trustees will
periodically review the commissions paid by the Master Portfolio to consider
whether the commissions paid over representative periods of time appear to be
reasonable in relation to the benefits inuring to the Master Portfolio. 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 BGFA

31
<PAGE>

exercises investment discretion. Conversely, the Master Portfolio 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 investment
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 investment 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 investment adviser with lawful and appropriate
assistance in the performance of its investment decision-making
responsibilities." Accordingly, the price to the Master Portfolio 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.

Portfolio Turnover. The portfolio turnover rates for the Bond Index, Asset
------------------
Allocation and S&P 500 Index Master Portfolios generally are not expected to
exceed 100%, 450% and 50%, respectively. The higher portfolio turnover rates
for the Asset Allocation and Bond Index Master Portfolios may result in higher
transaction (i.e., principal markup/markdown, brokerage, and other transaction)
costs. The portfolio turnover rate will not be a limiting factor when BGFA deem
portfolio changes appropriate.

DIVIDENDS, DISTRIBUTIONS AND TAXES

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

The Company intends to continue to qualify each 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. Each Fund will be treated as a separate entity for federal income
tax purposes and, thus, the provisions of the Code applicable to regulated
investment companies generally will be applied individually to each Fund, rather
than to the Company as a whole. Accordingly, income, gains and expenses will be
determined separately for each Fund. As a regulated investment company, each
Fund will not be taxed on its net income and gains distributed to its
shareholders.

Qualification as a regulated investment company under the Code requires, among
other things, that (i) each 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 (ii) each Fund diversify its
holdings so that, at the end of each quarter of the taxable year, (a) 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 (b) 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

32
<PAGE>

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

Each Fund must also distribute or be deemed to distribute to its shareholders
at least 90% of the aggregate of its ordinary income, net short-term capital
gain and certain other items 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 twelve
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. Each Fund intends to pay out substantially all of its net income
and gains (if any) for each year.

Master Portfolios. Each Fund seeks to qualify as a regulated investment
------------------
company by investing substantially all of its assets in its corresponding Master
Portfolio. Under the Code, each Master Portfolio will be treated as a
partnership rather than as a regulated investment company or a corporation. As
a partnership, any interest, dividends, gains and losses of the Master Portfolio
shall be deemed to have been "passed through" to the corresponding 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 a Master
Portfolio were to accrue but not distribute any interest, dividends or gains,
the corresponding Fund would be deemed to have realized its proportionate share
of such income without receipt of any corresponding distribution. However, each
Master Portfolio will seek to minimize recognition by its investors (such as
Fund) of interest, dividends and gains without a corresponding distribution.

Excise Tax. A 4% nondeductible excise tax will be imposed on each Fund (other
-----------
than to the extent of its tax-exempt interest income) to the extent it does not
meet certain minimum distribution requirements of its income and gains by the
end of each calendar year. Each Fund intends to actually or be deemed to
distribute substantially all of its income and gains (if any) 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 purchased by a Master
Portfolio at a market discount (generally at a price less than its principal
amount) generally will be treated as ordinary income to the extent of the
portion of market discount that accrued, but was not previously recognized
pursuant to an available election, during the term the Master Portfolio held the
debt obligation.

If an option granted by a Master Portfolio lapses or is terminated through a
closing transaction, such as a repurchase by the Master Portfolio of the option
from its holder, the Master Portfolio will realize a short-term capital gain or
loss, depending on whether the premium income is greater or less than the amount
paid by the Master Portfolio in the closing transaction. Some realized capital
losses may be deferred if they result from a position that is part of a
"straddle," discussed below. If securities are sold by a Master Portfolio
pursuant to the exercise of a call option granted by it, the Master Portfolio
will add the premium received to the sale price of the securities delivered in
determining the amount of gain or loss on the sale. If securities are purchased
by a Master Portfolio pursuant to the exercise of a put option written by it,
the Master Portfolio will subtract the premium received from its cost basis in
the securities purchased.

33
<PAGE>

Under Section 1256 of the Code, a Master Portfolio will be required to "mark
to market" its positions in "Section 1256 contracts," which generally include
regulated futures contracts and listed non-equity options. In this regard,
Section 1256 contracts will be deemed to have been sold at market value at the
end of each taxable year. Under Section 1256 of the Code, sixty percent (60%) of
any net gain or loss realized on all dispositions of Section 1256 contracts,
including deemed dispositions under the mark-to-market regime, generally will be
treated as long-term capital gain or loss, and the remaining forty percent (40%)
will be treated as short-term capital gain or loss. Transactions that qualify
as designated hedges are excepted from the mark-to-market and 60%/40% rules.

Under Section 988 of the Code, a Master Portfolio generally will recognize
ordinary income or loss to the extent that gain or loss realized on the
disposition of portfolio securities is attributable to changes in foreign
currency exchange rates. In addition, gain or loss realized on the disposition
of a foreign currency forward contract, futures contract, option or similar
financial instrument, or of foreign currency itself, will generally be treated
as ordinary income or loss. The Master Portfolios will attempt to monitor
Section 988 transactions, where applicable, to avoid adverse federal income tax
impact.

Offsetting positions held by a Master Portfolio involving certain financial
forward, futures or options contracts may be considered, for tax purposes, to
constitute "straddles." "Straddles" are defined to include "offsetting
positions" in actively traded personal property. The tax treatment of
"straddles" is governed by Section 1092 of the Code, which, in certain
circumstances, overrides or modifies the provisions of Section 1256 of the Code,
described above. If a Master Portfolio were treated as entering into
"straddles" by engaging in certain financial forward, futures or option
contracts, such straddles could be characterized as "mixed straddles" if the
futures, forwards, or options comprising a part of such straddles were governed
by Section 1256 of the Code. The Master Portfolios may make one or more
elections with respect to "mixed straddles." Depending upon which election is
made, if any, the results with respect to a Master Portfolio may differ.
Generally, to the extent the straddle rules apply to positions established by a
Master Portfolio, losses realized by the Master Portfolio may be deferred to the
extent of unrealized gain in any offsetting positions. Moreover, as a result of
the straddle and the conversion transaction rules, short-term capital loss on
straddle positions may be recharacterized as long-term capital loss, and long-
term capital gain may be characterized as short-term capital gain or ordinary
income.

If a 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; (iii) a futures or forward contract, or (iv) other
transactions identified in future Treasury Regulations.

Under Section 1260 of the Code, the amount of long-term capital gain a
taxpayer may recognize from derivative transactions is limited with respect to
certain pass-through entities. The amount of long-term capital gain is limited
to the amount of such gain the taxpayer would have had if the taxpayer owned a
direct interest in the pass-through entity during the term of the derivative
contract. Any gain in excess of this amount is treated as ordinary income. An
interest charge is imposed on the amount of gain that is treated as ordinary
income. The Master Portfolios do not anticipate engaging in any derivative
transactions that would be subject to these rules.

34
<PAGE>

of its PFIC shares. If the Master Portfolio invests in a PFIC, the Master
Portfolio intends to make an available election to mark-to-market its interest
in PFIC shares. Under the election, the Master Portfolio will be treated as
recognizing at the end of each taxable year the difference, if any, between the
fair market value of its interest in the PFIC shares and its basis in such
shares. In some circumstances, the recognition of loss may be suspended. The
Master Portfolio will adjust its basis in the PFIC shares by the amount of
income (or loss) recognized. Although such income (or loss) will be taxable to
the Master Portfolio as ordinary income (or loss) notwithstanding any
distributions by the PFIC, the corresponding Fund will not be subject to federal
income tax or the interest charge with respect to its indirect interest in the
PFIC, if the Master Portfolio makes the available election.

Foreign Taxes. Income and dividends received by a Fund (through a
--------------
corresponding Master Portfolio) 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 such 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 Funds do not expect to be
eligible to make such an election.

Capital Gain Distributions. Distributions that are designated by a Fund as
---------------------------
capital gain distributions will be taxed to shareholders as long-term capital
gain (to the extent such distributions 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.

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 shall 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. This loss disallowance rule does not apply to losses realized
under a periodic redemption plan.

35
<PAGE>

eliminate the benefit of lower marginal income tax rates). Obviously, 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.

Corporate Shareholders. Corporate shareholders of the Funds may be eligible
----------------------
for the dividends-received deduction on dividends distributed out of a Fund's
net investment income attributable to dividends received from domestic
corporations, which, if received directly by the corporate shareholder, would
qualify for such deduction. A distribution by a Fund attributable to dividends
of a domestic corporation will only qualify for the dividends-received deduction
if (i) the corporate shareholder generally holds the Fund shares upon which the
distribution is made for at least 46 days during the 90 day period beginning 45
days prior to the date upon which the shareholder becomes entitled to the
distribution; and (ii) the Fund generally holds the shares of the domestic
corporation producing the dividend income for at least 46 days during the 90 day
period beginning 45 days prior to the date upon which the Fund becomes entitled
to such dividend income.

Foreign Shareholders. Under the Code, distributions attributable to ordinary
---------------------
income, net short-term capital gain and certain other items realized by a Fund
and paid to a nonresident alien individual, foreign trust (i.e., trust that 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 (each, a "foreign shareholder") will be subject to federal
withholding tax (at a rate of 30% or, if an income tax treaty applies, at the
lower treaty rate, if any). Such tax withheld generally is not refundable.
Withholding will not apply if a distribution paid by a 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. persons will apply. Gain on the disposition of
Fund shares and capital gain distributions generally are not subject to tax
withholding applicable to foreign shareholders.

New Regulations. On October 6, 1997, the Treasury Department issued new
----------------
regulations (the "New Regulations") that 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, 2000, subject to certain
transition rules. Among other things, the New Regulations will permit the Fund
to estimate the portion of their distributions qualifying as capital gain
distributions for purposes of determining the portion of their distributions
paid to foreign shareholders that will be subject to federal income tax
withholding. Prospective investors are urged to consult their own tax advisors
regarding the impact to them of the New Regulations.

Other Matters. Investors should be aware that the investments to be made by a
--------------
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 non-cash income, such non-cash income
could be recognized by a 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 a Fund. Each investor is urged to consult
his or her tax advisor regarding federal, state, local and foreign taxes
applicable to him or her.

36
<PAGE>

CAPITAL STOCK

The authorized capital stock of the Company consists of 21,300,000,000 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 ten 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 or funds.

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
submitted 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.

The Master Portfolio. Whenever a 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. If the Master Portfolio's 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 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.

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 a
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 Prospectus of each Fund 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

37
<PAGE>

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 1940
Act.

Each share of a 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 a 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 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 Declarations 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 each Master Portfolio of MIP have substantially identical
voting and other rights as those rights enumerated above for shares of the
Funds. MIP also intends to dispense with annual meetings, but is required by
Section 16(c) of the Act to hold a special meeting and assist investor
communications under the circumstances described above with respect to the
Company. Whenever a 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 a Fund does not receive instruction from certain of its
shareholders on how to vote the corresponding shares of a Master Portfolio, such
Fund will vote such shares in the same proportion as the shares for which the
Fund does receive voting instructions.

38
<PAGE>

ADDITIONAL INFORMATION ON THE FUNDS

The Company provides annual and semi-annual reports to all shareholders. The
annual reports contain audited financial statements and other information about
the Funds 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.

The Registration Statement of the Company and the Trust, including the
Prospectus for each Fund, the SAI and the exhibits filed therewith, may be
examined at the office of the SEC in Washington, D.C. Statements contained in a
Prospectus or the SAI as to the contents of any contract or other document
referred to herein or in a 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.

No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and in the
Company's official sales literature in connection with the offer of the Funds'
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
offering may not lawfully be made.

FINANCIAL STATEMENTS

The audited financial statements, including the portfolio of investments,
financial highlights and independent auditors' reports for the ten-month period
ended December 31, 1999 for the Asset Allocation, Bond Index and S&P 500 Stock
Funds and corresponding Master Portfolios are hereby incorporated by reference
to the Company's Annual Report, as filed with the SEC on February 28, 2000. The
audited financial statements are attached to all SAIs delivered to shareholders
or prospective shareholders.

39
<PAGE>

APPENDIX
--------

INVESTMENT RATINGS

The following describes how three of the major rating agencies classify their
investment ratings. Ratings of debt securities represent the rating agency's
opinion regarding their quality, and are not a guarantee of quality. Credit
ratings attempt to evaluate the safety of principal and interest payments, and
do not evaluate the risks of fluctuations in market value. Furthermore, rating
agencies may fail to make timely changes in credit ratings in response to
subsequent events, so that an issuer's current financial condition may be better
or worse than the rating indicates. Subsequent to purchase by a Master
Portfolio, the rating of a debt security may be reduced below the minimum rating
required for initial purchase by the Master Portfolio or the security may cease
to be rated. BGFA will consider either such event in determining whether a
Master Portfolio should continue to hold the security. In no event will a Master
Portfolio hold more than 5% of its net assets in debt securities rated below
"BBB" by S&P or below "Baa" by Moody's or in unrated low quality (below
investment grade) debt securities. BGFA does not make any representation that
the investment ratings provided by such rating agencies are accurate or
complete.

Standard & Poor's Ratings

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 although
it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
Bonds rated "BBB" by S&P are regarded as having an adequate capacity to pay
interest and repay principal. Whereas such bonds 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 debt in this category than in higher rated categories.

Commercial Paper Ratings. Commercial paper with the greatest capacity for timely
------------------------
payment is rated "A" by S&P. Issues within this category are further redefined
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 of the best
------------
quality. 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 elements
may be of greater amplitude or there may be other elements present that make the
long-term risks appear somewhat larger than is the case with "Aaa" securities.
Bonds that are rated "A" possess many favorable investment attributes and are
to be considered upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment sometime in the future. Bonds that are
rated "Baa" by Moody's are considered 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
<PAGE>

over longer periods of time. Such bonds lack outstanding investment
characteristics and, in fact, have speculative characteristics as well.

Commercial Paper Ratings. Moody's employs the designations of "Prime-1,"
-------------------------
"Prime-2" and "Prime-3" to indicate the relative capacity of the rated
issuers to repay punctually. "Prime-1" is the highest commercial paper rating
assigned by Moody's. Issuers of "Prime-1" obligations must have a superior
capacity for repayment of short-term promissory obligations, and will normally
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.

Fitch Investors Service Ratings

Bond Ratings. Bonds rated "BBB" by Fitch are considered to be investment grade
------------
and of satisfactory 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 weaken this ability than with
bonds having higher ratings.
<PAGE>

BARCLAYS GLOBAL INVESTORS FUNDS, INC.

STATEMENT OF ADDITIONAL INFORMATION

MONEY MARKET FUND

July 1, 2000

_______________________

Barclays Global Investors 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," at times the "Trust"). The Master Portfolio
has the same investment objective as the Fund as described in its Prospectus.

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 July 1, 2000. 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 Barclays Global
Investors 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>
Fund History......................................................... 1
Description of the Fund and Its Investments and Risks................ 1
Portfolio Securities................................................. 3
Management........................................................... 10
Control Persons and Principal Holders of Securities.................. 12
Investment Adviser and Other Service Providers....................... 12
Performance Information.............................................. 15
Determination of Net Asset Value..................................... 17
Purchases, Redemption and Pricing of Shares.......................... 18
Portfolio Transactions............................................... 19
Dividends, Distributions and Taxes................................... 21
Capital Stock........................................................ 24
Additional Information on the Fund................................... 26
Financial Statements................................................. 26
Appendix............................................................. A-1
</TABLE>
<PAGE>

FUND HISTORY

The Company, an open-end management investment company, was incorporated in
Maryland on October 15, 1992 and currently offers ten series including the Fund.
MIP, organized as a Delaware business trust on October 21, 1993, consists of
twelve series including the Money Market Master Portfolio. The Company's
principal office is located at 111 Center Street, Little Rock, Arkansas 72201.
The Fund invests all of its assets in the corresponding Money Market Master
Portfolio of MIP that has the same or substantially the same investment
objective as the Fund.

DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS

Investment Restrictions. The Fund and Master Portfolio have adopted
-----------------------
investment policies that may be fundamental or non-fundamental. Fundamental
policies cannot be changed without approval by the holders of a majority (as
defined in the Investment Company Act of 1940, as amended (the "1940 Act")) of
the outstanding voting securities of such Fund or Master Portfolio, as the case
may be. Non-fundamental policies may be changed without shareholder approval by
vote of a majority of the Directors of the Company or the Trustees of the Trust,
as the case may be, at any time.

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);

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

1
<PAGE>

(5) purchase securities on margin (except for short-term credits necessary for
the clearance of transactions) 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);

(8) borrow money or issue senior securities as defined in 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
<PAGE>

(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 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.

(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.

PORTFOLIO SECURITIES

To the extent set forth in this SAI, the Fund through its investment in the
corresponding Master Portfolio may invest in the securities described below. To
avoid the need to refer to both the Fund and the Master Portfolio in every
instance, the following sections generally refers to the Fund only.

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.

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 agencies or
instrumentalities. Payment of principal and interest on U.S. Government
obligations (i) may be backed by the full faith and credit of the United States
(as with U.S. Treasury obligations and GNMA certificates) or (ii) may be backed
solely by the issuing or guaranteeing agency or instrumentality itself (as with
FNMA notes). In the latter case, the investor must look principally to the
agency or instrumentality issuing or guaranteeing the obligation for ultimate
repayment, which agency or instrumentality may be privately owned. There can be
no assurance that the U.S. Government would provide financial support to its
agencies or instrumentalities where it is not obligated to do so. As a general
matter, the value of debt instruments, including U.S. Government obligations,
declines when market interest rates increase and rises when market interest
rates decrease. Certain types of U.S. Government obligations are subject to
fluctuations in yield or value due to their structure or contract terms.

Asset-Backed Securities. The Fund may purchase asset-backed securities, which
------------------------
are securities backed by installment contracts, credit-card receivables or other
assets.

3
<PAGE>

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 effect ''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 varies with the maturities of the underlying instruments and
is likely to be substantially less than the original maturity of the assets
underlying the securities as a result of prepayments. For this and other
reasons, an asset-backed security's stated maturity 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 that 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 that 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 that vary depending upon market conditions and the remaining 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 withdrawal 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 marketable than comparable obligations of U.S. banks,
that a foreign jurisdiction might impose withholding taxes on interest income
payable on those obligations, that foreign deposits may be seized or
nationalized, that foreign governmental restrictions (such as foreign exchange
controls) may be adopted that might adversely affect the payment of principal
and interest on those obligations and that the selection of those obligations
may be more difficult because there may be less publicly available information
concerning foreign banks or the accounting, auditing and financial reporting
standards, practices and requirements applicable to foreign banks may differ
from those applicable to U.S. banks. In that connection, foreign banks are not
subject to examination by any U.S. Government agency or instrumentality.

4
<PAGE>

whereby both parties have the right to vary the amount of the outstanding
indebtedness on the notes. The investment adviser to the Master Portfolio
monitors on an ongoing basis the ability of an issuer of a demand instrument to
pay principal and interest on demand. The Fund also may invest in high quality
non-convertible corporate debt securities (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 below the minimum rating required for
purchase by the Fund. The investment adviser to the Master Portfolio will
consider such an event in determining whether the Master Portfolio should
continue to hold the obligation. To the extent the Master Portfolio continues to
hold such obligations, it may be subject to additional risk of default.

Repurchase Agreements. 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. The period of maturity is usually
quite short, often overnight or a few days, although it may extend over a number
of months. 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 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 repurchase agreement
transactions with other funds advised by BGFA.

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 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
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.

Letters of Credit. Certain of the debt obligations, certificates of
------------------
participation, commercial paper and other short-term obligations that 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
that assumes the obligation for payment of principal and interest in the event
of default by the issuer. Letter of credit-backed investments must, in the
opinion of BGFA, as investment adviser, be of investment quality comparable to
other permitted investments of the Fund.

5
<PAGE>

Investment Company Securities. The Fund may invest in securities issued by
------------------------------
other investment companies that principally invest in securities of the type in
which the Fund invests. Under the 1940 Act, the Fund's investment in such
securities currently is limited to, subject to certain exceptions, (i) 3% of the
total voting stock of any one investment company, (ii) 5% of the Fund's net
assets with respect to any one investment company and (iii) 10% of the Fund's
net assets in the aggregate. Investments in the securities of other investment
companies generally will involve duplication of advisory fees and certain other
expenses.

Municipal Obligations. The Fund may invest in municipal obligations. Municipal
----------------------
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 revenues. The
ability of an issuer to make payments on notes is therefore especially dependent
on such tax receipts, proceeds from bond sales or other revenues, 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 working 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 commercial paper, with
remaining maturities not exceeding 13 months.

Floating- and Variable-Rate Obligations. The Fund may purchase debt
----------------------------------------
instruments with interest rates that are periodically adjusted at specified
intervals or whenever a benchmark rate or index changes. The floating- and
variable-rate instruments that the Fund may purchase include certificates of
participation in such instruments. These adjustments generally limit the
increase or decrease in the amount of interest received on the debt instruments.
Floating- and variable-rate instruments are subject to interest rate risk and
credit risk.

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 that are not so rated only if BGFA determines that at the
time of investment the

6
<PAGE>

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.

Participation Interests. The Fund may invest in participation interests in
------------------------
any type of security in which the Fund may invest. A 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 under
--------------------
the Securities Act of 1933, as amended (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 difficulty in selling securities may result in a loss
or be costly to the Fund.

Unrated Investments. The Fund may purchase instruments that are not rated if,
-------------------
in the opinion of BGFA, as investment 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

7
<PAGE>

("NRSRO") 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 that 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.

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 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.

8
<PAGE>

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 1933 Act, 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, and the ability to enforce contractual obligations with respect
to, securities of issuers located in those countries.

Loan Participation Agreements. The Fund may purchase interests in loan
-----------------------------
participations that typically represent direct participation in a loan to a
corporate borrower, and generally are offered by an intermediary bank or other
financial institution or lending syndicate. Under these loan participation
arrangements, the Fund will have the right to receive payments of principal,
interest and any fees to which it is entitled from the bank selling the loan
participation upon receipt by the bank of the payments from the borrower. The
borrower in the underlying loan will be deemed to be the issuer of the
participation interest except to the extent the Fund derives its rights from the
intermediary bank that sold the loan participation. Such loans must be to
issuers in whose obligations the Fund may invest. Any participation purchased
by the Fund must be sold by an intermediary bank in the United States with
assets exceeding $1 billion.

Because the bank issuing the loan participation does not guarantee the
participation in any way, the participation is subject to the credit risks
associated with the underlying corporate borrower. In addition, it may be
necessary, under the terms of the loan participation, for the Fund to assert its
rights against the underlying corporate borrower, in the event that the
underlying corporate borrower should fail to pay principal and interest when
due. Thus, the Fund could be subject to delays, expenses, and risks that are
greater than those that would have been involved if the Fund had purchased a
direct obligation of the borrower. Moreover, under the terms of the loan
participation, the Fund may be regarded as a creditor of the issuing bank
(rather than of the underlying corporate borrower), so that the Fund also may be
subject to the risk that the issuing bank may become insolvent. Further, in the
event of the bankruptcy or insolvency of the corporate borrower, the loan
participation might be subject to certain defenses that can be asserted by the
borrower as a result of improper conduct by the issuing bank.

9
<PAGE>

Valuation of illiquid indebtedness involves a greater degree of judgment in
determining the Fund's net asset value than if the value were based on available
market quotations.

Funding Agreements. The Fund may invest in short-term funding agreements. A
------------------
funding agreement is a contract between an issuer and a purchaser that obligates
the issuer to pay a guaranteed rate of interest on a principal sum deposited by
the purchaser. Funding agreements will also guarantee the return of principal
and may guarantee a stream of payments over time. A funding agreement has a
fixed maturity and may have either a fixed, variable or floating interest rate
that is based on an index and guaranteed for a fixed time period. The Fund will
purchase short-term funding agreements only from banks and insurance companies
that, at the time of purchase, are rated in one of the three highest rating
categories and have assets of $1 billion or more.

The secondary market, if any, for these funding agreements is limited; thus,
such investments purchased by the Fund may be treated as illiquid. If a funding
agreement is determined to be illiquid it will be valued at its fair market
value as determined by procedures approved by the Board of Directors. Valuation
of illiquid indebtedness involves a greater degree of judgment in determining
the Fund's net asset value than if the value were based on available market
quotations.

MANAGEMENT

The business and affairs of the Company are managed under the direction of its
Board of Directors in conformity with Maryland law. The Board of Directors of
the Company supervises the Fund's activities and monitors the Fund's contractual
arrangements with various service providers. The Company's Directors are also
MIP's Trustees. The Company's Board, including a majority of the Directors who
are not ''interested persons'' (as that term is defined in the 1940 Act) of the
Company, has adopted procedures to address potential conflicts of interest that
may arise as a result of the structure of the Boards.

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.

*R. Greg Feltus, 49 Director, Executive Vice President of Stephens
Chairman Inc.; President of Stephens Insurance
and President Services Inc.; Senior Vice President
of Stephens Sports Management Inc.;
and President of Investors Brokerage
Insurance Inc.

W. Rodney Hughes, 74 Director Private Investor.
31 Dellwood Court
San Rafael, CA 94901
</TABLE>

10
<PAGE>

<TABLE>
Principal Occupations
Name, Address and Age Position(s) During Past 5 Years
--------------------- ----------- ---------------------
<S> <C> <C>
Leo Soong,/1/ 54 Director Managing Director of Crystal Geyser Roxane
Crystal Geyser Water Co. Water Co.; Co-Founder and President of Crystal
55 Francisco Street, Suite 410 Geyser Water Co.
San Francisco, CA 94133

Richard H. Blank, Jr., 44 Chief Operating Vice President of Stephens Inc.; Director of
Officer, Secretary Stephens Sports Management Inc.; and Director
and Treasurer of Capo Inc.

</TABLE>

____________________
/1/ Elected to the Board of Directors of the Company on February 9, 2000.

11
<PAGE>

Compensation Table
For the Calendar Year Ended December 31, 1999

Aggregate Total Compensation
Compensation from Registrant
Name and Position from Registrant and Fund Complex
----------------- --------------- ------------------
<S> <C> <C>
Jack S. Euphrat
Director $5,875 $11,750

*R. Greg Feltus
Director $ 0 $ 0

Thomas S. Goho/1/
Director $1,500 $ 3,000

W. Rodney Hughes
Director $5,875 $11,750

*J. Tucker Morse/1/
Director $1,500 $ 3,000
</TABLE>

____________________
/1/ Retired from the Board of Directors of the Company on April 28, 1999.

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 exists 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

12
<PAGE>

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.
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 that 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.

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

As of May 31, 2000, the shareholders identified below were known by the
Company to own 5% or more of the Money Market Fund's outstanding shares in the
following capacity:

<TABLE>
<CAPTION>
Name and Address Percentage Nature of
of Shareholder of Fund Ownership
---------------- ---------- ---------
<S> <C> <C>
Merrill Lynch Pierce Fenner & Smith 96% Record
For the Sole Benefit of its Customers
4800 Deer Lake Drive East
Third Floor
Jacksonville, Fl 32246
</TABLE>

For purposes of the 1940 Act, any person who owns directly or through one or
more controlled companies more than 25% of the voting securities of a company is
presumed to "control" such company. Accordingly, to the extent that a
shareholder identified in the foregoing table is identified as the beneficial
holder of more than 25% of the Fund, or is identified as the holder of record of
more than 25% of the Fund and has voting and/or investment powers, it may be
presumed to control the Fund.

INVESTMENT ADVISER AND OTHER SERVICE PROVIDERS

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 now invests 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 as the investment
adviser to manage its assets. The advisory

13
<PAGE>

fee level is 0.10% of average net assets on an annual basis. BGFA does not
engage 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 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 interests of the Master Portfolio 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 MIP or BGFA, by vote cast in person at a meeting called for
the purpose of voting on such approval. The Advisory Contract is terminable
without penalty, on 60 days written notice by the Master Portfolio's Board of
Trustees or by vote of the holders of a majority of the Master Portfolio's
interests, or, after the Reapproval Date, on not less than 60 days written
notice, by BGFA. The Advisory Contract terminates automatically in the event of
an assignment as defined in the 1940 Act.

For the fiscal years ended February 28, 1997, February 28, 1998, February 28,
1999 and for the ten-month period ended December 31, 1999, the Fund/Master
Portfolio paid the following advisory fees to BGFA, without waivers:

<TABLE>
<CAPTION>
Ten-Month
Period Ended
FYE 2/28/97 FYE 2/28/98 FYE 2/28/99 12/31/99
Fees Paid Fees Paid Fees Paid Fees Paid
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
Money Market Fund/ $570,332 $630,279 $414,988 $ 189,564
Master Portfolio
</TABLE>

Prior to the Fund's conversion to a Master/Feeder structure, BGFA engaged
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 fiscal years ended February 28,
1997, February 28, 1998, and February 28, 1999, BGFA paid to Wells Fargo Bank
the sub-advisory fees indicated below, without waivers:

<TABLE>
<CAPTION>
FYE 2/28/97 FYE 2/28/98 FYE 2/28/99
Fees Paid Fees Paid Fees Paid
----------- ----------- -----------
<S> <C> <C> <C>
Money Market Fund $80,773 $90,190 $43,588
</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.

14
<PAGE>

In addition, except for advisory fees, extraordinary expenses, brokerage and
other expenses connected to the execution of portfolio transactions and certain
expenses that 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 an annual 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 28, 1997, February 28, 1998, February 28,
1999 and the ten-month period ended December 31, 1999, the Fund paid the
following administration fees:

<TABLE>
<CAPTION>
Ten-Month
Period Ended
FYE 2/28/97 FYE 2/28/98 FYE 2/28/99 12/31/99
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Money Market Fund $111,048/1/ $179,427/2/ $410,994/2/ $440,125/2/
</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/ Co-administration fees paid jointly to Stephens and BGI.

Shareholder Servicing Agents. The Fund has adopted a Shareholder Servicing
----------------------------
Plan pursuant to which it has entered into a Shareholder Servicing Agreement
with BGI and may enter into similar agreements with other entities
(collectively, "Shareholder Servicing Agents") for the provision of certain
services to Fund shareholders. The services provided may include personal
services relating to shareholder accounts, such as answering shareholder
inquiries, providing reports and other information, and providing services
related to the maintenance of shareholder accounts. For these services, each
Shareholder Servicing Agent is entitled to receive a monthly fee at the annual
rate of up to 0.20% of the average daily value of the Fund represented by shares
owned during the period for which payment is being made by investors with whom
the Shareholder Servicing Agent maintains a servicing relationship, or an amount
that equals the maximum amount payable to the Shareholder Servicing Agent under
applicable laws, regulations or rules, including the Conduct Rules of the
National Association of Securities Dealers, Inc., whichever is less. Stephens
and BGI as co-administrators have agreed to pay these shareholder servicing fees
out of the fees each receives for co-administration services.

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
Investment adviser discussed above.

15
<PAGE>

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.
For the fiscal year ended February 28, 1999 and the ten-month period ended
December 31, 1999, 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 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.
Stephens and BGI as co-administrators have agreed to pay these fees and expenses
out of the fees each receives for co-administration services. The annual
maintenance fee is paid as follows:

<TABLE>
<CAPTION>
Annual Fee
------------------------------
<S> <C>
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
</TABLE>
_______________
* 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 that the Company
specifically orders or requires IBT to order.

Independent Auditors. KPMG 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.

Expenses. Except for extraordinary expenses, brokerage and other expenses
---------
connected with the execution of portfolio transactions and certain other
expenses that are borne by the Fund, Stephens and BGI have agreed to bear all
costs of the Fund's and the Company's operations.

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.

The Fund's performance may be advertised in terms of current yield or
effective yield. These performance figures are based on historical results and
are not intended to indicate future performance.

16
<PAGE>

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 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 described
above, may not provide a basis for comparison with other investments or other
investment companies using a different method of calculating performance.

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 December 31, 1999
were 5.52% and 5.47%, 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 subtracting one from the result. The
effective yield for the Fund for the seven-day period ended December 31, 1999
was 5.67%.

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.

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.

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.

17
<PAGE>

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 BGFA, 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
or its 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 that monitor the 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 an 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 that 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

18
<PAGE>

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 the Board of Directors 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, the Board is required to establish
procedures designed to stabilize, to the extent reasonably possible, the 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 the Board of
Directors, 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, REDEMPTION AND PRICING 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 Fund.

In-Kind Purchases. Payment for shares of the Fund may, at the discretion of
------------------
the investment 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.

19
<PAGE>

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) 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.

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 that 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.

20
<PAGE>

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 BGFA 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 investment
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 investment 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 investment 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 BGFA may furnish statistical, research and other
information or services that are deemed by BGFA to be beneficial to the Fund's
investment programs. Research services received from brokers supplement BGFA'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 BGFA 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 BGFA since the brokers utilized
by BGFA as a group tend to follow a broader universe of securities and other
matters than the staff of BGFA can follow. In addition, this research provides
BGFA with a diverse perspective on financial markets. Research services that 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.

21
<PAGE>

Securities of Regular Broker/Dealers. As of December 31, 1999 the Fund owned
------------------------------------
no securities of its "regular brokers or dealers" or their parents, as defined
in the 1940 Act.

DIVIDENDS, DISTRIBUTIONS AND TAXES

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

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 generally will be applied individually to the Fund, rather than to the
Company as a whole. Accordingly, income, gains and expenses will be determined
separately for the Fund. As a regulated investment company, the Fund will not
be taxed on its net income and gains distributed to its shareholders.

Qualification as a regulated investment company under the Code requires, among
other things, that (i) 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 (ii) the Fund diversify its
holdings so that, at the end of each quarter of the taxable year, (a) 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 (b) 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 that the Fund controls and which are
determined to be engaged in the same or similar trades or businesses.

The Fund must also distribute or be deemed to distribute to its shareholders
at least 90% of the aggregate of its ordinary income, net short-term capital
gain and certain other items 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 twelve
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 income
and gains (if any) for each year.

Master Portfolio. The Fund seeks to qualify as a regulated investment company
-----------------
by investing substantially all of its assets in the Master Portfolio. Under the
Code, the Master Portfolio will be treated as a partnership rather than as a
regulated investment company or a corporation. As a partnership, 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 its
proportionate share of such income without receipt of any corresponding
distribution. However, the Master Portfolio

22
<PAGE>

will seek to minimize recognition by its investors (such as the Fund) of
interest, dividends and gains without a corresponding 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 of its income and gains by the
end of each calendar year. The Fund intends to actually or be deemed to
distribute substantially all of its income and gains (if any) by the end of each
calendar year and, thus, expects not to be subject to the excise tax.

Gains recognized on the disposition of a debt obligation purchased by the
Master Portfolio at a market discount (generally at a price less than its
principal amount) generally will be treated as ordinary income to the extent of
the portion of market discount that 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; (iii) a futures or forward contract, or (iv) other
transactions identified in future Treasury Regulations.

Capital Gain Distributions. Distributions that are designated by the Fund as
---------------------------
capital gain distributions will be taxed to shareholders as long-term capital
gain (to the extent such distributions 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.

Other Distributions. Although distributions will be declared daily based on
--------------------
the Fund's daily earnings, 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 taxable, dividend
distributions. Thus, if during a taxable year the Fund's distributions (as
declared daily throughout the year) exceed the Fund's earnings and profits
(generally, the Fund's net investment income and capital gain with certain
adjustments) as determined at the end of the year, only that portion of the
year's distributions that equals the year's earnings and profits will be deemed
to have constituted a taxable distribution. Distributions in excess of earnings
and profits will first be treated as a return of capital up to the amount of a
shareholder's basis in its Fund shares and then as capital gain. It is expected
that the Fund's earnings and profits, 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 to the shareholder, depending on the
amount received for the shares (or are deemed to receive in the case of an
exchange) and the cost of the shares. Any loss realized on a redemption or
exchange of shares of the Fund will be disallowed for federal income tax
purposes, to the extent that substantially identical shares

23
<PAGE>

are acquired within the 61-day period beginning 30 days before and ending 30
days after the shares are disposed of.

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). Obviously, 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.

Foreign Shareholders. Under the Code, distributions attributable to ordinary
---------------------
income, net short-term capital gain and certain other items realized by the Fund
and paid to a nonresident alien individual, foreign trust (i.e., a trust that 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 (each, a "foreign shareholder") will be subject to federal
withholding tax (at a rate of 30% or, if an income tax treaty applies, at the
lower treaty rate, if any). Such tax withheld generally is not refundable.
Withholding will not apply if a 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. persons will apply. Gain on the disposition of
Fund shares and capital gain distributions generally are not subject to tax
withholding applicable to foreign shareholders.

New Regulations. On October 6, 1997, the Treasury Department issued new
----------------
regulations (the "New Regulations") that 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, 2000, 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 its distributions paid
to foreign shareholders that will be subject to federal income tax withholding.
Prospective investors are urged to consult their own tax advisors regarding the
impact to them of the New Regulations.

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 non-cash income, such non-cash 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.

24
<PAGE>

investor is urged to consult his or her tax advisor regarding federal, state,
local and foreign taxes applicable to him or her.

CAPITAL STOCK

Although the Company is not required to hold regular annual shareholder
meetings, occasional annual or special meetings may be required for purposes
such as electing and removing Directors, approving advisory contracts, and
changing the Fund's investment objective or fundamental investment policies.
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 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.

Voting. 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 the 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 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.

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 submitted 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.

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

25
<PAGE>

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.

The Master Portfolio. 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. If the Master Portfolio's 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 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.

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.

ADDITIONAL INFORMATION ON THE FUND

26
<PAGE>

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
calling 1-888-204-3956.

No person has been authorized to give any information or to make any
representations other than those contained in this SAI 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 SAI does not constitute an
offer in any state in which, or to any person to whom, such offering may not
lawfully be made.

FINANCIAL STATEMENTS

The audited financial statements, including the portfolio of investments,
financial highlights and independent auditors' reports for the ten-month period
ended December 31, 1999 for the Fund and Master Portfolio are hereby
incorporated by reference to the Company's Annual Report, as filed with the SEC
on February 28, 2000. The audited financial statements are attached to all SAIs
delivered to shareholders or prospective shareholders.

27
<PAGE>

APPENDIX

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

S&P Bond Ratings

"AAA"

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

"AA"

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

"A"

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

"BBB"

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

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

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

Moody's Bond Ratings

"Aaa"

Bonds that 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

A-1
<PAGE>

change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

"Aa"

Bonds that 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 that make the long-term risks appear somewhat larger than in "Aaa"
securities.

"A"

Bonds that 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 that
suggest a susceptibility to impairment sometime in the future.

"Baa"

Bonds that 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 Prime-1 ("P-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 Prime-2 ("P-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

A-2
<PAGE>

any guarantor, as well as the political and economic environment that might
affect the issuer's future financial strength and credit quality.

"AAA"

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

"AA"

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

"A"

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

"BBB"

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

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

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

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

"F-1+"

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

A-3
<PAGE>

"F-1"

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

"F-2"

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

Duff Bond Ratings

"AAA"

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

"AA"

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

"A"

Bonds rated "A" have protection factors that 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 that 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 Ratings

Bond and Long-Term Rating. 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

A-4
<PAGE>

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 Rating. 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 Rating. 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.

BankWatch. 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.

A-5
<PAGE>

"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-6
<PAGE>

BARCLAYS GLOBAL INVESTORS FUNDS, INC.

STATEMENT OF ADDITIONAL INFORMATION

INSTITUTIONAL MONEY MARKET FUND
Distributor Class and Institutional Class

July 1, 2000

_______________________

Barclays Global Investors Funds, Inc. (the "Company") is an open-end,
management investment company. This Statement of Additional Information ("SAI")
contains additional information about the Company's Institutional 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," at times the "Trust"). The
Master Portfolio has the same investment objective as the Fund as described in
its Prospectus.

This SAI is not a prospectus and should be read in conjunction with the Fund's
current Prospectus, also dated July 1, 2000. 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 Barclays
Global Investors 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>
Fund History............................................................................... 1
Description of the Fund and Its Investments and Risks...................................... 1
Portfolio Securities....................................................................... 3
Management................................................................................. 10
Control Persons and Principal Holders of Securities........................................ 12
Investment Adviser and Other Service Providers............................................. 12
Performance Information.................................................................... 15
Determination of Net Asset Value........................................................... 17
Purchase, Redemption and Pricing of Shares................................................. 18
Portfolio Transactions..................................................................... 18
Dividends, Distributions and Taxes......................................................... 20
Capital Stock.............................................................................. 23
Additional Information on the Fund......................................................... 25
Financial Statements....................................................................... 25
Appendix................................................................................... A-1
</TABLE>

i
<PAGE>

FUND HISTORY

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."
On April 28, 1999, the Company's Board of Directors approved the change of its
corporate name from "MasterWorks Funds Inc." to "Barclays Global Investors
Funds, Inc."

DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS

Fundamental Investment Restrictions. The Fund is subject to the following
investment restrictions, all of which are fundamental policies.

The Institutional 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);

(3) purchase commodities or commodity contracts (including futures
contracts), except that the Fund may purchase securities of an issuer that
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) or make short sales of securities;

1
<PAGE>

(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);

(8) borrow money or issue senior securities as defined in 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
<PAGE>

subject to withdrawal penalties and that have maturities of more than seven
days, and (iii) repurchase agreements not terminable within seven days.

PORTFOLIO SECURITIES

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

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 effect "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 varies with the maturities of the underlying instruments and
is likely to be substantially less than the original maturity of the assets
underlying the securities as a result of prepayments. For this and other
reasons, an asset-backed security's stated maturity may be shortened,

3
<PAGE>

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.

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 corporations
to finance short-term credit needs. Commercial paper is usually sold on a
discount basis and has a maturity at the time of issuance not exceeding nine
months. Variable amount master demand notes are demand obligations that permit
the investment of fluctuating amounts at varying market rates of interest
pursuant to arrangements between the issuer and a commercial bank acting as
agent for the payee of such notes whereby both parties have the right to vary
the amount of the outstanding indebtedness on the notes. The investment adviser
to the Master Portfolio monitors on an ongoing basis the ability of an issuer of
a demand instrument to pay principal and interest on demand. The Fund also may
invest in high quality non-convertible corporate debt securities (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 below the minimum rating
required for purchase by the Fund. The investment adviser to the Master
Portfolio will consider such an event in determining whether the Master
Portfolio should continue to hold the obligation. To the extent the Master
Portfolio continues to hold such obligations, it may be subject to additional
risk of default.

4
<PAGE>

The Fund may participate in pooled repurchase agreement transactions with other
funds advised by BGFA.

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 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
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.

5
<PAGE>

such instruments. These adjustments generally limit the increase or decrease in
the amount of interest received on the debt instruments. Floating- and variable-
rate instruments are subject to interest-rate risk and credit risk.

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 that 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);

. 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.

6
<PAGE>

Illiquid Securities. The Fund may invest in securities not registered under
--------------------
the Securities Act of 1933, as amended ("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 difficulty in selling securities may result in a loss
or be costly to the Fund.

7
<PAGE>

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 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.

8
<PAGE>

from the borrower. The borrower in the underlying loan will be deemed to be the
issuer of the participation interest except to the extent the Fund derives its
rights from the intermediary bank that sold the loan participation. Such loans
must be to issuers in whose obligations the Fund may invest. Any participation
purchased by the Fund must be sold by an intermediary bank in the United States
with assets exceeding $1 billion.

The secondary market, if any, for these loan participation interests is
limited; thus, such participations purchased by the Fund may be treated as
illiquid. If a loan participation is determined to be illiquid, it will be
valued at its fair market value as determined by procedures approved by the
Board of Directors. Valuation of illiquid indebtedness involves a greater
degree of judgment in determining the Fund's net asset value than if the value
were based on available market quotations

MANAGEMENT

The business and affairs of the Company are managed under the direction of its
Board of Directors in conformity with Maryland law. The Board of Directors of
the Company supervises the Fund's activities and monitors the Fund's contractual
arrangements with various service providers. The Company's Directors are also
MIP's Trustees. The Company's Board, including a majority of the Directors who
are not "interested persons" (as that term is defined in the 1940 Act) of the
Company, has adopted

9
<PAGE>

procedures to address potential conflicts of interest that may arise as a result
of the structure of the Boards.

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(s) During Past 5 Years
--------------------- ----------- --------------------------
<S> <C> <C>
Jack S. Euphrat, 78 Director Private Investor.
415 Walsh Road
Atherton, CA 94027

W. Rodney Hughes, 74 Director Private Investor.
31 Dellwood Court
San Rafael, CA 94901

Richard H. Blank, Jr., 44 Chief Operating Vice President of Stephens Inc.; Director of
Officer, Secretary Stephens Sports Management Inc.; and Director
and Treasurer of Capo Inc.
</TABLE>

____________________
/1/ Elected to the Board of Directors of the Company on February 9, 2000.

10
<PAGE>

Compensation Table
For the Calendar Year Ended December 31, 1999

<TABLE>
<CAPTION>
Aggregate Total Compensation
Compensation from Registrant
Name and Position from Registrant and Fund Complex
----------------- -------------------- -------------------------
<S> <C> <C>
Jack S. Euphrat $5,875 $11,750
Director

*R. Greg Feltus $ 0 $ 0
Director

Thomas S. Goho/1/ $1,500 $ 3,000
Director

W. Rodney Hughes $5,875 $11,750
Director

*J. Tucker Morse/1/ $1,500 $ 3,000
Director
</TABLE>

____________________
/1/ Retired from the Board of Directors of the Company on April 28, 1999.

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 exists 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.

11
<PAGE>

investment adviser to manage the Fund's assets in accordance with the investment
policies described below with respect to the Master Portfolio.

Certain policies of the Master Portfolio that 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.

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

As of May 31, 2000, the shareholders identified below were known by the
Company to own 5% or more of the Fund's outstanding shares in the following
capacity:

<TABLE>
<CAPTION>
Name and Address Percentage Nature of
of Shareholder of Fund Ownership
---------------- ----------- ---------
<S> <C> <C>
Stephens Inc. 100% Record
111 Center Street
Little Rock, AR 72201
</TABLE>

INVESTMENT ADVISER AND OTHER SERVICE PROVIDERS

Investment Adviser. The Fund is a feeder fund in a master/feeder structure.
------------------
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 as the
investment adviser to manage its assets. The advisory fee level is 0.10% of
average net assets on an annual basis. BGFA does not engage 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.

12
<PAGE>

Contract is terminable without penalty, on 60 days' written notice by the Master
Portfolio's Board of Trustees or by vote of the holders of a majority of the
Master Portfolio's interests, or, after the Reapproval Date, on not less than 60
days' written notice, by BGFA. The Advisory Contract terminates automatically in
the event of an assignment as defined in the 1940 Act. For the five-month period
ended December 31, 1999, the Master Portfolio paid BGFA $88,966 in advisory
fees, without waivers.

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.

In addition, except for advisory fees, extraordinary expenses, brokerage and
other expenses connected to the execution of portfolio transactions and certain
expenses that 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 monthly fee at an annual rate of 0.02% of the
Fund's average daily net assets. BGI has contracted with Investors Bank & Trust
Company ("IBT") to provide certain sub-administrative services. For the five-
month period ended December 31, 1999, the Fund paid co-administration fees of
less than $1.00 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. The term and termination provisions of the Distribution Agreement are
substantially similar to those of the Agreement with the investment adviser
discussed above.

The Fund has adopted a distribution plan (a "Plan") under Section 12(b) of the
1940 Act and Rule 12b-1 thereunder (the "Rule") for its Distributor Class
("Class D") shares. The Plan was adopted by the Company's Board of Directors,
including a majority of the Directors who were not "interested persons" (as
defined in the 1940 Act) of the Fund and who have no direct or indirect
financial interest in the operation of the Plan or in any agreement related to
the Plan (the "Non-Interested Directors"). The Fund currently does not have a
distribution plan in place for its Institutional Class ("Class I") shares.
Class I shareholders do not pay any fees for distribution services.

Under the Plan and pursuant to the related Distribution Agreement, the Fund
pays Stephens an annual fee of 0.10% of the average daily net asset value of the
Fund's Class D shares as compensation for distribution-related services or as
reimbursement for distribution-related expenses. For the five-month period
ended December 31, 1999, the Fund paid Stephens $1.00 for distribution-related
services and expenses.

The actual fee payable to the Distributor by the Fund's Class D shares is
determined, within such limits, from time to time by mutual agreement between
the Company and the Distributor and will not

13
<PAGE>

exceed the maximum sales charges payable by mutual funds sold by members of the
National Association of Securities Dealers, Inc. ("NASD") under the Conduct
Rules of the NASD. The Distributor may enter into selling agreements with one or
more selling agents under which such agents may receive compensation for
distribution-related services from the Distributor, including, but not limited
to, commissions or other payments to such agents based on the average daily net
assets of Fund shares attributable to their customers. The Distributor may
retain any portion of the total distribution fee payable thereunder to
compensate it for distribution-related services provided by it or to reimburse
it for other distribution-related expenses.

The Plan will continue in effect from year to year if such continuance is
approved by a majority vote of both the Directors of the Company and the Non-
Interested Directors. The Distribution Agreement related to the Plan also must
be approved by such vote of the Directors and the Non-Interested Directors.
Such Agreement will terminate automatically if assigned, and may be terminated
at any time, without payment of any penalty, by a vote of a majority of the
outstanding voting securities of the Class D shares of the Fund or by vote of a
majority of the Non-Interested Directors on not more than 60 days written
notice. The Plan may not be amended to increase materially the amounts payable
thereunder without the approval of a majority of the outstanding voting
securities of the Fund, and no material amendment to the Plan may be made except
by a majority of both the Directors of the Company and the Non-Interested
Directors.

The Plan requires that the Treasurer of the Company shall provide to the
Directors, and the Directors shall review, at least quarterly, a written report
of the amounts expended (and purposes therefor) under the Plan. The Rule also
requires that the selection and nomination of Directors who are not "interested
persons" of the Company be made by such disinterested Directors.

Custodian. IBT 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.

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.

14
<PAGE>

Independent Auditors. KPMG 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.

Expenses. Except for extraordinary expenses, brokerage and other expenses
---------
connected with the execution of portfolio transactions and certain other
expenses that are borne by the Fund, Stephens and BGI have agreed to bear all
costs of the Fund's and the Company's operations.

PERFORMANCE INFORMATION

The Fund's performance may be advertised in terms of current yield or
effective 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 because of the compounding effect of the assumed
reinvestment of income earned.

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 December 31, 1999
were 5.78% and 5.77%, respectively, for the Class D shares, and 5.87% and 5.85%,
respectively, for the Class I shares.

Effective yield for the Institutional 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 subtracting one from the result. The

15
<PAGE>

effective yield for the Fund for the seven-day period ended December 31, 1999
was 5.94% for the Class D shares and 6.04% for the Class I shares.

In addition, investors should recognize that changes in the net asset values
of shares of the Institutional 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.

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.

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 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 BGFA, 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
or its affiliates.

16
<PAGE>

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.

PURCHASE, REDEMPTION AND PRICING OF SHARES

17
<PAGE>

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 Fund.

In-Kind Purchases. Payment for shares of the Fund may, at the discretion of
-----------------
the investment 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) 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.

PORTFOLIO TRANSACTIONS

18
<PAGE>

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 that 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 provided by such broker/dealer, viewed in terms
of either the particular transaction or the overall responsibilities of BGFA.
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 BGFA 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 investment
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 investment 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 investment 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.

19
<PAGE>

specialized services to BGFA 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.

Securities of Regular Broker/Dealers. As of December 31, 1999, the Fund owned
------------------------------------
no securities of its "regular brokers or dealers" or their parents, as defined
in the 1940 Act.

DIVIDENDS, DISTRIBUTIONS AND TAXES

20
<PAGE>

21
<PAGE>

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 to the shareholder, depending on the
amount received for the shares (or are deemed to receive in the case of an
exchange) and the cost of the shares. Any loss realized on a redemption or
exchange of shares of the Fund will be disallowed for federal income tax
purposes 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.

Foreign Shareholders. Under the Code, distributions attributable to ordinary
---------------------
income, net short-term capital gain and certain other items realized by the Fund
and paid to a nonresident alien individual, foreign trust (i.e., a trust that 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 (each, a "foreign shareholder") will be subject to federal
withholding tax (at a rate of 30% or, if an income tax treaty applies, at the
lower treaty rate, if any). Such tax withheld generally is not refundable.
Withholding will not apply if a 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. persons will apply. Gain on the disposition of
Fund shares and capital gain distributions generally are not subject to tax
withholding applicable to foreign shareholders.

22
<PAGE>

New Regulations. On October 6, 1997, the Treasury Department issued new
----------------
regulations (the "New Regulations") that 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, 2000, 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 its distributions paid
to foreign shareholders that will be subject to federal income tax withholding.
Prospective investors are urged to consult their own tax advisors regarding the
impact to them of the New Regulations.

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 federal, state, local and foreign taxes
applicable to him or her.

CAPITAL STOCK

23
<PAGE>

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.

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

24
<PAGE>

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.

ADDITIONAL INFORMATION ON THE FUND

No person has been authorized to give any information or to make any
representations 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
offering may not lawfully be made.

FINANCIAL STATEMENTS

The audited financial statements, including the portfolio of investments,
financial highlights and independent auditors' reports for the five-month period
ended December 31, 1999 for the Fund and for the ten-month period ended December
31, 1999 for the Master Portfolio, are hereby incorporated by reference to the
Company's Annual Report, as filed with the SEC on February 28, 2000. The
audited financial statements are attached to all SAIs delivered to shareholders
or prospective shareholders.

25
<PAGE>

APPENDIX

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"

"BBB"

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.

Moody's Bond Ratings

"Aaa"

A-1
<PAGE>

change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

"Aa"

"A"

"Baa"

Fitch Bond Ratings

A-2
<PAGE>

any guarantor, as well as the political and economic environment that might
affect the issuer's future financial strength and credit quality.

"AAA"

"AA"

"A"

"BBB"

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

"F-1+"

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

A-3
<PAGE>

"F-1"

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

"F-2"

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

Duff Bond Ratings

"AAA"

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

"AA"

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

"A"

Bonds rated "A" have protection factors that 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.

IBCA Bond Ratings

A-4
<PAGE>

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.

International and U.S. Bank Rating. 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.

"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.

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

A-5
<PAGE>

"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-6
<PAGE>

BARCLAYS GLOBAL INVESTORS FUNDS, INC.

STATEMENT OF ADDITIONAL INFORMATION

LIFEPATH INCOME FUND
LIFEPATH 2010 FUND
LIFEPATH 2020 FUND
LIFEPATH 2030 FUND
LIFEPATH 2040 FUND

July 1, 2000

Barclays Global Investors Funds, Inc. (the "Company") is an open-end,
management investment company. This Statement of Additional Information ("SAI")
contains additional information about the Company's LifePath Income (formerly
LifePath 2000), LifePath 2010, LifePath 2020, LifePath 2030, and LifePath 2040
Funds (the "LifePath Funds" or the "Funds").

Each LifePath Fund invests all of its assets in a separate portfolio (each
a "Master Portfolio" and collectively, the "Master Portfolios") of Master
Investment Portfolio ("MIP," at times the "Trust") having the same investment
objective as the Fund. Therefore, the investment experience of each Fund will
correspond directly with the relevant Master Portfolio's investment experience.
MIP is an open-end, series investment company. Barclays Global Fund Advisors
("BGFA") serves as investment adviser to the corresponding Master Portfolio of
each LifePath Fund. References to the investments, investment policies and risks
of the Funds unless otherwise indicated, should be understood as references to
the investments, investment policies and risks of the corresponding Master
Portfolios.

This SAI is not a prospectus and should be read in conjunction with the
Funds' current Prospectus, also dated July 1, 2000. All terms used in this SAI
that are defined in the Prospectus have the meanings assigned in the Prospectus.
A copy of the Prospectus may be obtained without charge by writing Barclays
Global Investors 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>
Fund History....................................................... 1
Description of the Funds and Their Investments and Risks........... 1
Portfolio Securities............................................... 4
Risk Considerations................................................ 15
Management......................................................... 17
Control Persons and Principal Holders of Securities................ 19
Investment Adviser and Other Service Providers..................... 21
Performance Information............................................ 25
Determination of Net Asset Value................................... 27
Purchase, Redemption and Pricing of Shares......................... 28
Portfolio Transactions............................................. 29
Dividends, Distributions and Taxes................................. 30
Capital Stock...................................................... 35
Additional Information on the Funds................................ 37
Financial Statements............................................... 37
Appendix........................................................... A-1
</TABLE>

i
<PAGE>

FUND HISTORY

The Company, an open-end management investment company, was incorporated in
Maryland on October 15, 1992 and currently offers ten series including the
LifePath Funds. MIP, organized as a Delaware business trust on October 21, 1993,
consists of twelve series including the LifePath Master Portfolios. The
Company's principal office is located at 111 Center Street, Little Rock,
Arkansas 72201. Each Fund invests all of its assets in the corresponding Master
Portfolio of MIP (as shown below), which has the same investment objective as
the related Fund. BGFA has granted the Company a non-exclusive license to use
the name "LifePath." If the license agreement is terminated, the Company, at
BGFA's request, will cease using the "LifePath" name.

LifePath Fund Corresponding Master Portfolio
------------- ------------------------------
LifePath Income Fund LifePath Income Master Portfolio
LifePath 2010 Fund LifePath 2010 Master Portfolio
LifePath 2020 Fund LifePath 2020 Master Portfolio
LifePath 2030 Fund LifePath 2030 Master Portfolio
LifePath 2040 Fund LifePath 2040 Master Portfolio

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." On
April 28, 1999, the Company's Board of Directors approved, primarily for
marketing purposes, the change of its corporate name from "MasterWorks Funds
Inc." to "Barclays Global Investors Funds, Inc."

On or about December 1, 1995, the LifePath Funds were added to the
registration statement of the Company with the filing of post-effective
amendment No. 11 on Form N-1A. The MasterWorks Funds Inc. LifePath Funds were
established to supersede the LifePath Institutional Class Shares of Stagecoach
Trust (another investment company that is now known as Wells Fargo Funds Trust).
See "Performance Information" in this SAI.

DESCRIPTION OF THE FUNDS AND THEIR INVESTMENTS AND RISKS

The LifePath Master Portfolios consist of five asset allocation funds, each
of which is a diversified fund offered by MIP. Organizations and other entities
such as the Funds that hold shares of beneficial interest of a Master Portfolio
may be referred to herein as "feeder funds."

The Master Portfolios seek to provide long-term investors in a feeder fund
with an asset allocation strategy designed to maximize assets consistent with
the quantitatively measured risk such investors, on average, may be willing to
accept given their investment time horizons. The Master Portfolios invest in a
wide range of U.S. and foreign equity and debt securities and money market
instruments. Each Master Portfolio, except the LifePath Income Master Portfolio,
is managed for investors planning to retire (or begin to withdraw substantial
portions of their investment) approximately in the year stated in the title of
the Fund in which they invest (e.g., investors in the LifePath 2010 Fund plan to
retire, or begin to withdraw substantial portions of their investment, in the
year 2010). The LifePath Income Master Portfolio is managed for investors who
are retired, or are planning to retire in the near future.

1
<PAGE>

As with all mutual funds, there can be no assurance that the investment
objective of each Master Portfolio will be achieved. Each Master Portfolio's
investment objective cannot be changed without approval by the holders of a
majority (as defined in the Investment Company Act of 1940, as amended (the
"1940 Act")) of such Master Portfolio's outstanding interests.

The LifePath Funds contain both "strategic" and "tactical" components,
with the strategic component weighted more heavily than the tactical component.
The strategic component of the Funds evaluates the risk that investors, on
average, may be willing to accept given their investment time horizons. The
strategic component thus determines the changing investment risk level of each
LifePath Fund as time passes. The tactical component addresses short-term market
conditions. The tactical component thus adjusts the amount of investment risk
taken by each LifePath Fund without regard to time horizon, but rather in
consideration of the relative risk-adjusted short-term attractiveness of various
asset classes. The LifePath Funds may invest in a wide range of U.S. and foreign
investments and market sectors and may shift their allocations among investments
and sectors from time to time. To manage the LifePath Funds, BGFA employs a
proprietary investment model (the "Model") that analyzes extensive financial
and economic data, including risk correlation and expected return statistics.
The Model selects indices representing segments of the global equity and debt
markets and the Funds invest to create market exposure by purchasing
representative samples of the indices in an attempt to replicate their
performance.

The Model has broad latitude to allocate the Funds' investments among a wide
range of asset classes, including, among others, equity securities, debt
securities and money market instruments. The LifePath Funds are not managed as
balanced portfolios and are not required to maintain a portion of their
investments in each of the permitted investment categories at all times. Until a
LifePath Fund attains an asset level of approximately $100 to $150 million, the
Model will allocate assets across fewer of the investment categories identified
below than it otherwise would. As a LifePath Fund approaches this minimum asset
level, the Model will add investment categories from among those identified
below, thereby approaching the desired investment mix over time. The portfolio
of investments of each LifePath Fund is compared from time to time to the
Model's recommended allocation. Recommended reallocations are implemented
subject to BGFA's assessment of current economic conditions and investment
opportunities. BGFA may change from time to time the criteria and methods it
uses to implement the recommendations of the Model. Recommended reallocations
are implemented in accordance with trading policies designed to take advantage
of market opportunities and reduce transaction costs. The asset allocation mix
selected by the Model is a primary determinant in the respective LifePath Fund's
investment performance. BGFA manages other portfolios that also invest in
accordance with the Model. The performance of each of those other portfolios is
likely to vary from the performance of LifePath Funds. Such variation in
performance is primarily due to different equilibrium asset-mix assumptions used
for the various portfolios, timing differences in the implementation of the
Model's recommendations and differences in expenses and liquidity requirements.
The overall management of each LifePath Fund is based on the recommendation of
the Model, and no person is primarily responsible for recommending the mix of
asset classes in each Fund or the mix of securities within the asset classes.
Decisions relating to the Model are made by BGFA's investment committee.

Investment Restrictions. Each Fund and Master Portfolio has adopted
-----------------------
investment policies that may be fundamental or non-fundamental. Fundamental
policies cannot be changed without approval by the holders of a majority (as
defined in the Investment Company Act of 1940, as amended (the "1940 Act")) of
the outstanding voting shares of such Fund or outstanding interests of such
Master Portfolio, as the case may be. Non-fundamental policies may be changed
without shareholder approval by vote of a majority of the Directors of the
Company or the Trustees of the Trust, as the case may be, at any time.

2
<PAGE>

Fundamental Investment Restrictions. The Funds are subject to the following
investment restrictions, all of which are fundamental policies.

Each LifePath Fund may not:

(1) invest more than 5% of its assets in the obligations of any single issuer,
except that up to 25% of the value of its total assets may be invested, and
securities issued or guaranteed by the U.S. Government, or its agencies or
instrumentalities may be purchased, without regard to any such limitation;

(2) hold more than 10% of the outstanding voting securities of any single
issuer. This investment restriction applies only with respect to 75% of its
total assets;

(3) invest in commodities, except that each Fund or Master Portfolio may
purchase and sell (i.e., write) options, forward contracts, futures contracts,
including those relating to indices, and options on futures contracts or
indices;

(4) purchase, hold or deal in real estate, or oil, gas or other mineral leases
or exploration or development programs, but each Fund or Master Portfolio may
purchase and sell securities that are secured by real estate or issued by
companies that invest or deal in real estate;

(5) borrow money, except to the extent permitted under the 1940 Act. For
purposes of this investment restriction, a Fund's or Master Portfolio's entry
into options, forward contracts, futures contracts, including those relating to
indices, and options on futures contracts or indices shall not constitute
borrowing to the extent certain segregated accounts are established and
maintained by the Master Portfolio as described in the prospectus;

(6) make loans to others, except through the purchase of debt obligations and
the entry into repurchase agreements. However, each Fund or Master Portfolio may
lend its portfolio securities in an amount not to exceed one-third of the value
of its total assets. Any loans of portfolio securities will be made according to
guidelines established by the Securities and Exchange Commission ("SEC") and the
Board of Trustees of MIP or the Board of Directors of the Company, as the case
may be;

(7) act as an underwriter of securities of other issuers, except to the extent
the Fund or Master Portfolio may be deemed an underwriter under the Securities
Act of 1933, as amended, by virtue of disposing of portfolio securities;

(8) invest 25% or more of its total assets in the securities of issuers in any
particular industry or group of closely related industries, except that, in the
case of each Fund or Master Portfolio, there shall be no limitation on the
purchase of obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities;

(9) issue any senior security (as such term is defined in Section 18(f) of the
1940 Act), except to the extent the activities permitted in investment
restriction nos. 3 and 5 may be deemed to give rise to a senior security or as
otherwise permitted under the rules and regulations or an exemptive order of the
SEC;

(10) purchase securities on margin, but each Fund or Master Portfolio may make
margin deposits in connection with transactions in options, forward contracts,
futures contracts, including those relating to indices, and options on futures
contracts or indices;

3
<PAGE>

Non-Fundamental Investment Restrictions. The Funds are subject to the
following investment restrictions, all of which are non-fundamental policies.

As a matter of non-fundamental policy:

(1) The Funds 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, a 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 such Fund's net assets with respect to any one
investment company, and (iii) 10% of such Fund's net assets in the aggregate.
Other investment companies in which the Funds invest 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 a Fund.

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

PORTFOLIO SECURITIES

To the extent set forth in this SAI, each Fund through its investment in the
corresponding Master Portfolio may invest in the securities described below. To
avoid the need to refer to both the Funds and the Master Portfolios in every
instance, the following sections generally refer to the Funds only.

Bank Obligations. Each LifePath Fund may invest in bank obligations, including
----------------
certificates of deposit, time deposits and other short-term obligations of
domestic banks, obligations of foreign branches of domestic banks and
obligations of domestic and foreign branches of foreign banks. Domestic
commercial banks organized under federal law are supervised and examined by the
Comptroller of the Currency and are required to be members of the Federal
Reserve System and to have their deposits insured by the Federal Deposit
Insurance Corporation (the "FDIC"). Domestic banks organized under state law are
supervised and examined by state banking authorities but are members of the
Federal Reserve System only if they elect to join. In addition, state banks
whose certificates of deposit ("CDs") may be purchased by each Fund are insured
by the FDIC (although such insurance may not be of material benefit to the Fund,
depending on the principal amount of the CDs of each bank held by the Fund) and
are subject to federal examination and to a substantial body of federal law and
regulation. As a result of federal or state laws and regulations, domestic
branches of domestic banks whose CDs may be purchased by each Fund generally are
required, among other things, to maintain specified levels of reserves, are
limited in the amounts that they can loan to a single borrower and are subject
to other regulations

4
<PAGE>

designed to promote financial soundness. However, not all of such laws and
regulations apply to the foreign branches of domestic banks.

Obligations of foreign branches of domestic banks, foreign subsidiaries of
domestic banks and domestic and foreign branches of foreign banks, such as CDs
and time deposits ("TDs"), may be general obligations of the parent banks in
addition to the issuing branch, or may be limited by the terms of a specific
obligation and/or governmental regulation. Such obligations are subject to
different risks than are those of domestic banks. These risks include foreign
economic and political developments, foreign governmental restrictions that may
adversely affect payment of principal and interest on the obligations, foreign
exchange controls and foreign withholding and other taxes on interest income.
These foreign branches and subsidiaries are not necessarily subject to the same
or similar regulatory requirements that apply to domestic banks, such as
mandatory reserve requirements, loan limitations, and accounting, auditing and
financial record keeping requirements. In addition, less information may be
publicly available about a foreign branch of a domestic bank or about a foreign
bank than about a domestic bank.

Obligations of U.S. branches of foreign banks may be general obligations of
the parent bank in addition to the issuing branch, or may be limited by the
terms of a specific obligation or by federal or state regulation as well as
governmental action in the country in which the foreign bank has its head
office. A domestic branch of a foreign bank with assets in excess of $1 billion
may be subject to reserve requirements imposed by the Federal Reserve System or
by the state in which the branch is located if the branch is licensed in that
state.

In addition, federal branches licensed by the Comptroller of the Currency and
branches licensed by certain states ("State Branches") may be required to: (i)
pledge to the appropriate regulatory authority, by depositing assets with a
designated bank within the relevant state, a certain percentage of their assets
as fixed from time to time by such regulatory authority; and (ii) maintain
assets within the relevant state in an amount equal to a specified percentage of
the aggregate amount of liabilities of the foreign bank payable at or through
all of its agencies or branches within the state. The deposits of federal and
State Branches generally must be insured by the FDIC if such branches take
deposits of less than $100,000.

In view of the foregoing factors associated with the purchase of CDs and TDs
issued by foreign branches of domestic banks, by foreign subsidiaries of
domestic banks, by foreign branches of foreign banks or by domestic branches of
foreign banks, BGFA carefully evaluates such investments on a case-by-case
basis.

Each Fund may purchase CDs issued by banks, savings and loan associations and
similar thrift institutions with less than $1 billion in assets, provided that
such institutions are members of the FDIC, and further provided such Fund
purchases any such CD in a principal amount of not more than $100,000, which
amount would be fully insured by the Bank Insurance Fund or the Savings
Association Insurance Fund administered by the FDIC. Interest payments on such a
CD are not insured by the FDIC. No Fund will own more than one such CD per such
issuer.

U.S. Government Obligations. The LifePath Funds may invest in various types
----------------------------
of U.S. Government obligations. U.S. Government obligations include securities
issued or guaranteed as to principal and interest by the U.S. Government, its
agencies or instrumentalities. Payment of principal and interest on U.S.
Government obligations (i) may be backed by the full faith and credit of the
United States (as with U.S. Treasury obligations and GNMA certificates) or (ii)
may be backed solely by the issuing or guaranteeing agency or instrumentality
itself (as with FNMA notes). In the latter case, the investor must look
principally to the agency or instrumentality issuing or guaranteeing the
obligation for ultimate repayment, which agency or instrumentality may be
privately owned. There can be no assurance that the

5
<PAGE>

U.S. Government would provide financial support to its agencies or
instrumentalities where it is not obligated to do so. As a general matter, the
value of debt instruments, including U.S. Government obligations, declines when
market interest rates increase and rises when market interest rates decrease.
Certain types of U.S. Government obligations are subject to fluctuations in
yield or value due to their structure or contract terms.

Securities of Non-U.S. Issuers. The LifePath Funds may invest in certain
-------------------------------
securities of non-U.S. issuers as discussed below.

Obligations of Foreign Governments, Supranational Entities and Banks. Each
LifePath Fund may invest in U.S. dollar-denominated short-term obligations
issued or guaranteed by one or more foreign governments or any of their
political subdivisions, agencies or instrumentalities that are determined by
BGFA to be of comparable quality to the other obligations in which such Fund may
invest. The Funds may also invest in debt obligations of supranational entities.
Supranational entities include international organizations designated or
supported by governmental entities to promote economic reconstruction or
development and international banking institutions and related government
agencies. Examples include the International Bank for Reconstruction and
Development (the World Bank), the European Coal and Steel Community, the Asian
Development Bank and the InterAmerican Development Bank. The percentage of each
Fund's assets invested in obligations of foreign governments and supranational
entities will vary depending on the relative yields of such securities, the
economic and financial markets of the countries in which the investments are
made and the interest rate climate of such countries.

Each Fund may invest a portion of its total assets in high-quality, short-term
(one year or less) debt obligations of foreign branches of U.S. banks or U.S.
branches of foreign banks that are denominated in and pay interest in U.S.
dollars.

Foreign Equity Securities and Depositary Receipts - Each LifePath Fund's assets
may be invested in equity securities of foreign issuers and American Depositary
Receipts ("ADRs"), European Depositary Receipts ("EDRs") and Global Depositary
Receipts ("GDRs") of such issuers. ADRs, EDRs and GDRs may not necessarily be
denominated in the same currency as the securities into which they may be
converted. ADRs are receipts typically issued by a United States bank or trust
company that evidence ownership of underlying securities issued by a foreign
corporation. GDRs are receipts issued by either a U.S. or non-U.S. banking
institution, that evidence ownership of underlying foreign securities. EDRs,
which are sometimes referred to as Continental Depositary Receipts ("CDRs"), are
receipts issued in Europe typically by non-United States banks and trust
companies that evidence ownership of either foreign or domestic securities.
Generally, ADRs in registered form are designed for use in the United States
securities markets and EDRs and CDRs in bearer form are designed for use in
Europe. Each LifePath Fund may invest in ADRs, EDRs, CDRs and GDRs through
"sponsored" or "unsponsored" facilities. A sponsored facility is established
jointly by the issuer of the underlying security and a depositary, whereas a
depositary may establish an unsponsored facility without participation by the
issuer of the deposited security. Holders of unsponsored depositary receipts
generally bear all the costs of such facilities and the depositary of an
unsponsored facility frequently is under no obligation to distribute shareholder
communications received from the issuer of the deposited security or to pass
through voting rights to the holders of such receipts in respect of the
deposited securities.

Futures Contracts and Options Transactions. LifePath Funds may use futures
------------------------------------------
contracts as a hedge against the effects of interest rate changes or changes in
the market value of the stocks comprising the index in which such Fund invests.
In managing their cash flows, these Funds also may use futures contracts as a
substitute for holding the designated securities underlying the futures
contract. A futures contract provides for the future sale by one party and
purchase by another party of a specified amount of

6
<PAGE>

a specific financial instrument for a specified price at a designated date, time
and place. An index futures contract is a standardized agreement between two
parties that commits one party to buy and the other party to sell a stipulated
quantity of a market index at a set price on or before a given date in the
future. The seller never actually delivers "shares" of the index or shares of
all the stocks in the index. Instead, the buyer and the seller settle the
difference between the contract price and the market price in cash on the
agreed-upon date - the buyer paying the difference if the actual price is lower
than the contract price and the seller paying the difference if the actual price
is higher. Options on futures contracts are similar to options on securities or
currencies except that options on futures contracts give the purchaser the
right, in return for the premium paid, to assume a position in a futures
contract (a long position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during the period of
the option. Futures contracts and options are standardized and traded on
exchanges, where the exchange serves as the ultimate counterparty for all
contracts. At the time it enters into a futures transaction, a Fund is required
to make a performance deposit (initial margin) of cash or liquid securities in a
segregated account in the name of the futures broker. Subsequent payments of
"variation margin" are then made on a daily basis, depending on the value of the
futures position that is continually "marked to market."

A LifePath Fund may engage only in futures contract transactions involving (i)
the sale of a futures contract (i.e., short positions) to hedge the value of
securities held by such Fund; (ii) the purchase of a futures contract when such
Fund holds a short position having the same delivery month (i.e., a long
position offsetting a short position); or (iii) the purchase of a futures
contract to permit the Fund to, in effect, participate in the market for the
designated securities underlying the futures contract without actually owning
such designated securities. When a Fund purchases a futures contract, it will
create a segregated account consisting of cash or other liquid assets in an
amount equal to the total market value of such futures contract, less the amount
of initial margin for the contract.

If a LifePath Fund enters into a short position in a futures contract as a
hedge against anticipated adverse market movements and the market then rises,
the increase in the value of the hedged securities will be offset, in whole or
in part, by a loss on the futures contract. If instead a Fund purchases a
futures contract as a substitute for investing in the designated underlying
securities, a Fund experiences gains or losses that correspond generally to
gains or losses in the underlying securities. The latter type of futures
contract transactions permits a Fund to experience the results of being fully
invested in a particular asset class, while maintaining the liquidity needed to
manage cash flows into or out of the Fund (e.g., from purchases and redemptions
of Fund shares). Under normal market conditions, futures contract positions may
be closed out on a daily basis. The LifePath Funds expect to apply a portion of
their cash or cash equivalents maintained for liquidity needs to such
activities.

Transactions by a LifePath Fund in futures contracts involve certain risks.
One risk in employing futures contracts as a hedge against cash market price
volatility is the possibility that futures prices will correlate imperfectly
with the behavior of the prices of the securities in the Fund's investment
portfolio. Similarly, in employing futures contracts as a substitute for
purchasing the designated underlying securities, there is a risk that the
performance of the futures contract may correlate imperfectly with the
performance of the direct investments for which the futures contract is a
substitute. In addition, commodity exchanges generally limit the amount of
fluctuation permitted in futures contract prices during a single trading day,
and the existence of such limits may prevent the prompt liquidation of futures
positions in certain cases. Limits on price fluctuations are designed to
stabilize prices for the benefit of market participants; however, there could be
cases where the Fund could incur a larger loss due to the delay in trading than
it would have if no limit rules had been in effect.

7
<PAGE>

In order to comply with undertakings made by the LifePath Fund pursuant to
Commodity Futures Trading Commission ("CFTC") Regulation 4.5, the Funds will use
futures and option contracts solely for bona fide hedging purposes within the
meaning and intent of CFTC Reg. 1.3(z); provided, however, that in addition,
with respect to positions in commodity futures or commodity option contracts
that do not come within the meaning and intent of CFTC Reg. 1.3(z), the
aggregate initial margin and premiums required to establish such positions will
not exceed five percent of the liquidation value of the Fund's portfolio, after
taking into account unrealized profits and unrealized losses on any such
contract it has entered into; and provided further, that in the case of an
option that is in-the-money at the time of purchase, the in-the-money amount as
defined in CFTC Reg. 190.01(x) may be excluded in computing such five percent.

Stock Index Futures and Options on Stock Index Futures. Each LifePath Fund may
invest in stock index futures and options on stock index futures as a substitute
for a comparable market position in the underlying securities. No physical
delivery of the underlying stocks in the index is made. With respect to stock
indices that are permitted investments, each Fund intends to purchase and sell
futures contracts on the stock index for which it can obtain the best price with
consideration also given to liquidity. There can be no assurance that a liquid
market will exist at the time when a Fund seeks to close out a futures contract
or a futures option position. Lack of a liquid market may prevent liquidation of
an unfavorable position.

Options on stock indices are similar to options on stock except that (a) the
expiration cycles of stock index options are monthly, while those of stock
options are currently quarterly, and (b) the delivery requirements are
different. Instead of giving the right to take or make delivery of stock at a
specified price, an option on a stock index gives the holder the right to
receive a cash "exercise settlement amount" equal to (i) the amount, if any, by
which the fixed exercise price of the option exceeds (in the case of a put) or
is less than (in the case of a call) the closing value of the underlying index
on the date of exercise, multiplied by (ii) a fixed "index multiplier." Receipt
of this cash amount depends upon the closing level of the stock index upon which
the option is based being greater than (in the case of a call) or less than (in
the case of a put) the exercise price of the option. The amount of cash received
is equal to such difference between the closing price of the index and the
exercise price of the option expressed in dollars multiplied by a specified
multiplier. The writer of the option is obligated, in return for the premium
received, to make delivery of this amount. The writer may offset a position in
stock index options prior to expiration by entering into a closing transaction
on an exchange or the writer may let the option expire unexercised.

Interest-Rate Futures Contracts and Options on Interest-Rate Futures Contracts.
Each LifePath Fund may invest in interest-rate futures contracts and options on
interest-rate futures contracts as a substitute for a comparable market position
in the underlying securities. The Funds may also sell options on interest-rate
futures contracts as part of closing purchase transactions to terminate their
options positions. No assurance can be given that such closing transactions can
be effected or the degree of correlation between price movements in the options
on interest rate futures and price movements in the Funds' portfolio securities
that are the subject of the transaction.

Interest-Rate and Index Swaps. Each LifePath Fund may enter into interest-rate
and index swaps in pursuit of their investment objectives. Interest-rate swaps
involve the exchange by a Fund with another party of their respective
commitments to pay or receive interest (for example, an exchange of floating-
rate payments on fixed-rate payments). Index swaps involve the exchange by a
Fund with another party of cash flows based upon the performance of an index of
securities or a portion of an index of securities that usually include dividends
or income. In each case, the exchange commitments can involve payments to be
made in the same currency or in different currencies. A Fund will usually enter
into swaps on a net

8
<PAGE>

basis. In so doing, the two payment streams are netted out, with a Fund
receiving or paying, as the case may be, only the net amount of the two
payments. If a Fund enters into a swap, it will maintain a segregated account on
a gross basis, unless the contract provides for a segregated account on a net
basis. If there is a default by the other party to such a transaction, a Fund
will have contractual remedies pursuant to the agreements related to the
transaction. The use of interest-rate and index swaps is a highly specialized
activity that involves investment techniques and risks different from those
associated with ordinary portfolio security transactions. There is no limit,
except as provided below, on the amount of swap transactions that may be entered
into by a Fund. These transactions generally do not involve the delivery of
securities or other underlying assets or principal. Accordingly, the risk of
loss with respect to swaps generally is limited to the net amount of payments
that a Fund is contractually obligated to make. There is also a risk of a
default by the other party to a swap, in which case a Fund may not receive net
amount of payments that a Fund contractually is entitled to receive.

Foreign Currency Transactions. Currency exchange rates may fluctuate
-----------------------------
significantly over short periods of time. They generally are determined by the
forces of supply and demand in the foreign exchange markets and the relative
merits of investments in different countries, actual or perceived changes in
interest rates and other complex factors, as seen from an international
perspective. Currency exchange rates also can be affected unpredictably by the
intervention of U.S. or foreign governments or central banks, or by the failure
to intervene, or by currency controls or political developments in the United
States or abroad. The LifePath Funds intend to engage in foreign currency
transactions to maintain the same foreign currency exposure as the relevant
foreign securities index through which the Funds seek foreign equity market
exposure, but not as part of a defensive strategy to protect against
fluctuations in exchange rates. If a LifePath Fund enters into a foreign
currency transaction or forward contract, such Fund deposits, if required by
applicable regulations, with MIP's custodian cash or high-grade debt securities
in a segregated account of the LifePath Fund in an amount at least equal to the
value of the LifePath Fund's total assets committed to the consummation of the
forward contract. If the value of the securities placed in the segregated
account declines, additional cash or securities is placed in the account so that
the value of the account equals the amount of the LifePath Fund's commitment
with respect to the contract.

At or before the maturity of a forward contract, a LifePath Fund either may
sell a portfolio security and make delivery of the currency, or may retain the
security and offset its contractual obligation to deliver the currency by
purchasing a second contract pursuant to which such Fund obtains, on the same
maturity date, the same amount of the currency that it is obligated to deliver.
If the LifePath Fund retains the portfolio security and engages in an offsetting
transaction, such Fund, at the time of execution of the offsetting transaction,
incurs a gain or a loss to the extent that movement has occurred in forward
contract prices. Should forward prices decline during the period between the
LifePath Fund's entering into a forward contract for the sale of a currency and
the date it enters into an offsetting contract for the purchase of the currency,
the Fund realizes a gain to the extent the price of the currency it has agreed
to sell exceeds the price of the currency it has agreed to purchase. Should
forward prices increase, the Fund suffers a loss to the extent the price of the
currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell.

The cost to a LifePath Fund of engaging in currency transactions varies with
factors such as the currency involved, the length of the contract period and the
market conditions then prevailing. Because transactions in currency exchange
usually are conducted on a principal basis, no fees or commissions are involved.
BGFA considers on an ongoing basis the creditworthiness of the institutions with
which a LifePath Fund enters into foreign currency transactions. The use of
forward currency exchange contracts does not eliminate fluctuations in the
underlying prices of the securities, but it does establish a rate of

9
<PAGE>

exchange that can be achieved in the future. If a devaluation generally is
anticipated, the LifePath Fund may not be able to contract to sell the currency
at a price above the devaluation level it anticipates.

The purchase of options on currency futures allows a LifePath Fund, for the
price of the premium it must pay for the option, to decide whether or not to buy
(in the case of a call option) or to sell (in the case of a put option) a
futures contract at a specified price at any time during the period before the
option expires.

Foreign currency transactions may occur on a spot (i.e., cash) basis at the
rate prevailing in the currency exchange market or on a forward basis. A forward
currency exchange contract involves an obligation to purchase or sell a specific
currency at a set price on a future date which must be more than two days from
the date of the contract. The forward foreign currency market offers less
protection against default than is available when trading currencies on an
exchange, since a forward currency contract is not guaranteed by an exchange or
clearinghouse. Therefore, a default on a forward currency contract would deprive
a LifePath Fund of unrealized profits or force such Fund to cover its
commitments for purchase or resale, if any, at the current market price.

Each LifePath Fund may combine forward currency exchange contracts with
investments in securities denominated in other currencies.

Each LifePath Fund also may maintain short positions in forward currency
exchange transactions, which would involve the Fund agreeing to exchange an
amount of a currency it did not currently own for another currency at a future
date in anticipation of a decline in the value of the currency sold relative to
the currency such Fund contracted to receive in the exchange.

Unlike trading on domestic futures exchanges, trading on foreign futures
exchanges is not regulated by the Commodity Futures Trading Commission (the
"CFTC") and generally is subject to greater risks than trading on domestic
exchanges. For example, some foreign exchanges are principal markets so that no
common clearing facility exists and an investor may look only to the broker for
performance of the contract. BGFA, however, considers on an ongoing basis the
creditworthiness of such counterparties. In addition, any profits that a
LifePath Fund might realize in trading could be eliminated by adverse changes in
the exchange rate; adverse exchange rate changes also could cause a Fund to
incur losses. Transactions on foreign exchanges may include both futures
contracts which are traded on domestic exchanges and those which are not. Such
transactions may also be subject to withholding and other taxes imposed by
foreign governments.

Future Developments. Each LifePath Fund may take advantage of opportunities in
-------------------
the areas of options and futures contracts and options on futures contracts and
any other derivative investments that are not presently contemplated for use by
the Funds or which are not currently available but which may be developed, to
the extent such opportunities are both consistent with a LifePath Fund's
investment objective and legally permissible for each Fund. Before entering
into such transactions or making any such investment, a LifePath Fund would
provide appropriate disclosure in its prospectus or this SAI.

Forward Commitments, When-Issued Purchases and Delayed-Delivery Transactions.
-----------------------------------------------------------------------------
Each Fund may purchase or sell securities on a when-issued or delayed-delivery
basis and make contracts to purchase or sell securities for a fixed price at a
future date beyond customary settlement time. Securities purchased or sold on a
when-issued, delayed-delivery or forward commitment basis involve a risk of loss
if the value of the security to be purchased declines, or the value of the
security to be sold increases, before the settlement date. Although a Fund will
generally purchase securities with the intention of acquiring them,

10
<PAGE>

a Fund may dispose of securities purchased on a when issued, delayed-delivery or
a forward commitment basis before settlement when deemed appropriate by the
investment adviser.

Investment Company Securities. Each LifePath Fund may invest in securities
------------------------------
issued by other investment companies that principally invest in securities of
the type in which the Fund invests. Under the 1940 Act, a Fund's investment in
such securities currently is limited to, subject to certain exceptions, (i) 3%
of the total voting stock of any one investment company, (ii) 5% of the Fund's
net assets with respect to any one investment company and (iii) 10% of the
Fund's net assets in the aggregate. Investments in the securities of other
investment companies generally will involve duplication of advisory fees and
certain other expenses. Each Fund may also purchase shares of exchange listed
closed-end funds.

Convertible Securities. Each LifePath Fund may purchase fixed-income
-----------------------
convertible securities, such as bonds or preferred stock, which may be converted
at a stated price within a specified period of time into a specified number of
shares of common stock of the same or a different issuer. Convertible securities
are senior to common stock in a corporation's capital structure, but usually are
subordinated to non-convertible debt securities. While providing a fixed-income
stream (generally higher in yield than the income from a common stock but lower
than that afforded by a non-convertible debt security), a convertible security
also affords an investor the opportunity, through its conversion feature, to
participate in the capital appreciation of the common stock into which it is
convertible. In general, the market value of a convertible security is the
higher of its "investment value" (i.e., its value as a fixed-income security)
or its "conversion value" (i.e., the value of the underlying shares of common
stock if the security is converted). As a fixed-income security, the market
value of a convertible security generally increases when interest rates decline
and generally decreases when interest rates rise. However, the price of a
convertible security also is influenced by the market value of the security's
underlying common stock. Thus, the price of a convertible security generally
increases as the market value of the underlying stock increases, and generally
decreases as the market value of the underlying stock declines. Investments in
convertible securities generally entail less risk than investments in the common
stock of the same issuer.

Illiquid Securities. Each LifePath Fund may invest up to 15% of the value of
--------------------
its net assets in securities as to which a liquid trading market does not exist,
provided such investments are consistent with its investment objective. Such
securities may include securities that are not readily marketable, such as
privately issued securities and other securities that are subject to legal or
contractual restrictions on resale, floating- and variable-rate demand
obligations as to which the Fund cannot exercise a demand feature on not more
than seven days notice and as to which there is no secondary market and
repurchase agreements providing for settlement more than seven days after
notice.

Mortgage-Backed Securities. Each LifePath Fund may invest in mortgage-backed
--------------------------
securities ("MBSs"), which are securities representing interests in a pool of
loans secured by mortgages. The resulting cash flow from these mortgages is used
to pay principal and interest on the securities. MBSs are assembled for sale to
investors by various government sponsored enterprises such as the Federal
National Mortgage Association ("FNMA") and the Federal Home Loan Mortgage
Corporation ("FHLMC") or are guaranteed by such governmental agencies as the
Government National Mortgage Association ("GNMA"). Regardless of the type of
guarantee, all MBSs are subject to interest rate risk (i.e., exposure to loss
due to changes in interest rates). GNMA MBSs include GNMA Mortgage Pass-Through
Certificates (also known as "Ginnie Maes") that are guaranteed as to the full
and timely payment of principal and interest by GNMA and such guarantee is
backed by the authority of GNMA to borrow funds from the U.S. Treasury to make
payments under its guarantee. GNMA is a wholly-owned U.S. Government corporation
within the Department of Housing and Urban Development and, as such, Ginnie

11
<PAGE>

Maes are backed by the full faith and credit of the federal government. In
contrast, MBSs issued by FNMA include FNMA Guaranteed Mortgage Pass-Through
Certificates ("Fannie Maes") that are solely the obligations of FNMA and are
neither backed by nor entitled to the full faith and credit of the federal
government. FNMA is a government-sponsored enterprise that is also a private
corporation whose stock trades on the NYSE. Fannie Maes are guaranteed as to
timely payment of principal and interest by FNMA. MBSs issued by FHLMC include
FHLMC Mortgage Participation Certificates ("Freddie Macs" or "PCs"). FHLMC is a
government-sponsored enterprise whose MBSs are solely obligations of FHLMC.
Therefore, Freddie Macs are not guaranteed by the United States or by any
Federal Home Loan Bank and do not constitute a debt or obligation of the United
States or of any Federal Home Loan Bank. FHLMC guarantees timely payment of
interest, but only ultimate payment of principal due under the obligations it
issues. FHLMC may, under certain circumstances, remit the guaranteed payment of
principal at any time after default on an underlying mortgage, but in no event
later than one year after the guarantee becomes payable.

Warrants. Each LifePath Fund may invest generally up to 5% of its net assets
---------
at the time of purchase in warrants, except that this limitation does not apply
to warrants acquired in units or attached to securities. A warrant is an
instrument issued by a corporation that gives the holder the right to subscribe
to a specified amount of the corporation's capital stock at a set price for a
specified period of time. The prices of warrants do not necessarily correlate
with the prices of the underlying securities.

Fixed-Income Obligations. Investors should be aware that even though
-------------------------
interest-bearing obligations are investments that promise a stable stream of
income, the prices of such securities are inversely affected by changes in
interest rates and, therefore, are subject to the risk of market price
fluctuations. Long-term obligations are affected to a greater extent by interest
rates than shorter-term obligations. The values of fixed-income obligations also
may be affected by changes in the credit rating or financial condition of the
issuing entities. Once the rating of a portfolio security has been changed to a
rating below investment grade, the particular LifePath Fund considers all
circumstances deemed relevant in determining whether to continue to hold the
security. Certain obligations that may be purchased by the LifePath Fund, such
as those rated "Baa" by Moody's and "BBB" by S&P, Fitch and Duff, may be subject
to such risk with respect to the issuing entity and to greater market
fluctuations than certain lower yielding, higher rated fixed-income securities.
Securities that are rated "Baa" by Moody's are considered medium-grade
obligations; they are neither highly protected nor poorly secured, and are
considered by Moody's to have speculative characteristics. Obligations rated
"BBB" by S&P are regarded as having adequate capacity to pay interest and repay
principal, and, while such debt securities ordinarily 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 securities in this category than in higher rated categories. Obligations
rated "BBB" by Fitch are considered investment grade and of satisfactory credit
quality; however, adverse changes in economic conditions and circumstances are
more likely to have an adverse impact on these obligations and, therefore,
impair timely payment. Obligations rated "BBB" by Duff have below average
protection factors but nonetheless are considered sufficient for prudent
investment. If a security held by a LifePath Fund is downgraded to a rating
below investment grade, such Fund may continue to hold the obligation until such
time as BGFA determines it to be advantageous for the LifePath Fund to sell the
obligation. If such a policy would cause a LifePath Fund to have 5% or more of
its net assets invested in obligations that have been downgraded below
investment grade, the Fund promptly would seek to dispose of such obligations in
an orderly manner.

Short-Term Instruments and Temporary Investments. Each LifePath Fund may
------------------------------------------------
invest in the following high-quality money market instruments on an ongoing
basis to provide liquidity, for temporary purposes when there is an unexpected
level of shareholder purchases or redemptions or when "defensive" strategies
are appropriate: (i) short-term obligations issued or guaranteed by the U.S.
Government, its

12
<PAGE>

agencies or instrumentalities (including government-sponsored enterprises); (ii)
negotiable certificates of deposit ("CDs"), bankers' acceptances, fixed time
deposits and other obligations of domestic banks (including foreign branches)
that have more than $1 billion in total assets at the time of investment and
that are members of the Federal Reserve System or are examined by the
Comptroller of the Currency or whose deposits are insured by the FDIC; (iii)
commercial paper rated at the date of purchase "Prime-1" by Moody's or "A-1+" or
"A-1" by S&P, or, if unrated, of comparable quality as determined by BGFA; (iv)
non-convertible corporate debt securities (e.g., bonds and debentures) with
remaining maturities at the date of purchase of not more than one year that are
rated at least "Aa" by Moody's or "AA" by S&P; (v) repurchase agreements; and
(vi) short-term, U.S. dollar-denominated obligations of foreign banks (including
U.S. branches) that, at the time of investment have more than $10 billion, or
the equivalent in other currencies, in total assets and in the opinion of BGFA
are of comparable quality to obligations of U.S. banks that may be purchased by
the Fund.

Commercial Paper and Short-Term Corporate Debt Instruments. Each Fund may invest
in commercial paper (including variable amount master demand notes), which
consists of short-term, unsecured promissory notes issued by corporations to
finance short-term credit needs. Commercial paper is usually sold on a discount
basis and has a maturity at the time of issuance not exceeding nine months.
Variable amount master demand notes are demand obligations that permit the
investment of fluctuating amounts at varying market rates of interest pursuant
to arrangements between the issuer and a commercial bank acting as agent for the
payee of such notes whereby both parties have the right to vary the amount of
the outstanding indebtedness on the notes. The investment adviser to each Fund
monitors on an ongoing basis the ability of an issuer of a demand instrument to
pay principal and interest on demand. Each Fund also may invest in non-
convertible corporate debt securities (e.g., bonds and debentures) with not more
than one year remaining to maturity at the date of settlement. A Fund will
invest only in such corporate bonds and debentures that are rated at the time of
purchase at least "Aa" by Moody's or "AA" by S&P. Subsequent to its purchase
by the Fund, an issue of securities may cease to be rated or its rating may be
reduced below the minimum rating required for purchase by the Fund. The
investment adviser to each Fund will consider such an event in determining
whether the Fund should continue to hold the obligation. To the extent the Fund
continues to hold such obligations, it may be subject to additional risk of
default.

Repurchase Agreements. Each 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. The Fund's custodian has custody of, and holds in a
segregated account, securities acquired as collateral by the Fund under a
repurchase agreement. Repurchase agreements are considered by the staff of the
SEC to be loans by the Fund. A 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 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 each Fund
to limit repurchase agreements to

13
<PAGE>

selected creditworthy securities dealers or domestic banks or other recognized
financial institutions. Each Fund considers on an ongoing basis the
creditworthiness of the institutions with which it enters into repurchase
agreements.

Floating- and Variable-Rate Obligations. Each LifePath 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 a 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 prepare 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
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. 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 each Fund may invest in obligations that are not so rated only if
the investment adviser determines that at the time of investment the obligations
are of comparable quality to the other obligations in which such Fund may
invest. The investment adviser, on behalf of each Fund, considers on an ongoing
basis the creditworthiness of the issuers of the floating- and variable-rate
demand obligations in such Fund's portfolio. No Fund invests 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.

Ratings. The ratings of Moody's, S&P, Fitch and Duff represent their opinions
--------
as to the quality of the obligations that they undertake to rate. It should be
emphasized, however, that ratings are relative and subjective and, although
ratings may be useful in evaluating the safety of interest and principal
payments, they do not evaluate the market value risk of such obligations.
Therefore, although these ratings may be an initial criterion for selection of
portfolio investments, BGFA also evaluates such obligations and the ability of
their issuers to pay interest and principal. Each Fund relies on BGFA's
judgment, analysis and experience in evaluating the creditworthiness of an
issuer. In this evaluation, BGFA takes into consideration, among other things,
the issuer's financial resources, its sensitivity to economic conditions and
trends, the quality of the issuer's management and regulatory matters. It also
is possible that a rating agency might not timely change the rating on a
particular issue to reflect subsequent events.

Borrowing Money. As a fundamental policy, each Fund is permitted to borrow to
----------------
the extent permitted under the 1940 Act. However, each Fund currently intends to
borrow money only for temporary or emergency (not leveraging) purposes, and may
borrow up to one-third of the value of its total assets (including the amount
borrowed) valued at the lesser of cost or market, less liabilities (not
including the amount borrowed) at the time the borrowing is made. As long as
such borrowings exceed 5% of a Fund's total assets, the Fund will not make any
new investments.

Lending Portfolio Securities. To a limited extent, each LifePath Fund may lend
----------------------------
its portfolio securities to brokers, dealers and other financial institutions,
provided it receives cash collateral that is maintained at all times in an
amount equal to at least 100% of the current market value of the securities
loaned. By

14
<PAGE>

lending its portfolio securities, a Fund can increase its income through the
investment of the cash collateral or by receipt of a loan premium from the
borrower. For purposes of this policy, each Fund considers collateral consisting
of U.S. Government obligations or irrevocable letters of credit issued by banks
whose securities meet the standards for investment by such Fund to be the
equivalent of cash. From time to time, a Fund may return to the borrower, or to
a third party unaffiliated with MIP that is acting as a "placing broker," a part
of the interest earned from the investment of collateral received in exchange
for securities loaned.

The SEC currently requires that the following conditions must be met whenever
portfolio securities are loaned: (i) the Fund must receive at least 100% cash
collateral from the borrower; (ii) the borrower must increase such collateral
whenever the market value of the securities loaned rises above the level of such
collateral; (iii) the Fund must be able to terminate the loan at any time; (iv)
the Fund must receive reasonable interest on the loan, as well as any dividends,
interest or other distributions payable on the loaned securities, and any
increase in market value; (v) the Fund may pay only reasonable custodian fees in
connection with the loan; and (vi) while voting rights on the loaned securities
may pass to the borrower, MIP's Board of Trustees must terminate the loan and
regain the right to vote the securities if a material event adversely affecting
the investment occurs. These conditions may be subject to future modification.

RISK CONSIDERATIONS

General. Since the investment characteristics and, therefore, investment
--------
risks directly associated with each LifePath Fund correspond to those of the
Master Portfolio in which each Fund invests, the following is a discussion of
the risks associated with the investments of the Master Portfolios. Once again,
unless otherwise specified, references to the investment policies and risks of a
Fund also should be understood as references to the investment policies and
risks of the corresponding Master Portfolio. The net asset value per share of
each LifePath Fund is neither insured nor guaranteed, is not fixed and should be
expected to fluctuate.

Equity Securities. The stock investments of the LifePath Funds are subject to
------------------
equity market risk. Equity market risk is the possibility that common stock
prices will fluctuate or decline over short or even extended periods. The U.S.
stock market tends to be cyclical, with periods when stock prices generally rise
and periods when prices generally decline. Throughout 1998, the stock market,
as measured by the S&P 500 Index and other commonly used indices, was trading at
or close to record levels. There can be no guarantee that these performance
levels will continue.

Debt Securities. The debt instruments in which the LifePath Funds invest
----------------
are subject to credit and interest rate risk. Credit risk is the risk that
issuers of the debt instruments in which the Funds invest may default on the
payment of principal and/or interest. Interest rate risk is the risk that
increases in market interest rates may adversely affect the value of the debt
instruments in which the Funds invest. The value of the debt instruments
generally changes inversely to market interest rates. Debt securities with
longer maturities, which tend to produce higher yields, are subject to
potentially greater capital appreciation and depreciation than obligations with
shorter maturities. Changes in the financial strength of an issuer or changes in
the ratings of any particular security may also affect the value of these
investments. Although some of the Funds' portfolio securities are guaranteed by
the U.S. Government, its agencies or instrumentalities, such securities are
subject to interest rate risk and the market value of these securities, upon
which the Funds' daily net asset value is based, will fluctuate. No assurance
can be given that the U.S. Government would provide financial support to its
agencies or instrumentalities where it is not obligated to do so.

15
<PAGE>

Foreign Securities. The LifePath Funds may invest in debt obligations and
------------------
equity securities of foreign issuers and may invest in American Depositary
Receipts ("ADRs") and European Depositary Receipts ("EDRs") of such issuers.
Investing in the securities of issuers in any foreign country, including through
ADRs and EDRs, involves special risks and considerations not typically
associated with investing in U.S. companies. These include differences in
accounting, auditing and financial reporting standards; generally higher
commission rates on foreign portfolio transactions; the possibility of
nationalization, expropriation or confiscatory taxation; adverse changes in
investment or exchange control regulations (which may include suspension of the
ability to transfer currency from a country); and political, social and monetary
or diplomatic developments that could affect U.S. investments in foreign
countries. Additionally, dispositions of foreign securities and dividends and
interest payable on those securities may be subject to foreign taxes, including
withholding taxes. Foreign securities often trade with less frequency and volume
than domestic securities and, therefore, may exhibit greater price volatility.
Additional costs associated with an investment in foreign securities may include
higher custodial fees than apply to domestic custodial arrangements and
transaction costs of foreign currency conversions. Changes in foreign exchange
rates also will affect the value of securities denominated or quoted in
currencies other than the U.S. dollar. A Fund's performance may be affected
either unfavorably or favorably by fluctuations in the relative rates of
exchange between the currencies of different nations, by exchange control
regulations and by indigenous economic and political developments.

Investment Considerations. Because the Funds may shift investment
-------------------------
allocations significantly from time to time, their performance may differ from
funds that invest in one asset class or from funds with a stable mix of assets.
Further, shifts among asset classes may result in relatively high turnover and
transaction (i.e., brokerage commission) costs. Portfolio turnover also can
generate short-term capital gains tax consequences. During those periods in
which a high percentage of a Fund's assets are invested in long-term bonds, the
Fund's exposure to interest rate risk will be greater because the longer
maturity of such securities means they are generally more sensitive to changes
in market interest rates than short-term securities."

Each LifePath Fund also may lend its portfolio securities and enter into
futures transactions, each of which involves risk. The futures contracts and
options on futures contracts that each Fund may purchase may be considered
derivatives. Derivatives are financial instruments whose values are derived, at
least in part, from the prices of other securities or specified assets, indices
or rates.

Asset allocation and modeling strategies are employed by BGFA for other
investment companies and accounts advised or sub-advised by BGFA. If these
strategies indicate particular securities should be purchased or sold, at the
same time, by a LifePath Fund and one or more of these investment companies or
accounts, available investments or opportunities for sales will be allocated
equitably to each by BGFA. In some cases, this procedure may adversely affect
the size of the position obtained for or disposed of by a LifePath Fund or the
price paid or received by such Fund.

16
<PAGE>

MANAGEMENT

The business and affairs of the Company are managed under the direction of its
Board of Directors in conformity with Maryland law. The Board of Directors of
the Company supervises the Funds' activities and monitors the Funds' contractual
arrangements with various service providers. The Company's Directors are also
MIP's Trustees. The Company's Board, including a majority of the Directors who
are not "interested persons" (as that term is defined in the 1940 Act) of the
Company, has adopted procedures to address potential conflicts of interest that
may arise as a result of the structure of the Boards.

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(s) During Past 5 Years
-------------------- ----------- -------------------
<S> <C> <C>
Jack S. Euphrat, 78 Director Private Investor.
415 Walsh Road
Atherton, CA 94027

*R. Greg Feltus, 49 Director, Chairman Executive Vice President of Stephens Inc.; President
and President of Stephens Insurance Services Inc.; Senior Vice
President of Stephens Sports Management Inc.; and
President of Investors Brokerage Insurance Inc.

W. Rodney Hughes, 74 Director Private Investor.
31 Dellwood Court
San Rafael, CA 94901

Leo Soong,/1/ 54 Director Managing Director of Crystal Geyser Roxane Water Co.;
Crystal Geyser Water Co. Co-Founder and President of Crystal Geyser Water Co.
55 Francisco Street, Suite 410
San Francisco, CA 94133

Richard H. Blank, Jr., 44 Chief Operating Vice President of Stephens Inc.; Director of Stephens
Officer, Secretary Sports Management Inc.; and Director of Capo Inc.
and Treasurer
</TABLE>

______________________
/1/ Elected to the Board of Directors of the Company on February 9, 2000.

17
<PAGE>

Compensation Table
For the Fiscal Year Ended February 29, 2000

<TABLE>
<CAPTION>
Aggregate Total Compensation
Compensation from Registrant
Name and Position from Registrant and Fund Complex
----------------- --------------- ----------------
<S> <C> <C>
Jack S. Euphrat $9,125 $18,250
Director

*R. Greg Feltus $ 0 $ 0
Director

Thomas S. Goho/1/ $1,500 $ 3,000
Director

W. Rodney Hughes $9,125 $18,250
Director

*J. Tucker Morse/1/ $1,500 $ 3,000
Director

Leo Soong $1,429 $ 2,857
Director
</TABLE>

______________________
/1/ Retired from the Board of Directors of the Company on April 28, 1999.

Master/Feeder Structure. Each LifePath Fund seeks to achieve its investment
------------------------
objective by investing all of its assets into the corresponding LifePath Master
Portfolio of MIP. The Funds and other entities investing in a Master Portfolio
are each liable for all obligations of such Master Portfolio. However, the risk
of a Fund incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and MIP itself is unable
to meet its obligations. Accordingly, the Company's Board of Directors believes
that neither a Fund nor its shareholders will be adversely affected by investing
Fund assets in a Master Portfolio. However, if a mutual fund or other investor
withdraws its investment from such 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.

A Fund may withdraw its investment in a Master Portfolio only if the Company's
Board of Directors determines that such action is in the best interests of such
Fund and its shareholders. Upon any 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

18
<PAGE>

investment adviser to manage the Fund's assets in accordance with the investment
policies described below with respect to the Master Portfolio.

Certain policies of a Master Portfolio that are non-fundamental may be changed
by vote of a majority of MIP's Trustees without interestholder approval. If a
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. A Fund also may elect to redeem its
interests in the corresponding 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, a 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 Funds 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.

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

As of May 31, 2000, the shareholders identified below were known by the
Company to own 5% or more of the LifePath Fund's outstanding shares in the
following capacity:

<TABLE>
<CAPTION>
Name and Address Percentage Nature of
Name of Fund of Shareholder of Fund Ownership
------------ ------------------------------------- ------------------ ---------
<S> <C> <C> <C>
LifePath Income Fund Merrill Lynch Pierce Fenner and Smith 74% Record
Qualified Retirement Plan
265 Davidson Ave., 4th Floor
Somerset, NJ 08873

Siemens Corp. Savings Plan 17% Record
Bankers Trust Company TR
P.O. Box 1992 MS D5
Boston, MA 02105

LifePath 2010 Fund Merrill Lynch Pierce Fenner and Smith 59% Record
Qualified Retirement Plan
265 Davidson Ave., 4th Floor
Somerset, NJ 08873

Siemens Corp. Savings Plan 17% Record
Bankers Trust Company TR
P.O. Box 1992 MS D5
Boston, MA 02105
</TABLE>

19
<PAGE>

<TABLE>
<CAPTION>
Name and Address Percentage Nature of
Name of Fund of Shareholder of Fund Ownership
------------ ------------------------------------------ -------------- -------------
<S> <C> <C> <C>
Charles Schwab & Co. Inc. 7% Record
Special Custody Account for the Exclusive
Benefit of our Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104

Bankers Trust Co. of CA NA TEEE 6% Record
FBO Pacificorp K Plus Employee
Savings and Stock Ownership Plan
300 S. Grand Ave., 40th Floor
Los Angeles, CA 90071

LifePath 2020 Fund Merrill Lynch Pierce Fenner and Smith 39% Record
Qualified Retirement Plan
265 Davidson Ave., 4th Floor
Somerset, NJ 08873

Chase Manhattan Bank 22% Record
Directed Trust for MetLife Defined
Contribution Group
4 New York Plaza, 2/nd/ Floor
New York, NY 10004
Charles Schwab & Co. Inc. 13% Record
Special Custody Account for the Exclusive
Benefit of our Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104

Siemens Corp. Savings Plan 12% Record
Bankers Trust Company TR
P.O. Box 1992 MS D5
Boston, MA 02105

LifePath 2030 Fund Merrill Lynch Pierce Fenner and Smith 54% Record
Qualified Retirement Plan
265 Davidson Ave., 4th Floor
Somerset, NJ 08873

Siemens Corp. Savings Plan 23% Record
Bankers Trust Company TR
P.O. Box 1992 MS D5
Boston, MA 02105

Bankers Trust Co. of CA NA TEEE 7% Record
FBO Pacificorp K Plus Employee
Savings and Stock Ownership Plan
300 S. Grand Ave., 40th Floor
Los Angeles, CA 90071
</TABLE>

20
<PAGE>

<TABLE>
<CAPTION>
Name and Address Percentage Nature of
Name of Fund of Shareholder of Fund Ownership
------------ ------------------------------------------ -------------- -------------
<S> <C> <C> <C>
LifePath 2040 Fund Merrill Lynch Pierce Fenner and Smith 49% Record
Qualified Retirement Plan
265 Davidson Ave., 4th Floor
Somerset, NJ 08873

Siemens Corp. Savings Plan 28% Record
Bankers Trust Company TR
P.O. Box 1992 MS D5
Boston, MA 02105

Bankers Trust Co. of CA NA TEEE 10% Record
FBO Pacificorp K Plus Employee
Savings & Stock Ownership Plan
300 S. Grand Avenue, 40th Floor
Los Angeles, CA 90071
</TABLE>

For purposes of the 1940 Act, any person who owns directly or through one
or more controlled companies more than 25% of the voting securities of a company
is presumed to "control" such company. Accordingly, to the extent that a
shareholder identified in the foregoing table is identified as the beneficial
holder of more than 25% of a Fund, or is identified as the holder of record of
more than 25% of a Fund and has voting and/or investment powers, it may be
presumed to control such Fund.

INVESTMENT ADVISER AND OTHER SERVICE PROVIDERS

Investment Adviser. BGFA provides investment advisory services to each
------------------
Master Portfolio pursuant to separate Investment Advisory Contracts (each, a
"BGFA Advisory Contract") with MIP. Pursuant to the Advisory Contracts, BGFA
furnishes to the Trust's Board of Trustees periodic reports on the investment
strategy and performance of each Master Portfolio. BGFA has agreed to provide to
the Master Portfolios, among other things, money market security and fixed-
income research, analysis and statistical and economic data and information
concerning interest rate and security market trends, portfolio composition,
credit conditions and average maturities of each Master Portfolio's investment
portfolio.

BGFA is entitled to receive monthly fees at the annual rate of 0.55% of
each Master Portfolio's average daily net assets as compensation for its
advisory services to such Master Portfolio.

As to each Master Portfolio, the applicable BGFA Advisory Contract is
subject to annual approval by (i) MIP's Board of Trustees or (ii) vote of a
majority (as defined in the 1940 Act) of the outstanding interests of such
Master Portfolio, provided that in either event the continuance also is approved
by a majority of MIP's Board of Trustees who are not "interested persons" (as
defined in the 1940 Act) of MIP or BGFA, by vote cast in person at a meeting
called for the purpose of voting on such approval. As to each Master Portfolio,
the applicable BGFA Advisory Contract is terminable without penalty, on 60 days
written notice by MIP's Board of Trustees or by vote of the holders of a
majority of such Master Portfolio's interests, or, on not less than 60 days
written notice, by BGFA. The applicable BGFA Advisory Contract terminates
automatically, as to the relevant Master Portfolio, in the event of its
assignment (as defined in the 1940 Act).

21
<PAGE>

For the fiscal years ended February 28, 1998, February 28, 1999 and
February 29, 2000, the advisory fees paid to BGFA by the corresponding Master
Portfolio of each LifePath Fund is shown below, without waivers.

<TABLE>
<CAPTION>
FYE 2/28/98 FYE 2/28/99 FYE 2/29/00
Master Portfolio Fees Paid Fees Paid Fees Paid
--------------------------- --------- --------- ---------
<S> <C> <C> <C>
LifePath Income Master Portfolio $ 656,142 $ 630,133 $ 592,139
LifePath 2010 Master Portfolio $1,018,984 $1,236,989 $1,282,599
LifePath 2020 Master Portfolio $1,572,634 $1,882,147 $2,101,737
LifePath 2030 Master Portfolio $1,048,151 $1,405,948 $1,501,573
LifePath 2040 Master Portfolio $1,767,632 $2,472,170 $2,790,585
</TABLE>

Co-Administrators. The Company has engaged Stephens Inc. ("Stephens") and
-----------------
Barclays Global Investors, N.A. ("BGI") to provide certain administration
services to the Funds. Pursuant to a Co-Administration Agreement with the
Company, Stephens and BGI provide as administrative services, among other
things: (i) general supervision of the operation of the Funds, including
coordination of the services performed by the investment adviser, transfer and
dividend disbursing agent, custodians, 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 Company; 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 Funds together with all other administrative services reasonably
necessary for the operation of the Funds, other than those services provided by
the Company's transfer and dividend disbursing agent. Stephens also pays the
compensation of the Company's Directors, officers and employees who are
affiliated with Stephens.

In addition, except for advisory fees, extraordinary expenses, brokerage
and other expenses connected to the execution of portfolio transactions and
certain expenses that are borne by the LifePath Funds, Stephens and BGI have
agreed to bear all costs of the Funds' and the Company's operations including,
but not limited to, transfer and dividend disbursing agency fees, shareholder
servicing fees, and expenses of printing and preparing prospectuses, SAIs and
other Fund materials. For providing such services, Stephens and BGI are entitled
to an annual fee of 0.40% of each Fund's average daily net assets. Effective
October 21, 1996, BGI contracted with Investors Bank & Trust Company ("IBT") to
provide certain sub-administration services.

For the fiscal years ended February 28, 1998, February 28, 1999 and
February 29, 2000, the Funds paid co-administration fees jointly to Stephens and
BGI as follows:

Fund FYE 2/28/98 FYE 2/28/99 FYE 2/29/00
---- ----------- ----------- -----------
LifePath Income Fund $183,550 $201,472 $156,853
LifePath 2010 Fund $388,764 $489,497 $429,967
LifePath 2020 Fund $502,717 $620,533 $624,390
LifePath 2030 Fund $293,010 $420,202 $385,776
LifePath 2040 Fund $372,862 $580,007 $541,602

Shareholder Servicing Agents. The Funds have adopted a Shareholder
----------------------------
Servicing Plan pursuant to which they have entered into Shareholder Servicing
Agreements with BGI and may enter into similar agreements with other entities
(collectively, "Shareholder Servicing Agents") for the provision of certain
services to Fund shareholders. The services provided may include personal
services relating to

22
<PAGE>

shareholder accounts, such as answering shareholder inquiries, providing reports
and other information, and providing services related to the maintenance of
shareholder accounts. For these services, each Shareholder Servicing Agent is
entitled to receive a monthly fee at the annual rate of up to 0.20% of the
average daily value of each LifePath Fund represented by shares owned during the
period for which payment is being made by investors with whom the Shareholder
Servicing Agent maintains a servicing relationship, or an amount that equals the
maximum amount payable to the Shareholder Servicing Agent under applicable laws,
regulations or rules, including the Conduct Rules of the National Association of
Securities Dealers, Inc., whichever is less. Stephens and BGI as co-
administrators have agreed to pay these shareholder servicing fees out of the
fees each receives for co-administration services.

Custodian. IBT, concurrent with its appointment as sub-administrator for
---------
the Funds on October 21, 1996, also has been retained as custodian of each
Fund's investments, 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 Funds, receives and delivers all assets
for the Funds upon purchase and upon sale or maturity; collects and receives all
income and other payments and distributions on account of the assets of the
Funds and pays all expenses of the Funds. IBT shall not be entitled to
compensation for providing custody services to the Funds pursuant to the Custody
Agreement so long as it receives fees from BGI for providing sub-administration
services to the Funds.

Transfer and Dividend Disbursing Agent. IBT has been retained as the
--------------------------------------
transfer and dividend disbursing agent for the Funds. For its services as
transfer and dividend disbursing agent to the Funds, IBT is entitled to receive
an annual maintenance fee computed on the basis of the number of shareholder
accounts that it maintains for the Funds and to be reimbursed for out-of-pocket
expenses or advances incurred by it in performing its obligations under the
agreement. Stephens and BGI as co-administrators have agreed to pay these fees
and expenses out of the fees each receives for co-administration services. The
annual maintenance fee is paid as follows:

23
<PAGE>

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
Funds, including, without limitation, any equipment or supplies that the Company
specifically orders or requires IBT to order.

Distribution Plan. MIP's Board of Trustees has adopted, on behalf of each
-----------------
Master Portfolio, a "defensive" distribution plan under Section 12(b) of the
1940 Act and Rule 12b-1 thereunder (the "Plan"). The Plan was adopted by a
majority of MIP's Board of Trustees (including a majority of those Trustees who
are not "interested persons" of MIP as defined in the 1940 Act ) on October 10,
1995. The Plan was intended as a precaution designed to address the possibility
that certain ongoing payments by BGFA to Wells Fargo in connection with the sale
of WFNIA may be characterized as indirect payments by each Master Portfolio to
finance activities primarily intended to result in the sale of interests in such
Master Portfolio. The Plan provides that if any portion of a Master Portfolio's
advisory fees (up to 0.25% of the average daily net assets of each Master
Portfolio on an annual basis) were deemed to constitute an indirect payment for
activities that are primarily intended to result in the sale of interests in a
Master Portfolio such payment would be authorized pursuant to the Plan. The
Master Portfolio's do not currently pay any amounts pursuant to the Plan.

Independent Auditors. KPMG 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.

Brokerage Commissions. For the fiscal years ended February 28, 1998,
---------------------
February 28, 1999 and February 29, 2000, the corresponding Master Portfolio of
each Fund paid the dollar amounts of brokerage commissions indicated below. None
of these brokerage commissions were paid to affiliated brokers.

<TABLE>
<CAPTION>
Commissions Paid
----------------
Master Portfolio FYE 2/28/98 FYE 2/28/99 FYE 2/29/00
---------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
LifePath Income Master Portfolio $ 9,361 $ 8,427 $ 6,565
LifePath 2010 Master Portfolio $15,306 $25,441 $ 29,150
LifePath 2020 Master Portfolio $29,153 $47,302 $ 71,716
LifePath 2030 Master Portfolio $28,908 $35,369 $ 50,148
LifePath 2040 Master Portfolio $94,717 $90,551 $115,074
</TABLE>

24
<PAGE>

Securities of Regular Broker/Dealers. As of February 29, 2000, the
------------------------------------
corresponding Master Portfolio of each Fund owned securities of its "regular
brokers or dealers" or their parents, as defined in the 1940 Act, as follows:

<TABLE>
<CAPTION>
Master Portfolio Broker/Dealer Amount
---------------- ----------------- ------
<S> <C> <C>
LifePath Income Master Portfolio J.P. Morgan Co., Inc. $ 12,876
Donaldson Lufkin & Jenrette, Inc. $ 8,687
Lehman Brothers Holdings, Inc. $ 13,050
Merrill Lynch & Co., Inc. $ 23,575
Morgan Stanley Dean Witter Discover & Co. $ 62,548
The Goldman Sachs Group $ 18,500

LifePath 2010 Master Portfolio J.P. Morgan Co., Inc. $ 145,299
Donaldson Lufkin & Jenrette, Inc. $ 6,602
Lehman Brothers Holdings, Inc. $ 54,375
Merrill Lynch & Co., Inc. $ 239,235
Morgan Stanley Dean Witter Discover & Co. $ 543,918
The Goldman Sachs Group $ 222,000

LifePath 2020 Master Portfolio J.P. Morgan Co., Inc. $ 323,232
Donaldson Lufkin & Jenrette, Inc. $ 19,077
Lehman Brothers Holdings, Inc. $ 146,088
Merrill Lynch & Co., Inc. $ 642,470
Morgan Stanley Dean Witter Discover & Co. $1,339,862
The Goldman Sachs Group $ 518,000

LifePath 2030 Master Portfolio Donaldson Lufkin & Jenrette, Inc. $ 18,461
Lehman Brothers Holdings, Inc. $ 119,987
Merrill Lynch & Co., Inc. $ 539,048
Morgan Stanley Dean Witter Discover & Co. $1,140,806

LifePath 2040 Master Portfolio J.P. Morgan Co., Inc. $ 607,392
Donaldson Lufkin & Jenrette, Inc. $ 58,648
Lehman Brothers Holdings, Inc. $ 264,987
Merrill Lynch & Co., Inc. $1,203,555
Morgan Stanley Dean Witter Discover & Co. $2,510,674
The Goldman Sachs Group $1,156,250
</TABLE>

PERFORMANCE INFORMATION

LifePath Funds. Average annual total return is calculated by determining
--------------
the ending redeemable value of an investment purchased with a hypothetical
$1,000 payment made at the beginning of the period (assuming the reinvestment of
dividends and distributions), dividing by the amount of the initial investment,
taking the "n"th root of the quotient (where "n" is the number of years in the
period) and subtracting 1 from the result.

Total return is calculated by subtracting the amount of the net asset value
per share at the beginning of a stated period from the net asset value per share
at the end of the period (after giving effect to the reinvestment of dividends
and distributions during the period), and dividing the result by the net asset
value per share at the beginning of the period.

25
<PAGE>

The LifePath Funds are successors to the assets of the Institutional Class
shares of the Stagecoach Trust LifePath Funds (the "Predecessor Funds"), which
commenced operations on March 1, 1994. The performance information shown below
for periods prior to March 26, 1996, the Company's LifePath Funds' commencement
of operations, reflects the performance of the Predecessor Funds.

For the fiscal year ended February 29, 2000, the five-year fiscal period from
March 1, 1995 to February 29, 2000 and the fiscal period from March 1, 1994
(commencement of operations) to February 29, 2000, the average annual total
returns on the LifePath Funds were as follows:

Fund 3/1/94-2/29/00 3/1/95-2/29/00 FYE 2/29/00
-------------------- -------------- -------------- -----------
<S> <C> <C> <C>
LifePath Income Fund 7.66% 8.74% 4.82%
LifePath 2010 Fund 11.86% 13.59% 7.92%
LifePath 2020 Fund 14.81% 17.00% 10.84%
LifePath 2030 Fund 16.95% 19.62% 13.04%
LifePath 2040 Fund 19.29% 22.22% 16.01%
</TABLE>

For the fiscal period from March 1, 1994 (commencement of operations) to
February 29, 2000, the cumulative total returns on the LifePath Funds were as
follows:

Fund 3/1/94-2/29/00
---- --------------

LifePath Income Fund 55.75%
LifePath 2010 Fund 95.93%
LifePath 2020 Fund 129.07%
LifePath 2030 Fund 155.93%
LifePath 2040 Fund 188.18%

The Master Portfolios have in effect a defensive Rule 12b-1 plan, which does
not result in any additional expenses either for the Funds or for the Master
Portfolios in which they invest. Under the Plan, up to 0.25% of Management Fees
may be designated as Rule 12b-1 fees to cover continuing payments to the
investment adviser for the activities relating to the sale of Master Portfolio
interests.

From time to time, the Company may use, in advertisements and other types of
literature, information and statements: (1) describing the investment adviser,
and its affiliates and predecessors, as one of the first investment managers to
advise investment accounts using asset allocation and index strategies; (2)
describing the Funds as one of the first mutual funds to offer a flexible
investment strategy designed to change over specific time horizons; (3)
describing the performance for the LifePath Funds; (4) describing the level of
assets under management by the investment adviser; and (5) describing the
investment adviser and its affiliates as managing over $782 billion in assets as
of December 31, 1999 for Fortune 500 companies, governments and other
institutions around the world.

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

For purposes of advertising, performance of the LifePath Funds may be
calculated on the basis of average annual total return and/or cumulative total
return of shares. Average annual total return of shares is calculated pursuant
to a standardized formula that assumes that an investment in shares of a Fund
was purchased with an initial payment of $1,000 and that the investment was
redeemed at the end of a stated

26
<PAGE>

period of time, after giving effect to the reinvestment of dividends and
distributions during the period. The return of shares is expressed as a
percentage rate that, if applied on a compounded annual basis, would result in
the redeemable value of the investment in shares at the end of the period.
Advertisements of the performance of shares of a LifePath Fund include the
Fund's average annual total return of shares for one, five and ten year periods,
or for shorter time periods depending upon the length of time during which such
Fund has operated.

Cumulative total return of shares is computed on a per share basis and assumes
the reinvestment of dividends and distributions. Cumulative total return of
shares generally is expressed as a percentage rate that is calculated by
combining the income and principal changes for a specified period and dividing
by the net asset value per share at the beginning of the period. Advertisements
may include the percentage rate of total return of shares or may include the
value of a hypothetical investment in shares at the end of the period that
assumes the application of the percentage rate of total return.

Performance figures are based on historical results and does not indicate
future performance. Investors should remember that performance is a function of
the type and quality of portfolio securities held by the Master Portfolio in
which the Fund invests and is affected by operating expenses. Performance
information, such as that described above, may not provide a basis for
comparison with other investments or other investment companies using a
different method of calculating performance.

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

DETERMINATION OF NET ASSET VALUE

LifePath Master Portfolios. The securities of the LifePath Master Portfolios,
--------------------------
including covered call options written by a LifePath Master Portfolio, are
valued at the last sale price on the securities exchange or national securities
market on which such securities primarily are traded. Securities not listed on
an exchange or national securities market, or securities in which there were no
transactions, are valued at the most recent bid prices. Portfolio securities
that are traded primarily on foreign securities exchanges generally are valued
at the preceding closing values of such securities on their respective
exchanges, except that when an occurrence subsequent to the time a value was so
established is likely to have changed such value, then the fair value of those
securities is determined by consideration of other factors by or under the
direction of MIP's Board of Trustees or its delegates. Short-term investments
are carried at amortized cost, which approximates market value. Any securities
or other assets for which recent market quotations are not readily available are
valued at fair value as determined in good faith by MIP's Board of Trustees.

Restricted securities, as well as securities or other assets for which market
quotations are not readily available, or are not valued by a pricing service
approved by MIP's Board of Trustees, are valued at fair value as determined in
good faith by or under the direction of MIP's Board of Trustees or its
delegates. MIP's Board of Trustees reviews the method of valuation on a current
basis. In making a good-faith valuation of restricted securities, the following
are generally considered: restricted securities that are, or are convertible
into, securities of the same class of securities for which a public market
exists usually are valued at market value less the same percentage discount at
which such securities were purchased. This discount may be revised periodically
if the investment adviser believes that the discount no longer reflects the
value of the restricted securities. Restricted securities not of the same class
as securities for which a public market exists usually are valued initially at
cost. Any subsequent adjustment from cost is

27
<PAGE>

based upon considerations deemed relevant by or under the direction of MIP's
Board of Trustees or its delegates.

Any assets or liabilities initially expressed in terms of foreign currency are
translated into dollars using information provided by pricing entities, such as
Morgan Stanley Capital International or Gelderman Data Service, or at a quoted
market exchange rate as may be determined to be appropriate by the investment
adviser. Forward currency contracts are valued at the current cost of offsetting
the contract. Because of the need to obtain prices as of the close of trading on
various exchanges throughout the world, the calculation of net asset value does
not take place contemporaneously with the determination of prices of the foreign
securities held by the LifePath Master Portfolios. In addition, foreign
securities held by a LifePath Master Portfolio may be traded actively in
securities markets that are open for trading on days when the Master Portfolio
does not determine its net asset value. Accordingly, there may be occasions when
a LifePath Master Portfolio does not calculate its net asset value but when the
value of such Master Portfolio's portfolio securities is affected by such
trading activity.

Fixed-income securities are valued each business day using available market
quotations or at fair value as determined by one or more independent pricing
services (collectively, the "Service") approved by MIP's Board of Trustees. The
Service may use available market quotations and employ electronic data
processing techniques and/or a matrix system to determine valuations. The
Service's procedures are reviewed by MIP's officers under the general
supervision of MIP's Board of Trustees.

Expenses and fees, including advisory fees, are accrued daily and are taken
into account for the purpose of determining the value of the net assets of each
LifePath Master Portfolio.

PURCHASE, REDEMPTION AND PRICING OF SHARES

A copy of the Shareholder Guide is available at no charge for additional
information regarding the purchase, redemption and exchange of shares.

In-Kind Purchases. Payment for shares of a LifePath Fund may, at the
------------------
discretion of the investment 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 such 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

28
<PAGE>

exchange for securities generally cannot be redeemed until the transfer has
settled. Each Fund immediately will transfer to its corresponding Master
Portfolio any and all securities received by it in connection with an in-kind
purchase transaction, in exchange for interests in such Master Portfolio.

PORTFOLIO TRANSACTIONS

Since each Fund invests all of its assets in a corresponding Master Portfolio
of MIP, set forth below is a description of the Master Portfolios' policies
governing portfolio securities transactions.

Purchases and sales of equity securities on a securities exchange usually are
effected through brokers who charge a negotiated commission for their services.
Commission rates are established pursuant to negotiations with the broker based
on the quality and quantity of execution services provided by the broker in
light of generally prevailing rates. Orders may be directed to any broker
including, to the extent and in the manner permitted by applicable law, Stephens
or Barclays Global Investors Services. In the over-the-counter market,
securities are generally traded on a "net" basis with dealers acting as
principal for their own accounts without a stated commission, although the price
of the security usually includes a profit to the dealer. In underwritten
offerings, securities are purchased at a fixed price that includes an amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount.

Purchases 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 may also be purchased
in underwritten offerings or directly from an issuer. Generally debt obligations
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 MIP
are prohibited from dealing with MIP as a principal in the purchase and sale of
portfolio securities unless an exemptive order allowing such transactions is
obtained from the Commission or an exemption is otherwise available. The Master
Portfolios may purchase securities 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 MIP's Board of Trustees.

MIP 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 MIP's Board of Trustees, BGFA, as investment adviser, is
responsible for the Master Portfolio's investment decisions and the placing of
portfolio

29
<PAGE>

transactions. In placing orders, it is MIP's policy 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. BGFA generally seeks
reasonably competitive spreads or commissions.

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. As a result, a
Master Portfolio may pay a broker/dealer that furnishes brokerage services a
higher commission than that which might be charged by another broker/dealer for
effecting the same transaction, provided that such commission is determined to
be reasonable in relation to the value of the brokerage services provided by
such broker/dealer. Certain of the broker/dealers with whom the Master
Portfolios may transact business may offer commission rebates to the Master
Portfolios. BGFA considers such rebates in assessing the best overall terms
available for any transaction. MIP's Board of Trustees will periodically review
the commissions paid by the Master Portfolios to consider whether the
commissions paid over representative periods of time appear to be reasonable in
relation to the benefits inuring to the Master Portfolios.

Under Section 28(e) of the Securities Exchange Act of 1934, an investment
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 investment 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 investment adviser with lawful and appropriate
assistance in the performance of its investment decision-making
responsibilities." Accordingly, the price to a Master Portfolio 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.

DIVIDENDS, DISTRIBUTIONS AND TAXES

30
<PAGE>

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 (ii) each Fund diversify its holdings so that, at
the end of each quarter of the taxable year, (a) 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 (b) 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
that the Fund controls and which are determined to be engaged in the same or
similar trades or businesses.

Master Portfolios. Each Fund seeks to qualify as a regulated investment
------------------
company by investing substantially all of its assets in its corresponding Master
Portfolio. Under the Code, each Master Portfolio will be treated as a
partnership rather than as a regulated investment company or a corporation. As a
partnership, any interest, dividends, gains and losses of the Master Portfolio
shall be deemed to have been "passed through" to the corresponding 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 a Master
Portfolio were to accrue but not distribute any interest, dividends or gains,
the corresponding Fund would be deemed to have realized its proportionate share
of such income without receipt of any corresponding distribution. However, each
Master Portfolio will seek to minimize recognition by its investors (such as
Fund) of interest, dividends and gains without a corresponding distribution.

31
<PAGE>

amount paid by the Master Portfolio in the closing transaction. Some realized
capital losses may be deferred if they result from a position that is part of a
"straddle," discussed below. If securities are sold by a Master Portfolio
pursuant to the exercise of a call option granted by it, the Master Portfolio
will add the premium received to the sale price of the securities delivered in
determining the amount of gain or loss on the sale. If securities are purchased
by a Master Portfolio pursuant to the exercise of a put option written by it,
the Master Portfolio will subtract the premium received from its cost basis in
the securities purchased.

Under Section 1256 of the Code, a Master Portfolio will be required to "mark
to market" its positions in "Section 1256 contracts," which generally include
regulated futures contracts and listed non-equity options. In this regard,
Section 1256 contracts will be deemed to have been sold at market value at the
end of each taxable year. Under Section 1256 of the Code, sixty percent (60%) of
any net gain or loss realized on all dispositions of Section 1256 contracts,
including deemed dispositions under the mark-to-market regime, generally will be
treated as long-term capital gain or loss, and the remaining forty percent (40%)
will be treated as short-term capital gain or loss. Transactions that qualify as
designated hedges are excepted from the mark-to-market and 60%/40% rules.

Offsetting positions held by a Master Portfolio involving certain financial
forward, futures or options contracts may be considered, for tax purposes, to
constitute "straddles." "Straddles" are defined to include "offsetting
positions" in actively traded personal property. The tax treatment of
"straddles" is governed by Section 1092 of the Code, which, in certain
circumstances, overrides or modifies the provisions of Section 1256 of the Code,
described above. If a Master Portfolio were treated as entering into "straddles"
by engaging in certain financial forward, futures or option contracts, such
straddles could be characterized as "mixed straddles" if the futures, forwards,
or options comprising a part of such straddles were governed by Section 1256 of
the Code. The Master Portfolios may make one or more elections with respect to
"mixed straddles." Depending upon which election is made, if any, the results
with respect to a Master Portfolio may differ. Generally, to the extent the
straddle rules apply to positions established by a Master Portfolio, losses
realized by the Master Portfolio may be deferred to the extent of unrealized
gain in any offsetting positions. Moreover, as a result of the straddle and the
conversion transaction rules, short-term capital loss on straddle positions may
be recharacterized as long-term capital loss, and long-term capital gain may be
characterized as short-term capital gain or ordinary income.

If a 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; (iii) a futures or forward contract, or (iv) other
transactions identified in future Treasury Regulations.

32
<PAGE>

direct interest in the pass-through entity during the term of the derivative
contract. Any gain in excess of this amount is treated as ordinary income. An
interest charge is imposed on the amount of gain that is treated as ordinary
income. The Master Portfolios do not anticipate engaging in any derivative
transactions that would be subject to these rules.

If a Master Portfolio purchases shares in a "passive foreign investment
company" ("PFIC"), the corresponding Fund may be subject to federal income tax
and an interest charge imposed by the Internal Revenue Service ("IRS") upon
certain distributions from the PFIC or the Master Portfolio's disposition of its
PFIC shares. If the Master Portfolio invests in a PFIC, the Master Portfolio
intends to make an available election to mark-to-market its interest in PFIC
shares. Under the election, the Master Portfolio will be treated as recognizing
at the end of each taxable year the difference, if any, between the fair market
value of its interest in the PFIC shares and its basis in such shares. In some
circumstances, the recognition of loss may be suspended. The Master Portfolio
will adjust its basis in the PFIC shares by the amount of income (or loss)
recognized. Although such income (or loss) will be taxable to the Master
Portfolio as ordinary income (or loss) notwithstanding any distributions by the
PFIC, the corresponding Fund will not be subject to federal income tax or the
interest charge with respect to its indirect interest in the PFIC, if the Master
Portfolio makes the available election.

33
<PAGE>

long-term capital loss to the extent of the designated capital gain
distribution. This loss disallowance rule does not apply to losses realized
under a periodic redemption plan.

34
<PAGE>

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 a Fund. Each investor is urged to consult his
or her tax advisor regarding federal, state, local and foreign taxes applicable
to him or her.

CAPITAL STOCK

Each Fund share has one vote and, when issued and paid for in accordance with
the terms of the offering, is fully paid and non-assessable. Shares have no
preemptive, subscription or conversion rights and are freely transferable. Each
share has identical voting rights with respect to the Fund that issues it. Rule
18f-2 under the 1940 Act provides that any matter required to be submitted under
the provisions of the 1940 Act or applicable state law or otherwise to the
holders of the outstanding voting securities of an investment company, such as
the Company, will not be deemed to have been effectively acted upon unless
approved by the holders of a majority of the outstanding shares of each Fund
affected by such matter. Rule 18f-2 further provides that a Fund shall be deemed
to be affected by a matter unless it is clear that the interests of such Fund in
the matter are identical or that the matter does not affect any interest of such
Fund. However, the Rule exempts the selection of independent auditors and the
election of Directors from the separate voting requirements of the Rule.

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 a
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 each 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 Prospectus of each Fund 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.

Depending on the terms of a particular Benefit Plan and the matter being
submitted to a vote, a sponsor may request direction from individual
participants regarding a shareholder vote. In addition, whenever a Fund is
requested to vote on matters pertaining to a Master Portfolio, the Company will
hold a meeting of the Fund's shareholders and will cast its vote as instructed
by Fund shareholders. 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. Whenever a Fund, as a Master
Portfolio interestholder, is requested to vote on any matter submitted to
interestholders of such 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

35
<PAGE>

voting instructions are voted in the same proportion as the votes received from
Fund shareholders. If a Master Portfolio's investment objective or policies are
changed, the corresponding 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 that Fund.

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 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. Occasional annual or special meetings
may be required for purposes such as approving advisory contracts and changing a
Fund's investment objective or fundamental investment policies.

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 management investment companies organized as
Delaware business trust 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 MIP,
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 MIP 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.

36
<PAGE>

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.

ADDITIONAL INFORMATION ON THE FUNDS

The Registration Statement, including the Prospectus for the LifePath Funds,
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.

No person has been authorized to give any information or to make any
representations other than those contained in this Statement of Additional
Information and in the Company's official sales literature in connection with
the offer of the Funds' 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 offering may not lawfully be made.

FINANCIAL STATEMENTS

The audited financial statements, including the portfolio of investments,
financial highlights and independent auditors' reports for the fiscal year ended
February 29, 2000 for each LifePath Fund and corresponding LifePath Master
Portfolio are hereby incorporated by reference to the Company's Annual Report,
as filed with the SEC on May 1, 2000. The audited financial statements are
attached to all SAIs delivered to shareholders or prospective shareholders.

37
<PAGE>

APPENDIX

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"

"BBB"

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"

A-1
<PAGE>

likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

"Aa"

Bonds that 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 that make the
long-term risks appear somewhat larger than in Aaa securities.

"A"

"Baa"

Commercial Paper Rating. The rating Prime-1 ("P-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 this ordinarily
is 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 Prime-2 ("P-2") have a
strong capacity for repayment of short-term promissory obligations. This
ordinarily is evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, are more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.

Fitch Bond Ratings

A-2
<PAGE>

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"

"AA"

"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"

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.

"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+".

A-3
<PAGE>

"F-2"

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

Duff Bond Ratings

"AAA"

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

"AA"

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

"A"

Bonds rated "A" have protection factors that 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 "D-1" is the highest commercial paper
-----------------------
rating assigned by Duff. Paper rated "D-1" is regarded as having very high
certainty of timely payment with excellent liquidity factors that are supported
by ample asset protection. Risk factors are minor. Paper rated "D-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

A-4
<PAGE>

strong capacity for timely repayment, although such capacity may be susceptible
to adverse changes in business, economic or financial conditions.

International and U.S. Bank Ratings. An IBCA bank rating represents IBCA's
-----------------------------------
current assessment of the strength of the bank and whether such bank would
receive support should it experience difficulties. In its assessment of a bank,
IBCA uses a dual rating system comprised of Legal Ratings and Individual
Ratings. In addition, IBCA assigns banks Long-and Short-Term Ratings as used in
the corporate ratings discussed above. Legal Ratings, which range in gradation
from 1 through 5, address the question of whether the bank would receive support
provided by central banks or 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.

A-5
<PAGE>

BARCLAYS GLOBAL INVESTORS FUNDS, INC.
FILE NO. 33-54126; 811-7332

PART C

OTHER INFORMATION

Item 23. Exhibits.
--------

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Exhibit Description
--------------------------------------------------------------------------------
<S> <C>
(a) Restated Articles of Incorporation dated October 31, 1995,
incorporated by reference to Post-Effective Amendment No. 11,
filed December 1, 1995.
--------------------------------------------------------------------------------
(b) By-Laws, incorporated by reference to Post-Effective Amendment
No. 8, filed June 27, 1995.
--------------------------------------------------------------------------------
(c) Not applicable
--------------------------------------------------------------------------------
(d) Not applicable
--------------------------------------------------------------------------------
(e) 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.
--------------------------------------------------------------------------------
(f) Not applicable.
--------------------------------------------------------------------------------
(g) Custody Agreement with Investors Bank & Trust Company on behalf
of the Funds, dated October 21, 1996, incorporated by reference
to Post-Effective Amendment No. 22, filed July 30, 1999.
--------------------------------------------------------------------------------
(h)(1) Transfer Agency and Service Agreement with Investors Bank & Trust
Company on behalf of the Funds, dated February 27, 1998,
incorporated by reference to Post-Effective Amendment No. 22,
filed July 30, 1999.
--------------------------------------------------------------------------------
(h)(2) Shareholder Servicing Plan and Form of Shareholder Servicing
Agreement for the Asset Allocation, Bond Index, Money Market and
S&P 500 Stock Funds, dated February 1, 1994, as amended October
29, 1998, incorporated by reference to Post-Effective Amendment
No. 18, filed November 20, 1998.
--------------------------------------------------------------------------------
</TABLE>

C-1
<PAGE>

(h)(3) Shareholder Servicing Plan and Form of Shareholder Servicing
Agreement for the LifePath Income, LifePath 2010, LifePath 2020,
LifePath 2030 and LifePath 2040 Funds, dated March 15, 1996, as
amended October 28, 1998, incorporated by reference to
Post-Effective Amendment No. 18, filed November 20, 1998.
--------------------------------------------------------------------------------
(h)(4) Co-Administration Agreement with Stephens Inc. and Barclays
Global Investors, N.A. on behalf of the Funds, dated October 21,
1996, as amended on June 11, 1998, incorporated by reference to
Post-Effective Amendment No. 22, filed July 30, 1999.
--------------------------------------------------------------------------------
(h)(5) 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.
--------------------------------------------------------------------------------
(h)(6) Service Agreement with Merrill Lynch, Pierce, Fenner & Smith
Incorporated on behalf of the Funds, dated December 31, 1997,
incorporated by reference to Post-Effective Amendment No. 16,
filed July 2, 1998.
--------------------------------------------------------------------------------
(h)(7) Financial Services Agreement with Merrill Lynch, Pierce, Fenner &
Smith Incorporated on behalf of the Funds, dated December 31,
1997, incorporated by reference to Post-Effective Amendment No.
16, filed July 2, 1998.
--------------------------------------------------------------------------------
(i) Opinion and Consent of Counsel, filed herewith.
--------------------------------------------------------------------------------
(j)(1) Consent of Independent Auditors, filed herewith.
--------------------------------------------------------------------------------
(j)(2) Powers of Attorney for Jack S. Euphrat, R. Greg Feltus and W.
Rodney Hughes, incorporated by reference to Post-Effective
Amendment No. 14, filed June 30, 1997.
--------------------------------------------------------------------------------
(j)(3) Power of Attorney for Leo Soong, filed herewith.
--------------------------------------------------------------------------------
(k) Not applicable
--------------------------------------------------------------------------------
(l) Not applicable
--------------------------------------------------------------------------------
</TABLE>

C-2
<PAGE>

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Exhibit Description
--------------------------------------------------------------------------------
<S> <C>
(m) Distribution Plan dated October 28, 1998, on behalf of the Asset
Allocation, Institutional Money Market, LifePath Income, LifePath
2010, LifePath 2020, LifePath 2030 and LifePath 2040 Funds,
incorporated by reference to Post-Effective Amendment No. 22,
filed July 30, 1999.
--------------------------------------------------------------------------------
(n) Rule 18f-3 Multi-Class Plan, incorporated by reference to Post-
Effective Amendment No. 22, filed July 30, 1999.
--------------------------------------------------------------------------------
(p) Code of Ethics of Barclays Global Investors Funds, Inc. and
Master Investment Portfolio, filed herewith.
--------------------------------------------------------------------------------
</TABLE>

Item 24. Persons Controlled by or Under Common Control with the Fund
-----------------------------------------------------------

As of May 31, 2000, each Fund owned the following percentages of the
outstanding beneficial interests of the corresponding Master Portfolios of MIP.
As such, each Fund could be considered a controlling person of the corresponding
Master Portfolio for purposes of the 1940 Act, with the exception of the
Institutional Money Market Fund.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
Percentage
Corresponding of beneficial
Fund Master Portfolio interests held
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Asset Allocation Fund Asset Allocation Master Portfolio (MIP) 100%
----------------------------------------------------------------------------------------------------------------------
Bond Index Fund Bond Index Master Portfolio (MIP) 20%
----------------------------------------------------------------------------------------------------------------------
Institutional Money Market Fund Money Market Master Portfolio (MIP) *1%
----------------------------------------------------------------------------------------------------------------------
LifePath Income Fund LifePath Income Master Portfolio (MIP) 31%
----------------------------------------------------------------------------------------------------------------------
LifePath 2010 Fund LifePath 2010 Master Portfolio (MIP) 39%
----------------------------------------------------------------------------------------------------------------------
LifePath 2020 Fund LifePath 2020 Master Portfolio (MIP) 42%
----------------------------------------------------------------------------------------------------------------------
LifePath 2030 Fund LifePath 2030 Master Portfolio (MIP) 31%
----------------------------------------------------------------------------------------------------------------------
LifePath 2040 Fund LifePath 2040 Master Portfolio (MIP) 23%
----------------------------------------------------------------------------------------------------------------------
Money Market Fund Money Market Master Portfolio (MIP) 36%
----------------------------------------------------------------------------------------------------------------------
S&P 500 Stock Fund S&P 500 Index Master Portfolio (MIP) 69%
----------------------------------------------------------------------------------------------------------------------
</TABLE>

* greater than

Item 25. 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

C-3
<PAGE>

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 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 26. Business and Other Connections of Investment Adviser.
----------------------------------------------------

The Funds currently do not retain an investment adviser. The corresponding
MIP Master Portfolio to the Fund is advised by Barclays Global Fund Advisors
("BGFA"), a wholly-owned subsidiary of Barclays Global Investors, N.A. ("BGI").
BGFA's business is that of a registered investment adviser to certain open-end,
management investment companies and various other institutional investors.

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.

C-4
<PAGE>

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

Item 27. 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 distributor for Nations Fund Trust, Nations Fund, Inc., Nations Reserves,
Nations LifeGoal Funds, Inc., Nations Funds Trust, Wells Fargo Funds Trust and
Wells Fargo Variable Trust and is the exclusive placement agent for Wells Fargo
Core Trust, Nations Master Investment Trust, and Master Investment Portfolio,
all of which are registered open-end management investment companies, and has
acted as principal underwriter for the Liberty Term Trust, Inc., Nations
Government Income Term Trust 2003, Inc., Nations Government Income Term Trust
2004, Inc., Nations Balanced Target Maturity Fund, Inc., and Hatteras Income
Securities, Inc., closed-end management investment companies.

(b) Information with respect to each director and officer of the principal
underwriter is incorporated by reference to Form ADV filed by Stephens Inc. with
the SEC pursuant to the 1940 Act (file No. 501-15510).

Item 28. Location of Accounts and Records.
--------------------------------

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

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

C-5
<PAGE>

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

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

Item 29. Management Services.
-------------------

Other than as set forth under the caption "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 30. Undertakings.
------------

Not Applicable.

C-6
<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 30th day of June, 2000.

BARCLAYS GLOBAL INVESTORS FUNDS, INC.

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

Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 23 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 6/30/00
---------------------------
(R. Greg Feltus) (Principal Executive Officer)

/s/ Richard H. Blank, Jr. Secretary and Treasurer 6/30/00
---------------------------
(Richard H. Blank, Jr.) (Principal Financial Officer)

* Director 6/30/00
---------------------------
(Jack S. Euphrat)

* Director 6/30/00
---------------------------
(W. Rodney Hughes)

* Director 6/30/00
---------------------------
(Leo Soong)

*By: /s/ Richard H. Blank, Jr.
-------------------------
Richard H. Blank, Jr.
As Attorney-in-Fact
June 30, 2000
<PAGE>

BARCLAYS GLOBAL INVESTORS FUNDS, INC.
SEC FILE Nos. 33-54126; 811-7332

EXHIBIT INDEX

Exhibit Number Description

Exhibit (i) . Opinion and Consent of Counsel - Morrison & Foerster
LLP

Exhibit (j)(1) . Opinion of Independent Auditors - KPMG LLP

Exhibit (j)(3) . Power of Attorney for Leo Soong.

Exhibit (p) . Code of Ethics of Barclays Global Investors Funds,
Inc. and Master Investment Portfolio