STAGECOACH FUNDS INC /AK/, 497, 1996-05-16

STAGECOACH FUNDS INC /AK/
497, 1996-05-16

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STAGECOACH FUNDS, INC.
Telephone: 1-800-222-8222

STATEMENT OF ADDITIONAL INFORMATION
DATED APRIL 29, 1996

U.S. GOVERNMENT ALLOCATION FUND
CORPORATE STOCK FUND
ASSET ALLOCATION FUND

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Stagecoach Funds, Inc. is an open-end, series investment company.
This Statement of Additional Information ("SAI") contains information about
three of the funds in the Stagecoach Family of Funds. This SAI is not a
prospectus, but supplements and should be read in conjunction with the current
Prospectus describing the U.S. GOVERNMENT ALLOCATION FUND and the ASSET
ALLOCATION FUND and the Prospectus describing the CORPORATE STOCK FUND (each, a
"Fund" and collectively, the "Funds") of Stagecoach Funds, Inc. (the "Company")
dated April 29, 1996, as it may be revised from time to time. All terms used
in this SAI that are defined in each Fund's Prospectus will have the meaning
assigned in such Prospectus. A copy of the Prospectus for each Fund may be
obtained without charge by writing Stephens Inc., the Company's sponsor,
administrator and distributor, at 111 Center Street, Little Rock, Arkansas
72201, or calling the Transfer Agent at the telephone number indicated above.

As described in each Prospectus, each of these Funds invests all of
its assets in a separate Master Portfolio of Master Investment Trust ("MIT"),
an open-end management investment company, having the same investment objective
as the Fund bearing the corresponding name. Each of the Funds, other than the
Corporate Stock Fund, offers two classes (each a "Class") of shares -- Class A
Shares and Class B Shares. This SAI relates to the shares offered by the
Corporate Stock Fund and to both Classes of shares offered by the other Funds.
The investment objective of each Fund is described in its Prospectus under the
Section entitled "How the Funds Work -- Investment Objectives and Policies."

Wells Fargo Bank, N.A. ("Wells Fargo Bank") is investment adviser and
BZW Barclays Global Fund Advisors ("BGFA"), an affiliate of Barclays Bank PLC
("Barclays"), is investment sub-adviser to each of the Master Portfolios of
MIT. Stephens Inc. ("Stephens") serves as the Company's administrator and as
distributor of each Fund's shares.

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TABLE OF CONTENTS

Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . 3
Additional Permitted Investment Activities . . . . . . . . . . . . . . . 8
Management of the Company . . . . . . . . . . . . . . . . . . . . . . . . 14
Compensation Table . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Distribution Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Calculation of Yield and Total Return . . . . . . . . . . . . . . . . . . 23
Determination of Net Asset Value . . . . . . . . . . . . . . . . . . . . 29
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 29
Federal Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Fund Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SAI Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1

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INTRODUCTION

The Company is a registered investment company consisting of eight
series including the Funds. MIT is a registered investment company consisting
of thirteen series including the Master Portfolios. Each Fund invests all of
its assets in the corresponding Master Portfolio of MIT (as illustrated below),
which has the same investment objectives as the related Fund.

Fund Corresponding Master Portfolio
- ---- ------------------------------
U.S. Government Allocation Fund U.S. Government Allocation Master Portfolio
Corporate Stock Fund Corporate Stock Master Portfolio
Asset Allocation Fund Asset Allocation Master Portfolio

INVESTMENT RESTRICTIONS

General. Each Master Portfolio has the same investment objective as
its related Fund. Each Fund may withdraw its investment in the corresponding
Master Portfolio at any time if the Board of Directors of the Company
determines that such action is in the best interests of the Fund and its
shareholders. Upon such withdrawal, the Company's Board of Directors 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 and restrictions described in the Fund's Prospectus and
this SAI.

Investment Restrictions of the Funds. Each Fund has adopted the
following investment restrictions, all of which are fundamental policies; that
is, they may not be changed without approval by the vote of 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. Whenever a
Fund is requested to vote on a fundamental policy of the Master Portfolio in
which it invests, such Fund holds a meeting of Fund shareholders and casts its
votes as instructed by such Fund's shareholders.

None of the Funds may:

(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 its total assets, provided that there is
no limitation with respect to investments in (i) obligations of the United
States Government, its agencies or instrumentalities, (ii) in the case of the
Corporate Stock Fund and the Asset Allocation Fund, any industry in which the
S&P 500 Index becomes concentrated to the same degree during the same period,
and (iii) in the case of the Asset Allocation Fund, money market instruments
invested in the

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banking industry (but the Fund 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 of 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 (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 or sell commodities or commodity contracts; except
that each Fund may purchase and sell (i.e., write) options, forward contracts,
futures contracts, including those relating to indices, and options on futures
contracts or indices, and may participate in interest rate and index swaps;

(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 transactions in options, forward contracts, futures contracts,
including those relating to indices, and options on futures contracts or
indices) 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 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 underwriting 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) issue senior securities, except to the extent the activities
permitted in Investment Restrictions Nos. 3 and 5 may be deemed to give rise
to a senior security but do not violate the provisions of section 18 of the
1940 Act, and except that each Fund may borrow up to 20% of the current value
of each such Fund's 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 each such Fund's net assets (but investments

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may not be purchased by such Funds while any such outstanding borrowings exceed
5% of the respective Fund's net assets);

(9) write, purchase or sell puts, calls, straddles, spreads,
warrants, options or any combination thereof, except that each Fund may engage
in options transactions to the extent permitted in Investment Restrictions Nos.
3 and 5, and except that each Fund may purchase securities with put rights in
order to maintain liquidity; or

(10) purchase securities of any issuer (except securities issued or
guaranteed by the U.S. Government, its agencies and instrumentalities) if, as a
result, more than 5% of the value of the Fund's total assets would be invested
in the securities of any one issuer or the 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).

Each Fund may make loans in accordance with its investment policies.

As a fundamental policy, each Fund may invest, notwithstanding any
other investment restrictions (whether or not fundamental), all of its assets
in the securities of a single open-end, management investment company with
substantially the same fundamental investment objectives, policies and
restrictions as such Fund.

Each Fund is subject to the following non-fundamental policies which
may be changed by a majority vote of the Board of Directors of the Company at
any time and without approval of the shareholders.

No Fund may:

(1) purchase or retain securities of any issuer if the officers or
Directors of the Company or the investment adviser owning beneficially more
than one-half of one percent (0.50%) of the securities of the issuer together
owned beneficially more than 5% of such securities;

(2) purchase securities of issuers who, with their predecessors,
have been in existence less than three years, unless the securities are fully
guaranteed or insured by the U.S. Government, a state, commonwealth,
possession, territory, the District of Columbia or by an entity in existence at
least three years, or the securities are backed by the assets and revenues of
any of the foregoing if, by reason thereof, the value of its aggregate
investments in such securities will exceed 5% of its total assets;

(3) purchase securities of unseasoned issuers, including their
predecessors, which have been in operation for less than three years, and
equity securities of issuers which are not readily marketable if by reason
thereof the value of its aggregate investment in such classes of securities
will exceed 5% of its total assets; or

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(4) invest more than 15% of its net assets in illiquid securities,
including repurchase agreements maturing in more than seven days.

Investment Restrictions of the Master Portfolios. Each Master
Portfolio has adopted the following investment restrictions, all of which are
fundamental policies; that is, they may not be changed without approval by the
vote of the holders of a majority (as defined in the 1940 Act) of the
outstanding voting securities of such Master Portfolio.

None of the Master Portfolios may:

(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 Master Portfolio's investments in that
industry would be 25% or more of the current value of its total assets,
provided that there is no limitation with respect to investments in (i)
obligations of the United States Government, its agencies or instrumentalities,
(ii) in the case of the Corporate Stock Master Portfolio and the Asset
Allocation Master Portfolio, any industry in which the S&P 500 Index becomes
concentrated to the same degree during the same period, and (iii) in the case
of the Asset Allocation Master Portfolio, money market instruments invested in
the banking industry (but the Master Portfolio 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);

(3) purchase or sell commodities or commodity contracts; except
that each 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, and may participate in interest rate and index
swaps;

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

(7) make investments for the purpose of exercising control or
management;

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(8) issue senior securities, except to the extent the activities
permitted in Investment Restrictions Nos. 3 and 5 may be deemed to give rise
to a senior security but do not violate the provisions of section 18 of the
1940 Act, and except that each Master Portfolio may borrow up to 20% of the
current value of each such Master Portfolio's 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 each such Master Portfolio's net
assets (but investments may not be purchased by such Master Portfolios while
any such outstanding borrowings exceed 5% of the respective Master Portfolio's
net assets);

(9) write, purchase or sell puts, calls, straddles, spreads,
warrants, options or any combination thereof, except that each Master Portfolio
may engage in options transactions to the extent permitted in Investment
Restrictions Nos. 3 and 5, and except that each Master Portfolio may purchase
securities with put rights in order to maintain liquidity; or

Each Master Portfolio may make loans in accordance with their
investment policies.

Each Master Portfolio is subject to the following non-fundamental
policies which may be changed by a majority vote of the Board of Trustees of
MIT at any time and without approval of the shareholders.

No Master Portfolio may:

(1) purchase or retain securities of any issuer if the officers or
Directors of MIT or Wells Fargo Bank owning beneficially more than one-half of
one percent (0.50%) of the securities of the issuer together owned beneficially
more than 5% of such securities;

(3) purchase securities of unseasoned issuers, including their
predecessors, which have been in operation for less than three years, and
equity securities of issuers

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which are not readily marketable if by reason thereof the value of its
aggregate investment in such classes of securities will exceed 5% of its total
assets; or

(4) invest more than 15% of its net assets in illiquid securities,
including repurchase agreements maturing in more than seven days.

In addition, 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, provided that any such purchases will be
limited to temporary investments in shares of unaffiliated investment companies
and Wells Fargo Bank will waive its advisory fees for that portion of the
Master Portfolios' assets so invested, except when such purchase is part of a
plan of merger, consolidation, reorganization or acquisition.

MIT may make commitments more restrictive than the restrictions listed
above, so as to permit the sale of shares of a feeder fund that invests in the
Master Portfolio in certain states. Should MIT determine that a commitment is
no longer in the best interest of the Master Portfolio and its interestholders,
MIT reserves the right to revoke the commitment by terminating the sale of such
Master Portfolio's shares in the state involved.

ADDITIONAL PERMITTED INVESTMENT ACTIVITIES

PORTFOLIO SECURITIES. To the extent set forth in the Prospectus and
SAI, each Master Portfolio may invest in the securities described below.

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
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 which 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. Using these data, the Asset Allocation
Model is run daily to determine the recommended asset allocation. The model's
recommendations are presently made in 10% increments.

Unrated Investments. Each Master Portfolio may purchase instruments
that are not rated if, in the opinion of Wells Fargo Bank, such obligations are
of investment quality comparable to other rated investments that are permitted
to be purchased by such Master Portfolio. After purchase by a Master
Portfolio, a security may cease to be rated or its rating may be reduced below
the minimum required for purchase by such Master Portfolio.

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Neither event will require a sale of such security by such Master Portfolio.
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 Master Portfolio
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.

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

Pass-Through Obligations. The Master Portfolios may invest in
pass-through obligations that are supported by the full faith and credit of the
U.S. Government (such as those issued by the Government National Mortgage
Association) or those that are guaranteed by an agency or instrumentality of
the U.S. Government or government-sponsored enterprise (such as the Federal
National Mortgage Association or the Federal Home Loan Mortgage Corporation) or
bonds collateralized by any of the foregoing.

When-Issued Securities. Certain of the securities in which the U.S.
Government Allocation Master Portfolio and the Asset Allocation Master
Portfolio 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 Master Portfolios 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.

Each Master Portfolio will segregate cash, U.S. Government obligations
or other high-quality debt instruments in an amount at least equal in value to
the Master Portfolio's commitments to purchase when-issued securities. If the
value of these assets declines, the Master Portfolio will segregate additional
liquid assets on a daily basis so that the value of the segregated assets is
equal to the amount of such commitments.

Loans of Portfolio Securities. All of the Master Portfolios may lend
securities from their portfolios to brokers, dealers and financial institutions
(but not individuals) if

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cash, U.S. Government obligations or other high-quality debt instruments equal
to at least 100% of the current market value of the securities loan (including
accrued interest thereon) plus the interest payable to such Master Portfolio
with respect to the loan is maintained with the Master Portfolio. In
determining whether to lend a security to a particular broker, dealer or
financial institution, Wells Fargo Bank will consider all relevant facts and
circumstances, including the creditworthiness 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 Master
Portfolios will not enter into any portfolio security lending arrangement
having a duration of longer than one year. Any securities that a Master
Portfolio may receive as collateral will not become part of the Master
Portfolio's portfolio at the time of the loan and, in the event of a default by
the borrower, the Master Portfolio will, if permitted by law, dispose of such
collateral except for such part thereof that is a security in which the Master
Portfolio is permitted to invest. During the time securities are on loan, the
borrower will pay the Master Portfolio any accrued income on those securities,
and the Master Portfolio may invest the cash collateral and earn additional
income or receive an agreed-upon fee from a borrower that has delivered
cash-equivalent collateral. None of the Master Portfolios will lend securities
having a value that exceeds 33 1/3% of the current value of its total assets.
Loans of securities by any of the Master Portfolios will be subject to
termination at the Master Portfolio's or the borrower's option. The Master
Portfolios 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, MIT, its Adviser, or its Distributor.

Futures Contracts and Options Transactions. Each Master Portfolio may
enter into futures contracts and may purchase and write options thereon. Upon
the exercise, the writer of the option delivers to the holder of the option the
futures position and the accumulated balance in the writer's futures margin
account, which represents the amount by which the market price of the futures
contract exceeds, in the case of a call, or is less than, in the case of a put,
the exercise price of the option on the futures contract. The potential loss
related to the purchase of options on futures contracts is limited to the
premium paid for the option (plus transaction costs). Because the value of the
option is fixed at the time of sale, there are no daily cash payments to
reflect changes in the value of the underlying contract; however, the value of
the option may change daily, and that change would be reflected in the net
asset value of the relevant Master Portfolio.

Foreign Currency Transactions. If a Master Portfolio enters into a
foreign currency transaction or forward contract, such Master Portfolio
deposits, if required by applicable regulations, with MIT's custodian cash or
high-grade debt securities in a segregated account of the Master Portfolio in
an amount at least equal to the value of the Master Portfolio'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 are placed in the account so that the value of the account equals
the amount of the Master Portfolio's commitment with respect to the contract.

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At or before the maturity of a forward contract, a Master Portfolio
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 Master
Portfolio obtains, on the same maturity date, the same amount of the currency
which it is obligated to deliver. If the Master Portfolio retains the
portfolio security and engages in an offsetting transaction, such Master
Portfolio, 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 Master
Portfolio'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 Master Portfolio will realize 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 Master Portfolio will suffer
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 Master Portfolio of engaging in current 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. Wells Fargo Bank or BGFA, as appropriate, considers
on an ongoing basis the creditworthiness of the institutions with which a
Master Portfolio enters into foreign currency transactions. The use of forward
currency exchange contracts does not eliminate fluctuations in the underlying
prices of the securities, but it does establish a rate of exchange that can be
achieved in the future. If a devaluation generally is anticipated, the Master
Portfolio may not be able to contract to sell the currency at a price above the
devaluation level it anticipates.

The purchase of options on currency futures allows a Master Portfolio,
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.

Future Developments. Each Master Portfolio may take advantage of
opportunities in the areas of options and futures contracts and options on
futures contracts and any other derivative investments which are not presently
contemplated for use by such Master Portfolio or which are not currently
available but which may be developed, to the extent such opportunities are both
consistent with a Master Portfolio's investment objective and legally
permissible for the Master Portfolio. Before entering into such transactions
or making any such investment, a Master Portfolio would provide appropriate
disclosure in its Prospectus or this SAI.

Stock Index Options. The Master Portfolios may purchase and write
(i.e., sell) put and call options on stock indices as a substitute for
comparable market positions in the underlying securities. A stock index
fluctuates with changes in the market values of the stocks included in the
index. The aggregate premiums paid on all options purchased may

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not exceed 20% of a Master Portfolio's total assets and the value of the
options written may not exceed 10% of the value of the Master Portfolio's total
assets.

The effectiveness of purchasing or writing stock index options will
depend upon the extent to which price movements in a Master Portfolio's
portfolio correlate with price movements of the stock index selected. Because
the value of an index option depends upon movements in the level of the index
rather than the price of a particular stock, whether a Master Portfolio will
realize a gain or loss from purchasing or writing stock index options depends
upon movements in the level of stock prices in the stock market generally or,
in the case of certain indices, in an industry or market segment, rather than
movements in the price of particular stock.

When a Master Portfolio writes an option on a stock index, the Master
Portfolio will place in a segregated account with the Master Portfolio's
custodian cash or liquid securities in an amount at least equal to the market
value of the underlying stock index and will maintain the account while the
option is open or otherwise will cover the transaction.

Stock Index Futures and Options on Stock Index Futures. Each Master
Portfolio 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 Master Portfolio
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.

Interest-Rate Futures Contracts and Options on Interest-Rate Futures
Contracts. Each Master Portfolio 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. Each Master Portfolio may also
sell options on interest-rate futures contracts as part of closing purchase
transactions to terminate its options positions. No assurance can be given
that such closing transactions can be effected or as to the degree of
correlation between price movements in the options on interest rate futures and
price movements in the Master Portfolio's portfolio securities which are the
subject of the transaction.

Interest-Rate and Index Swaps. Each Master Portfolio may enter into
interest-rate and index swaps in pursuit of its investment objective.
Interest-rate swaps involve the exchange by a Master Portfolio with another
party of their respective commitments to pay or receive interest (for example,
an exchange of floating-rate payments for fixed-rate payments). Index swaps
involve the exchange by the Master Portfolio 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

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commitments can involve payments to be made in the same currency or in
different currencies. Each Master Portfolio will usually enter into swaps on a
net basis. In so doing, the two payment streams are netted out, with the
Master Portfolio receiving or paying, as the case may be, only the net amount
of the two payments. If a Master Portfolio 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, the Master Portfolio 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 which 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 Master Portfolio. 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 the Master Portfolio is contractually obligated to
make. There is also a risk of a default by the other party to a swap, in which
case the Fund may not receive net amount of payments that the Master Portfolio
contractually is entitled to receive. Each Fund and Master Portfolio may
invest up to 10% of its respective net assets in interest-rate and index swaps.

Some of the permissible investments described herein are considered
"derivative" securities because their value is derived, at least in part, from
the price of another security or a specified asset, index or rate. For
example, the futures contracts and options on futures contracts that the Master
Portfolios may purchase are considered derivatives. The Master Portfolios may
only purchase or sell these contracts or options as substitutes for comparable
market positions in the underlying securities. Also, asset-backed securities
issued or guaranteed by U.S. Government agencies or instrumentalities and
certain floating- and variable-rate instruments can be considered derivatives.
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.

Wells Fargo Bank and BGFA use a variety of internal risk management
procedures to ensure that derivatives use is consistent with a Master
Portfolio's investment objective, does not expose the Master Portfolio to undue
risk and is closely monitored. These procedures include providing periodic
reports to the Board of Trustees concerning the use of derivatives.

The use of derivatives by the Master Portfolios also is subject to
broadly applicable investment policies. For example, a Master Portfolio may
not invest more than a specified percentage of its assets in "illiquid
securities," including those derivatives that do not have active secondary
markets. Nor may a Master Portfolio use certain derivatives without
establishing adequate "cover" in compliance with Securities and Exchange
Commission rules limiting the use of leverage.

13
<PAGE> 14

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,
interest 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. None of the
Master Portfolios may invest 25% or more of its assets in foreign obligations.

MANAGEMENT OF THE COMPANY

Directors and officers of the Company, together with information as to
their principal business occupations during at least the last five years, are
shown below. The address of each, unless otherwise indicated, is 111 Center
Street, Little Rock, Arkansas 72201. Each of the Directors and officers of the
Company serves in the identical capacity as an officer and/or Director of
Overland Express Funds, Inc. and Stagecoach, Inc. (all of which consist of
several separately managed investment portfolios) and as a Trustee and/or
officer of Stagecoach Trust, Life & Annuity Trust, Master Investment Trust,
Master Investment Portfolio and Managed Series Investment Trust. Directors
deemed to be an "interested person" of the Company, as defined in the 1940 Act,
are indicated by an asterisk.

<TABLE>
<CAPTION>
Principal Occupations
Name, Address and Age Position During Past 5 Years
- --------------------- -------- -----------------------
<S> <C> <C>
Jack S. Euphrat, 73 Director Private Investor.
415 Walsh Road
Atherton, CA 94027

*R. Greg Feltus, 44 Director, Chairman Senior Vice President of Stephens; Manager of
and President Financial Services Group; President of Stephens
Insurance Services Inc.,; Senior Vice President
of Stephens Sports Management Inc.; and
President of Investors Brokerage Insurance Inc.
</TABLE>

14
<PAGE> 15

<TABLE>
<S> <C> <C>
Thomas S. Goho, 53 Director T.B. Rose Faculty Fellow - Business, Wake Forest
321 Beechcliff Court University, Calloway School of Business and
Winston-Salem, NC 27104 Accountancy; Associate Professor of Finance of
the School of Business and Accounting at Wake
Forest University since 1983.

*Zoe Ann Hines, 46 Director Senior Vice President of Stephens and Director
of Brokerage Accounting; and Secretary of
Stephens Resource Management.

*W. Rodney Hughes, 69 Director Private Investor.
31 Dellwood Court
San Rafael, CA 94901

Robert M. Joses, 77 Director Private Investor.
47 Dowitcher Way
San Rafael, CA 94901

*J. Tucker Morse, 51 Director Private Investor; Real Estate Developer;
10 Legrae Street Chairman of Renaissance Properties Ltd.;
Charleston, SC 29401 President of Morse Investment Corporation; and
Co-Managing Partner of Main Street Ventures.

Richard H. Blank, Jr., 39 Chief Operating Associate of Financial Services Group of
Officer, Secretary Stephens; Director of Stephens Sports Management
and Treasurer Inc.; and Director of Capo Inc.
</TABLE>

COMPENSATION TABLE
For the Year Ended December 31, 1995
<TABLE>
<CAPTION>
Aggregate Compensation Total Compensation from
Name and Position from Registrant Registrant and Fund Complex
----------------- ----------------------------- ---------------------------
<S> <C> <C>
Jack S. Euphrat $10,188 $39,750
Director
</TABLE>

15
<PAGE> 16

<TABLE>
<S> <C> <C>
*R. Greg Feltus 0 0
Director

Thomas S. Goho 10,188 39,750
Director

*Zoe Ann Hines 0 0
Director

*W. Rodney Hughes 9,438 37,000
Director

Robert M. Joses 9,938 39,000
Director

*J. Tucker Morse 8,313 33,250
Director
</TABLE>

As stated above, each of the Directors and officers of the Company
serves in an identical capacity as a Director and/or Officer of Overland
Express Funds, Inc. and Masterworks Funds, Inc. and as a Trustee and/or officer
of Stagecoach Trust, Life & Annuity Trust, Master Investment Trust, Master
Investment Portfolio and Managed Series Investment Trust. All of these
entities are open-end management investment companies, and each is considered
to be in the same "fund complex," as such term is defined in Form N-1A under
the 1940 Act, as the Company. Directors of the Company are compensated
annually by the Company and by all registrants in the fund complex for their
services as indicated in the above Compensation Table and also are reimbursed
for all out-of-pocket expenses relating to attendance at board meetings.
Currently the Directors do not receive any retirement benefits or deferred
compensation from the Company or any other member of the fund complex.

As of the date of this SAI, Directors and officers of the Company as a
group beneficially owned less than 1% of the outstanding shares of the Company.

Investment Adviser. Wells Fargo Bank provides investment advisory
services to each Master Portfolio pursuant to an Investment Advisory Agreement
dated April 30, 1996 with MIT. Each such Investment Advisory Agreement will be
referred to as the "Advisory Agreement". The Advisory Agreements provide that
Wells Fargo Bank shall furnish to the Master Portfolios investment guidance and
policy direction in connection with the daily portfolio management of each
Master Portfolio. Pursuant to the Advisory Agreements, Wells Fargo Bank
furnishes to the Board of Trustees periodic reports on the investment strategy
and performance of each Master Portfolio. As to each Master Portfolio, the
applicable Advisory Agreement has an initial two-year term, and will thereafter
be subject to annual approval by (i) MIT's Board of Trustees or (ii) vote of a
majority (as defined in the 1940 Act) of the outstanding voting securities of
such Master

16
<PAGE> 17

Portfolio, provided that in either event the continuance also is approved by a
majority of MIT's Board of Trustees who are not "interested persons" (as
defined in the 1940 Act) of MIT or Wells Fargo Bank, by vote cast in person at
a meeting called for the purpose of voting on such approval. As to each Master
Portfolio, the Advisory Agreement is terminable without penalty, on 60 days'
written notice, by MIT'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 Wells Fargo Bank. Each Advisory Agreement terminates
automatically, as to the relevant Master Portfolio, in the event of its
assignment (as defined in the 1940 Act).

Wells Fargo Bank has engaged BGFA to provide sub-investment advisory
services to each Master Portfolio of MIT pursuant to a Sub-Investment Advisory
Agreement (the "Sub-Advisory Agreement") dated April 30, 1996. As to each
Master Portfolio, the Sub-Advisory Agreement has an initial two-year term, and
will thereafter be subject to annual approval by (i) MIT's Board of Trustees or
(ii) vote of a majority (as defined in the 1940 Act) of the outstanding
securities of such Master Portfolio, provided that in either event the
continuance also is approved by a majority of MIT's Board of Trustees who are
not interested persons (as defined in the 1940 Act) of the Master Portfolio 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 Sub-Advisory Agreement is
terminable without penalty, on 60 days' written notice, by MIT's Board of
Trustees or by vote of the holders of a majority of such Master Portfolio's
interests. The Sub-Advisory Agreement terminates automatically upon an
assignment (as defined in the 1940 Act). Subject to the direction of MIT's
Board of Trustees and the overall supervision and control of Wells Fargo Bank
and MIT, BGFA is responsible for investing and reinvesting the Master
Portfolios' assets. BGFA has agreed to furnish to Wells Fargo Bank periodic
reports on the investment activity and performance of the Master Portfolios,
and such additional reports and information as Wells Fargo Bank and MIT's Board
of Trustees and officers shall reasonably request.

Wells Fargo Bank 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, in the
case of the U.S. Government Allocation Master Portfolio and the Asset
Allocation Master Portfolio, average maturities of the portfolios of each of
those Master Portfolios.

BGFA was created by the reorganization of Wells Fargo Nikko Investment
Advisors ("WFNIA"), a former affiliate of Wells Fargo Bank, with and into an
affiliate of Wells Fargo Institutional Trust Company, N.A. (the
"Reorganization"). Prior to the Funds' conversion to master/feeder structure,
Wells Fargo Bank provided investment advisory services directly to the Funds.
For the years ended December 31, 1993, 1994 and 1995, the Funds paid to Wells
Fargo Bank the advisory fees indicated below and Wells Fargo Bank waived the
indicated amounts:

17
<PAGE> 18

<TABLE>
<CAPTION>
1993 1994 1995
FEES FEES FEES FEES FEES FEES
FUND PAID WAIVED PAID WAIVED PAID WAIVED
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Asset Allocation $3,136,581 -0- $3,907,880 -0- $3,814,364 -0-

Corporate Stock $1,248,207 -0- $1,259,739 -0- $1,398,439 -0-

U.S. Government $1,090,400 -0- $1,034,079 -0- $680,049 -0-
Allocation
</TABLE>

Prior to the Reorganization on January 1, 1996 and the Funds'
conversion to master/feeder structure, WFNIA provided sub-advisory services
directly to the Funds. For the years ended December 31, 1993, 1994 and 1995,
Wells Fargo paid to WFNIA the sub-advisory fees indicated below with respect to
the Funds (before the conversion to master/feeder structure):
<TABLE>
<CAPTION>
1993 1994 1995
FUND FEES PAID FEES PAID FEES PAID
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Asset Allocation $1,586,982 $2,106,980 $2,043,249

Corporate Stock $239,319 $241,489 $269,787

U.S. Government $366,951 $353,761 $244,478
Allocation
</TABLE>

Administrator and Distributor. The Company has retained Stephens as
administrator and distributor on behalf of each of its Funds. Each
Administration Agreement between Stephens and each Fund states that Stephens
shall provide as administrative services, among other things: (i) general
supervision of the operation of the Fund, including coordination of the
services performed by Wells Fargo Bank, transfer and dividend disbursing agent,
custodian, shareholder servicing agent(s), independent public accountants and
legal counsel, regulatory compliance, 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 (ii) 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 those ordinary clerical and bookkeeping

18
<PAGE> 19

services that are not being furnished by Adviser. Stephens also pays the
compensation of the Company's Directors, officers and employees who are
affiliated with Stephens.

For the fiscal years ended December 31, 1993, 1994 and 1995, the Funds
paid administrative fees to Stephens as follows:

<TABLE>
<CAPTION>
FUND 1993 1994 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Asset Allocation Fund $238,347 $315,787 $306,436

Corporate Stock Fund $74,804 $75,748 $92,555

U.S. Government Allocation Fund $65,395 $62,168 $40,803
</TABLE>

The Advisory Agreement for each Master Portfolio and the
Administration Agreements for each Fund and Master Portfolio provide that if,
in any fiscal year, the total expenses of the Fund and corresponding Master
Portfolio incurred by, or allocated to, the Fund or corresponding Master
Portfolio (excluding taxes, interest, brokerage commissions and other portfolio
transaction expenses, other expenditures that are capitalized in accordance
with generally accepted accounting principles, extraordinary expenses and
amounts accrued or paid under the Plan (defined below) but including the fees
provided for in the Advisory Agreement and the Administration Agreements)
exceed the most restrictive expense limitation applicable to the Fund and/or
corresponding Master Portfolio imposed by the securities laws or regulations of
the states from time to time in which the Fund's shares are registered for
sale, Adviser and Stephens shall waive or reimburse their fees proportionately
under the Advisory Agreement and the Administration Agreements, respectively,
for each Fund or corresponding Master Portfolio for the fiscal year to the
extent of the excess or reimburse the excess, but only to the extent of their
respective fees. The Advisory Agreement for each Master Portfolio and the
Administration Agreements for each Fund and Master Portfolio further provide
that the total expenses of the Fund or Master Portfolio shall be reviewed
monthly so that, to the extent the annualized expenses for such month exceed
the most restrictive applicable annual expense limitation, the monthly fees
under the agreements shall be reduced as necessary. The most stringent
applicable restriction limits these expenses for any fiscal year to 2.50% of
the first $30 million of the average net assets of the Fund and/or the
corresponding Master Portfolio, 2.00% of the next $70 million of average net
assets, and 1.50% of the average net assets in excess of $100 million. To the
extent the Funds and/or the Master Portfolios will incur miscellaneous expense
in connection with the conversion to master/feeder structure, Wells Fargo Bank
has agreed to absorb such expenses for at least one year following the
Reorganization.

19
<PAGE> 20

Shareholder Servicing Agent. As discussed in each Fund's Prospectus
under the heading "Shareholder Servicing Agent," the Funds have entered into
shareholder servicing agreements with Wells Fargo Bank. The dollar amount of
shareholder servicing fees paid by the Corporate Stock Fund and each class of
the Asset Allocation and U.S. Government Allocation Funds for each of the last
three fiscal years is listed below:

<TABLE>
<CAPTION>
FUND 1995
- --------------------------------------------------------------------------------
<S> <C>
Corporate Stock Fund $861,478

Asset Allocation Fund: Class A $3,029,551

Asset Allocation Fund: Class B $34,813

Government Allocation Fund: Class A $406,707

U.S. Government Allocation Fund: Class B $1,322
</TABLE>

Custodian and Transfer and Dividend Disbursing Agent. BZW Barclays
Global Investors, N.A. ("BGI") acts as the custodian for the Funds and the
Master Portfolios. For its services as custodian, BGI receives an asset-based
fee and transaction charge from the respective Funds. For the year ended
December 31, 1995, the Funds did not pay any custody fees.

Wells Fargo Bank has been retained to act as the transfer and dividend
disbursing agent for the Funds, and receives for its services a base fee and
per-account fees from each Fund. For the year ended December 31, 1995, the
Funds paid transfer and dividend disbursing agency fees to Wells Fargo Bank as
follows:

<TABLE>
<CAPTION>
FUND 1995
- --------------------------------------------------------------------------------
<S> <C>
Asset Allocation Fund $470,918

Corporate Stock Fund $43,987

U.S. Government Allocation Fund $95,715
</TABLE>

Underwriting Commissions. For the fiscal years ended December 31,
1993 and 1994, the Funds' distributor retained $26,215,173 and $5,415,227,
respectively, in underwriting commissions (front-end sales loads and CDSCs, if
any) in connection with the purchase or redemption of Fund shares. For the
fiscal years ended December 31, 1993 and 1994, Wells Fargo Securities Inc.
("WFSI"), and its registered representatives received $378,895 and $904,274,
respectively, in underwriting commissions in connection with the purchase or
redemption of Fund shares.

20
<PAGE> 21

For the year ended December 31, 1995, the aggregate amount of
underwriting commissions paid to Stephens on sales/redemptions of the
Registrant's shares was $1,251,311. Stephens retained $162,660 of such
commissions. WFSI and its registered representatives retained $399,809 of such
commissions.

DISTRIBUTION PLANS

As indicated in each Fund's respective Prospectus, each of the Funds
has adopted a distribution plan (a "Plan") under Section 12(b) of the 1940 Act
and Rule 12b-1 thereunder (the "Rule"). The Plans for the Corporate Stock Fund
and the shares now designated the Class A Shares of each other Fund were
adopted by the Company's Board of Directors on October 22, 1991, including a
majority of the Directors who were not "interested persons" (as defined in the
1940 Act) of the respective Fund and who had no direct or indirect financial
interest in the operation of the Plan or in any agreement related to the Plan
(the "Qualified Directors"), and were approved by the initial shareholder of
each Fund on December 31, 1991. The Plans for the Class B shares of each Fund
having such shares were adopted by the Company's Board of Directors, including
a majority of the Qualified Directors, on July 27, 1994.

The Plans in effect for the Corporate Stock Fund and the Class A
Shares of each other Fund allow such Funds to defray all or part of the cost of
preparing and printing prospectuses and other promotional materials and of
delivering prospectuses and those materials to prospective shareholders of each
such Fund by paying on an annual basis up to 0.05% of the respective Fund's
average daily net assets or average daily net assets attributable to Class A
Shares of such Fund, as the case may be. The plans for the Corporate Stock
Fund and Class A Shares of the other Funds provide only for the reimbursement
of actual expenses. The plans for the Class B Shares allow each Fund with such
shares to pay to Stephens Inc., as compensation for distribution-related
services provided, or as reimbursement for distribution-related expenses
incurred a monthly fee at the annual rate of up to 0.70% of the average daily
net assets attributable to the Class B Shares of each respective Fund. The
actual fee payable to Stephens shall, within such limit, be determined from
time to time by mutual agreement between the Company and Stephens. In
addition, each Plan contemplates that to the extent any fees payable pursuant
to a Shareholder Servicing Agreement are deemed to be for distribution-related
services, rather than shareholder services, such payments are approved and
payable pursuant to such Plan.

Each 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 Qualified Directors. Any agreements related to the Plans
("Agreements") also must be approved by majority vote of the Directors and the
Qualified Directors. Such Agreements will terminate automatically if assigned.
The Corporate Stock Fund may terminate such Agreements at any time, without
payment of any penalty, by a vote of a majority of the outstanding voting

21
<PAGE> 22

securities of such Fund. Each of the Funds with Class A and Class B shares may
terminate such Agreements at any time, without payment of any penalty, by a
vote of a majority of outstanding voting securities of the Class of shares
affected by such Agreement. The amounts payable under each Plan may not be
increased materially without, in the case of the Corporate Stock Fund, the
approval of a majority of the voting securities of such Fund, or, in the case
of the other Funds, without the approval of a majority of the voting securities
of each Class of Funds effected by such Agreements. Material amendments to a
Plan may not be made except by affirmative vote of a majority of both the
Directors of the Company and the Qualified Directors.

Each 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.

For the year ended December 31, 1995, the Funds paid the fees and/or
expenses listed below pursuant to their 12b-1 distribution plans.

<TABLE>
<CAPTION>
PRINTING & MARKETING COMPENSATION
FUND TOTAL MAILING BROCHURES TO
PROSPECTUS DEALERS
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset Allocation Fund
Class A $955,893 $58,656 $897,237 N/A
Class B $59,525 N/A N/A $59,525

Corporate Stock Fund $41,620 $16,503 $25,117 N/A

U.S. Government Allocation
Fund
Class A $95,225 $19,422 $ 75,803 N/A
Class B $13,468 N/A N/A $13,468
</TABLE>

CALCULATION OF YIELD AND TOTAL RETURN

As described in the Prospectuses for each Fund, the IRA Funds of the
Trust were reorganized into the corresponding Funds of the Company on January
2, 1992. Therefore, the performance information for the Funds is based on that
of the IRA Funds for the periods prior to January 2, 1992, and reference should
be made to the footnotes to the condensed financial information in the
"Financial Highlights" section of each Prospectus regarding differences in
investment objectives, policies and/or restrictions between certain

22
<PAGE> 23

of the Funds and the IRA Funds, which may affect the relevance of the
performance information provided below.

The Corporate Stock Fund may advertise certain total return
information computed in the manner described in each Funds' Prospectus. As and
to the extent required by the SEC, an average annual compound rate of return
("T") will be computed by using the redeemable value at the end of a specified
period ("ERV") of a hypothetical initial investment in shares of the Fund ("P")
over a period of years ("n") according to the following formula: P(1+T)n = ERV.
In addition, the Corporate Stock Fund, at times, 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 charges 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 Asset Allocation and U.S. Government Allocation Funds may
advertise certain total return information with respect to each class of shares
computed in the manner described in such Fund's Prospectus. As and to the
extent required by the SEC, an average annual compound rate of return ("T")
will be computed by using the redeemable value at the end of a specified period
("ERV") of a hypothetical initial investment in a Class of shares ("P") over a
period of years ("n") according to the following formula: P(1+T)n = ERV. In
addition, the Funds that assess a sales charge, at times, also may calculate
total return based on net asset value per share of each Class (rather than the
public offering price), in which case the figures would not reflect the effect
of any sales charges 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 return for the period since inception (March
31, 1987) to December 31, 1995 for the Class A Shares of the U.S. Government
Allocation Fund, assuming a 4.50% sales load, was 7.93%. The average annual
total return on Class A Shares for the same period, assuming no sales load, was
8.50%. The average annual total return on Class A Shares for the five-year
period ended December 31, 1995, assuming a 4.50% sales load, was 8.36%. The
average annual total return on Class A Shares for the same period, assuming no
sales load, was 9.36%. The annual total return on Class A Shares for the year
ended December 31, 1995, assuming a 4.50% sales load, was 9.73%. The annual
total return for the Class A Shares for the same period, assuming no sales
load, was 14.91%.

The annual total return on the Class B Shares of the U.S. Government
Allocation Fund for the year ended December 31, 1995, assuming payment of the
maximum CDSC was 11.11%. The annual total return on the Class B Shares for the
same period if no CDSC was paid was 14.11%.

23
<PAGE> 24

The average annual total return for the period since inception
(November 13, 1986) to December 31, 1995, for the Class A Shares of the Asset
Allocation Fund, assuming a 4.50% sales load was 11.05%. The average annual
return for the same period on Class A Shares, assuming no sales load, was
11.61%. The average annual total return on Class A Shares for the five-year
period ended December 31, 1995, assuming a 4.50% sales load, was 12.49%. For
the same period the average annual total return on Class A Shares, assuming no
sales load, was 13.53%. The annual total return on Class A Shares for the year
ended December 31, 1995, assuming a 4.50% sales load, was 23.36%. For the same
period, the annual total return on Class A Shares, assuming no sales load, was
29.18%.

The annual total return on the Class B Shares of the Asset Allocation
Fund for the year ended December 31, 1995, assuming payment of the maximum CDSC
was 24.72%. The annual total return on Class B Shares for the same period if
the CDSC was not paid was 27.72%.

The average annual total return assuming a purchase at net asset
value, for the period since inception (January 25, 1984) to December 31, 1995,
for the Corporate Stock Fund was 14.10%. Similarly, the average annual total
return for the five-year period ended December 31, 1995, was 15.33%. For the
year ended December 31, 1995, average annual total return on shares of the
Corporate Stock Fund was 35.99%.

Each of the Asset Allocation and U.S. Government Allocation Funds may
advertise cumulative total return on its Class A and B Shares. 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 which 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 which assumes
the application of the percentage rate of total return.

The cumulative total return for the Class A Shares of the Asset
Allocation Fund from inception to December 31, 1995, assuming a 4.50% sales
load and no sales load, was 160.28% and 172.52%, respectively. The cumulative
total return for the Class A Shares for the five-year period ended December 31,
1995, assuming a 4.50% sales load and no sales load, was 80.12% and 88.59%,
respectively. The cumulative total return on the Class A Shares for the
three-year period ended December 31, 1995, assuming a 4.50 sales load and no
sales load, was 37.82% and 44.29%, respectively.

The cumulative total return for the Class A Shares of the U.S.
Government Allocation Fund from inception to December 31, 1995, assuming a
4.50% sales load and no sales load, was 96.30% and 105.53%, respectively. The
cumulative total return for the Class A Shares for the five-year period ended
December 31, 1995, assuming a 4.50% sales load and no sales load, was 49.36%
and 56.41%, respectively. The cumulative total

24
<PAGE> 25

return on the Class A Shares for the three-year period ended December 31, 1995,
assuming a 4.50% sales load and no sales load, was 19.87% and 25.54%,
respectively.

The cumulative total return on the shares of the Corporate Stock Fund
from inception to December 31, 1995 was 381.62%. The cumulative total return
for the ten-year period ended December 31, 1995 was 253.09%. The cumulative
total return for the five-year period ended December 31, 1995 was 104.08. The
cumulative total return for the three-year period ended December 31, 1995 was
48.73%.

As indicated in its Prospectus, the U.S. Government Allocation Fund
may advertise certain yield information on their shares. As and to the extent
required by the SEC, yield on each Class of shares, 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 the public offering price,
provided that the yield data derived pursuant to the calculation described
above also are presented.

The yield for the 30-day period ended December 31, 1995, assuming a
maximum sales load of 4.50%, on the Class A Shares of the U.S. Government
Allocation Fund was 4.24%. The 30-day yield for the same period on the Class A
Shares, assuming no sales charge, was 4.25%.

The yield on each Class of the U.S. Government Allocation Fund will
fluctuate 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.

In addition, investors should recognize that changes in the net asset
values of shares of each Class of the U.S. Government Allocation Fund will
affect the yield of each such Class for any specified period, and such changes
should be considered together with the yield of each Class in ascertaining the
total return for the period to shareholders of each Fund. Yield information
for each Fund or each Class of shares of the Funds, as the case may be, may be
useful in reviewing the performance of such Funds and for providing a basis for
comparison with investment alternatives. The yield of each Fund or each Class
of a Fund, however, may not be comparable to the yields from investment
alternatives

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<PAGE> 26

because of differences in the foregoing variables and differences in the
methods used to value portfolio securities, compute expenses and calculate
yield.

From time to time and only to the extent the comparison is appropriate
for a Fund or Class of shares of a Fund, the Company may quote the performance
or price-earning ratio of a Fund or Class of shares in advertising and other
types of literature as compared to the performance of the Lehman Brothers
Municipal Bond Index, the 1-Year Treasury Bill Rate, the S&P Index, the Dow
Jones Industrial Average, the Lehman Brothers 20+ Treasury Index, the Lehman
Brothers 5-7 Year Treasury Index, Donoghue's Money Fund Averages, Real Estate
Investment Averages (as reported by the National Association of Real Estate
Investment Trusts), Gold Investment Averages (provided by the World Gold
Council), 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), average annualized certificate of
deposit rates (from the Federal Reserve G-13 Statistical Releases or the Bank
Rate Monitor), the Salomon One Year Treasury Benchmark Index, the Consumer
Price Index (as published by the U.S. Bureau of Labor Statistics), Ten Year
U.S. Government Bond Average, sap's Corporate Bond Yield Averages, Schabacter
Investment Management Indices, Salomon Brothers High Grade Bond Index, Lehman
Brothers Long-Term High Quality Government/Corporate Bond Index, other managed
or unmanaged indices or performance data of bonds, stocks or government
securities (including data provided by Ibbotson Associates), or by other
services, companies, publications or persons who monitor mutual funds on
overall performance or other criteria. The S&P Index and the Dow Jones
Industrial Average are unmanaged indices of selected common stock prices. The
performance of a Fund or Class of shares, as appropriate, 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., CDA Investment Technologies, Inc., Bloomberg Financial Markets
or Morningstar, Inc., independent services which monitor the performance of
mutual funds. The performance of a Fund or Class of shares, as appropriate,
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 past
performance of a Fund or Class of shares with that of its competitors. 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.

In addition, the Company also may use, in advertisements and other
types of literature, information and statements: (1) showing that bank savings
accounts offer a guaranteed return of principal and a fixed rate of interest,
but no opportunity for capital growth; and (2) describing Wells Fargo Bank, and
its affiliates and predecessors, as one of the first investment managers to
advise investment accounts using asset allocation and index strategies. The
Company also may include in advertising and other types of

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<PAGE> 27

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 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 a
Class of shares, 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 Class of shares (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, performance information for a Class of shares of the U.S.
Government Allocation Fund, the Asset Allocation Fund and the shares of the
Corporate 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, or other appropriate managed or unmanaged indices of the
performance of various types of investments, so that investors may compare
results of a Fund or Class of shares with those of indices widely regarded by
investors as representative of the 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.

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 U.S. Government Allocation Fund and the
corresponding Master Portfolio and the Asset Allocation Fund and the
corresponding Master Portfolio and a comparison of this strategy with other
investment strategies. In particular, the responsiveness of these Funds as to
changing market conditions may be discussed. For example, the Company may
describe the benefits derived by having Wells Fargo Bank monitor and reallocate
investments among the asset categories described in the Prospectus of each Fund
and Master Portfolio. The Company's advertising or other marketing material
also might set forth illustrations depicting examples of recommended
allocations in different market conditions. It may state, for example, that
when the model indicates that stocks represent a better value than bonds or
money market instruments, the Asset Allocation Master Portfolio might consist
of 70% stocks, 25% bonds and 5% money market instruments and

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<PAGE> 28

that when the model indicates that bonds represent a better value than stocks
or money market instruments, the balance of assets might shift to 60% bonds,
20% stocks and 20% money market instruments.

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.

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 & 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 which are assigned ratings
by NRSROs. Any such comparisons may be useful to investors who wish to compare
the Fund's past performance with other rated investments.

From time to time, the Funds may use the following statements, or
variations thereof, in advertisements and other promotional materials: "Wells
Fargo Bank, as a Shareholder Servicing Agent for the Stagecoach Funds, provides
various services to its customers that are also shareholders of the Funds.
These services may include access to Stagecoach Funds' account information
through Automated Teller Machines (ATMs), the placement of purchase and
redemption requests for shares of the Funds through ATMs and the availability
of combined Wells Fargo Bank and Stagecoach Funds account statements." The
Company may also disclose in advertising and other types of sales literature
the assets and categories of assets under management by its investment adviser
or sub-adviser and the total amount of assets under management by Wells Fargo
Investment Management Group ("IMG"). As of December 31, 1995, IMG had $30.1
billion in assets under management. The Company may disclose in advertising,
statements and other literature the amount of assets and mutual fund assets
managed by Wells Fargo Bank. As of April 1, 1996, Wells Fargo Bank provided
investment advisory services for approximately $56 billion of assets of
individuals, trusts, estates and institutions and $17 billion of mutual fund
assets.

The Company also may disclose in sales literature, information and
statements the distribution rate on the shares of each class of the Fund.
Distribution rate, which may be annualized, is the amount determined by
dividing the dollar amount per share of the most recent dividend by the most
recent NAV or maximum offering price per share as of a date specified in the
sales literature. Distribution rate will be accompanied by the standard 30-day
yield as required by the SEC.

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<PAGE> 29

DETERMINATION OF NET ASSET VALUE

Net asset value per share for each Master Portfolio or per share for
each Class of each Master Portfolio is determined by the Custodian of the
Master Portfolio on each day the NYSE is open for trading.

Securities of a Master Portfolio 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.
Futures contracts will be marked to market daily at their respective settlement
prices determined by the relevant exchange. These prices are not necessarily
final closing prices, but are intended to represent prices prevailing during
the final 30 seconds of the trading day. 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 a
reputable independent pricing service approved by the Board of Directors.
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. All other securities and other assets of the Master
Portfolios for which current market quotations are not readily available are
valued at fair value as determined in good faith by the Company's Directors and
in accordance with procedures adopted by the Directors.

PORTFOLIO TRANSACTIONS

GENERAL

MIT 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 MIT's Board of Trustees, Wells Fargo Bank is responsible for
each Master Portfolio's portfolio decisions and the placing of portfolio
transactions. In placing orders, it is the policy of the MIT to obtain the
best results 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 Wells Fargo Bank
generally seeks reasonably competitive spreads or commissions, the Master
Portfolios will not necessarily be paying the lowest spread or commission
available

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<PAGE> 30

Except in the case of equity securities purchased by the Corporate
Stock Master Portfolio and the Asset Allocation Master Portfolio, purchases and
sales of securities usually will be principal transactions. Portfolio
securities normally will be purchased or sold from or to dealers serving as
market makers for the securities at a net price. Each of the Master Portfolios
also will purchase portfolio securities in underwritten offerings and may
purchase securities directly from the issuer. Generally, money market
securities, ARMs and CMOs are traded on a net basis and do not involve
brokerage commissions. The cost of executing a Master Portfolio's portfolio
securities transactions will consist primarily of dealer spreads and
underwriting commissions. Under the 1940 Act, persons affiliated with MIT are
prohibited from dealing with MIT 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.

Wells Fargo Bank, as the investment adviser of each of the Funds, may,
in circumstances in which two or more dealers are in a position to offer
comparable results for a Master Portfolio transaction, give preference to a
dealer that has provided statistical or other research services to Wells Fargo
Bank. By allocating transactions in this manner, Wells Fargo Bank is able to
supplement its research and analysis with the views and information of
securities firms. Information so received will be in addition to, and not in
lieu of, the services required to be performed by Wells Fargo Bank under the
Advisory Agreements, and the expenses of Wells Fargo Bank will not necessarily
be reduced as a result of the receipt of this supplemental research
information. Furthermore, research services furnished by dealers through which
Wells Fargo Bank places securities transactions for a Master Portfolio may be
used by Wells Fargo Bank in servicing its other accounts, and not all of these
services may be used by Wells Fargo Bank in connection with advising the Master
Portfolios.

The Corporate Stock Fund and the Asset Allocation Fund. Purchases and
sales of equity securities on a securities exchange are effected through
brokers who charge a negotiated commission for their services. Orders may be
directed to any broker including, to the extent and in the manner permitted by
applicable law, Stephens or Wells Fargo Securities Inc. 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. No Master Portfolio will deal with
Stephens, Wells Fargo Bank or their affiliates in any transaction in which any
of them acts as principal without an exemptive order from the SEC or unless an
exemption is otherwise available.

In placing orders for portfolio securities of these Master Portfolios,
Wells Fargo Bank is required to give primary consideration to obtaining the
most favorable price and efficient execution. This means that Wells Fargo Bank
will seek to execute each transaction at a price and commission, if any, that
provide the most favorable total cost or proceeds reasonably attainable in the
circumstances. While Wells Fargo Bank will

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<PAGE> 31

generally seek reasonably competitive spreads or commissions, these Master
Portfolios will not necessarily be paying the lowest spread or commission
available. Commission rates are established pursuant to negotiations with the
broker based on the quality and quantity of execution services provided by the
broker in the light of generally prevailing rates. The allocation of orders
among brokers and the commission rates paid are reviewed periodically by the
Board of Trustees of MIT.

Brokerage Commissions. For the year ended December 31, 1993, the
Asset Allocation Fund and the Corporate Stock Fund paid brokerage commissions
in the amounts of $294,861 and $30,123, respectively. For the year ended
December 31, 1994, the Asset Allocation Fund and the Corporate Stock Fund paid
brokerage commissions in the amounts of $99,002 and $31,896, respectively. For
the year ended December 31, 1995, the Asset Allocation Fund and Corporate Stock
Fund paid brokerage commissions in the amounts of $34,488 and $8,696,
respectively. The U.S. Government Allocation Fund did not pay any brokerage
commissions during 1995 and none of the Funds paid brokerage commissions to
affiliated brokers.

The higher portfolio turnover rate for the U.S. Government Allocation
Master Portfolio should not adversely affect this Master Portfolio because
portfolio transactions ordinarily are made directly with principals on a net
basis and, consequently, this Master Portfolio usually does not incur brokerage
expenses. Portfolio turnover rate is not a limiting factor when Wells Fargo
Bank deems portfolio changes appropriate.

Securities of Regular Broker/Dealers. As of December 31, 1995, none
of the Funds owned securities of their regular broker-dealers.

FEDERAL INCOME TAXES

The Prospectus describes generally the tax treatment of distributions
by each Master Portfolio and each Fund. This section of the SAI includes
additional information concerning federal income taxes.

Qualification as a "regulated investment company" under the Internal
Revenue Code of 1986, as amended, (the "Code") requires, among other things,
that (a) at least 90% of each Fund's annual gross income be derived from
interest, payments with respect to securities loans, dividends and gains from
the sale or other disposition of securities or options thereon; (b) each Fund
derives less than 30% of its gross income from gains from the sale or other
disposition of securities or options thereon held for less than three months;
and (c) each Fund diversifies its holdings so that, at the end of each quarter
of the taxable year, (i) at least 50% of the market value of each 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 each Fund's
assets and 10% of the outstanding voting securities of such issuer, and (ii)
not more than 25% of the value of its assets is invested in the securities of
any one issuer (other than U.S. Government obligations and the securities

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<PAGE> 32

of other regulated investment companies), or of two or more issuers which the
taxpayer controls and which are determined to be engaged in the same or similar
trades or businesses or related trades or businesses. For purposes of
complying with these qualification requirements, each Fund will be deemed to
own a proportionate share of the Master Portfolio assets. As a regulated
investment company, each Fund will not be subject to federal income tax on its
net investment income and net capital gains distributed to its shareholders,
provided that it distributes to its stockholders at least 90% of its net
investment income and tax-exempt income earned in each year.

A 4% nondeductible excise tax will be imposed on each Fund (other than
to the extent of each Fund's tax-exempt income) to the extent it does not meet
certain minimum distribution requirements by the end of each calendar year.
For this purpose, any income or gain retained by each Fund that is subject to
income tax will be considered to have been distributed by year-end. Each Fund
intends to distribute substantially all of its net investment income and net
capital gains and, thus, expects not to be subject to the excise tax.

Income and dividends received by each Fund from sources within foreign
countries may be subject to withholding and other taxes (generally at rates
from 10% to 40%) imposed by such countries. Tax conventions between certain
countries and the United States may reduce or eliminate such taxes. Because
not more than 50% of the value of the total assets of each Fund is expected to
consist of securities of foreign issuers, each Fund will not be eligible to
elect to "pass through" foreign tax credits to shareholders.

Each Master Portfolio will be treated as a non-publicly traded
partnership rather than as a regulated investment company or a corporation
under the Code. As a non-publicly traded partnership under the Code, any
interest, dividends and gains or losses of each Master Portfolio will be deemed
to have been "passed through" to its corresponding Fund bearing the same name
and any other investors in each Master Portfolio, regardless of whether or not
such interest, dividends or gains have been distributed by the Master Portfolio
or losses have been realized (through contribution) by its corresponding Fund
and any other investors. Therefore, to the extent each Master Portfolio were
to accrue but not distribute any interest, dividends, or gains, its
corresponding Fund would be deemed to have realized and recognized its
proportionate share of interest, dividends, or gains without receipt of any
corresponding distribution. However, each Master Portfolio will seek to
minimize recognition by investors of interest, dividends, or gains without a
corresponding distribution.

Gains or losses on sales of portfolio securities by each Master
Portfolio will generally be long-term capital gains or losses if the securities
have been held by it for more than one year, except in certain cases including
where each Master Portfolio acquires a put or writes a call thereon. Other
gains or losses on the sale of securities will be short-term capital gains or
losses. Gain recognized on the disposition of a debt obligation (including,
with respect to obligations purchased after April 30, 1993, tax-exempt
obligations)

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<PAGE> 33

purchased by each Master Portfolio at a market discount (generally, at a price
less than its principal amount) will be treated as ordinary income to the
extent of the portion of the market discount which accrued during the period of
time the Master Portfolio held the debt obligation.

To the extent that a Fund recognizes long-term capital gains, such
gains will be distributed at least annually. Such distributions will be
taxable to shareholders as long-term capital gains, regardless of how long a
shareholder has held Fund shares. Such distributions will be designated as a
capital gains distribution in a written notice mailed by the Fund to
shareholders not later than 60 days after the close of the Fund's taxable year.
If a 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 a long-term capital loss to the extent of the designated capital gain
distribution thereon.

Any loss realized on a redemption or exchange of shares of any Fund
will be disallowed to the extent shares are reacquired within the 61-day period
beginning 30 days before and ending 30 days after the shares are disposed of.
In addition, 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
for shares of the Fund, or of a different fund, 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) for the purpose of determining the amount of gain or loss on the
exchange, but will be treated as having been incurred in the acquisition of
such other shares.

As of the printing of this SAI, the maximum individual tax rate
applicable to ordinary income is 39.6%, the maximum individual rate applicable
to net realized capital gains is 28% and the maximum corporate tax rate
applicable to ordinary income and net realized capital gains is 35%. However,
to eliminate the benefit of lower marginal corporate income tax rates,
corporations which have taxable income in excess of $100,000 for a taxable year
will be required to pay an additional amount of income tax of up to $11,750 and
corporations which have taxable income in excess of $15,000,000 for a taxable
year will be required to pay an additional amount of income tax of up to
$100,000.

If an option written by a Master Portfolio lapses or is terminated
through a closing transaction, such as a repurchase by such 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
which is part of a tax straddle.

If securities are sold by a Master Portfolio pursuant to the exercise
of a call option written by it, such 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

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<PAGE> 34

purchased by a Master Portfolio pursuant to the exercise of a put option
written by it, such Master Portfolio will subtract the premium received from
its cost basis in the securities purchased. The requirement that the Master
Portfolio derive less than 30% of its gross income from gains from the sale of
securities held for less than three months may limit the Master Portfolio's
ability to write options.

The amount of any gain or loss realized by a Master Portfolio on
closing out a futures contract will generally result in a realized capital gain
or loss for tax purposes. Futures contracts held at the end of each fiscal
year will be required to be "marked to market" for federal income tax purposes.
In this regard, they will be deemed to have been sold at market value. Sixty
percent (60%) of any net gain or loss recognized on these deemed sales and
sixty percent (60%) of any net realized gain or loss from any actual sales,
generally will be treated as long-term capital gain or loss, and the remainder
will be treated as short-term capital gain or loss. Transactions that qualify
as designated hedges are excepted from the marked to market rule and the
"60%/40%" rule. Currency transactions may be subject to Section 988 of the
Code, under which foreign currency gains or losses would generally be computed
separately and treated as ordinary income or losses. Each Master Portfolio
will attempt to monitor Section 988 transactions to avoid an adverse tax
impact.

Offsetting positions held by a regulated investment company involving
certain financial forward, futures or option 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.

If a regulated investment company were treated as entering into
"straddles" by reason of its 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 regulated investment company may
make one or more elections with respect to "mixed straddles." Depending upon
which election is made, if any, the results with respect to the regulated
investment company may differ. Generally, to the extent the straddle rules
apply to positions established by the regulated investment company, losses
realized by the regulated investment company 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, in the opinion of the Company, ownership of its shares has or may
become concentrated to an extent that could cause the Company to be deemed a
personal holding company within the meaning of the Code, the Company may
require the redemption of

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<PAGE> 35

shares or reject any order for the purchase of shares in an effort to prevent
such concentration.

Foreign Shareholders. Under the Code, distributions of net investment
income by any Fund to a nonresident alien individual, non-resident alien
fiduciary of a trust or estate, foreign corporation, or foreign partnership (a
"foreign shareholder") will be subject to U.S. withholding tax (at a rate of
30% or a lower treaty rate). Withholding will not apply if a dividend paid by
each Fund to a foreign shareholder is "effectively connected" with a U.S. trade
or business, in which case the reporting and withholding requirements
applicable to U.S. citizens or domestic corporations will apply. Distributions
of net long-term capital gains are not subject to tax withholding, but, in the
case of a foreign shareholder who is a nonresident alien individual, such
distributions ordinarily will be subject to U.S. income tax at a rate of 30% if
the individual is physically present in the U.S. for more than 182 days during
the taxable year.

Other Matters. Investors should be aware that the investments to be
made by the Master Portfolios may involve sophisticated tax rules such as the
original issue discount and real estate mortgage investment conduit ("REMIC")
rules that would result in income or gain recognition by the Master Portfolios
without corresponding current cash receipts. Although the Master Portfolios
will seek to avoid significant noncash income, such noncash income could be
recognized by a Master Portfolio, and thereby its corresponding 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 tax
considerations generally affecting investments in a Fund. Each investor is
urged to consult his or her tax advisor regarding specific questions as to
federal, state or local taxes.

FUND EXPENSES

Except for the expenses borne by Wells Fargo Bank and Stephens, the
Company bears all costs of its operations, including the compensation of its
Directors who are not affiliated with Stephens or Adviser or any of their
affiliates; advisory, shareholder servicing and administration fees; payments
pursuant to any Plan; interest charges; taxes; fees and expenses of its
independent accountants, legal counsel, transfer agent and dividend disbursing
agent; expenses of redeeming shares; expenses of preparing and printing
prospectuses (except the expense of printing and mailing prospectuses used for
promotional purposes, unless otherwise payable pursuant to a Plan),
shareholders' reports, notices, proxy statements and reports to regulatory
agencies; insurance premiums and certain expenses relating to insurance
coverage; trade association membership dues; brokerage and other expenses
connected with the execution of portfolio transactions; fees

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<PAGE> 36

and expenses of its custodian, including those for keeping books and accounts
and calculating the NAV per share of a Fund; expenses of shareholders'
meetings; expenses relating to the issuance, registration and qualification of
Fund shares; pricing services, and any extraordinary expenses. Expenses
attributable to a Fund are charged against a Fund's assets. General expenses
of the Company are allocated among all of the funds of the Company, including a
Fund, in a manner proportionate to the net assets of each Fund, on a
transactional basis, or on such other basis as the Company's Board of Directors
deems equitable.

CAPITAL STOCK

The Company, an open-end, management investment company, was
incorporated in Maryland on September 9, 1991. The authorized capital stock of
the Company consists of 10,000,000,000 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 fourteen series of shares, each representing an
interest in one portfolio -- the Aggressive Growth, the Asset Allocation Fund,
the California Tax-Free Bond Fund, the California Tax-Free Income Fund, the
California Tax-Free Money Market Mutual Fund, the Corporate Stock Fund, the
Diversified Income Fund, the Ginnie Mae Fund, the Growth and Income Fund, the
Money Market Mutual Fund, the Short-Intermediate U.S. Government Income Fund,
the U.S. Government Allocation Fund, the Variable Rate Government Fund and the
Strategic Growth Fund -- and the Board of Directors may, in the future,
authorize the issuance of other series of capital stock representing shares of
additional investment portfolios.

The Asset Allocation and U.S. Government Allocation Funds have two
classes of shares -- Class A shares and Class B shares. The Corporate Stock
Fund has a single class of shares. With respect to matters affecting one Class
but not another, shareholders vote as a Class. Subject to the foregoing, all
shares of a Fund 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 affects only one series and would be voted upon
only by shareholders of the Fund involved. Additionally, approval of an
advisory contract, since it affects only one Fund, is a matter to be determined
separately by Series. Approval by the shareholders of one Series is effective
as to that Series whether or not sufficient votes are received from the
shareholders of the other Series to approve the proposal as to those Series.
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 a Class of
shares of a Fund, means the vote of the lesser of (i) 67% of the shares of the
Class represented at a meeting if the holders of more

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than 50% of the outstanding shares of the Class are present in person or by
proxy, or (ii) more than 50% of the outstanding shares of the Class of the
Fund. 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 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 or Class represents an equal proportional
interest in the Fund or Class 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.

MIT is an open-end, series management investment company organized as
a Delaware business trust. In accordance with Delaware law and in connection
with the tax treatment sought by MIT, MIT's Declaration of Trust provides that
its investors would be personally responsible for MIT's liabilities and
obligations, but only to the extent MIT property is not sufficient to satisfy
such liabilities and obligations. The Declaration of Trust also provides that
MIT shall maintain appropriate insurance (for example, fidelity bonding and
errors and omissions insurance) for the protection of MIT, 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 MIT 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 MIT itself was
unable to meet its obligations.

The Declaration of Trust further provides that obligations of MIT are
not binding upon its Trustees individually but only upon the property of MIT
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

37
<PAGE> 38

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 MIT have substantially
identical voting and other rights as those rights described above for shares of
the Funds. MIT may 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 required to vote on a matter with respect to MIT, 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 MIT,
such Fund will vote such shares in the same proportion as the shares for which
the Fund does receive voting instructions.

As of February 29, 1996, no shareholders of the Corporate Stock Fund,
nor any Class A or Class B shareholder of the Asset Allocation Fund and U.S.
Government Allocation Fund, were known by the Company to own 5% or more of
their respective outstanding shares.

OTHER

The Registration Statements for MIT and the Company, 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.

INDEPENDENT AUDITORS

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

FINANCIAL INFORMATION

The portfolio of investments, financial statements and independent
auditors' report for the Funds contained in Post-Effective Amendment No. 21 to
the Company's Registration Statement, as filed on Form N-1A with the SEC on
February 29, 1996, are

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hereby incorporated by reference into this SAI. The portfolio of investments,
audited financial statements and independent auditors' reports are attached to
all SAIs delivered to current or prospective shareholders.

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SAI APPENDIX

The following is a description of the ratings given by Moody's and S&P
to corporate bonds and commercial paper. Corporate Bonds

Moody's: The four highest ratings for corporate bonds are "Aaa,"
"Aa," "A" and "Baa." Bonds rated "Aaa" are judged to be of the "best quality"
and carry the smallest amount of investment risk. Bonds rated "Aa" are of
"high quality by all standards," but margins of protection or other elements
make long-term risks appear somewhat greater than "Aaa" rated bonds. Bonds
rated "A" possess many favorable investment attributes and are considered to be
upper medium grade obligations. Bonds rated "Baa" are considered to be medium
grade obligations; 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 have
speculative characteristics as well. Moody's applies numerical modifiers: 1,
2 and 3 in each rating category from "Aa" through "Baa" in its rating system.
The modifier 1 indicates that the security ranks in the higher end of its
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end.

S&P: The four highest ratings for corporate bonds are "AAA," "AA,"
"A" and "BBB." Bonds rated "AAA" have the highest ratings assigned by S&P and
have an extremely strong capacity to pay interest and repay principal. Bonds
rated "AA" have a "very strong capacity to pay interest and repay principal"
and differ "from the highest rated issued only in small degree." Bonds rated
"A" have a "strong capacity" to pay interest and repay principal, but are
"somewhat more susceptible" to adverse effects of changes in economic
conditions or other circumstances than bonds in higher rated categories. Bonds
rated "BBB" are regarded as having an "adequate capacity" to pay interest and
repay principal, but changes in economic conditions or other circumstances are
more likely to lead to a "weakened capacity" to make such repayments. The
ratings from "AA" to "BBB" may be modified by the addition of a plus or minus
sign to show relative standing within the category.

Corporate Commercial Paper

Moody's: The highest rating for corporate commercial paper is "P-1"
(Prime-1). Issuers rated "P-1" have a "superior capacity for repayment of
short-term promissory obligations." Issuers rated "P-2" (Prime-2) "have a
strong capacity for repayment of short-term promissory obligations," but
earnings trends, while sound, will be subject to more variation.

S&P: The "A-1" rating for corporate commercial paper indicates that
the "degree of safety regarding timely payment is either overwhelming or very
strong." Commercial

A-1
<PAGE> 41

paper with "overwhelming safety characteristics" will be rated "A-1+."
Commercial paper with a strong capacity for timely payments on issues will be
rated "A-2."

A-2