<PAGE>
[KPMG PEAT MARWCIK LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees
Managed Series Investment Trust
To the Board of Directors
MasterWorks Funds Inc.
We have examined management's assertion that the Growth Stock Master Portfolio
and Short-Intermediate Term Master Portfolio (constituting Managed Series
Investment Trust), and Growth Stock Fund and Short-Intermediate Term Fund (two
of the funds comprising MasterWorks Funds Inc.) (collectively, the "Funds")
complied with the requirements of subsections (b) and (c) of Rule 17f-2 under
the Investment Company Act of 1940 as of December 31, 1997, included in the
accompanying Management Statement regarding Compliance with Certain Provisions
of the Investment Company Act of 1940. Management is responsible for the Funds'
compliance with those requirements. Our responsibility is to express an opinion
on management's assertion about the Funds' compliance based on our examination.
The Growth Stock Fund and Short-Intermediate Term Fund are feeder funds which
invest solely in corresponding master portfolios. As such, the investment
record consists of book-entry tracking of ownership interests on the feeder
funds' accounting and custodial system.
Our examination was made in accordance with standards established by the
American Institute of Certified Public Accountants and, accordingly, included
examining, on a test basis, evidence about the Funds' compliance with those
requirements and performing such other procedures as we considered necessary in
the circumstances. Included among our procedures were the following tests
performed as of December 31, 1997, and for the period from August 29, 1997 (the
date of our last examination) to December 31, 1997, with respect to securities
transactions, without prior notice to management:
* Confirmation of all securities with the custodian Investors Bank & Trust
Company (the "Custodian"), and examination of selected security position
reconciliations with the Depository Trust Company and the Federal Reserve
Bank;
* Confirmation or examination of underlying documentation of all securities
purchased, but not received;
<PAGE>
* Reconciliation of all securities to the books and records of the Funds and
the Custodian;
* Verified that each feeder fund's ownership interest in a corresponding master
portfolio agrees to the books and records of the master portfolio;
* Tested a selected sample of security transactions to determine if they were
properly recorded.
We believe that our examination provides a reasonable basis for our opinion. Our
examination does not provide a legal determination on the Funds' compliance with
the specified requirements.
In our opinion, management's assertion that the Funds were in compliance with
the above mentioned provisions of Rule 17f-2 of the Investment Company Act of
1940 as December 31, 1997, and for the period from August 29, 1997 to December
31, 1997 is fairly stated in all material respects.
This report is intended solely for the information and use of management of
Managed Series Investment Trust and MasterWorks Funds Inc. and the Securities
and Exchange Commission and should not be used for any other purpose.
/s/ KPMG Peat Marwick LLP
-------------------------
January 9, 1998
<PAGE>
---------------------------
OMB APPROVAL
---------------------------
OMB Number: 3235-0360
Expires: June 30, 1997
Estimated average burden
hours per response.....0.05
---------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-17f-2
Certificate of Accounting of Securities and Similar
Investments in the Custody of
Management Investment Companies
Pursuant to Rule 17f-2 [17 CFR 270.17f-2]
- --------------------------------------------------------------------------------
1. INVESTMENT COMPANY ACT FILE NUMBER: DATE EXAMINATION COMPLETED:
8140 December 31, 1997
- --------------------------------------------------------------------------------
2. STATE IDENTIFICATION NUMBER:
- --------------------------------------------------------------------------------
AL AK AZ AR CA CO
- --------------------------------------------------------------------------------
CT DE DC FL GA HI
- --------------------------------------------------------------------------------
ID IL IN IA KS KY
- --------------------------------------------------------------------------------
LA ME MD MA MI MN
- --------------------------------------------------------------------------------
MS MO MT NE NV NH
- --------------------------------------------------------------------------------
NJ NM NY NC ND OH
- --------------------------------------------------------------------------------
OK OR PA RI SC SD
- --------------------------------------------------------------------------------
TN TX UT VT VA WA
- --------------------------------------------------------------------------------
WV WI WY PUERTO RICO
- --------------------------------------------------------------------------------
Other (specify):
- --------------------------------------------------------------------------------
3. EXACT NAME OF INVESTMENT COMPANY AS SPECIFIED IN REGISTRATION STATEMENT:
MANAGED SERIES INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. ADDRESS OF PRINCIPAL EXECUTIVE OFFICE
(NUMBER, STREET, CITY, STATE, ZIP CODE):
111 CENTER STREET, LITTLE ROCK, ARKANSAS 72201
- --------------------------------------------------------------------------------
INSTRUCTIONS:
This Form must be completed by investment companies that have custody of
securities or similar investments.
INVESTMENT COMPANY:
1. All items must be completed by the investment company.
2. Give this Form to the independent public accountant who, in compliance
with Rule 17f-2 under the Act and applicable state law, examines
securities and similar investments in the custody of the investment
company.
ACCOUNTANT:
THIS FORM MUST BE GIVEN TO YOUR INDEPENDENT PUBLIC ACCOUNTANT
<PAGE>
3. Submit this Form to the Securities and Exchange Commission and appropriate
state securities administrators when filing the certificate of accounting
required by Rule 17f-2 under the Act and applicable state law. File the
original and one copy with the Securities and Exchange Commission's
principal office in Washington D.C., one copy with the regional office for
the region in which the investment company's principal business operations
are conducted, and one copy with the appropriate state administrator(s),
if applicable.
THIS FORM MUST BE GIVEN TO YOUR INDEPENDENT PUBLIC ACCOUNTANT
<PAGE>
---------------------------
OMB APPROVAL
---------------------------
OMB Number: 3235-0360
Expires: June 30, 1997
Estimated average burden
hours per response.....0.05
---------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-17f-2
Certificate of Accounting of Securities and Similar
Investments in the Custody of
Management Investment Companies
Pursuant to Rule 17f-2 [17 CFR 270.17f-2]
- --------------------------------------------------------------------------------
1. INVESTMENT COMPANY ACT FILE NUMBER: DATE EXAMINATION COMPLETED:
7332 December 31, 1997
- --------------------------------------------------------------------------------
2. STATE IDENTIFICATION NUMBER:
- --------------------------------------------------------------------------------
AL AK AZ AR CA CO
- --------------------------------------------------------------------------------
CT DE DC FL GA HI
- --------------------------------------------------------------------------------
ID IL IN IA KS KY
- --------------------------------------------------------------------------------
LA ME MD MA MI MN
- --------------------------------------------------------------------------------
MS MO MT NE NV NH
- --------------------------------------------------------------------------------
NJ NM NY NC ND OH
- --------------------------------------------------------------------------------
OK OR PA RI SC SD
- --------------------------------------------------------------------------------
TN TX UT VT VA WA
- --------------------------------------------------------------------------------
WV WI WY PUERTO RICO
- --------------------------------------------------------------------------------
Other (specify):
- --------------------------------------------------------------------------------
3. EXACT NAME OF INVESTMENT COMPANY AS SPECIFIED IN REGISTRATION STATEMENT:
MASTERWORKS FUNDS, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. ADDRESS OF PRINCIPAL EXECUTIVE OFFICE
(NUMBER, STREET, CITY, STATE, ZIP CODE):
111 CENTER STREET, LITTLE ROCK, ARKANSAS 72201
- --------------------------------------------------------------------------------
INSTRUCTIONS:
This Form must be completed by investment companies that have custody of
securities or similar investments.
INVESTMENT COMPANY:
1. All items must be completed by the investment company.
2. Give this Form to the independent public accountant who, in compliance
with Rule 17f-2 under the Act and applicable state law, examines
securities and similar investments in the custody of the investment
company.
ACCOUNTANT:
THIS FORM MUST BE GIVEN TO YOUR INDEPENDENT PUBLIC ACCOUNTANT
<PAGE>
3. Submit this Form to the Securities and Exchange Commission and appropriate
state securities administrators when filing the certificate of accounting
required by Rule 17f-2 under the Act and applicable state law. File the
original and one copy with the Securities and Exchange Commission's
principal office in Washington D.C., one copy with the regional office for
the region in which the investment company's principal business operations
are conducted, and one copy with the appropriate state administrator(s),
if applicable.
THIS FORM MUST BE GIVEN TO YOUR INDEPENDENT PUBLIC ACCOUNTANT
<PAGE>
MASTERWORKS FUNDS, INC.
KPMG Peat Marwick LLP January 9, 1998
Three Embarcadero Center
San Francisco, CA 94111
MANAGEMENT STATEMENT REGARDING COMPLIANCE WITH
CERTAIN PROVISIONS OF THE INVESTMENT COMPANY ACT OF 1940
We, as members of management of MasterWorks Funds Inc.("the Funds"), are
responsible for complying with the requirements of subsections (b) and (c) of
Rule 17f-2, "Custody of Investments by Registered Management Investment
Companies," of the Investment Company Act of 1940. We are also responsible for
establishing and maintaining an effective internal control structure over
compliance with Rule 17f-2 requirements. We have performed an evaluation of the
Funds' compliance with the requirements of subsections (b) and (c) of Rule 17f-2
as of December 31, 1997 and for the period from August 29, 1997 to December 31,
1997.
Based on this evaluation, we assert that the Funds were in compliance with the
requirements of subsections (b) and (c) of Rule 17f-2 of the Investment Company
Act of 1940 as of December 31, 1997 and for the period from August 29, 1997 to
December 31, 1997, with respect to securities reflected in the investment
accounts of the Funds.
MasterWorks Funds Inc.
By:
/s/ Richard H. Blank Jr. /s/ Rochelle Siote
- -------------------------- -----------------------
Richard H. Blank, Jr. Rochelle Siote
Treasurer and Chief Operating Officer Principal
MasterWorks Funds Inc. Barclays Global Investors,
Advisors, Adviser and Co-
Administrator to
MasterWorks Funds, Inc.
111 Center Street * Little Rock, AR 72201
<PAGE>
Page2
KPMG Peat Marwick LLP
Januray 9, 1998
/s/ Elizabeth Gottfried
- -------------------------
Elizabeth Gottfried
Vice President
Investment Services Group
Wells Fargo Bank, Sub-Adviser to
MasterWorks Funds, Inc.
<PAGE>
MANAGED SERIES INVESTMENT TRUST
KPMG Peat Marwick LLP January 9, 1998
Three Embarcadero Center
San Francisco, CA 94111
MANAGEMENT STATEMENT REGARDING COMPLIANCE WITH
CERTAIN PROVISIONS OF THE INVESTMENT COMPANY ACT OF 1940
We, as members of management of Managed Series Investment Trust ("the Funds"),
are responsible for complying with the requirements of subsections (b) and (c)
of Rule 17f-2, "Custody of Investments by Registered Management Investment
Companies," of the Investment Company Act of 1940. We are also responsible for
establishing and maintaining an effective internal control structure over
compliance with Rule 17f-2 requirements. We have performed an evaluation of the
Funds' compliance with the requirements of subsections (b) and (c) of Rule 17f-2
as of December 31, 1997 and for the period from August 29, 1997 to December 31,
1997.
Based on this evaluation, we assert that the Funds were in compliance with the
requirements of subsections (b) and (c) of Rule 17f-2 of the Investment Company
Act of 1940 as of December 31, 1997 and for the period from August 29, 1997 to
December 31, 1997, with respect to securities reflected in the investment
accounts of the Funds.
Managed Series Investment Trust
By:
/s/ Richard H. Blank, Jr. /s/ Rochelle Siote
- --------------------------- ----------------------------
Richard H. Blank, Jr. Rochelle Sioted
Treasurer and Chief Operating Officer Principal
Managed Series Investment Trust Barclays Global Fund
Advisors, Adviser and Co-
Administrator to Managed
Series Investment Trust
111 Center Street * Little Rock, AR 72201
<PAGE>
Page2
KPMG Peat Marwick LLP
January 9, 1998
/s/ Elizabeth Gottfried
- -------------------------
Elizabeth Gottfried
Vice President
Investment Services Group
Wells Fargo Bank, Sub-Adviser to
Managed Series Investment Trust
