<PAGE>
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No. [ ] Post-Effective Amendment No.
(Check appropriate box or boxes)
_______________________________________
Exact Name of Registrant as Specified in Charter:
STAGECOACH FUNDS, INC.
Area Code and Telephone Number:
(800) 643-9691
Address of Principal Executive Offices:
111 Center Street
Little Rock, Arkansas 72201
________________________________
Name and Address of Agent for Service:
Richard H. Blank, Jr.
c/o Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
Copies to:
Robert M. Kurucza, Esq.
Marco E. Adelfio, Esq.
Morrison & Foerster LLP
2000 Pennsylvania Ave., N.W., Suite 5500
Washington, D.C. 20006
================================================================================
It is proposed that this filing will become effective on October 18, 1998
pursuant to Rule 488. No filing fee is due because the Registrant has
previously filed an election pursuant to Rule 24f-2 to register an indefinite
number of the Registrant's shares.
As filed with the Securities and Exchange Commission on September 18, 1998
Registration No. ______________
<PAGE>
STAGECOACH FUNDS, INC.
CROSS-REFERENCE SHEET
ITEMS REQUIRED BY FORM N-14
---------------------------
PART A
- ------
<TABLE>
<CAPTION>
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- ---------- --------------------------------- ----------------------------------------------------------
<C> <S> <C>
1 Beginning of Registration COVER PAGE OF REGISTRATION STATEMENT; CROSS-REFERENCE
Statement and Outside Front SHEET; FRONT COVER PAGE OF COMBINED PROXY
Cover Page of Prospectus STATEMENT/PROSPECTUS
2 Beginning and Outside Back Cover TABLE OF CONTENTS
Page of Prospectus
3 Synopsis Information and THE PROPOSED TRANSACTION; SPECIAL RISK CONSIDERATIONS;
Risk Factors COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND
RESTRICTIONS; EXHIBIT B - DISCUSSION OF FUND PERFORMANCE
4 Information About the Transaction THE PROPOSED TRANSACTION
5 Information About the Registrant THE PROPOSED TRANSACTION - IV. Reasons for the
(Acquiring Fund) Consolidation; V. Federal Income Tax Consequences; VI.
Comparison of Service Arrangements and fees;
VII. Comparison of Purchase, Redemption and Exchange
Procedures; SPECIAL RISK CONSIDERATIONS; COMPARISON OF
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS;
ADDITIONAL COMPARATIVE INFORMATION; MISCELLANEOUS -
Organization of the Funds; EXHIBIT B - DISCUSSION OF
FUND PERFORMANCE.
6 Information About the Company THE PROPOSED TRANSACTION - IV. Reasons for the
(Fund) Being Acquired Consolidation; V. Federal Income Tax Consequences; VI.
Comparison of Service Arrangements and fees;
VII. Comparison of Purchase, Redemption and Exchange
Procedures; SPECIAL RISK CONSIDERATIONS; COMPARISON OF
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS;
ADDITIONAL COMPARATIVE INFORMATION; MISCELLANEOUS -
Organization of the Funds; EXHIBIT B - DISCUSSION OF
FUND PERFORMANCE.
7 Voting Information MISCELLANEOUS - Approval and Consummation of the Proposed
Transaction.
</TABLE>
1
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<TABLE>
<CAPTION>
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- ---------- --------------------------------- ----------------------------------------------------------
<C> <S> <C>
8 Interest of Certain Persons and NOT APPLICABLE
Experts
9 Additional Information Required NOT APPLICABLE
for Reoffering by Persons Deemed
to be Underwriters
</TABLE>
PART B
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<TABLE>
<CAPTION>
STATEMENT OF ADDITIONAL
ITEM NO. ITEM CAPTION INFORMATION CAPTION
- ----------- ------------------------------------ ---------------------------------------------------
<C> <S> <C>
10 Cover Page COVER PAGE
11 Table of Contents TABLE OF CONTENTS
12 Additional Information About the INCORPORATION OF DOCUMENTS BY REFERENCE IN
Registrant (Acquiring Fund) STATEMENT OF ADDITIONAL INFORMATION; GENERAL
INFORMATION
13 Additional Information About the INCORPORATION OF DOCUMENTS BY REFERENCE IN
Company (Fund) Being Acquired STATEMENT OF ADDITIONAL INFORMATION; GENERAL
INFORMATION
14 Financial Statements INCORPORATION OF DOCUMENTS BY REFERENCE IN
STATEMENT OF ADDITIONAL INFORMATION; INTRODUCTORY
NOTE TO PRO FORMA FINANCIAL INFORMATION; PRO
FORMA FINANCIAL STATEMENTS
<CAPTION>
PART C
- -----------
ITEM NOS.
- -----------
15-17 Information required to be included in Part C is set forth under the appropriate Item,
so numbered, in Part C of this Registration Statement.
</TABLE>
THE FOLLOWING ITEMS ARE HEREBY INCORPORATED BY REFERENCE:
A) From Post-Effective Amendment No. 48 of the Stagecoach Funds, Inc., filed
July 31, 1998 (SEC File No. 33-42927; 811-6419): The Prospectus and Statement
of Additional Information dated August 1, 1998, describing the retail classes
of shares of the Short-Intermediate U.S. Government Income Fund;
B) The audited financial statements and related independent auditors'
reports for the Retail shares of the Short-Intermediate U.S. Government
Income Fund of Stagecoach Funds, Inc., contained in the Annual Reports for
the fiscal year ended March 31, 1998, as filed with the SEC on June 9 and 10,
1998;
C) From Post-Effective Amendment No. 15 of MasterWorks Funds Inc., filed
June 30, 1998 (SEC File No. 33-54126; 811-7332): The Prospectus and Statement
of Additional Information dated June 30, 1998, describing the shares of the
Short-Intermediate Term Fund, ; and
D) The audited financial statements and related independent auditors'
reports for the Short-Intermediate U.S. Government Income Fund of MasterWorks
Funds Inc., contained in the Annual Report for the fiscal year ended February
28, 1998, as filed with the SEC on May 1, 1998.
2
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COMBINED PROSPECTUS/PROXY STATEMENT
OCTOBER __, 1998
_______________________________________
Acquisition and Assumption of: All of the Assets and Liabilities of the Short-
Intermediate Term Fund (the "S-I Term Fund") of MasterWorks Funds Inc.
("MasterWorks")
In Exchange for: Class A Shares of the Short-Intermediate U.S. Government
Income Fund (the "Government Fund") of Stagecoach Funds, Inc. ("Stagecoach")
______________________________________
STAGECOACH FUNDS, INC. MASTERWORKS FUNDS INC.
C/O 111 Center Street
STAGECOACH SHAREHOLDER SERVICES Little Rock, Arkansas 72201
WELLS FARGO BANK, NA Telephone: 1-888-204-3956
P.O. Box 7066
San Francisco, CA 94120-7066
1-800-222-8222
Stagecoach is an open-end, management investment company. This
Combined Prospectus/Proxy Statement is being furnished to shareholders of the S-
I Term Fund of MasterWorks in connection with the solicitation of proxies by the
Board of Directors of MasterWorks, for a special meeting of Shareholders of the
S-I Term Fund (the "Special Meeting") to be held at the principal office of
MasterWorks, 111 Center Street, Little Rock, Arkansas 72201, on Tuesday,
November 24, 1998 beginning at 11:00 a.m. (Central time).
This Combined Prospectus/Proxy Statement, which should be retained for
future reference, sets forth concisely the information about the Government Fund
that prospective investors, including shareholders of the S-I Term Fund, should
know before investing. Additional information is contained in a separate
Statement of Additional Information, dated October __, 1998, which has been
filed with the Securities and Exchange Commission (the "SEC") and is available
without charge by calling MasterWorks at 1-888-204-3956 or Stagecoach toll-free
at 1-800-222-8222.
The Prospectus for the S-I Term Fund is incorporated by reference in
this Combined Prospectus/Proxy Statement and is available without charge by
calling MasterWorks at 1-888-204-3956. The Prospectus for the Government Fund
is incorporated by reference and accompanies this Combined Prospectus/Proxy
Statement.
1
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, ANY STATE
SECURITIES COMMISSION OR ANY OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THESE
AUTHORITIES PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SHARES OF STAGECOACH ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR ISSUED,
ENDORSED OR GUARANTEED BY, WELLS FARGO BANK, N.A., WELLS CAPITAL MANAGEMENT, OR
ANY OF THEIR AFFILIATES. SUCH SHARES ARE NOT INSURED OR GUARANTEED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN A FUND INVOLVES CERTAIN RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
WELLS FARGO BANK IS THE INVESTMENT ADVISER AND PROVIDES OTHER SERVICES TO
STAGECOACH FOR WHICH IT IS COMPENSATED. STEPHENS INC., WHICH IS NOT AFFILIATED
WITH WELLS FARGO BANK, IS THE CO-ADMINISTRATOR AND SERVES AS THE DISTRIBUTOR FOR
STAGECOACH.
2
<PAGE>
TABLE OF CONTENTS
PAGE
----
THE PROPOSED TRANSACTION................................................ 1
RISK CONSIDERATIONS..................................................... 9
COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS.......... 11
ADDITIONAL COMPARATIVE INFORMATION...................................... 15
MISCELLANEOUS........................................................... 15
EXHIBIT A - AGREEMENT AND PLAN OF CONSOLIDATION
EXHIBIT B - SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND PERFORMANCE
i
<PAGE>
MASTERWORKS FUNDS INC.
111 CENTER STREET
LITTLE ROCK, ARKANSAS 72201
_________________________________________________
SPECIAL MEETING OF SHAREHOLDERS
SHORT-INTERMEDIATE TERM FUND
TO BE HELD ON NOVEMBER 24, 1998
THE PROPOSED TRANSACTION
Important information about the matter to be considered at the Special
Meeting of Shareholders follows. This information is qualified by reference to
the Exhibits at the end of this document.
I. OVERVIEW
The Directors are seeking your approval of an Agreement and Plan of
Consolidation (the "Plan"), which contemplates that the Government Fund of
Stagecoach will acquire all of the assets of the S-I Term Fund of MasterWorks
and assume all of the liabilities of the S-I Term Fund in exchange for Class A
Shares of the Government Fund. The shares of the Government Fund received by
the S-I Term Fund will then be distributed to the S-I Term Fund's shareholders
and the S-I Term Fund will be dissolved and liquidated. The transactions
contemplated by the Plan are sometimes referred to in these materials as the
"Consolidation."
As a result of the Consolidation, you will receive full and fractional
shares of the Government Fund equal in value to the shares of the S-I Term Fund
owned by you immediately prior to the transaction. No commissions or sales loads
will be charged in connection with the Consolidation, and the Consolidation is
not expected to cause you to recognize a gain or loss for federal income tax
purposes. See "Federal Income Tax Consequences" for additional information. You
should separately consider any state tax consequences in consultation with your
tax advisor.
The S-I Term Fund seeks to provide a total return, before fees and
expenses, exceeding that of the Lehman Brothers Intermediate
Government/Corporate Bond Index (the "LB Intermediate Bond Index"). The
Government Fund seeks to provide investors with current income while preserving
capital.
1
<PAGE>
Although both Funds invest in U.S. Government obligations, the
Government Fund has a policy of investing, under normal market conditions, at
least 65% of its assets in U.S. Government obligations, with the remainder in
corporate bonds and other securities. The S-I Term Fund invests, through a
master portfolio, in a mix of U.S. Government obligations, corporate bonds and
other securities. Both Funds have an investment policy of maintaining, under
normal market conditions, a weighted average portfolio maturity of between 2 and
5 years. The risk factors of investing in the Government Fund are comparable to
those of investing in the S-I Term Fund. There are some differences between
investment strategies, as well as differences in fees and expenses, which are
described in detail below.
II. DESCRIPTION OF THE PLAN OF CONSOLIDATION
The Plan provides that all of the assets of the S-I Term Fund as of
the Closing Date will be transferred to the Government Fund, and that the
Government Fund will assume all of the liabilities of the S-I Term Fund, in
exchange for Class A Shares of the Government Fund. The "Closing Date" is
expected to be on or about December 4, 1998. A copy of the Plan is attached as
Exhibit A to this Combined Prospectus/Proxy Statement.
Promptly after the Closing Date, the S-I Term Fund will distribute the
shares of the Government Fund received to the S-I Term Fund's shareholders of
record as of the close of business on the Closing Date. The shares of the
Government Fund that will be issued for distribution to the S-I Term Fund's
shareholders will be equal in value to the shares of the S-I Term Fund held as
of the Closing Date. MasterWorks will then take all necessary steps to
terminate the qualification, registration and classification of the S-I Term
Fund. All issued and outstanding shares of the S-I Term Fund will be cancelled
on the S-I Term Fund's books. Shares of the Government Fund will be represented
only by book entries; no share certificates will be issued unless expressly
requested in writing. Certificates are not issued for fractional shares.
The consummation of the proposed Consolidation is subject to the
satisfaction of a number of conditions set forth in the Plan, including approval
by the shareholders of the S-I Term Fund. The S-I Term Fund may waive certain
conditions at any time before or after approval of the Plan by the shareholders.
The Plan also may be terminated and the Consolidation abandoned at any time by
the mutual written consent of MasterWorks and Stagecoach or by either party if
any of the conditions precedent to the Closing are not satisfied. The
Consolidation also is subject to the condition, which cannot be waived, of
obtaining an opinion of counsel to the effect that the Consolidation constitutes
a tax-free reorganization for federal income tax purposes.
Shareholders of the S-I Term Fund will have no dissenters' rights or
appraisal rights. All shareholders of the S-I Term Fund as of the Closing Date,
including those that vote against the approval of the Plan and those that do not
vote, will receive shares of the Government Fund if the Consolidation is
approved. All shareholders of the S-I Term Fund
2
<PAGE>
have the right at any time up to the business day preceding the Closing Date
to redeem their shares at net asset value according to the procedures set
forth in the S-I Term Fund's Prospectus. In addition, up until the business
day preceding the Closing Date, shareholders of the S-I Term Fund may exchange
their shares for shares of other funds in the MasterWorks Family of Funds, in
accordance with the exchange privilege described in the S-I Term Fund's
Prospectus.
III. BOARD CONSIDERATION
The business and affairs of MasterWorks are managed under the
direction of its Board of Directors. The Board of Directors of MasterWorks and
Stagecoach each unanimously voted to approve the Plan of Consolidation at a
meeting held on September 2, 1998. In reviewing the proposed Consolidation, the
Boards of MasterWorks and Stagecoach considered the potential impact of the
Consolidation on each Fund's shareholders. The Boards considered, among other
things: (i) the terms and conditions of the Plan, including those intended to
avoid the dilution of shareholder interests; (ii) the potential marketing and
shareholder benefits obtained by having a combined fund; (iii) the similarity of
the investment objectives and significant policies and restrictions of the
Funds; (iv) the historical investment performance of the Funds; (v) the
historical and projected investment advisory fee rates and operating expenses of
the Funds; (vi) the identity of the organizations that provide investment
advisory and certain other services to the Funds, and the terms on which these
services are provided; and (vii) the prospects for long-term viability of the
Funds.
Based upon their evaluation of these factors, and in light of their
fiduciary duties under federal and state law, the Boards of MasterWorks and
Stagecoach have determined that the proposed Consolidation is in the best
interests of the shareholders of the respective Funds and that the interests of
the shareholders of the respective Funds will not be diluted as a result of the
Consolidation. MASTERWORKS' BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE FOR THE PLAN OF CONSOLIDATION.
---
IV. REASONS FOR THE CONSOLIDATION
The primary reason for the proposed Consolidation is to allow S-I Term
Fund investors to transfer their investment into a fund that has greater
prospects for long-term viability. As of June 30, 1998, the S-I Term Fund had
only $11 million in net assets; the Government Fund had approximately $136
million in net assets. Management of MasterWorks Funds believes that
consolidating the S-I Term Fund into a fund that has generally compatible
investment objectives and policies and greater prospects for continued growth,
is a better alternative than liquidation of the S-I Term Fund.
3
<PAGE>
Combining the S-I Term Fund into a larger, more viable fund is
intended to provide various benefits to shareholders of the S-I Term Fund. For
example, higher asset levels should benefit portfolio management by permitting
larger individual portfolio investments (in quantities that may result in
reduced transaction costs and/or more favorable pricing) and by providing the
opportunity for greater portfolio diversity.
Currently, the fees and expenses of the Government Fund are higher, on
both a before-waiver and after-waiver basis than those of the S-I Term Fund.
Nonetheless, your Board of Directors believes that the proposed Consolidation
will likely benefit S-I Term Fund shareholders for all of the reasons described
here. One fee difference is that the Government Fund has a Rule 12b-1
distribution plan, which has been used to pay for distribution-related
activities that have contributed to the increase in this Fund's assets. Another
difference is that BGI and Stephens have agreed to assume all of the ordinary
operating expenses of the S-I Term Fund (other than investment advisory fees,
portfolio transaction expenses and administrative fees), which, given the very
small size of the S-I Term Fund, requires BGI and Stephens, in effect, to
subsidize the S-I Term Fund's ongoing operations. There is no similar
arrangement in place for the Government Fund.
In short, management of MasterWorks believes that the proposed
Consolidation should provide S-I Term Fund shareholders with an investment
vehicle that has compatible investment objectives and policies and greater
prospects for long-term viability and continued growth.
V. FEDERAL INCOME TAX CONSEQUENCES
The S-I Term Fund and the Government Fund each qualify as a separate
"regulated investment company" under the Internal Revenue Code of 1986, as
amended (the "Code"). Accordingly, the S-I Term Fund and the Government Fund has
been, and expects to continue to be, relieved of federal income tax liability.
As a condition to the Consolidation, MasterWorks and Stagecoach must
receive a favorable opinion from Morrison & Foerster LLP, counsel to MasterWorks
and Stagecoach, substantially to the effect that, for federal income tax
purposes, (a) the Consolidation will constitute a "reorganization" within the
meaning of Section 368(a) of the Code, and the Government Fund and S-I Term Fund
will each be a "party to a reorganization," within the meaning of Section 368(b)
of the Code, with respect to the Consolidation; (b) no gain or loss will be
recognized by the S-I Term Fund as a result of the Consolidation; (c) no gain or
loss will be recognized by the Government Fund as a result of the Consolidation;
(d) no gain or loss will be recognized by the shareholders of the S-I Term Fund
on the distribution to them by the S-I Term Fund of shares of the Government
Fund in exchange for their shares of the S-I Term Fund; (e) the basis of the
Government Fund shares received by each shareholder of the S-I Term Fund will be
the same as the basis of the shareholder's S-I Term Fund shares immediately
prior to the Consolidation; (f) the basis of the Fund Assets received by the
Government Fund will be the same as the basis of such Fund Assets in the hands
of the S-I Term Fund immediately prior to the Consolidation; (g) a shareholder's
holding period for Government Fund shares will be determined by including the
period for which the shareholder held the shares of the S-I Term Fund exchanged
therefor, provided that the shareholder held such shares of the S-I Term Fund as
a capital asset; (h) the holding period of the Government Fund with respect to
the Funds Assets will include the period for which such Fund Assets were held by
the S-I Term Fund; and (i) the Government Fund will succeed to the tax
attributes of the S-I Term Fund described in Section 381(c) of the Code.
Neither MasterWorks nor Stagecoach intends to seek a private letter
ruling from the Internal Revenue Service ("IRS") with respect to the tax effects
of the Consolidation. The opinion of Morrison & Foerster LLP with respect to the
tax consequences of the Consolidation is not binding on the IRS and does not
preclude the IRS from adopting a contrary position. Shareholders should consult
their own advisers concerning the potential tax consequences of the
Consolidation to them, including any applicable foreign, state and local income
tax consequences.
4
<PAGE>
VI. COMPARISON OF SERVICE ARRANGEMENTS AND FEES
OVERVIEW
--------
S-I Term Fund Government Fund
------------- ---------------
Investment Adviser BGFA (to the Master Wells Fargo Bank
Portfolio)
Sub-Adviser Wells Fargo Bank Wells Capital
(to the Master Portfolio) Management ("WCM")
Distributor Stephens Stephens
Administrator Stephens, BGI Wells Fargo Bank
(Co-Administrators)
Co-Administrator Stephens, BGI Stephens
(Co-Administrators)
Custodian Investors Bank & Trust Wells Fargo Bank
("IBT")
Fund Accountant IBT Wells Fargo Bank
Transfer Agent IBT Wells Fargo Bank
Independent Auditors KPMG Peat Marwick LLP KPMG Peat Marwick
LLP
Investment Advisory Services. BGFA provides investment advisory
----------------------------
services to the Master Portfolio in which the S-I Term Fund invests (the "Master
Portfolio") and the maximum advisory fee payable by the Master Portfolio is a
monthly fee at an annual rate of 0.45% of the Master Portfolio's average daily
net assets. BGFA provides investment guidance and policy direction in
connection with the management of the Master Portfolio's assets. BGFA is an
indirect subsidiary of Barclays Bank PLC and is located at 45 Fremont Street,
San Francisco, California 94105. As of April 30, 1998, BGFA and its affiliates
provided investment advisory services for approximately $575 billion of assets.
Wells Fargo Bank serves as investment sub-adviser to the Master Portfolio and is
entitled to receive from BGFA monthly fees at the annual rate of 0.10% of the
Master Portfolio's average daily net assets.
Wells Fargo Bank provides investment advisory services to the
Government Fund and the maximum advisory fee payable by the Government Fund is a
monthly fee at an annual rate of 0.50% of the Fund's average daily net assets.
WCM is the investment sub-adviser for the Government Fund. For providing sub-
advisory services to the Government Fund, WCM is entitled to receive from Wells
Fargo Bank a monthly fee at an annual rate of: 0.15% of the Fund's average
daily net assets up to the first $400 million, 0.125% of the next $400 million,
and 0.10% of all assets over $800 million. WCM is entitled to receive from
Wells Fargo Bank a minimum annual sub-advisory fee of $120,000. As of August 1,
1998, Wells Fargo Bank and its affiliates managed over $63 billion in assets and
WCM provided investment advisory services for over $32 billion in assets.
For the fiscal year ended February 28, 1998, after waivers and
reimbursements, the Master Portfolio paid advisory fees at the annual rate of
0.45% of its average daily net assets. For the fiscal year ended March 31, 1998,
after waivers and reimbursements, the
5
<PAGE>
Government Fund paid advisory fees at the annual rate of
0.40% of its average daily net assets.
Wells Fargo & Company/Norwest Merger -- Wells Fargo & Company, the
------------------------------------
parent company of Wells Fargo Bank, has signed a definitive agreement to merge
with Norwest Corporation. The proposed merger is subject to certain regulatory
approvals and must be approved by shareholders of both holding companies. The
merger is expected to close in the fourth quarter of 1998. The combined company
will be called Wells Fargo & Company. Wells Fargo Bank has advised the Boards
of Stagecoach and MasterWorks that the merger will not reduce the level or
quality of advisory and other services it and WCM provide to the Government
Fund.
Administrative Services. Stephens and BGI are the S-I Term Fund's co-
-----------------------
administrators. Stephens and BGI provide the S-I Term Fund with administrative
services, including, among other things, general supervision of the Fund's non-
investment operations, preparation of proxy statements and shareholder reports
and general supervision of data completion in connection with preparing periodic
reports to the Board of Directors and officers of MasterWorks. Stephens and BGI
have agreed to assume all of the ordinary operating expenses of the S-I Term
Fund (other than investment advisory fees, portfolio transaction expenses and
administrative fees). For these services and the assumption of expenses,
Stephens and BGI are entitled to a monthly fee, in the aggregate, at the annual
rate of 0.18% of the S-I Term Fund's average daily net assets. Wells Fargo Bank
and Stephens are the Government Fund's administrator and co-administrator,
respectively, and are entitled to receive monthly fees at annual rates of 0.03%
and 0.04%, respectively, of the Fund's assets for providing these services.
Distribution and Shareholder Servicing Arrangements. Shares of the S-
---------------------------------------------------
I Term Fund and the Government Fund are distributed by Stephens, a full service
broker-dealer, pursuant to a distribution agreement. Pursuant to Rule 12b-1
under the 1940 Act, Stagecoach has adopted a Distribution Plan on behalf of the
Class A shares of the Government Fund (the "Distribution Plan"). The
Distribution Plan allows the Government Fund to pay up to 0.05% of its average
daily net assets for the reimbursement of actual expenses incurred for
distribution and shareholder services ("Rule 12b-1 fees"). Long-term holders of
shares of the Government Fund could pay more in sales charges than the economic
equivalent of the maximum front-end sales charges applicable to mutual funds
sold by members of the National Association of Securities Dealers, Inc. (the
"NASD"). There are no Rule 12b-1 fees associated with an investment in the S-I
Term Fund.
The Directors of MasterWorks and Stagecoach Funds also have approved
Shareholder Servicing Plans for the S-I Term Fund and Government Fund (the
"Servicing Plans"), respectively, pursuant to which they have entered into
Shareholder Servicing Agreements. For these services, the S-I Term Fund and the
Government Fund may pay a monthly fee equal to 0.10% and 0.30%, respectively, of
the average daily net assets of such Fund represented by shares owned during the
period for which payment is being made by investors with whom the Shareholder
Servicing Agent maintains a servicing relationship, or
6
<PAGE>
an amount which equals the maximum amount payable to the Shareholder Servicing
Agent under applicable laws, regulations or rules, including the Conduct Rules
of the National Association of Securities Dealers, Inc., whichever is less.
For the fiscal years ended February 28, 1998 and March 31, 1998, the S-I Term
Fund and the Government Fund, respectively, paid Shareholder Servicing fees,
after waivers and reimbursements, as follows:
ANNUAL SHAREHOLDER SERVICING FEE
--------------------------------
S-I Term Fund 0.10%*
Government Fund 0.30%
- -----------
* Stephens and BGI as co-administrators to pay these shareholder servicing fees
out of the fees each receives for co-administration services.
7
<PAGE>
VII. COMPARISON OF DIVIDEND POLICIES
Both Funds pay monthly dividends from net investment income and
distribute capital gains, if any, at least annually. Each Fund allows
shareholders to reinvest the dividends in the Fund or receive cash payments. In
addition, the Government Fund offers the option to automatically invest
dividends in shares of other Stagecoach Funds.
VIII. COMPARISON OF FEES AND EXPENSES
The following comparison is based on current information for the S-I
Term and Government Funds, restated to reflect voluntary fee waivers and expense
reimbursements that are expected to continue during the current fiscal year.
There can be no assurances that the waivers or reimbursements will continue
after the end of the current fiscal year.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
--------------------------------
PRO FORMA
S-I TERM GOVERNMENT FUND (AFTER CONSOLIDATION)
FUND CLASS A CLASS A
-------- --------------- -----------------
<S> <C> <C> <C>
Maximum Sales
Load Imposed
on Purchases
(as a percentage
of offering price)........ None 3.00% 3.00%
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
PRO FORMA
S-I TERM GOVERNMENT FUND (AFTER CONSOLIDATION)
FUND CLASS A CLASS A
--------- ---------------- ----------------------
<S> <C> <C> <C>
Management Fees* 0.45% 0.40% 0.40%
Distribution Fees 0.00% 0.05% 0.05%
Other Expenses 0.18% 0.51% 0.51%
---- ---- ----
TOTAL FUND OPERATING EXPENSES 0.63% 0.96% 0.96%
</TABLE>
- ---------
* In the case of the S-I Term Fund, management fees are paid by the Master
Portfolio.
8
<PAGE>
EXAMPLE OF EXPENSES
You would pay the following expenses on a $1,000 investment in shares of the
specified fund, assuming (A) a 5% annual return and (B) redemption at the end of
each time period indicated:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
S-I Term Fund $ 6 $20 $35 $ 79
Government Fund $40 $60 $81 $144
Pro Forma $40 $60 $81 $144
Annual Fund operating expenses for the shares of the S-I Term Fund
and the Government Fund are based on amounts incurred during the most recent
fiscal year, restated to reflect voluntary fee waivers and expense
reimbursements that are expected to continue during the current fiscal year.
There can be no assurances that waivers or reimbursements will continue.
With respect to the S-I Term Fund, Stephens and BGI have agreed to
assume all of the ordinary operating expenses of the Fund (other than investment
advisory fees, portfolio transaction expenses and administrative fees). There
is no similar arrangement in place for the Government Fund, which means that,
absent voluntary fee waivers or expense reimbursements, the Government Fund
bears all of its own ordinary (as well as extraordinary) operating expenses.
RISK CONSIDERATIONS
Each Fund is subject to credit risk and interest rate risk on
investments in debt securities. Credit risk is the possibility that an issuer of
a security will be unable to make interest payments or repay principal.
Interest rate risk is the possibility that interest rates may increase and
reduce the resale value of securities in a Fund's portfolio. Interest rate
increases usually result in a decrease in the value of debt securities. Each
Fund maintains an average weighted portfolio maturity of 2 - 5 years, resulting
in similar exposure to interest rate risk.
The Government Fund invests primarily in obligations of the U.S.
Government, its agencies and instrumentalities, which are subject to interest
rate risk, but have low credit risk. Some U.S. Government obligations are
backed by the full faith and credit of the United States, while others are only
backed by the agency or instrumentality that issues or guarantees the
instrument. The U.S. Government does not guarantee the market value or current
yield of its obligations.
The S-I Term Fund invests, through the Master Portfolio, in a mix of
U.S. Government obligations and in corporate bonds that are rated in the top
four rating categories by an NRSRO. A portion of the Government Fund's assets
also is generally invested in corporate bonds. Corporate bonds expose investors
to greater credit risk than U.S. Government obligations and are generally higher
yielding.
9
<PAGE>
The following table compares the investment allocations of the
Funds as of June 30, 1998.
- --------------------------------------------------------------------------------
PORTFOLIO DIVERSIFICATION AS OF 6/30/98:
- --------------------------------------------------------------------------------
MASTERWORKS S-I TERM FUND (Single Class) STAGECOACH GOVERNMENT FUND (Class A)
- --------------------------------------------------------------------------------
U.S. Treasury Bonds 10% U.S. Treasury Bonds 2%
U.S. Treasury Notes 32% U.S. Treasury Notes 16%
U.S. Government agencies 9% U.S. Government agencies 45%
Corporate Bonds 49% Corporate Bonds 32%
Foreign Issuer Bonds 0% Foreign Issuer Bonds 2%
Cash 0% Cash 3%
- --------------------------------------------------------------------------------
ADDITIONAL RISK CONSIDERATIONS
The S-I Term Fund may not purchase unrated investments, whereas the
Government Fund may invest up to 5% of its net assets in unrated investments.
However, the S-I Term Fund is not obligated to sell securities that lose their
rating after purchase and, therefore, the S-I Term Fund also may hold unrated
investments. Unrated investments may be more sensitive to economic conditions
and have higher interest rate and credit risk.
The S-I Term Fund may enter into futures transactions, and each Fund
may invest in certain floating- and variable-rate securities. Some of these and
other portfolio securities may be considered derivatives, which may be more
sensitive than direct securities to changes in interest rates and sudden market
moves. The Government Fund may invest in Stripped Treasury Securities, which
may have greater interest rate risk than traditional government securities with
identical credit ratings.
Each Fund may invest up to 25% of its assets in high-quality, U.S.
dollar denominated obligations of foreign branches of U.S. banks and U.S.
branches of foreign banks.
Market risk is the risk that the value of a bond or other security
will be reduced by market activity. By investing to a greater extent in
corporate bonds, the S-I Term Fund has greater market risk exposure than the
Government Fund. Counter party risk is the risk that the other party in a
repurchase agreement or other transaction will not fulfill its contract
obligation. Both Funds invest in repurchase agreements. In addition, some of
the asset-backed securities in which the Funds invest are subject to extension
risk, which is the risk that when interest rates rise, prepayments of the
underlying obligations slow, thereby lengthening the duration and potentially
reducing the value of these securities.
10
<PAGE>
CAPITALIZATION
The following table shows the capitalization of each Fund as of June
30, 1998, and on a pro forma basis as of June 30, 1998 after giving effect to
the Consolidation:
S-I GOVERNMENT PRO FORMA
TERM FUND COMBINED
FUND CLASS A SHARES CLASS A SHARES
----------- --------------- --------------
Net assets $10,568,179 $ 38,148,574* $48,716,753
Net asset value per share $ 9.35 $ 9.97 $ 9.97
Shares outstanding 1,130,818 3,824,728 $ 4,885,224
Shares authorized 300 Million 500 Million 500 Million
___________________
* Total Net Assets for the Government Fund including all share classes is
$135,808,583.
The Government Fund's financial highlights can be found in its Prospectus, which
accompanies and is incorporated by reference into this Combined Prospectus/Proxy
Statement. The Government Fund's financial statements and pro forma financial
statements are included in the Statement of Additional Information to this
Combined Prospectus/Proxy Statement and are incorporated by reference herein.
COMPARISON OF INVESTMENT OBJECTIVES,
POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVES AND POLICIES
The investment objective, policies and strategies of the S-I Term Fund
are generally similar to those of the Government Fund. The investment objective
of each Fund is fundamental and may not be changed without shareholder approval.
Below is a table comparing the investment objectives and key policies of the
Funds.
- --------------------------------------------------------------------------------
S-I TERM FUND GOVERNMENT FUND
- --------------------------------------------------------------------------------
OBJECTIVE: Seeks to provide a total OBJECTIVE: Seeks to provide
return, before fees and expenses, investors with current income while
exceeding that of the Lehman preserving capital, by investing
Brothers Intermediate primarily in a portfolio consisting
Government/Corporate Bond Index. of short- to intermediate term
securities issued or guaranteed by
the U.S. Government, its agencies and
instrumentalities.
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
S-I TERM FUND GOVERNMENT FUND
- --------------------------------------------------------------------------------
IN PURSUING ITS OBJECTIVE: The Fund IN PURSUING ITS OBJECTIVE: The Fund
invests in a mix of U.S. Treasury invests primarily in U.S. Government
and agency debt securities, obligations, including Treasuries,
corporate bonds, CMOs, mortgage- and CMOs, mortgage- and asset-backed
asset-backed securities and money securities and money market
market instruments. instruments. The Fund also may
invest in corporate bonds.
- --------------------------------------------------------------------------------
KEY INVESTMENT POLICIES:
- --------------------------------------------------------------------------------
* no minimum % of investments in U.S. * at least 65% of investments in U.S.
Government obligations or any other Government obligations or repurchase
particular category of debt agreements collateralized by U.S.
securities Government obligations
* only investment-grade securities are * maximum of 5% of total assets in
considered for investment; no securities downgraded below
requirement to sell securities investment grade after purchase
subsequently downgraded
* avg. weighted maturity: 2-5 years * avg. weighted maturity: 2-5 years
- --------------------------------------------------------------------------------
THE S-I TERM FUND
Since the investment characteristics of the S-I Term Fund directly
correspond to those of the Short-Intermediate Term Master Portfolio, the
discussion below relates to the various investments of and techniques employed
by the Master Portfolio.
Under normal market conditions, the Master Portfolio seeks to maintain
an average weighted portfolio maturity generally in the 2-to-5 year range. In
the case of mortgage-related, asset-backed and similar securities, the Master
Portfolio uses the security's average life in calculating the Master Portfolio's
average maturity. Under unusual market conditions, the Master Portfolio may
shorten or lengthen its average weighted portfolio maturity.
Only investment-grade securities are considered for investment. These
securities will be identified by their ratings according to one of two major
rating services, S&P and Moody's. Each service classifies securities into broad
categories starting with "investment grade" at the top and ranging downward
through more speculative classes, including so-called "junk bonds," to
securities that are virtually worthless. The "investment grade" category is
subdivided into four rating groups by both services. The four rating groups are
called "AAA"/"Aaa," "AA"/"Aa," "A"/"A," and "BBB"/"Baa" by S&P and Moody's,
respectively. Obligations with the lowest investment grade rating have
speculative characteristics, and changes in economic conditions or other
circumstances are more likely
12
<PAGE>
to lead to a weakened capacity to make principal and interest payments than in
the case of higher grade debt obligations. The Master Portfolio may invest in
securities of all four rating groups; however, most of the Master Portfolio's
assets will be invested in securities that, at the time of purchase, are rated
in the third group or higher, denoted "A" or better by both rating services.
Asset-backed securities are further restricted to the top two rating groups at
time of purchase. Mortgage-related securities, which are issued or guaranteed by
U.S. Government agencies, are all currently considered to be in the highest
rating category. Subsequent to its purchase by the Master Portfolio, an issue of
securities may cease to be rated or its rating may be reduced below the minimum
rating required for purchase by the Master Portfolio. Wells Fargo will consider
such an event in determining whether the Master Portfolio should continue to
hold the obligation. To the extent the Master Portfolio continues to hold such
obligations, it may be subject to additional risk of default.
The Master Portfolio seeks to emphasize those maturity segments or
rating groups that appear to offer the most favorable returns to their risks,
within the maturity and quality ranges described above.
The Master Portfolio may invest some of its assets (no more than 10%
of total assets under normal market conditions) in high quality money market
instruments, which include U.S. Government obligations, obligations of domestic
and foreign banks, repurchase agreements, commercial paper (including variable
amount master demand notes) and short-term corporate debt obligations. Such
investments are made on an ongoing basis to provide liquidity and, to a greater
extent on a temporary basis, when there is an unexpected or abnormal level of
investor purchases or redemptions of Master Portfolio's shares or when
"defensive" strategies are appropriate.
THE GOVERNMENT FUND
Wells Fargo Bank, as the Government Fund's investment adviser,
actively manages a diversified portfolio consisting primarily of short-to-
intermediate-term U.S. Government obligations. The Government Fund may invest
in securities of any maturity. Under ordinary circumstances, the Government
Fund expects to maintain a dollar-weighted average maturity of between 2 and 5
years. The Government Fund seek to preserve capital by shortening average
maturity when interest rates are expected to increase and to increase total
return by lengthening maturity when interest rates are expected to fall.
Under normal market conditions, the Government Fund invests at least
65% of total assets in U.S. Government obligations or repurchase agreements
collateralized by U.S. Government obligations. The Government Fund also may
invest in investment grade corporate debt securities including asset-backed
securities; no more than 5% of total assets in securities downgraded below
investment grade after being acquired; up to 25% of assets in dollar-denominated
debt of U.S. branches of foreign banks or foreign branches of U.S. banks; and in
stripped Treasury securities, adjustable-rate mortgage securities, adjustable
portions of collateralized mortgage obligations.
13
<PAGE>
The Government Fund may temporarily hold assets in cash or in money
market instruments, including U.S. Government obligations, shares of other
mutual funds and repurchase agreements, or make other short-term investments,
either to maintain liquidity or for short-term defensive purposes when the
adviser believes it is in the best interest of shareholders to do so. In
addition, the Government Fund may invest in forward currency exchange contracts
to try to reduce currency exchange risks and from foreign securities
investments. The Fund also may invest in certain derivative instruments such as
options or futures contracts.
PORTFOLIO MANAGERS GOVERNMENT FUND
Mr. Jeff Weaver assumed responsibility as a portfolio co-manager for
the day-to-day management of the portfolio of the Government Fund as of July 16,
1996. Mr. Weaver joined Wells Fargo Bank in February of 1994, after three years
as a short-term fixed income trader and portfolio manager in the investment
management group of Bankers Trust Company in New York. He holds a B.A. in
economics from the University of Colorado and is a chartered financial analyst.
Ms. Madeleine Gish assumed responsibility as a portfolio co-manager
for the day-to-day management of the portfolio of the Government Fund as of July
16, 1996. Ms. Gish joined Wells Fargo Bank in 1989 as the portfolio coordinator
for the Mutual Funds Division and played an integral part in the rapid growth of
the Overland Express Funds. Since joining the fixed-income group in 1992, Ms.
Gish has assisted in the research and trading for various portfolios and is
currently managing taxable liquidity portfolios. She holds a B.S. in Business
Administration from the University of Kansas and is a chartered financial
analyst.
* * * *
Because the investment objective, policies, strategies and
restrictions of the S-I Term Fund and the Government Fund are generally similar,
the overall level of investment risk should not materially change as a result of
the Consolidation. For a more complete description of the Government Fund's and
the S-I Term Fund's investment policies and restrictions, see "The Funds" in the
Funds' Prospectus and "Additional Permitted Investments" in the Funds'
Statements of Additional Information.
14
<PAGE>
ADDITIONAL COMPARATIVE INFORMATION
COMPARISON OF PURCHASE, REDEMPTION AND EXCHANGE PROCEDURES
Sales Loads: The single class shares of the S-I Term Fund do not have
-----------
a sales load. The Class A shares of the Government Fund, have a front-end sales
load of 3.00%. The sales load is reduced in connection with certain volume
purchases and is waived under certain other circumstances, such as in connection
with certain retirement, benefit and pension plans. There are no sales charges
on reinvested distributions.
Minimum Investments: The S-I Term Fund requires a minimum investment
-------------------
amount of $1 million from direct buyers, although the requirement may be waived
under certain circumstances. The Government Fund requires a minimum investment
of $1,000 from direct buyers and additional investments in the Fund must be at
least $100. Both Funds typically waive the minimum in connection with
retirement, benefit and pension plans.
Purchases: Both Funds' shares may be purchased by mail, by wire or by
---------
phone, directly from the Fund, through a brokerage account with an approved
selling or shareholder servicing agent, through certain retirement, benefit and
pension plans, or through certain packaged investment products. Both Funds
process requests at net asset value on the same day if the request is proper and
received before 1 p.m. on a business day. In addition, Class A shares of the
Government Fund may be purchased or redeemed monthly through various automated
programs such as the AutoSaver and Systematic Withdrawal Plans and other
dividend reinvestment and payment plans. Shareholder servicing agents with
Approved Bank Accounts may transmit orders for S-I Term Fund shares on behalf of
qualified buyers through the transfer agent.
Redemptions: Investors may redeem their shares free of charge on any
-----------
business day by mail or telephone. Redemption proceeds are calculated at the
next determined net asset value after a proper request is received, and are
remitted generally within seven days. Benefit, pension, retirement and similar
plan investors usually have separate established withdrawal procedures. Proceeds
may sent by check or credited to a designated account for certain investors.
There is a $5,000 minimum redemption request for wiring redemptions to an ACH
linked bank account for the Government Fund.
Exchanges: Exchanges between the single class of shares of the S-I
---------
Term Fund and single class shares of other MasterWorks Funds are at the next
determined net asset value and there are no fees for exchanging. The Class A
shares of the Government Fund similarly may be exchanged for Class A shares of
other Stagecoach Funds, but will pay a sales load differential where such shares
are exchanged for Class A shares with a higher front-end sales load. Exchanges
also are permitted between Class A shares and certain other classes of shares of
Stagecoach Funds.
COMPARISON OF PERFORMANCE
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURN AS OF 6/30/98 -- EXCLUDING SALES CHARGES
- --------------------------------------------------------------------------------
Stagecoach
MasterWorks Government Fund
S-I Term Fund Benchmark/1/ Class A Shares Benchmark/2/
- ------------------ ------------ ------------------ ------------
YTD 3.04% 3.47% YTD 2.93% 3.39%
1 yr. 8.15% 8.54% 1 yr. 7.53% 8.42%
3 yr. 6.35% 6.91% 3 yr. 6.22% 6.71%
- ------------------
/1/ Lehman Brothers Intermediate Government/Corporate Bond Index. The Index
has an average weighted maturity of one to ten years and includes both
government and corporate bonds.
/2/ The Lehman Brothers Treasury Note Index is an unmanaged index of U.S.
Treasury 2-10 year notes.
Yield for the Period Ended June 30, 1998/*/
----------------------------------------
Fund Thirty-Day Yield
- ---- -----------------
After Waiver Before Waiver
------------ -------------
S-I Term Fund N/A 5.47%
Government Fund - Class A 5.55% 5.26%
- ----------------------
/*/ The amounts shown above reflect all front-end sales charges for the
Government Fund. "After waiver" figures reflect any waived fees or
reimbursed expenses throughout the period.
Additional information regarding the performance of the Government
Fund is contained in Exhibit B to this Combined Prospectus/Proxy Statement.
MISCELLANEOUS
ORGANIZATION OF MASTERWORKS AND STAGECOACH
Both MasterWorks and Stagecoach are registered as open-end management
investment companies under the 1940 Act. MasterWorks currently consists of 12
series of shares and Stagecoach currently offers over 30 separate funds.
MasterWorks and Stagecoach are each organized as Maryland Corporations
and each are subject to the provisions of its respective Articles of
Incorporation and By-Laws. MasterWorks incorporated on October 15, 1992;
Stagecoach was incorporated on September 9, 1991. Shares of
15
<PAGE>
each Fund have a par value of $.001 per share. The Government Fund consists of
1.5 billion shares (500 million per class). Shares of each Fund are entitled to
one vote for each full share held and fractional votes for fractional shares
held, and will vote in the aggregate and not by portfolio or class except as
otherwise required by law. Shares of the Funds have no preemptive rights and
have only such conversion and exchange rights as the Board of Directors of
MasterWorks or the Board of Directors of Stagecoach, respectively, may grant in
their discretion. When issued for payment as described in their respective
prospectuses, each Fund's shares are fully paid and non-assessable.
Each share of the S-I Term Fund and each Class A Share of the
Government Fund represents an equal proportionate interest in the Fund with
other shares of the same class. Each share is entitled to cash dividends and
distributions earned on such shares as may be declared in the discretion of the
Board of Directors. Shares of each class of the Government Fund bear a pro rata
portion of all operating expenses paid by the Fund, except that certain expenses
relating to class-specific services (such as distribution and shareholder
servicing fees) may be allocated to a particular class.
APPROVAL AND CONSUMMATION OF THE PROPOSED TRANSACTION
It is expected that the solicitation of proxies will be primarily by
mail. Officers and agents of MasterWorks and Stagecoach also may solicit
proxies by telephone, telegraph or personal interview. Shareholders may vote by
(1) mail, by marking, signing, dating and returning the enclosed Proxy Ballot in
the enclosed postage-paid envelope; (2) telephone, by calling Shareholder
Communications Corp. ("SCC") toll-free at [1-800-733-8481, EXT. ___ FROM 6:00
A.M. TO 8:00 P.M. PACIFIC TIME]; or (3) telefacsimile, by marking, signing,
dating and faxing the enclosed Proxy Ballot to [SCC AT 1-800-733-1885]. SCC has
been retained by MasterWorks to assist in the tabulation of proxy votes for
Consolidation. In addition, MasterWorks may retain an agent to assist in the
solicitation of proxies with the Consolidation.
Only shareholders of record at the close of business on October 9,
1998, will be entitled to vote at the Special Meeting. On that date,
___________ S-I Term Fund shares were outstanding and entitled to be voted. The
date of the first mailing of this Combined Prospectus/Proxy Statement to
shareholders is approximately [OCTOBER __, 1998].
Shareholders holding more than one-third of the outstanding shares
of the S-I Term Fund at the close of business on the Record Date will be deemed
sufficient to constitute a quorum for the transaction of business at the Special
Meeting. Pursuant to Maryland law, the affirmative
16
<PAGE>
vote of the holders of a majority of the outstanding voting securities of the S-
I Term Fund, is required for approval of the Plan. If the S-I Term Fund's
shareholders do not approve the proposed Consolidation, MasterWorks' Board of
Directors will consider what other alternatives would be in the shareholders'
best interests, including possibly, approving a Plan of Liquidation.
Any proxy which is properly executed and received in time to be voted
at the Special Meeting will be counted in determining whether a quorum is
present and will be voted in accordance with the instructions marked thereon. In
the absence of any instructions, such proxy will be voted in favor of the Plan.
Any shareholder giving a proxy may revoke it at any time before it is exercised
(i) by submitting to MasterWorks a written notice of revocation, (ii) by
submitting to MasterWorks a subsequently executed proxy or (iii) by attending
the Special Meeting and voting in person. Abstentions and "broker non-votes"
(i.e., proxies from brokers or nominees indicating that such persons have not
received instructions from the beneficial owners or other persons entitled to
vote shares as to a particular matter with respect to which the brokers or
nominees do not have discretionary power to vote) will not be counted for or
against any proxy to which they relate, but will be counted for purposes of
determining whether a quorum is present and will be counted as votes present at
the Special Meeting. For this reason, abstentions and broker non-votes will
have the effect of a vote against the proposal.
The duly appointed Proxies may, in their discretion, vote upon such
other matters as properly may come before the Special Meeting or any
adjournment(s) thereof, including any proposal to adjourn a meeting at which a
quorum is present to permit the continued solicitation of proxies in favor of
the Consolidation. Any such adjournment(s) will require the affirmative vote of
a majority of the shares present in person or by proxy at the session of the
Special Meeting to be adjourned. In case any such adjournment is proposed, the
duly appointed Proxies will vote those proxies which they are entitled to vote
for the Plan in favor of adjournment, and will vote those proxies required to be
voted against the Plan against adjournment.
ADDITIONAL INFORMATION
MasterWorks is subject to certain informational requirements of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the 1940 Act,
and in accordance therewith it files reports, proxy materials and other
information with the SEC. Such reports, proxy materials and other information
may be inspected and copied at the public reference facilities of the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549. Copies of such materials can be
obtained from the Public Reference Branch, Office of Consumer Affairs and
Information Services, Securities and Exchange Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates.
17
<PAGE>
SOLICITATION OF PROXIES AND PAYMENT OF EXPENSES
The cost of soliciting proxies for the Special Meeting, consisting
principally of printing and mailing expenses, together with the costs of any
supplementary solicitation and proxy soliciting services provided by third
parties, will be borne jointly by the Funds and is estimated to be $7,500.00.
Proxies will be solicited in the initial, and any supplemental, solicitation by
mail and may be solicited in person, by telephone, telegraph, telefacsimile or
other electronic means by officers of MasterWorks, personnel of BGFA or
Stephens, or an agent of MasterWorks.
SUBSTANTIAL SHAREHOLDERS
As of June 1, 1998,* the shareholders identified below were known by
MasterWorks to own 5% or more of the S-I Term Fund's outstanding shares in the
following capacity:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF PERCENTAGE NATURE OF
NAME OF FUND SHAREHOLDER OF FUND OWNERSHIP
- ------------ -------------------- ----------- ---------
<S> <C> <C> <C>
S-I Term Fund Merrill Lynch Trust Co. FSB 70.78% Record
FBO Various 401K Plans
P.O. Box 62000
San Francisco, CA 94162
Merrill Lynch Pierce Fenner & Smith 26.38% Record
For the sole benefit of its customers
4800 Deer Lake Drive, East, 3rd Floor
Jacksonville, FL 32246
</TABLE>
- -------------
* As of the close of business on June 1, 1998, the officers and Directors of
MasterWorks as a group beneficially owned less than 1% of the outstanding shares
of MasterWorks Funds.
As of June 30, 1998,* the Class A shareholders identified below were
known by Stagecoach to own 5% or more of the Government Fund's outstanding
shares in the following capacity:
<TABLE>
<CAPTION>
NAME AND TYPE OF PERCENTAGE PERCENTAGE
NAME OF FUND ADDRESS OWNERSHIP OF CLASS OF PORTFOLIO
- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Government Fund Wells Fargo Bank, TTEE Institutional Class 6.28% 4.20%
Choicemaster Record Holder
P.O. Box 9800
Calabasas, CA 91372-0800
Dim & co. Institutional Class 25.41% 16.98%
Attn: MF Dept. A88-4 Record Holder
P.O. Box 9800
Calabasas, CA 91372-0800
Virg & Co Institutional Class 34.22% 22.87%
Attn: MF Dept. A88-4 Record Holder
P.O. Box 9800
Calabasas, CA 91372-0800
Hep & Co. Institutional Class 31.71% 21.20%
Attn: MF Dept. A88-4 Record Holder
P.O. Box 9800 MAC 9139-027
Calabasas, CA 91302
Wells Fargo Bank Class A 24.16% 6.69%
FBO Retirement Plans Record Holder
Omnibus
P.O. Box 63015
San Francisco, CA 94163
Virg & Co. Class A 13.83% 3.83%
c/o Wells Fargo Bank Record Holder
P.O. Box 9800 MAC 9139-027
Calabasas, CA 91372
</TABLE>
- ------------
* As of the close of business on June 30, 1998, the officers and Directors of
Stagecoach as a group beneficially owned less than 1% of the outstanding shares
of Stagecoach Funds.
18
<PAGE>
OTHER BUSINESS
The Board of Directors of MasterWorks Funds knows of no other business
to be brought before the Special Meeting. However, if any other matters come
before the Special Meeting, including any proposal to adjourn the meeting to
permit the continued solicitation of proxies in favor of the Consolidation, it
is their intention that proxies which do not contain specific restrictions to
the contrary will be voted on such matters in accordance with the judgment of
the persons named in the enclosed Proxy Ballot.
FUTURE SHAREHOLDER PROPOSALS
Pursuant to rules adopted by the SEC under the 1934 Act, investors may
request inclusion in the Board's proxy statement for shareholder meetings
certain proposals for action which they intend to introduce at such meeting.
Any shareholder proposals must be presented a reasonable time before the proxy
materials for the next meeting are sent to shareholders. The submission of a
proposal does not guarantee its inclusion in MasterWorks Fund's proxy statement
and is subject to limitations under the 1934 Act. Because MasterWorks Funds
does not hold regular meetings of shareholders, no anticipated date of the next
meeting can be provided.
19
<PAGE>
EXHIBIT A
AGREEMENT AND
PLAN OF
CONSOLIDATION
FOR THE
SHORT-INTERMEDIATE TERM FUND
OF MASTERWORKS FUNDS INC.
AND THE
SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND
OF STAGECOACH FUNDS, INC.
OCTOBER __, 1998
<PAGE>
This AGREEMENT AND PLAN OF CONSOLIDATION (the "Plan") is made as of this
----
[_____] day of October, 1998, by and among MasterWorks Funds Inc.
("MasterWorks"), a Maryland corporation, for itself and on behalf of the Short-
-----------
Intermediate Term Fund (the "S-I Term Fund"), Managed Series Investment Trust
-------------
("MSIT"), a Delaware business trust, for itself and on behalf of the Short-
----
Intermediate Term Master Portfolio (the "S-I Term Master Portfolio") in which
-------------------------
the S-I Term Fund invests, and Stagecoach Funds, Inc. ("Stagecoach"), a Maryland
----------
corporation, for itself and on behalf of the Short-Intermediate U.S. Government
Income Fund (the "Government Fund").
---------------
WHEREAS, each of MasterWorks, MSIT and Stagecoach is an open-end management
investment company registered with the Securities and Exchange Commission (the
"SEC") under the Investment Company Act of 1940, as amended (the "1940 Act");
--- --------
and
WHEREAS, the S-I Term Fund pursues its investment objective by investing
substantially all of its assets in the S-I Term Master Portfolio and the
Government Fund pursues its investment objective by investing directly in a
portfolio of securities; and
WHEREAS, the parties desire that the assets and liabilities of the S-I Term
Fund be conveyed to, and be acquired and assumed by, the Government Fund, in
exchange for shares of equal value of the Government Fund which shall thereafter
promptly be distributed to the shareholders of the S-I Term Fund in connection
with its liquidation as described in this Plan (the "Consolidation"); and
-------------
WHEREAS, the parties intend that the Consolidation qualify as a
"reorganization," within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and that Government Fund and S-I Term
----
Fund will each be a "party to a reorganization," within the meaning of Section
368(b) of the Code, with respect to the Consolidation;
NOW, THEREFORE, in accordance with the terms and conditions described
herein, the S-I Term Fund and the Government Fund shall be consolidated as
follows:
1. Conveyance of Assets of S-I Term Fund.
-------------------------------------
(a) At the Effective Time of the Consolidation (as defined in Section
9), all assets of every kind, and all interests, rights, privileges and powers
of the S-I Term Fund, subject to all liabilities of the S-I Term Fund existing
as of the Effective Time of the Consolidation (the "Fund Assets"), shall be
-----------
transferred and conveyed by the S-I Term Fund to the Government Fund and shall
be accepted and assumed by the Government Fund, as more particularly set forth
in this Plan, such that at and after the Effective Time of the Consolidation:
(i) all assets of the S-I Term Fund shall become and be the assets of the
Government Fund; and (ii) all liabilities of the S-I Term Fund shall attach to
the Government Fund, enforceable against the Government Fund to the same extent
as if initially incurred by it.
1
<PAGE>
(b) It is understood and agreed that the Fund Assets shall include all
property and assets of any nature whatsoever, including, without limitation, all
cash, cash equivalents, securities, claims (whether absolute or contingent,
known or unknown, accrued or unaccrued) and receivables (including dividend and
interest receivables) owned by the S-I Term Fund, and any deferred or prepaid
expenses shown as an asset on the S-I Term Fund's books and that the liabilities
of the S-I Term Fund shall include all liabilities, whether known or unknown,
accrued or unaccrued, absolute or contingent, in all cases, existing at the
Effective Time of the Consolidation.
(c) It is understood and agreed that the S-I Term Master Portfolio will
liquidate the S-I Term Fund's interest in the S-I Term Master Portfolio through
an in-kind redemption, effective at or before the Effective Time of
Consolidation, so that the Fund Assets will consist primarily of the portfolio
securities held by the S-I Term Master Portfolio immediately before the
Effective Time of the Consolidation.
(d) At least fifteen (15) business days prior to the Closing Date, (as
defined in Section 9), the S-I Term Master Portfolio will provide to the
Government Fund, a schedule of its securities and other assets and known
liabilities. It is understood and agreed that the S-I Term Master Portfolio may
sell any of the securities or other assets shown on the list of assets prior to
the Effective Time of the Consolidation but will not, without the prior approval
of the Government Fund, acquire any additional securities other than securities
which the Government Fund is permitted to purchase in accordance with its stated
investment objective and policies. At least ten (10) business days prior to the
Closing Date, the Government Fund will advise the S-I Term Master Portfolio of
any investments of the S-I Term Master Portfolio shown on such schedule which
the Government Fund would not be permitted to hold, pursuant to its stated
investment objective and policies or otherwise. The S-I Term Master Portfolio,
if requested by the Government Fund, will dispose of any such securities prior
to the Closing Date to the extent practicable and consistent with applicable
legal requirements. In addition, if it is determined that the portfolios of the
S-I Term Master Portfolio and the Government Fund, when aggregated, would
contain investments exceeding certain percentage limitations applicable to the
Government Fund, the S-I Term Master Portfolio, if requested by the Government
Fund, will dispose of a sufficient amount of such investments as may be
necessary to avoid violating such limitations as of the Effective Time of the
Consolidation.
(e) The Fund Assets shall be transferred and conveyed to the Government
Fund on the following basis:
(1) In exchange for the transfer of the Fund Assets, the Government
Fund shall simultaneously issue to the S-I Term Fund at the Effective Time of
the Consolidation full and fractional Class A Shares of Common Stock in of
the Government Fund having an aggregate net asset value equal to the net
value of the Fund Assets so conveyed, all determined as provided in this
Plan. In this regard, the number of full
2
<PAGE>
and fractional shares of the Government Fund delivered to the S-I Term Fund
shall be determined by dividing the value of the Fund Assets, computed in the
manner and as of the time and date set forth in this Plan, by the net asset
value of one Government Fund Class A Share, computed in the manner and as of
the time and date set forth in this Plan.
(2) The net asset value of shares to be delivered by the Government
Fund, and the net value of the Fund Assets to be conveyed by the S-I Term
Fund, shall, in each case, be determined as of the Valuation Time as defined
in Section 3. The net asset value of Class A Shares of the Government Fund
shall be computed in accordance with its then current valuation procedures.
In determining the value of the Fund Assets, each security to be included in
the Fund Assets shall be priced in accordance with the Government Fund's then
current valuation procedures.
2. Liquidation of S-I Term Fund. At the Effective Time of the
----------------------------
Consolidation, the S-I Term Fund shall make a liquidating distribution to its
shareholders as follows: Shareholders of record of the S-I Term Fund shall be
credited with full and fractional shares of the Class A Shares of common stock
that are issued by the Government Fund in connection with the Consolidation
corresponding to the S-I Term Fund shares that are held of record by the
shareholder at the Effective Time of the Consolidation. Each such shareholder
also shall have the right to receive any unpaid dividends or other distributions
which were declared before the Effective Time of the Consolidation with respect
to the S-I Term Fund shares that are held of record by the shareholder at the
Effective Time of the Consolidation, and Stagecoach shall record on its books
the ownership of the respective Government Fund shares by such shareholders.
All of the issued and outstanding shares of the S-I Term Fund at the Effective
Time of the Consolidation shall be redeemed and canceled on the books of
MasterWorks at such time. As soon as reasonably possible after the Effective
Time of the Consolidation, MasterWorks shall wind up the affairs of the S-I Term
Fund and shall file any final regulatory reports, including but not limited to
any Form N-SAR and Rule 24f-2 filings, with respect to the S-I Term Fund, and
also shall take all other steps as are necessary and proper to effect the
termination or declassification of the S-I Term Fund in accordance with all
applicable laws.
3. Valuation Time. The "Valuation Time" shall be the time as of which
--------------- --------------
the net asset value of shares of each of the S-I Term Fund and the Government
Fund is determined pursuant to the Government Fund's valuation procedures on the
Closing Date or such earlier or later time as may be mutually agreed to in
writing by the parties hereto.
4. Certain Representations, Warranties and Agreements of MasterWorks.
-----------------------------------------------------------------
MasterWorks, on behalf of itself and, where appropriate, the S-I Term Fund,
represents and warrants to, and agrees with, Stagecoach and MSIT as follows;
such representations, warranties and agreements being made on behalf of the S-I
Term Fund on a several (and not joint, or joint and several) basis:
3
<PAGE>
(a) MasterWorks is a corporation, duly created, validly existing and in
good standing under the laws of the State of Maryland. MasterWorks is registered
with the SEC as an open-end management investment company under the 1940 Act,
and such registration is in full force and effect.
(b) MasterWorks has the power to own all of its properties and assets
and to consummate the transactions contemplated herein, and has all necessary
federal, state and local authorizations to carry on its business as now being
conducted and to consummate the transactions contemplated by this Plan.
(c) This Plan has been duly authorized by the Board of Directors of
MasterWorks, and executed and delivered by duly authorized officers of
MasterWorks, and represents a valid and binding contract, enforceable in
accordance with its terms, subject as to enforcement to bankruptcy, insolvency,
reorganization, arrangement, moratorium, and other similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles. The execution and delivery of this Plan does not, and, subject to
the approval of shareholders referred to in Section 7, the consummation of the
transactions contemplated by this Plan will not, violate MasterWorks' Amended
and Restated Articles of Incorporation or By-Laws or any material agreement or
arrangement to which it is a party or by which it is bound.
(d) The S-I Term Fund has elected to qualify and has qualified as a
regulated investment company under Part I of Subchapter M of Subtitle A, Chapter
1, of the Code, as of and since its first taxable year; has been a regulated
investment company under such Part of the Code at all times since the end of its
first taxable year when it so qualified; and qualifies and shall continue to
qualify as a regulated investment company for its taxable year ending upon its
liquidation.
(e) MasterWorks has valued, and will continue to value, the portfolio
securities and other assets of the S-I Term Fund in accordance with applicable
legal requirements.
(f) The proxy materials included within the Form N-14 Registration
Statement (the "N-14 Registration Statement") from its effective date with the
---------------------------
SEC, through the time of the shareholders meeting referred to in Section 7 and
the Effective Time of the Consolidation, insofar as they relate to MasterWorks,
(i) shall comply in all material respects with the applicable provisions of the
Securities Act of 1933, as amended (the "1933 Act"), the Securities Exchange Act
--------
of 1934, as amended (the "1934 Act") and the 1940 Act, the rules and regulations
--------
thereunder, and state securities laws, and (ii) shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein not misleading.
(g) All of the issued and outstanding shares of the S-I Term Fund have
been validly issued and are fully paid and non-assessable, and were offered for
sale and
4
<PAGE>
sold in conformity with the registration requirements of all applicable federal
and state securities laws.
(h) MasterWorks shall operate the business of the S-I Term Fund in the
ordinary course between the date hereof and the Effective Time of the
Consolidation, it being agreed that such ordinary course of business will
include the declaration and payment of customary dividends and distributions and
any other dividends and distributions deemed advisable in anticipation of the
Consolidation.
(i) At the Effective Time of the Consolidation, the S-I Term Fund will
have good and marketable title to the Fund Assets and full right, power and
authority to assign, deliver and otherwise transfer such assets.
(j) At the Effective Time of the Consolidation, all federal and other
tax returns and reports of the S-I Term Fund required by law to have been filed
by such time shall have been filed, and all federal and other taxes shall have
been paid so far as due, or provision shall have been made for the payment
thereof and, to the best of S-I Term Fund, no such return or report shall be
currently under audit and no assessment shall have been asserted with respect to
such returns or reports.
5. Certain Representations, Warranties and Agreements of MSIT. MSIT,
----------------------------------------------------------
on behalf of itself and, where appropriate, the S-I Term Master Portfolio,
represents and warrants to, and agrees with, MasterWorks and Stagecoach as
follows; such representations, warranties and agreements being made on behalf of
the S-I Term Master Portfolio on a several (and not joint, or joint and several)
basis:
(a) MSIT is a business trust, duly created, validly existing and in
good standing under the laws of the State of Delaware. MSIT is registered with
the SEC as an open-end management investment company under the 1940 Act, and
such registration is in full force and effect.
(b) MSIT has the power to own all of its properties and assets and to
consummate the transactions contemplated herein, and has all necessary federal,
state and local authorizations to carry on its business as now being conducted
and to consummate the transactions contemplated by this Plan.
(c) This Plan has been duly authorized by the Board of Trustees of
MSIT, and executed and delivered by duly authorized officers of MSIT, and
represents a valid and binding contract, enforceable in accordance with its
terms, subject as to enforcement to bankruptcy, insolvency, reorganization,
arrangement, moratorium, and other similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles. The
execution and delivery of this Plan does not, and, subject to the approval of
shareholders referred to in Section 7, the consummation of the transactions
contemplated by this Plan will not, violate MSIT's Amended and Restated
Agreement and Declaration of Trust or By-Laws or any material agreement or
arrangement to which it is a party or by which it is bound.
5
<PAGE>
(d) MSIT has qualified the Term Master Portfolio as a partnership under
the Code as of and since S-I Term Master Portfolio's inception; S-I Term Master
Portfolio has been a partnership under the Code at all times since its
inception; and S-I Term Master Portfolio qualifies and shall continue to qualify
as a partnership for all taxable years ending on or after the Effective Time for
the Consolidation.
(e) MSIT has valued, and will continue to value, the portfolio
securities and other assets of the S-I Term Master Portfolio in accordance with
applicable legal requirements.
(f) The proxy materials included within the N-14 Registration Statement
from its effective date with the SEC, through the time of the shareholders
meeting referred to in Section 7 and the Effective Time of the Consolidation,
insofar as they relate to MSIT, (i) shall comply in all material respects with
the applicable provisions of the 1933 Act, the 1934 Act and the 1940 Act, the
rules and regulations thereunder, and state securities laws, and (ii) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein
not misleading.
(g) All of the issued and outstanding interests in the S-I Term Master
Portfolio have been validly issued and are fully paid and non-assessable, and
were offered for sale and sold in conformity with the registration requirements
of all applicable federal and state securities laws, or available exemptions
thereto.
(h) MSIT shall operate the business of the S-I Term Master Portfolio in
the ordinary course between the date hereof and the Effective Time of the
Consolidation. It is understood that such ordinary course of business will
include the declaration and payment of customary dividends and distributions and
any other dividends and distributions deemed advisable in anticipation of the
Consolidation.
6. Certain Representations, Warranties and Agreements of Stagecoach.
----------------------------------------------------------------
Stagecoach, on behalf of itself and where appropriate, the Government Fund,
represents and warrants to, and agrees with MasterWorks and MSIT as follows;
such representations, warranties and agreements being made on behalf of the
Government Fund on a several (and not joint, or joint and several) basis:
(a) Stagecoach is a corporation duly created, validly existing and in
good standing under the laws of the State of Maryland. Stagecoach is registered
with the SEC as an open-end management investment company under the 1940 Act and
such registration is in full force and effect.
(b) Stagecoach has the power to own all of its properties and assets
and to consummate the transactions contemplated herein, and has all necessary
federal, state and local authorizations to carry on its business as now being
conducted and to consummate the transactions contemplated by this Plan.
6
<PAGE>
(c) This Plan has been duly authorized by the Board of Directors of
Stagecoach, and executed and delivered by duly authorized officers of
Stagecoach, and represents a valid and binding contract, enforceable in
accordance with its terms, subject as to enforcement to bankruptcy, insolvency,
reorganization, arrangement, moratorium and other similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles. The execution and delivery of this Plan does not, and the
consummation of the transactions contemplated by this Plan will not, violate the
Amended and Restated Articles of Incorporation or By-Laws of Stagecoach or any
material agreement or arrangement to which it is a party or by which it is
bound.
(d) The Government Fund has elected to qualify and has qualified as a
regulated investment company under Part I of Subchapter M of Subtitle A, Chapter
1, of the Code, as of and since its first taxable year; has been a regulated
investment company under such Part of the Code at all times since the end of its
first taxable year when it so qualified; and qualifies and shall continue to
qualify as a regulated investment company for its current taxable year.
(e) Stagecoach has valued, and will continue to value, the portfolio
securities and other assets of the Government Fund in accordance with applicable
legal requirements.
(f) The N-14 Registration Statement, including the proxy materials
contained therein, from its effective date with the SEC through the time of the
shareholders meeting referred to in Section 7 and at the Effective Time of the
Consolidation, insofar as it relates to Stagecoach, the Government Fund, the
core portfolio in which the Government Fund invests, or the Class A Shares of
the Government Fund to be issued pursuant thereto (i) shall comply in all
material respects with the applicable provisions of the 1933 Act, the 1934 Act
and the 1940 Act, the rules and regulations thereunder, and state securities
laws, and (ii) shall not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements made therein not misleading.
(g) The shares of the Government Fund to be issued and delivered to the
S-I Term Fund for the account of the shareholders of the S-I Term Fund, pursuant
to the terms hereof, shall have been duly authorized as of the Effective Time of
the Consolidation and, when so issued and delivered, shall be duly and validly
issued, fully paid and non-assessable, and no shareholder of the Government Fund
shall have any preemptive right of subscription or purchase in respect thereto.
(h) All of the issued and outstanding shares of the Government Fund
have been validly issued and are fully paid and non-assessable, and were offered
for sale and sold in conformity with the registration requirements of all
applicable federal and state securities laws.
7
<PAGE>
(i) Stagecoach shall operate the business of the Government Fund in the
ordinary course between the date hereof and the Effective Time of the
Consolidation. It is understood that such ordinary course of business will
include the declaration and payment of customary dividends and distributions and
any other dividends and distributions deemed advisable in anticipation of the
Consolidation.
(j) At the Effective Time of the Consolidation, all federal and other
tax returns and reports of the Government Fund required by law to have been
filed by such time shall have been filed, and all federal and other taxes shall
have been paid so far as due, or provision shall have been made for the payment
thereof and, to the best of Government Fund, no such return or report shall be
currently under audit and no assessment shall have been asserted with respect to
such returns or reports.
7. Shareholder Action. As soon as practicable after the effective date
------------------
of the N-14 Registration Statement MasterWorks shall hold meeting(s) of the
shareholders of the S-I Term Fund for the purpose of considering and voting
upon:
(a) approval of this Plan and the Consolidation contemplated hereby;
and
(b) such other matters as may be determined by the Board of Directors
of MasterWorks.
8. Regulatory Filings. As soon as practicable, Stagecoach shall file
------------------
an N-14 Registration Statement, which shall include all proxy materials required
in connection with the S-I Term Fund shareholder approval referenced in Section
7, with the SEC, and, where required, with appropriate state securities
regulatory authorities.
9. Closing Date, Effective Time of the Consolidation. The "Closing
------------------------------------------------- -------
Date" shall be December 4, 1998, or such earlier or later date as may be
- ----
mutually agreed in writing by the parties hereto. Delivery of the Fund Assets
and the shares of the Government Fund to be issued pursuant to Section 1 and the
liquidation of the S-I Term Fund pursuant to Section 2 shall occur on the day
following the Closing Date, whether or not such day is a business day, or on
such other date, and at such place and time, as may be mutually agreed in
writing, by the parties hereto. The date and time at which such actions are
taken are referred to herein as the "Effective Time of the Consolidation." To
-----------------------------------
the extent any Fund Assets are, for any reason, not transferred at the Effective
Time of the Consolidation, MasterWorks shall cause such Fund Assets to be
transferred in accordance with this Plan at the earliest practicable date
thereafter.
10. Conditions to MasterWorks and MSIT Obligations. The obligations of
----------------------------------------------
MasterWorks and MSIT hereunder shall be subject to the following conditions
precedent:
(a) This Plan and the Consolidation shall have been approved by the
Board of Directors of Stagecoach and by a majority of the shareholders of the
S-I Term Fund in the manner required by applicable law and this Plan.
8
<PAGE>
(b) All representations and warranties of Stagecoach made in this Plan
shall be true and correct in all material respects as if made at and as of the
Valuation Time and the Effective Time of the Consolidation.
(c) Stagecoach shall have delivered to MasterWorks a certificate
executed in its name by its President or Vice President and its Treasurer or
Assistant Treasurer, in a form reasonably satisfactory to MasterWorks and dated
as of the Closing Date, to the effect that the representations and warranties of
Stagecoach in this Plan are true and correct at and as of the Valuation Time and
that, to the best of its knowledge, the Fund Assets include only assets which
the Government Fund may properly acquire under its investment objectives,
policies and limitations and may otherwise be lawfully acquired by the
Government Fund.
(d) MasterWorks shall have received an opinion of Morrison & Foerster
LLP, as counsel to Stagecoach, in form reasonably satisfactory to MasterWorks
and dated the Closing Date, substantially to the effect that (i) Stagecoach is a
corporation duly established and validly existing under the laws of the State of
Maryland; (ii) the shares of the Government Fund to be delivered to the S-I Term
Fund as provided for by this Plan are duly authorized and upon delivery will be
validly issued, fully paid and non-assessable by Stagecoach; (iii) this Plan has
been duly authorized, executed and delivered by Stagecoach, and represents a
legal, valid and binding contract, enforceable in accordance with its terms,
subject to the effect of bankruptcy, insolvency, moratorium, fraudulent
conveyance and similar laws relating to or affecting creditors' rights generally
and court decisions with respect thereto, and such counsel shall express no
opinion with respect to the application of equitable principles in any
proceeding whether at law or in equity; (iv) the execution and delivery of this
Plan did not, and the consummation of the transactions contemplated by this Plan
will not, violate the Amended and Restated Articles of Incorporation or By-Laws
of Stagecoach or any material contract known to such counsel to which Stagecoach
is a party or by which it is bound; and (v) no consent, approval, notice,
authorization or order of any court or governmental authority is required for
the consummation by Stagecoach of the transactions contemplated by this Plan,
except such as have been obtained under the 1933 Act, the 1934 Act, the 1940
Act, the rules and regulations under those Acts and such as may be required by
state securities laws or such as may be required subsequent to the Effective
Time of the Consolidation. Such opinion may rely on the opinion of other counsel
to the extent set forth in such opinion, provided such other counsel is
reasonably acceptable to MasterWorks.
(e) MasterWorks shall have received an opinion of Morrison & Foerster
LLP addressed to Stagecoach and MasterWorks in a form reasonably satisfactory to
them, and dated the Closing Date, with respect to the matters specified in
Subsection 11(h).
(f) MasterWorks shall have received a memorandum addressed to
Stagecoach and MasterWorks, in a form reasonably satisfactory to them, prepared
by Stephens, or another person approved by the parties, concerning the
compliance by
9
<PAGE>
Stagecoach with applicable notice or filing requirements of state securities
laws in connection with the offering and issuance of shares pursuant to this
Plan.
(g) The N-14 Registration Statement shall have become effective under
the 1933 Act and no stop order suspending the effectiveness shall have been
instituted, or to the knowledge of Stagecoach, contemplated by the SEC.
(h) No action, suit or other proceeding shall be threatened or pending
before any court or governmental agency in which it is sought to restrain or
prohibit, or obtain damages or other relief in connection with, this Plan or the
transactions contemplated herein.
(i) The SEC shall not have issued any unfavorable advisory report under
Section 25(b) of the 1940 Act nor instituted any proceeding seeking to enjoin
consummation of the transactions contemplated by this Plan under Section 25(c)
of the 1940 Act.
(j) Stagecoach shall have performed and complied in all material
respects with each of its agreements and covenants required by this Plan to be
performed or complied with by it prior to or at the Valuation Time and the
Effective Time of the Consolidation.
(k) MasterWorks shall have received from Stagecoach a duly executed
instrument whereby the Government Fund assumes all of the liabilities of the S-I
Term Fund.
(l) MasterWorks shall have received a letter from KPMG Peat Marwick LLP
addressed to Stagecoach and MasterWorks in form reasonably satisfactory to them,
and dated the Closing Date, to the effect that on the basis of limited
procedures as agreed to by Stagecoach and MasterWorks and described in such
letter (but not an examination in accordance with generally accepted auditing
standards) (i) nothing came to their attention that caused them to believe that
the unaudited pro forma financial statements included in the N-14 Registration
Statement do not comply as to form in all material respects with the applicable
accounting requirements of Rule 11-02 of Regulation S-X or that the pro forma
adjustments have not properly been applied to the historical amounts in the
compilation of those amounts, (ii) the data used in the calculation of the
current and pro forma expense ratios of the Stagecoach Fund appearing in the
N-14 Registration Statement and Consolidation Proxy Materials agree with
underlying accounting records of the Government Fund or to written estimates
provided by officers of Stagecoach having responsibility for financial and
reporting matters and were found to be mathematically correct, and (iii) the
information relating to the Government Fund appearing in the N-14 Registration
Statement that is expressed in dollars or percentages of dollars has been
obtained from the accounting records of the Government Fund or from schedules
prepared by officers of Stagecoach having responsibility for financial and
reporting matters and such information is in agreement with such records,
schedules or computations made therefrom.
10
<PAGE>
11. Stagecoach Conditions. The obligations of Stagecoach hereunder
---------------------
shall be subject to the following conditions precedent:
(a) This Plan and the Consolidation shall have been approved by the
Board of Trustees of MSIT, the Board of Directors of MasterWorks and by a
majority of the shareholders of the S-I Term Fund in the manner required by
applicable law and this Plan.
(b) MSIT shall have delivered to Stagecoach a statement of assets and
liabilities of the S-I Term Master Portfolio, showing the tax costs of such
securities by lot and the holding periods of such securities, as of the
Valuation Time, certified by the Treasurer or Assistant Treasurer of MSIT as
having been prepared in accordance with generally accepted accounting principles
consistently applied.
(c) MasterWorks shall have duly executed and delivered to Stagecoach
such bills of sale, assignments, certificates and other instruments of transfer
("Transfer Documents") as Stagecoach may deem necessary or desirable to transfer
--------------------
all of the S-I Term Fund's right, title and interest in and to the Fund Assets.
(d) All representations and warranties of MasterWorks and MSIT made in
this Plan shall be true and correct in all material respects as if made at and
as of the Valuation Time and the Effective Time of the Consolidation.
(e) MasterWorks shall have delivered to Stagecoach a certificate
executed in its name by its President or Vice President and its Treasurer or
Assistant Treasurer, in a form reasonably satisfactory to Stagecoach and dated
as of the Closing Date, to the effect that the representations and warranties of
the MasterWorks in this Plan are true and correct at and as of the Valuation
Time.
(f) Stagecoach shall have received an opinion of Morrison & Foerster
LLP, as counsel to MasterWorks, in a form reasonably satisfactory to Stagecoach
and dated the Closing Date, substantially to the effect that (i) MasterWorks is
a corporation duly established and validly existing under the laws of the State
of Maryland; (ii) this Plan and the Transfer Documents have been duly
authorized, executed and delivered by MasterWorks and represent legal, valid and
binding contracts, enforceable in accordance with their terms, subject to the
effect of bankruptcy, insolvency, moratorium, fraudulent conveyance and similar
laws relating to or affecting creditors' rights generally and court decisions
with respect thereto, and such counsel shall express no opinion with respect to
the application of equitable principles in any proceeding, whether at law or in
equity; (iii) the execution and delivery of this Plan did not, and the
consummation of the transactions contemplated by this Plan will not, violate the
Amended and Restated Articles of Incorporation or By-Laws of MasterWorks or any
material contract known to such counsel to which MasterWorks is a party or by
which it is bound; (iv) the only Plan shareholder approvals required with
respect to the consummation of the transactions contemplated by this Plan are
the approval of a majority of the shareholders of the S-I
11
<PAGE>
Term Fund; and (v) no consent, approval, authorization or order of any court or
governmental authority is required for the consummation by MasterWorks of the
transactions contemplated by this Plan, except such as have been obtained under
the 1933 Act, the 1934 Act, the 1940 Act, the rules and regulations under those
Acts and such as may be required under the state securities laws or such as may
be required subsequent to the Effective Time of the Consolidation. Such opinion
may rely on the opinion of other counsel to the extent set forth in such
opinion, provided such other counsel is reasonably acceptable to Stagecoach.
(g) Stagecoach shall have received an opinion of Morrison & Foerster
LLP, as counsel to MSIT, in a form reasonably satisfactory to Stagecoach and
dated the Closing Date, substantially to the effect that (i) MSIT is a business
trust duly established and validly existing under the laws of the State of
Delaware; (ii) this Plan has been duly authorized, executed and delivered by
MSIT and represents a legal, valid and binding contract, enforceable in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
moratorium, fraudulent conveyance and similar laws relating to or affecting
creditors' rights generally and court decisions with respect thereto, and such
counsel shall express no opinion with respect to the application of equitable
principles in any proceeding, whether at law or in equity; (iii) the execution
and delivery of this Plan did not, and the consummation of the transactions
contemplated by this Plan will not, violate the Amended and Restated Agreement
and Declaration of Trust or By-Laws of MSIT or any material contract known to
such counsel to which MSIT is a party or by which it is bound; and (iv) no
consent, approval, authorization or order of any court or governmental authority
is required for the consummation by MSIT of the transactions contemplated by
this Plan, except such as have been obtained under the 1933 Act, the 1934 Act,
the 1940 Act, the rules and regulations under those Acts and such as may be
required under the state securities laws or such as may be required subsequent
to the Effective Time of the Consolidation. Such opinion may rely on the opinion
of other counsel to the extent set forth in such opinion, provided such other
counsel is reasonably acceptable to Stagecoach.
(h) Stagecoach shall have received an opinion of Morrison & Foerster
LLP addressed to Stagecoach and Masterworks in a form reasonably satisfactory to
them, and dated the Closing Date, substantially to the effect that, based upon
reasonable representations made in certificates provided by Stagecoach and
Masterworks, their affiliates and/or principal shareholders, and facts and
assumptions set forth in such opinion, for federal income tax purposes (i) the
Consolidation will constitute a "reorganization" within the meaning of Section
368(a), of the Code and the Government Fund and S-I Term Fund will each be a
"party to a reorganization," within the meaning of Section 368(b) of the Code,
with respect to the Consolidation; (ii) in accordance with Sections 361(a),
361(c)(1) and 357(a) of the Code, no gain or loss will be recognized by the S-I
Term Fund as a result of the Consolidation; (iii) in accordance with Section
1032(a) of the Code, no gain or loss will be recognized by the Government Fund
as a result of the Consolidation; (iv) in accordance with Section 354(a)(1) of
the Code, no gain or loss will be recognized by the shareholders of the S-I Term
Fund on the distribution to them by the S-I Term Fund of shares of the
Government Fund in exchange for their shares of the S-I Term Fund; (v) in
accordance
12
<PAGE>
with Section 358(a)(1) of the Code, the basis of the Government Fund shares
received by each shareholder of the S-I Term Fund will be the same as the basis
of the shareholder's S-I Term Fund shares immediately prior to the
Consolidation; (vi) in accordance with Section 362(b) of the Code, the basis of
the Fund Assets received by the Government Fund will be the same as the basis of
such Fund Assets in the hands of the S-I Term Fund immediately prior the
Consolidation; (vii) in accordance with Section 1223(1) of the Code, a
shareholder's holding period for Government Fund shares will be determined by
including the period for which the shareholder held the shares of the S-I Term
Fund exchanged therefor, provided that the shareholder held such shares of the
S-I Term Fund as a capital asset; (viii) in accordance with Section 1223(2) of
the Code, the holding period of the Government Fund with respect to the Fund
Assets will include the period for which such Fund Assets were held by the S-I
Term Fund; and (ix) in accordance with Section 381(a) of the Code, the
Government Fund will succeed to the tax attributes of the S-I Term Fund
described in Section 381(c) of the Code.
(i) The Fund Assets to be transferred to the Government Fund under this
Plan shall include no assets which the Government Fund may not properly acquire
pursuant to its investment objectives, policies or restrictions or may not
otherwise lawfully acquire.
(j) The N-14 Registration Statement shall have become effective under
the 1933 Act and no stop order suspending such effectiveness shall have been
instituted or, to the knowledge of Stagecoach, contemplated by the SEC.
(k) No action, suit or other proceeding shall be threatened or pending
before any court or governmental agency in which it is sought to restrain or
prohibit or obtain damages or other relief in connection with this Plan or the
transactions contemplated herein.
(l) The SEC shall not have issued any unfavorable advisory report under
Section 25(b) of the 1940 Act nor instituted any proceeding seeking to enjoin
consummation of the transactions contemplated by this Plan under Section 25(c)
of the 1940 Act.
(m) MasterWorks and MSIT shall have performed and complied in all
material respects with each of their respective agreements and covenants
required by this Plan to be performed or complied with by them prior to or at
the Valuation Time and the Effective Time of the Consolidation.
(n) Prior to the Valuation Time, S-I Term Fund shall have declared a
dividend or dividends, with a record date and ex-dividend date prior to the
Valuation Time, which, together with all previous dividends, shall have the
effect of distributing to its shareholders all of its net investment company
taxable income (as defined in the Code and computed without regard to any
deduction for dividends paid), if any, for all taxable periods or years ending
on or before the Effective Time of the Consolidation, and all of
13
<PAGE>
its net capital gain, if any, realized in taxable periods or years ending on or
before the Effective Time of the Consolidation.
12. Survival of Representations and Warranties. The representations and
------------------------------------------
warranties of Stagecoach set forth in this Plan shall survive the delivery of
the Fund Assets to the Government Fund and the issuance of the shares of the
Government Fund at the Effective Time of the Consolidation.
13. Termination of Plan. This Plan may be terminated by a party at or,
-------------------
in the case of Subsection 13(c), below, at any time prior to, the Effective Time
of the Consolidation by a vote of a majority of its Board of Directors/Trustees
as provided below:
(a) By MasterWorks or MSIT if the conditions set forth in Section 10
are not satisfied as specified in said Section;
(b) By Stagecoach if the conditions set forth in Section 11 are not
satisfied as specified in said Section;
(c) By mutual consent of the parties.
14. Governing Law. This Plan and the transactions contemplated hereby
-------------
shall be governed, construed and enforced in accordance with the laws of the
State of Maryland, except to the extent preempted by federal law.
15. Brokerage Fees and Expenses.
---------------------------
(a) Each of MasterWorks, MSIT and Stagecoach represents and warrants
that there are no brokers or finders entitled to receive any payments in
connection with Consolidation.
(b) Each of the S-I Term Fund, the S-I Term Master Portfolio and the
Government Fund shall be liable for its own expenses incurred in connection with
entering into and carrying out the provisions of this Plan, whether or not the
Consolidation is consummated.
16. Scope of Responsibilities. The parties hereto agree that the
-------------------------
responsibilities of MasterWorks, MSIT and Stagecoach under this Plan, shall not
be binding on any of the Directors or Trustees, shareholders, officers, agents
or employees of any of them and that, insofar as such responsibilities are
created on behalf of the S-I Term Fund, the S-I Term Master Portfolio and the
Government Fund, bind only the assets and property of the S-I Term Fund, the S-I
Term Master Portfolio and the Government Fund, respectively, and not the other
assets or property of MasterWorks, MSIT and Stagecoach.
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Plan to be
executed by their duly authorized officers designated below as of the date first
written above.
MASTERWORKS FUNDS INC.
ATTEST:
By:
- ------------------------- ---------------------------
Michael W. Nolte Richard H. Blank, Jr.
Assistant Secretary Chief Operating Officer,
Secretary and Treasurer
MANAGED SERIES INVESTMENT
TRUST
ATTEST:
By:
- ------------------------- ---------------------------
Michael W. Nolte Richard H. Blank, Jr.
Assistant Secretary Chief Operating Officer,
Secretary and Treasurer
STAGECOACH FUNDS, INC.
ATTEST:
By:
- ------------------------- ---------------------------
Michael W. Nolte Richard H. Blank, Jr.
Assistant Secretary Chief Operating Officer,
Secretary and Treasurer
15
<PAGE>
EXHIBIT B
SHORT-INTERMEDIATE
U.S. GOVERNMENT INCOME FUND
This Exhibit reproduces portions of the discussion of Fund performance
from the Government Fund's June 30, 1998, Annual Report. The discussion (which
has been slightly modified) reviews some of the factors that affected the Fund's
performance during this fiscal year and shows the performance of the Fund for
various periods. The discussion has not been updated to reflect events
occurring after June 30, 1998.
During the three-month reporting period, the Stagecoach Short-
Intermediate U.S. Government Income Fund's Class A net asset value increased
from $9.95 on March 31, 1998, to $9.97 on June 30, 1998. The Fund distributed
$0.13 per share in dividend income and no capital gains were distributed during
this period.
The Fund's distribution rate was 5.22% for Class A shares, based on an
annualization of June's monthly dividend of $0.045 per share and the maximum
offering price of $10.28 on June 30, 1998.
PORTFOLIO DATA/1/ (as of June 30 1998)
- ----------------------------------------------------------------
Number of Issues 51
Portfolio Turnover Ratio 12%
Weighted Average Coupon 6.87%
Weighted Average Maturity 4.91 years
Average Credit Quality AA1
Class A
-------
NAV $9.97
Distribution Rate 5.22%
SEC Yield 5.55%
- ------------
/1/ Please refer to important disclosures at the end of the Strategic Outlook
section.
For the three-month period ended June 30, 1998, the Class A shares of
the Short-Intermediate U.S. Government Income Fund returned 1.54%, excluding
sales charges. For the same time period, the Fund's Institutional Class
returned 1.56%. Overall, we remained very competitive with our benchmark, the
Lehman Brothers Treasury Note Index, which returned 1.54% in the same period.
The competitive performance of the Fund was due to several steps taken to
implement our total return strategy. We decreased our mortgage exposure to
decrease exposure to interest rate risk for the Fund. This was a result of the
current interest rate environment, where we've seen an increased prepayment risk
in the mortgage-backed securities sector as prepayment occurred when homeowners
refinanced
1
<PAGE>
out of their existing mortgages into ones with lower interest rates. In
addition, we maintained our exposure to higher yielding bonds, particularly
corporate bonds.
PORTFOLIO REVIEW
The Fund is managed with a total return strategy that attempts to
balance reasonable risk with competitive income and capital appreciation.
Investment quality, maturity and duration are carefully examined as the Fund's
managers employ a top-down approach. This approach involves analysis of
historical interest rate shifts in an attempt to predict changes in Federal
Reserve policy, which would ultimately affect the strategy of the Fund.
As of June 30, 1998, the Fund held 45% of the portfolio in federal
agency securities. This allocation helped to maintain a degree of stability and
credit quality for the Fund. Some of these securities are backed by the full
faith and credit of the United States, which has never defaulted on interest or
principal payments. As with all mutual funds, the Fund is guaranteed neither by
the U.S. Government nor any of its agencies.
With 32% of the portfolio invested in corporate bonds on June 30,
1998, we attempted to gain potential income and capital appreciation by
maintaining a high level of corporate exposure. On a similar note, we slightly
lowered our exposure to mortgage-backed securities due to the increased
prepayment risk associated with the flat interest rate environment.
To maintain liquidity, we held 16% of the portfolio in U.S. Treasury
notes at the end of the three month reporting period. In this interest rate
environment, we determined it prudent to use these liquid assets to alter the
Fund's duration. This strategy allowed the Fund to capture increased current
income while preserving capital.
PORTFOLIO ALLOCATION (AS OF JUNE 30, 1998)
------------------------------------------------------------
INVESTMENTS % OF PORTFOLIO
Cash 3%
Corporate Bonds 32%
Federal Agencies 45%
Foreign Bonds 2%
Treasury Bonds 2%
Treasury Notes 16%
The majority of the securities in the top ten holdings were acquired
during the Fund's growth phase and contributed to its growth. Some are higher
yielding corporate bonds that contribute to the Fund's income level. Overall,
these bonds have longer durations, which helps to maximize the Fund's income
potential but also increases the Fund's volatility in a changing interest rate
environment.
2
<PAGE>
Assets in the Short-Intermediate U.S. Government Income Fund increased
due to its consolidation with the Intermediate Bond Fund, which added over $57.7
million in assets. The number of issues in the Fund also grew from 28 bonds and
notes on March 31, 1998 to 51 on June 30, 1998. The additional assets have been
diversified according to the investment policies of the Fund, and should provide
current income for the portfolio.
TOP 10 HOLDINGS (AS OF JUNE 30, 1998)
----------------------------------------------------------
NAME/COUPON % OF PORTFOLIO
FHLB, 5.53% 5.9%
Pacific Gas & Electric, 7.88% 3.9%
FHLMC, 6.79% 3.9%
FHLMC, 7.01% 3.8%
First Bank Corp., 6.40% 3.8%
FNMA, 6.16% 3.8%
U.S. T-Note, 5.88% 3.8%
FNMA, 6.18% 3.7%
U.S. T-Note, 5.88% 3.6%
U.S. T-Note, 7.88% 3.3%
STRATEGIC OUTLOOK
The nation's economy continues to be healthy but we believe that it
may weaken over time. The Asian crisis may cause further effects such as
increasing the strength of the U.S. dollar and slowing inflation. Given these
views, we do not feel that the Federal Reserve Board will raise interest rates
in the near future. We feel that long-term interest rates may drift lower and
short-term rates will remain stable.
Based on this outlook, we intend to position the Fund with a longer
duration to capture the potential for income and capital appreciation. Our
management team has extensive experience in the bond market, enabling us to
respond quickly to economic conditions and market events. We will continue to
watch the events in Asia and monitor the region's impact on corporate
profitability. This will help us remain sensitive to the performance of the
Fund's corporate bond holdings. While we intend to maintain our corporate bond
exposure, we may decrease it slightly if the U.S. economy is expected to
experience a dramatic slowdown as a result of the events overseas. As always,
we will continue our focus on providing investors with current income and
preservation of capital.
/1/ The formula used to calculate the SEC yield is described in detail in the
Fund's statement of additional information and is designed to standardize
the yield calculations so that all mutual fund companies with the same or
similar portfolios use a uniform method to obtain yield figures for their
non-money market advertisements. SEC yields include the actual amount of
interest earned adjusted by any gain or loss realized due to the return of
principal, less expenses and the maximum offering price calculated on a 30-
day month-end basis.
3
<PAGE>
The distribution rate is based on the actual distributions made by the
Fund. The distribution rate is calculated by annualizing the Fund's most recent
income dividend and dividing that figure by the applicable current public
offering price.
Past performance is no guarantee of future results.
SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND
GROWTH OF A $10,000 INVESTMENT
Class A shares
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
SC Short Int'd U.S. Gov't Income - A Lehman Brothers U.S. Treasury Note Index
------------------------------------ -----------------------------------------
<S> <C> <C>
Oct-93 $9,700 $10,000
Nov-93 $9,715 $9,950
Dec-93 $9,745 $9,991
Jan-94 $9,807 $10,090
Feb-94 $9,748 $9,948
Mar-94 $9,695 $9,804
Apr-94 $9,661 $9,741
May-94 $9,689 $9,748
Jun-94 $9,697 $9,750
Jul-94 $9,756 $9,877
Aug-94 $9,753 $9,906
Sep-94 $9,632 $9,824
Oct-94 $9,626 $9,827
Nov-94 $9,570 $9,782
Dec-94 $9,608 $9,813
Jan-95 $9,759 $9,973
Feb-95 $9,937 $10,163
Mar-95 $9,988 $10,219
Apr-95 $10,074 $10,337
May-95 $10,300 $10,629
Jun-95 $10,361 $10,699
Jul-95 $10,364 $10,704
Aug-95 $10,434 $10,790
Sep-95 $10,495 $10,862
Oct-95 $10,597 $10,983
Nov-95 $10,710 $11,117
Dec-95 $10,825 $11,228
Jan-96 $10,919 $11,325
Feb-96 $10,825 $11,204
Mar-96 $10,762 $11,149
Apr-96 $10,720 $11,117
May-96 $10,695 $11,111
Jun-96 $10,796 $11,221
Jul-96 $10,825 $11,255
Aug-96 $10,823 $11,269
Sep-96 $10,971 $11,414
Oct-96 $11,108 $11,600
Nov-96 $11,265 $11,739
Dec-96 $11,216 $11,675
Jan-97 $11,288 $11,719
Feb-97 $11,327 $11,736
Mar-97 $11,253 $11,667
Apr-97 $11,382 $11,798
May-97 $11,456 $11,890
Jun-97 $11,549 $11,991
Jul-97 $11,764 $12,215
Aug-97 $11,707 $12,166
Sep-97 $11,825 $12,299
Oct-97 $11,950 $12,443
Nov-97 $11,970 $12,471
Dec-97 $12,065 $12,573
Jan-98 $12,229 $12,742
Feb-98 $12,204 $12,725
Mar-98 $12,230 $12,764
Apr-98 $12,284 $12,824
May-98 $12,376 $12,912
Jun-98 $12,419 $12,999
</TABLE>
The accompanying chart compares the performance of the Stagecoach Short-
Intermediate U.S. Government Income Fund Class A shares since inception with the
Lehman Brothers Treasury Note Index. The charge assumes a hypothetical $10,000
initial investment in Class A shares, reflects all operating expenses and
assumes the maximum initial sales charge of 3.00%. The Lehman Brothers Treasury
Note Index is an unmanaged index of U.S. Treasury 2-10 year notes. The Fund is
a professionally managed mutual fund. The index presented here does not incur
expenses and is not available directly for investment. Had this Index incurred
operating expenses, its performance would have been lower.
<TABLE>
<CAPTION>
AVERAGE ANNUAL RETURNS (as of June 30, 1998)
----------------------------------------------------------------------------------------------------------------
Excluding Sales Charge Including Sales Charge
- ----------------------------------------------------------------------------------------------------------------
Since Since
Year-to-date 1-Year 3-Year 10/27/93 Year-to-date 1-Year 3-Year 10/27/93
Inception Inception
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A 2.93 7.53 6.22 5.44 (0.18) 4.32 5.17 4.75
</TABLE>
Average annual returns represent the average annual change in value of an
investment over the indicated periods assuming reinvestment of dividends and
capital gains distributions. Investment return and principal value of an
investment will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. Figures quoted represent past
performance, which is no guarantee of future results. The Fund's manager has
voluntarily waived all or a portion of its management fees or assumed
responsibility for other expenses, which reduces operating expenses and
increases total return to shareholders. Without these reductions the Fund's
returns would have been lower. There is no guarantee that these reductions will
continue.
For Class A shares, the maximum front-end sales charge is 3.00%.
4
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
DATED OCTOBER __, 1998
MASTERWORKS FUNDS INC.
111 Center Street
Little Rock, Arkansas 72201
1-888-204-3956
STAGECOACH FUNDS, INC.
111 Center Street
Little Rock, Arkansas 72201
1-800-222-8222
NOVEMBER 24, 1998 SPECIAL MEETING OF
SHAREHOLDERS OF THE SHORT-INTERMEDIATE TERM FUND
This Statement of Additional Information sets forth certain additional
information about MasterWorks Funds Inc. ("MasterWorks") and MasterWork's Short-
Intermediate Term Fund (the "S-I Fund") and Stagecoach Funds, Inc.
("Stagecoach") and Stagecoach's Short-Intermediate U.S. Government Income Fund
(the "Government Fund"). This Statement of Additional Information is not a
prospectus but should be read in conjunction with the Combined
Proxy/Prospectus, also dated October __, 1998, for the Special Meeting of
Shareholders of the S-I Fund to be held on November 24, 1998. Copies of the
Combined Proxy/Prospectus may be obtained at no charge by calling 1-888-204-
3956 or writing MasterWorks at the address above.
Unless otherwise indicated, capitalized terms used herein and not
otherwise defined have the same meanings as are given to them in the Combined
Proxy/Prospectus. The Combined Proxy/Prospectus and this Statement of Additional
Information are sometimes referred to together as the "Voting Materials."
INCORPORATION OF DOCUMENTS BY REFERENCE
IN THIS STATEMENT OF ADDITIONAL INFORMATION
Further information about the S-I Fund and the Government Fund
(together, the "Funds") is contained in other documents previously filed with
the Securities and Exchange Commission (the "SEC"). These documents are
incorporated herein by reference to the documents referenced below.
Further information about the S-I Term Fund is contained in and
incorporated by reference to the S-I Term Fund's statement of additional
information, dated June 30, 1998.
1
<PAGE>
Further information about the Government Fund is contained in and incorporated
by reference to the Government Fund's statement of additional information, dated
August 1, 1998.
The audited financial statements and financial highlights for the S-I
Term Fund contained in the Annual Report for the fiscal period ended February
28, 1998, are hereby incorporated by reference to the Fund's Annual Report for
such period, as filed with the SEC on May 1, 1998.
The audited financial statements and financial highlights for the
Government Fund contained in the Annual Reports for the fiscal period ended
March 31, 1998, are hereby incorporated by reference to the Fund's Annual Report
for such period, as filed with the SEC on June 9 and 10, 1998.
2
<PAGE>
NOTE REGARDING PRO FORMA FINANCIAL INFORMATION
The total assets of the Government Fund as of August 31, 1998, were
$134,840,288. The total assets of the S-I Term Fund as of August 31, 1998
were $10,883,231.
Item 14(a)(2) of Form N-14 provides that the pro forma financial
statements required by Rule 11-01 of Regulation S-X need not be prepared if the
net asset value of the company being acquired does not exceed ten percent of the
registrant's net asset value, both of which are measured as of a specified date
within thirty days prior to the date of filing of this registration statement.
Therefore, pro forma financial information is not included in this
registration statement. This registration statement incorporates the audited
financial statements of each Fund by reference to its most recently filed annual
report.
3
<PAGE>
STAGECOACH FUNDS, INC.
c/o Stagecoach Shareholder Services
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, CA 94120-7066
1-800-222-8222
PART C
OTHER INFORMATION
Item 15. Indemnification
---------------
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the Registrant by the Registrant pursuant to the Amended and Restated
Articles of Incorporation or otherwise, the Registrant is aware that in the
opinion of the SEC, such indemnification is against public policy as
expressed in the Act and, therefore, is unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by directors, officers or
controlling persons of the Registrant in connection with the successful
defense of any act, suit or proceeding) is asserted by such directors,
officers or controlling persons in connection with the Shares being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issues.
With respect to the indemnification of the Registrant's directors and
officers, reference is made to Article VIII(h) of the Registrant's Amended
and Restated Articles of Incorporation which are incorporated by reference
as Exhibit 1 hereto.
With respect to the indemnification of Stephens Inc., the Registrant's
principal underwriter for each class of shares of each Fund of the
Registrant, reference is made to Section 10 of the Amended Distribution
Agreement between the Registrant and Stephens Inc., which is incorporated by
reference as Exhibit 7(a) hereto.
With respect to the indemnification of Wells Fargo Bank, N.A., the
Registrant's custodian for each Fund, reference is made to Section 14 of
Article XII of the Custody Agreements between the Registrant and Wells Fargo
Bank, N.A., on behalf of the Funds, which is incorporated by reference as
Exhibits 9(a) - 9(n) hereto.
With respect to the indemnification of Wells Fargo Bank, N.A., the
Registrant's Transfer Agent for each Fund, reference is made to Article VIII
of the Agency Agreement
C-1
<PAGE>
between the Registrant and Wells Fargo Bank, N.A., on behalf of the
Funds, which is incorporated by reference as Exhibit 13(a) hereto.
With respect to the indemnification of Wells Fargo Bank, N.A., the
Registrant's Administrator, reference is made to Section 5 of the
Administration Agreement between the Registrant and Wells Fargo Bank, N.A.,
on behalf of the Funds, which is incorporated by reference as Exhibit
13(b)(i) hereto.
With respect to the indemnification of Stephens Inc., the Registrant's
Co-Administrator, reference is made to Section 5 of the Co-Administration
Agreement between the Registrant , Wells Fargo Bank, N.A. and Stephens Inc.,
on behalf of the Funds, which is incorporated by reference as Exhibit
13(b)(2) hereto.
Item 16: Exhibits
--------
All references to the "Registration Statement" in the following list of
Exhibits refer to the Registrant's Registration Statement on Form N-1A (File
Nos. 811-6419; 33-42927).
Exhibit
Number Description
------ -----------
1(a) - Amended and Restated Articles of Incorporation dated November
22, 1995, incorporated by reference to Post-Effective
Amendment No. 17 to the Registration Statement, filed
November 29, 1995.
1(b) - Not Applicable
2 - By-Laws, incorporated by reference to the Post-Effective
Amendment No. 31 to the Registration Statement, filed May 15,
1997.
3 - Not Applicable.
4 - Agreement and Plan of Consolidation, filed herewith as
Appendix I to the Combined Proxy Statement/Prospectus.
5 - Not Applicable.
C-2
<PAGE>
6(a) - Advisory Contract with Wells Fargo Bank, N.A. on behalf of
the Short-Intermediate U.S. Government Income Fund,
incorporated by reference to Post-Effective Amendment No. 8
to the Registration Statement filed February 10, 1994 and
Post-Effective Amendment No. 48 filed July 31, 1998.
6(b) - Sub-Advisory Contract with Wells Capital Management on behalf
of various Funds incorporated by reference to Post-Effective
Amendment No. 48, filed July 31, 1998.
7(a) - Amended Distribution Agreement with Stephens Inc.
on behalf of the Funds, incorporated by reference to Post-
Effective Amendment No. 15 to the Registration Statement,
filed May 1, 1995 and incorporated by reference to Post-
Effective Amendment No. 48 filed July 31, 1998.
7(b) - Selling Agreement with Wells Fargo Bank, N.A. on behalf of
the Funds, incorporated by reference to Post-Effective
Amendment No. 2 to the Registration Statement, filed April
17, 1992 and Post-Effective Amendment No. 48 filed July 31,
1998.
8 - Not Applicable
C-3
<PAGE>
9(a) - Custody Agreement with Wells Fargo Bank, N.A. on
behalf of the Short-Intermediate U.S. Government Income Fund,
incorporated by reference to Post-Effective Amendment No. 8
to the Registration Statement, filed February 10, 1994 and
incorporated by reference to Post-Effective Amendment No. 48,
filed July 31, 1998.
9(a)(i) - Amendment No. 1 to the Custody Agreement with
Wells Fargo Bank, N.A. on behalf of the Short-Intermediate
U.S. Government Income Fund incorporated by reference to
Post-Effective Amendment No. 48, filed July 31, 1998.
C-4
<PAGE>
10(a) - Distribution Plan on behalf of various classes and Funds,
incorporated by reference to Post-Effective Amendment No. 48
filed July 31, 1998.
10(a)(i) - Distribution Plan on behalf of the Asset Allocation Fund,
California Tax-Free Bond Fund, California Tax-Free Income
Fund, California Tax-Free Money Market Mutual Fund,
Diversified Equity Income Fund, Growth Fund, Money Market
Mutual Fund, Short-Intermediate U.S. Government Income Fund,
U.S. Government Allocation Fund and U.S. Government Income
Fund, incorporated by reference to Post-Effective Amendment
No. 48 filed July 31, 1998.
10(b)(i) - Form of Shareholder Servicing Agreement with Wells Fargo
Bank, N.A. on behalf of the Funds, incorporated by reference
to Post-Effective Amendment No. 48, filed July 31, 1998.
10(b)(ii) - Servicing Plan as consolidated to include all classes of the
Funds, incorporated by reference to Post-Effective Amendment
No. 48 to the registration statement, filed July 31, 1998.
10(c) - Amended Rule 18f-3 Multi-Class Plan, incorporated by
reference to Post-Effective Amendment No. 33 to the
Registration Statement, filed August 5, 1997.
11 - Opinion and Consent of Morrison & Foerster LLP, filed
herewith.
12 - See Item 17(3) of this Part C.
13(a) - Agency Agreement with Wells Fargo Bank, N.A. on
behalf of the Funds, incorporated by reference to Post-
Effective Amendment No. 32 to the Registration Statement,
filed May 30, 1997.
13(b)(i) - Administration Agreement with Wells Fargo Bank,
N.A. on behalf of the Funds, incorporated by reference to
Post-Effective Amendment No. 48 to the Registration
Statement, filed July 31, 1998.
13(b)(ii) - Co-Administration Agreement with Wells Fargo Bank,
N.A. and Stephens Inc. on behalf of the Funds, incorporated
by reference to Post-Effective Amendment No. 48 to the
Registration Statement, filed July 31, 1998.
14 - Consent of Independent Auditors -- KPMG Peat Marwick LLP (to
be filed by Amendment)
15 - Not Applicable
C-5
<PAGE>
16 - Powers of Attorney for R. Greg Feltus, Jack S. Euphrat,
Thomas S. Goho, Joseph N. Hankin, W. Rodney Hughes, Robert M.
Joses and J. Tucker Morse, incorporated by reference to Post-
Effective Amendment No. 32 to the Registration Statement,
filed May 30, 1997; Power of Attorney for Peter G. Gordon,
incorporated by reference to Post-Effective Amendment No. 41
to the Registration Statement, filed January 30, 1998.
17(a) - Declarations pursuant to Rule 24f-2 for the fiscal years
ended March 31, 1998 and June 30, 1998, incorporated by
reference to Forms filed on June 26, 1998 and September
17th, 1998, respectively. Copies are provided herewith.
17(b)(i) - Form of Proxy Ballot, filed herewith.
17(b)(ii) - Form of Letter to Shareholders, filed herewith.
17(b)(iii) - Form of Notice of Special Meeting, filed herewith.
17(c)(i) - Prospectus and Statement of Additional Information for the
Retail shares of the Short-Intermediate U.S. Government
Income Fund, incorporated by reference to Post-Effective
Amendment No. 48 to the Registration Statement, filed
July 31, 1998.
17(c)(ii) - Annual Reports for the fiscal year ended March 31,
1998 for the Short-Intermediate U.S. Government Income Funds,
as filed on June 9, 1998.
27 - Financial Data Schedules for the fiscal period
ended March 31, 1998, incorporated by reference to the Form
N-SAR, filed August 27, 1998.
Item 17. Undertakings.
------------
1) The undersigned Registrant agrees that prior to any public reoffering of
the securities registered through the use of a prospectus which is a part of
this registration statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act of 1933, as
amended, the reoffering prospectus will contain the information called for by
the applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
2) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is effective,
and that, in determining any liability under the 1933 Act, each post-effective
amendment shall be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time shall be deemed
to be the initial bona fide offering of them.
3) The undersigned Registrant agrees to file, by post-effective amendment,
an opinion of counsel or a copy of an IRS ruling supporting the tax consequences
of the Reorganization within a reasonable time after receipt of such opinion or
ruling.
C-6
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form N-14 to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Little Rock,
State of Arkansas on the 18th day of September, 1998.
STAGECOACH FUNDS, INC.
By /s/ Richard H. Blank, Jr.
-------------------------
Richard H. Blank, Jr.
Secretary and Treasurer
(Principal Financial Officer)
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement on Form N-14 has been signed below by the following persons in the
capacities and on the date indicated:
<TABLE>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Director, Chairman and President
-------------------------
(R. Greg Feltus) (Principal Executive Officer)
/s/ Richard H. Blank, Jr. Secretary and Treasurer 9/18/98
-------------------------
(Richard H. Blank, Jr.) (Principal Financial Officer)
* Director
-------------------------
(Jack S. Euphrat)
* Director
-------------------------
(Thomas S. Goho)
* Director
-------------------------
(Peter G. Gordon)
* Director
-------------------------
(Joseph N. Hankin)
* Director
-------------------------
(W. Rodney Hughes)
* Director
-------------------------
(J. Tucker Morse)
</TABLE>
*By: /s/ Richard H. Blank, Jr.
-------------------------
Richard H. Blank, Jr.
As Attorney-in-Fact
September 18, 1998
<PAGE>
STAGECOACH FUNDS, INC.
N-14 Exhibit Index
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
99.11 Opinion and Consent of Morrison & Foerster LLP
99.14 Consent of Independent Auditors (to be filed by Amendment)
99.17(a) Copies of Declarations Pursuant to Rule 24f-2 for fiscal
periods ended March 31, 1998 and June 30, 1998
99.17(b)(i) Form of Proxy Ballot
99.17(b)(ii) Form of Letter of Shareholders
99.17(b)(iii) Form of Notice of Special Meeting
</TABLE>
<PAGE>
EXHIBIT 99.11
[MORRISON & FOERSTER LLP LETTERHEAD]
September 18, 1998
Stagecoach Funds, Inc.
111 Center Street
Little Rock, Arkansas 72201
Re: Shares of Common Stock of
Stagecoach Funds, Inc.
-------------------------
Ladies/Gentlemen:
We refer to the Registration Statement on Form N-14 (the "Registration
Statement") of Stagecoach Funds, Inc. (the "Company") relating to the
registration of an indefinite number of shares of common stock, par value $.001
per share (the "Shares"), of the Short-Intermediate U.S. Government Income Fund
of the Company (the "Fund").
We have been requested by the Company to furnish this opinion as Exhibit
11 to the Registration Statement.
We have examined documents relating to the organization of the Company
and the authorization and issuance of the Shares. We have also made such
inquiries of the Company and examined such questions of law as we have deemed
necessary for the purpose of rendering the opinion set forth herein. We have
assumed the genuineness of all signatures and the authenticity of all items
submitted to us as originals and the conformity with originals of all items
submitted to us as copies.
Based upon and subject to the foregoing, we are of the opinion that:
The issuance of the Shares by the Company, upon completion of such
corporate action as is deemed necessary or appropriate, will be duly and validly
authorized by such corporate action and assuming delivery by in accordance with
the description set forth in the Combined Proxy Statement/Prospectus included in
the Registration Statement, the Shares will be legally issued, fully paid and
nonassessable.
We consent to the inclusion of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Morrison & Foerster LLP
MORRISON & FOERSTER LLP
<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 24F-2
ANNUAL NOTICE OF SECURITIES SOLD
PURSUANT TO RULE 24f-2
1. Name and address of issuer: STAGECOACH FUNDS, INC.
111 Center Street,
Little Rock, AR 72201.
2. The name of each series or class of securities for which this Form is filed:
Arizona Tax-Free Fund Class A, Arizona Tax-Free Fund Class B, Arizona Tax-Free
Fund Institutional Class, Asset Allocation Fund Class A, Asset Allocation Fund
Class B, Balanced Fund Class A, Balanced Fund Class B, Balanced Fund
Institutional Class, California Tax-Free Income Fund Class A, California Tax-
Free Income Fund Institutional Class, California Tax-Free Money Market Mutual
Fund, California Tax-Free Money Market Trust, Diversified Equity Income Fund
Class A, Diversified Equity Income Fund Class B, Equity Index Fund Class A,
Equity Index Fund Class B, Equity Value Fund Class A, Equity Value Fund Class
B, Equity Value Fund Institutional Class, Government Money Market Mutual Fund
Class A, Growth Fund Class A, Growth Fund Class B, Growth Fund Institutional
Class, Index Allocation Fund Class A, Index Allocation Fund Class B, Index
Allocation Fund Class C, Intermediate Bond Fund Class A, Intermediate Bond Fund
Class B, Intermediate Bond Fund Institutional Class, International Equity Fund
Class A, International Equity Fund Class B, Money Market Mutual Fund Class A,
Money Market Mutual Fund Institutional Class, Money Market Mutual Fund Class S,
Money Market Trust, National Tax-Free Fund Class A, National Tax-Free Fund Class
B, National Tax-Free Fund Class C, National Tax-Free Fund Institutional Class,
National Tax-Free Money Market Mutual Fund Class A, National Tax-Free Money
Market Mutual Fund Institutional Class, National Tax-Free Money Market Trust,
Oregon Tax-Free Fund Class A, Oregon Tax-Free Fund Class B, Oregon Tax-Free Fund
Institutional Class, Overland Express Sweep Fund, Prime Money Market Mutual Fund
Class A, Prime Money Market Mutual Fund Administrative Class, Prime Money Market
Mutual Fund Institutional Class, Prime Money Market Mutual Fund Service Class,
Short-Intermediate U.S. Govt. Income Fund Class A, Short-Intermediate U.S. Govt.
Income Fund Institutional Class, Small Cap Fund Class A, Small Cap Fund Class B,
Small Cap Fund Class C, Small Cap Fund Institutional Class, Treasury Money
Market Mutual Fund Class A, Treasury Money Market Mutual Fund Administrative
Class, Treasury Money Market Mutual Fund Class E, Treasury Money Market Mutual
Fund Institutional Class, Treasury Money Market Mutual Fund Service Class,
U.S. Government Allocation Fund Class A, U.S. Government Allocation Fund Class B
3. Investment Company Act File Number: 811-6419
Securities Act File Number: 33-42927
4. Last day of fiscal year for which this Form is filed: 3/31/98
5. Calculation of registration fee:
<PAGE>
(i) Aggregate sale price of securities sold during the fiscal year
pursuant to section 24(f):
$31,714,685,473
(ii) Aggregate price of securities redeemed or repurchased during the
fiscal year:
$26,227,180,420
(iii) Aggregate price of securities redeemed or repurchased during any prior
fiscal year ending no earlier than October 11, 1995 that were not
previously used to reduce registration fees payable to the Commission:
$ 2,029,042,666
(iv) Total available redemption credits [add Items 5(ii) and 5(iii)]:
$28,256,223,086
(v) Net sales -- if Item 5(i) is greater than Item 5(iv) [subtract
Item 5(iv) from Item 5(i)]:
$3,458,462,387
(vi) Redemption credits available for use in future years -- if Item 5(i)
is less than Item 5
(iv) [subtract Item 5(iv) from Item 5(i)]: $ (0)
(vii) Multiplier for determining registration fee (See Instruction C.9):
x .000295
(viii) Registration fee due [multiply Item 5(v) by Item 5(vii)] (enter "0" if
no fee is due): =
$1,020,246.40
6. Prepaid Shares: If the response to item 5(i) was determined by deducting an
amount of securities that were registered under the Securities Act of 1933
pursuant to rule 24e-2 as in effect before [effective date of rescission of rule
24e-2], then report the amount of securities (number of shares or other units)
deducted here: _______. If there is a number of shares or other units that were
registered pursuant to rule 24e-2 remaining unsold at the end of the fiscal year
for which this form is filed that are available for use by the issuer in future
fiscal years, then state that number here: ________.
7. Interest due -- if this Form is being filed more than 90 days after the end
of the issuer's fiscal year (see Instruction D): +$ 0
8. Total of the amount of the registration fee due plus any interest due [line
5(viii) plus line 7]:= $1,020,246.40
9. Date the registration fee and any interest payment was sent to the
Commission's lockbox depository: Method of Delivery: [X] Wire Transfer [ ] Mail
or other means
SIGNATURES This report has been signed below by the following persons on behalf
of the issuer and in the capacities and on the dates indicated:
By: /s/ ANN M. BONSTEEL
-------------------
Ann M. Bonsteel
Assistant Secretary Date 6/26/98
<PAGE>
APPENDIX I
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 24F-2
ANNUAL NOTICE OF SECURITIES SOLD
PURSUANT TO RULE 24f-2
READ INSTRUCTIONS AT END OF FORM BEFORE PREPARING FORM. PLEASE PRINT OR TYPE.
1. Name and address of issuer:
Stagecoach Funds, Inc.
111 Center Street
Little Rock, AR 72201
2. The name of each series or class of securities for which this Form is
filed (if the Form is being filed for all series and classes of
securities of the issuer, check the box but do not list series or
classes):
[ ]
Arizona Tax-Free Fund Class A
Arizona Tax-Free Fund Class B
Arizona Tax-Free Fund Institutional Class
California Tax-Free Bond Fund Class A
California Tax-Free Bond Fund Class B
California Tax-Free Bond Fund Class C
California Tax-Free Bond Fund Institutional Class
California Tax-Free Income Fund Class A
California Tax-Free Income Fund Institutional Class
Corporate Bond Fund Class A
Corporate Bond Fund Class B
Corporate Bond Fund Class C
National Tax-Free Fund Class A
National Tax-Free Fund Class B
National Tax-Free Fund Class C
National Tax-Free Fund Institutional Class
Oregon Tax-Free Fund Class A
Oregon Tax-Free Fund Class B
Oregon Tax-Free Fund Institutional Class
Short-Intermediate U.S. Government Income Fund Class A
Short-Intermediate U.S. Government Income Fund Class B
Short-Intermediate U.S. Government Income Fund Institutional Class
Short-Term Government-Corporate Income Fund
Short-Term Municipal Income Fund
U.S. Government Income Fund Class A
U.S. Government Income Fund Class B
U.S. Government Income Fund Class C
U.S. Government Income Fund Institutional Class
Variable Rate Government Fund Class A
Variable Rate Government Fund Class C
3. Investment Company Act File Number: 811-6419
<PAGE>
Securities Act File Number: 33-42927
4(a). Last day of fiscal year for which this Form is filed:
6/30/98
4(b). [ ] Check box if this Form is being filed late (i.e., more than 90
calendar days after the end of the issuer's fiscal year). (See
Instruction A.2)
Note: If the Form is being filed late, interest must be paid on the
registration fee due.
4(c). [ ] Check box if this is the last time the issuer will be filing this
Form.
5. Calculation of registration fee:
(i) Aggregate sale price of securities sold during
the fiscal year pursuant to section 24(f): $273,501,495
(ii) Aggregate price of securities redeemed or
repurchased during the fiscal year: $292,830,863
-----------
(iii) Aggregate price of securities redeemed or
repurchased during any prior fiscal year
ending no earlier than October 11, 1995 that
were not previously used to reduce
registration fees payable to the Commission: $252,535,091
-----------
(iv) Total available redemption credits [add
Items 5(ii) and 5(iii): $545,365,954
(v) Net sales -- if Item 5(i) is greater than
Item 5(iv) [subtract Item 5(iv) from Item 5(i)]: $----------
(vi) Redemption credits available for use in future
years -- if Item 5(i) is less than Item 5(iv)
[subtract Item 5(iv) from Item 5(i)]: $(271,864,459)
------------
(vii) Multiplier for determining registration fee
(See Instruction C.9): x .000295
-----------
(viii) Registration fee due [multiply Item 5(v) by Item
5(vii)] (enter "0" if no fee is due): =$0
===========
<PAGE>
6. Prepaid Shares
If the response to item 5(i) was determined by deducting an amount of
securities that were registered under the Securities Act of 1933 pursuant
to rule 24e-2 as in effect before [effective date of rescission of rule
24e-2], then report the amount of securities (number of shares or other
units) deducted here: _______. If there is a number of shares or other
units that were registered pursuant to rule 24e-2 remaining unsold at the
end of the fiscal year for which this form is filed that are available for
use by the issuer in future fiscal years, then state that number
here: ________.
7. Interest due -- if this Form is being filed more than 90 days after the
end of the issuer's fiscal year (see Instruction D):
+$0
--------
8. Total of the amount of the registration fee due plus any interest due
[line 5(viii) plus line 7]:
=$0
- ------------------------------------------------------------------
9. Date the registration fee and any interest payment was sent to the
Commission's lockbox depository:
Method of Delivery:
[ ] Wire Transfer
[ ] Mail or other means
SIGNATURES
This report has been signed below by the following persons on behalf of the
issuer and in the capacities and on the dates indicated.
By (Signature and Title) /s/ ANN M. BONSTEEL
-----------------------------------
Assistant Secretary
-----------------------------------
Date 9/17/98
<PAGE>
EXHIBIT 99.17(b)(i)
BY SIGNING AND DATING THE LOWER PORTION OF THIS BALLOT, YOU AUTHORIZE THE NAMED
PROXIES TO VOTE THE PROPOSAL AS MARKED, OR, IF NOT MARKED TO VOTE, "FOR" THE
PROPOSAL AND TO USE THEIR DISCRETION TO VOTE ANY OTHER MATTER AS MAY PROPERLY
COME BEFORE THE SPECIAL MEETING. IF YOU DO NOT INTEND PERSONALLY TO ATTEND THE
SPECIAL MEETING, PLEASE COMPLETE, DETACH AND MAIL THE LOWER PORTION OF THIS
BALLOT AT ONCE IN THE ENCLOSED ENVELOPE OR SEND IN THIS BALLOT BY TELEFACSIMILE
(FRONT AND BACK) TO SCC.
SHORT-INTERMEDIATE TERM FUND
A SERIES OF MASTERWORKS FUNDS, INC.
SPECIAL MEETING OF SHAREHOLDERS ON NOVEMBER 24, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints R. Greg Feltus, Richard H. Blank, Jr.,
and Ann Bonsteel, and each of them, attorneys and proxies of the undersigned,
each with power of substitution and resubstitution, to attend, vote and act for
the undersigned at the special meeting of shareholders of the Short-Intermediate
Term Fund (the "S-I Term Fund") of MasterWorks Funds, Inc. (the "Company") to be
held at the principal executive offices of the Company, 111 Center Street,
Little Rock, Arkansas 72201, at 11:00 a.m. (Central time) on November 24, 1998
and at any adjournment(s) thereof, casting votes according to the number of
shares of the S-I Term Fund which the undersigned is entitled to vote with
respect to the proposal listed below, in accordance with the specification
indicated, if any, and with all the powers which the undersigned would possess
if personally present, hereby revoking any prior proxy to vote at such meeting,
and hereby ratifying and confirming all that said attorneys and proxies, or any
of them, may lawfully do by virtue thereof.
1
<PAGE>
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS OF THE S-I TERM FUND AND THE PROXY STATEMENT, DATED [OCTOBER __,
1998].
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
(1) Approval of an Agreement and Plan of Consolidation for the Company's
Short-Intermediate Term Fund and the transactions contemplated thereby,
which include (a) the transfer of all of the assets of the S-I Term Fund
to the Short-Intermediate U.S. Government Income Fund of Stagecoach Funds,
Inc. (the "Government Fund"), and the assumption by the Government Fund of
liabilities of the S-I Term Fund in exchange for shares of the Government
Fund; and (b) the distribution to shareholders of the S-I Term Fund of the
shares of the Government Fund so received.
[_] FOR [_] AGAINST [_] ABSTAIN
This proxy will be voted as specified above with respect to the action to
be taken on the above proposal. On any other matters that may properly come
before the Special Meeting, this proxy will be voted by the above named persons
at their discretion. In the absence of any specification, this proxy will be
voted in favor of the proposal.
________________________________ ________________________________
SIGNATURE SIGNATURE (JOINT OWNER)
Please sign name or names exactly as printed above to authorize the voting of
your shares as indicated above. Where shares are registered with joint owners,
all joint owners should sign. Persons signing as executors, administrators,
trustees, etc. should so indicate. Corporate proxies should be signed by an
authorized officer.
2
<PAGE>
EXHIBIT 99.17(b)(ii)
================================================================================
IMPORTANT NOTICE: PLEASE VOTE USING THE
ENCLOSED PROXY BALLOT AS SOON AS POSSIBLE.
FOR YOUR CONVENIENCE, YOU MAY VOTE BY CALLING SHAREHOLDER
COMMUNICATIONS CORP. ("SCC") TOLL-FREE AT [1-800-733-8481 EXT. ___
FROM 6:00 A.M. TO 8:00 P.M. PACIFIC TIME.] YOU MAY
ALSO VOTE BY FAXING THE FRONT AND BACK OF YOUR
PROXY BALLOT TO SCC AT [1-800-733-1885.]
A CONFIRMATION OF YOUR TELEPHONIC OR FACSIMILE
VOTE WILL BE SENT TO YOU.
================================================================================
MASTERWORKS FUNDS INC.
111 CENTER STREET
LITTLE ROCK, ARKANSAS 72201
OCTOBER __, 1998
Dear Shareholder of the Short-Intermediate Term Fund:
We are pleased to invite you to a Special Meeting of the Shareholders
of the Short-Intermediate Term Fund (the "S-I Term Fund") of MasterWorks Funds
Inc. ("MasterWorks") to be held on November 24, 1998. The Special Meeting is
being held to consider a proposal to consolidate the S-I Term Fund into the
Short-Intermediate U.S. Government Income Fund (the "Government Fund") of
Stagecoach Funds, Inc. ("Stagecoach"). If the proposed consolidation is
approved, you will receive shares of the Government Fund equal in value to your
shares of the S-I Term Fund.
THE BOARD OF DIRECTORS OF MASTERWORKS UNANIMOUSLY RECOMMENDS THAT YOU
VOTE IN FAVOR OF THE PROPOSAL.
This booklet describes the proposed consolidation and the Board of
Directors' reasons for recommending approval. The booklet is organized into
this cover letter, a formal notice, a Combined Prospectus/Proxy Statement and
several exhibits. Please take the time to review all the information before
casting your vote. You may attend the Special Meeting in person or you may use
the enclosed Proxy Ballot to cast your vote.
You should weigh several considerations in particular:
1
<PAGE>
* REASONS FOR THE PROPOSED CONSOLIDATION
The investment adviser to the S-I Term Fund is Barclays Global Fund
Advisors ("BGFA"); the investment sub-adviser is Wells Fargo Bank, N.A.
("Wells Fargo Bank"). In these capacities, BGFA has been primarily responsible
for supervisory, overall management and reporting responsibilities, while
Wells Fargo Bank has been primarily responsible for the day-to-day portfolio
management of the S-I Term Fund. For various reasons that are described
further in the Combined Prospectus/Proxy Statement, BGFA has advised the Board
of Directors of MasterWorks that it does not believe that the S-I Term Fund,
with only $11 million in assets, is viable on a long-term basis. As an
alternative to liquidation, the proposed consolidation allows shareholders to
continue to benefit from Wells Fargo Bank's day-to-day portfolio management
services, in a similar fund with similar investment objectives and policies.
* IMPORTANT FACTS ABOUT THE FUNDS
* Objectives and Policies--The investment objectives and policies
of the Funds are similar, although there are some important
differences that you should consider. The principal
similarities and differences are described in the Combined
Prospectus/Proxy Statement that is part of this booklet.
* Access Arrangements--The shareholder servicing, transaction and
other access arrangements are similar for both Funds.
* Share Values--The total dollar value of shares you will receive
in the Government Fund will be equal to the total dollar value
of your shares in the S-I Term Fund.
Whether or not you attend the Special Meeting of Shareholders, you
may vote by proxy in any of three ways:
* BY MAIL--Mark, date, sign and return the enclosed Proxy Ballot
in the postage-paid envelope;
* BY PHONE--Call Shareholder Communications Corp. toll-free at [1-
800-733-8481 EXT. _____] from [6:00 A.M. TO 8:00 P.M. (PACIFIC
TIME)]; or
* BY FAX--Mark, date, sign and fax both sides of the enclosed
Proxy Ballot to Shareholder Communications Corp. at [1-800-733-
1885].
A confirmation of phone and fax votes will be mailed to you. Every
vote is important to us.
If you have any questions, please call MasterWorks at 1-888-204-3956.
Very truly yours,
MasterWorks Funds Inc.
R. Greg Feltus
President
2
<PAGE>
EXHIBIT 99.17(b)(iii)
MASTERWORKS FUNDS INC.
111 CENTER STREET
LITTLE ROCK, ARKANSAS 72201
TELEPHONE: 1-888-204-3956
_____________________________________________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
SHORT-INTERMEDIATE TERM FUND
TO BE HELD ON NOVEMBER 24, 1998
_____________________________________________________
To the Shareholders of the Short-Intermediate Term Fund (the "S-I Term Fund") of
MasterWorks Funds Inc. ("MasterWorks"):
PLEASE TAKE NOTE that a SPECIAL MEETING OF SHAREHOLDERS (the "Special
Meeting") of the S-I Term Fund will be held on Friday, November 24, 1998, at
11:00 a.m. (Central time) at the principal office of MasterWorks, 111 Center
Street, Little Rock, Arkansas 72201. The Special Meeting is being called for
the following purposes:
(1) To approve an Agreement and Plan of Consolidation (the "Plan")
for the S-I Term Fund and the transactions contemplated
thereby, which include (a) the transfer of all of the assets of
the S-I Term Fund to the Short-Intermediate U.S. Government
Income Fund (the "Government Fund") of Stagecoach Funds, Inc.,
and the assumption by the Government Fund of all of the
liabilities of the S-I Term Fund, in exchange for Class A
Shares of the Government Fund; and (b) the distribution to
shareholders of the S-I Term Fund of the shares of the
Government Fund so received.
(2) To transact such other business as may properly come before the
meeting, or any adjournment(s) thereof, including any
adjournment(s) necessary to obtain requisite quorums and/or
approvals.
The Board of Directors of MasterWorks has fixed the close of business
on October 9, 1998, as the record date (the "Record Date") for the determination
of Fund shareholders entitled to receive notice of and to vote at the Special
Meeting or any adjournment(s) thereof. The Combined Prospectus/Proxy Statement
contains further information regarding the meeting and the proposal. Even if
you do not attend the Special Meeting in person, you may vote in any one of
three ways:
1. Mark, sign, date and return the enclosed Proxy Ballot in the
enclosed postage-paid envelope; or
1
<PAGE>
2. Vote by telephone by calling SCC toll-free at [1-800-733-8481
EXT. ___ FROM 6:00 A.M. TO 8:00 P.M. (PACIFIC TIME) (A CONFIRMATION OF YOUR
TELEPHONIC VOTE WILL BE SENT TO YOU)]; or
3. Mark, sign, date and fax the enclosed Proxy Ballot (both front
and back) to Shareholder Communications Corp. ("SCC") at [1-800-733-1885 (A
CONFIRMATION OF YOUR FACSIMILE VOTE WILL BE SENT TO YOU)].
IN ORDER FOR THE PLAN TO BE APPROVED, THE HOLDERS OF A MAJORITY OF
THE S-I TERM FUND'S SHARES OUTSTANDING ON THE RECORD DATE MUST BE PRESENT IN
PERSON OR BY PROXY. THEREFORE, YOUR PROXY IS VERY IMPORTANT TO US. WHETHER OR
NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE MARK, SIGN, DATE AND
RETURN THE ENCLOSED PROXY BALLOT TODAY, EITHER IN THE ENCLOSED POSTAGE-PAID
ENVELOPE OR BY TELEFACSIMILE (FRONT AND BACK) AT [1-800-733-1885, OR BY
CALLING TOLL-FREE AT 1-800-733-8481 EXT. ____]. SIGNED BUT UNMARKED PROXY
BALLOTS WILL BE COUNTED IN DETERMINING WHETHER A QUORUM IS PRESENT AND WILL BE
VOTED IN FAVOR OF THE PROPOSAL.
By Order of the Board of Directors
Richard H. Blank, Jr.
Secretary
October __, 1998
===================================================
YOUR VOTE IS VERY IMPORTANT TO US
REGARDLESS
OF THE NUMBER OF SHARES THAT YOU OWN.
PLEASE VOTE BY MAIL, FACSIMILE OR
OR TELEPHONE IMMEDIATELY.
===================================================
2
