<PAGE> 1
LOGO
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PROSPECTUS
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AGGRESSIVE GROWTH FUND
BALANCED FUND
CORPORATE STOCK FUND
DIVERSIFIED INCOME FUND
EQUITY VALUE FUND
GROWTH AND INCOME FUND
SMALL CAP FUND
CLASS A AND CLASS B
SEPTEMBER 6, 1996
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STAGECOACH FUNDS(R)
AGGRESSIVE GROWTH, BALANCED, CORPORATE STOCK,
DIVERSIFIED INCOME, EQUITY VALUE, GROWTH AND INCOME
AND SMALL CAP FUNDS
Stagecoach Funds, Inc. (the "Company") is an open-end management investment
company. This Prospectus contains information about Class A and Class B (except
for the Corporate Stock Fund) shares offered in seven funds of the Stagecoach
Family of Funds -- the AGGRESSIVE GROWTH, BALANCED, CORPORATE STOCK, DIVERSIFIED
INCOME, EQUITY VALUE, GROWTH AND INCOME and SMALL CAP FUNDS (each, a "Fund" and,
collectively, the "Funds"). The Corporate Stock Fund offers a single class of
shares (sometimes referred to in this Prospectus with the Class A shares of the
other Funds as "Class A" shares).
THE AGGRESSIVE GROWTH, CORPORATE STOCK AND SMALL CAP FUNDS EACH SEEKS TO
ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING ALL OF ITS ASSETS IN THE CAPITAL
APPRECIATION, CORPORATE STOCK AND SMALL CAP MASTER PORTFOLIOS (EACH, A "MASTER
PORTFOLIO" AND, COLLECTIVELY, THE "MASTER PORTFOLIOS"), RESPECTIVELY, OF MASTER
INVESTMENT TRUST (THE "MASTER TRUST"), AN OPEN-END MANAGEMENT INVESTMENT
COMPANY, RATHER THAN IN A PORTFOLIO OF SECURITIES. THE INVESTMENT EXPERIENCE OF
EACH SUCH FUND CORRESPONDS DIRECTLY TO THE INVESTMENT EXPERIENCE OF THE
CORRESPONDING MASTER PORTFOLIO IN WHICH IT INVESTS.
Please read this Prospectus and retain it for future reference. It is designed
to provide you with important information and to help you decide if a Fund's
goals match your own. A Statement of Additional Information ("SAI"), dated
September 6, 1996 has been filed with the Securities and Exchange Commission
("SEC") and is incorporated by reference into this Prospectus. The SAI is
available free of charge by writing to Stagecoach Funds, Inc., c/o Stagecoach
Shareholder Services, Wells Fargo Bank, N.A., P.O. Box 7066, San Francisco, CA
94120-7066, or by calling the Company at 1-800-222-8222. If you hold shares in
an IRA, please call 1-800-BEST-IRA (1-800-237-8472) for information or
assistance.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THESE AUTHORITIES PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
FUND SHARES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR ISSUED, ENDORSED OR
GUARANTEED BY, WELLS FARGO BANK, N.A. ("WELLS FARGO BANK"), BZW BARCLAYS GLOBAL
INVESTORS, N.A. ("BGI") OR ANY OF THEIR AFFILIATES. SUCH SHARES ARE NOT INSURED
OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION
("FDIC"), THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY. AN
INVESTMENT IN A FUND INVOLVES CERTAIN RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
PROSPECTUS DATED SEPTEMBER 6, 1996
PROSPECTUS
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The AGGRESSIVE GROWTH FUND seeks to provide investors with an above-average
level of capital appreciation. The BALANCED FUND seeks to provide investors with
both capital appreciation and current income resulting in a high total
investment return consistent with prudent investment risk and a balanced
investment approach. The CORPORATE STOCK FUND seeks to approximate to the extent
practicable the total rate of return of substantially all of the common stocks
comprising the Standard & Poor's 500 Composite Stock Price Index. The
DIVERSIFIED INCOME FUND seeks to earn current income and a growing stream of
income over time, consistent with preservation of capital. The EQUITY VALUE FUND
seeks to provide investors with long-term capital appreciation. The GROWTH AND
INCOME FUND seeks to earn current income and achieve long-term capital
appreciation by investing primarily in common stocks, and preferred stocks and
debt securities that are convertible into common stocks. The SMALL CAP FUND
seeks above-average long-term capital appreciation in order to provide investors
with a rate of total return exceeding that of the Russell 2000 Index (before
fees and expenses) over a time horizon of three to five years.
WELLS FARGO BANK IS THE INVESTMENT ADVISER AND IS COMPENSATED FOR PROVIDING
THE FUNDS AND MASTER PORTFOLIOS WITH CERTAIN OTHER SERVICES. BZW BARCLAYS GLOBAL
FUND ADVISORS ("BGFA") IS SUB-ADVISER TO THE CORPORATE STOCK MASTER PORTFOLIO.
BGI IS CUSTODIAN TO THE CORPORATE STOCK FUND AND CORPORATE STOCK MASTER
PORTFOLIO. STEPHENS INC. ("STEPHENS") WHICH IS NOT AFFILIATED WITH WELLS FARGO
BANK, BGFA OR BGI, IS THE SPONSOR, ADMINISTRATOR AND DISTRIBUTOR FOR THE FUNDS.
PROSPECTUS
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TABLE OF CONTENTS
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PROSPECTUS SUMMARY 1
SUMMARY OF FUND EXPENSES 6
FINANCIAL HIGHLIGHTS 12
HOW THE FUNDS WORK 23
INVESTMENT OBJECTIVES AND POLICIES 23
MASTER/FEEDER STRUCTURE -- THE CAPITAL APPRECIATION,
CORPORATE STOCK AND SMALL CAP MASTER PORTFOLIOS 33
THE FUNDS, MASTER PORTFOLIOS AND MANAGEMENT 38
INVESTING IN THE FUNDS 43
DIVIDENDS 54
HOW TO REDEEM SHARES 55
ADDITIONAL SHAREHOLDER SERVICES 59
MANAGEMENT, DISTRIBUTION AND SERVICING FEES 63
TAXES 69
PROSPECTUS APPENDIX - ADDITIONAL INVESTMENT POLICIES A-1
PROSPECTUS
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PROSPECTUS SUMMARY
The Funds provide you with a convenient way to invest in various portfolios of
securities selected and supervised by professional management. The following
provides you with summary information about the Funds. For more information,
please refer to the identified Prospectus sections and generally to the Funds'
Prospectus and SAI.
Q. WHAT ARE THE FUNDS' AND THE MASTER PORTFOLIOS' INVESTMENT OBJECTIVES?
A. The AGGRESSIVE GROWTH FUND seeks to provide investors with an above-average
level of capital appreciation. The Fund pursues this objective by investing
all of its assets in the Capital Appreciation Master Portfolio. The Capital
Appreciation Master Portfolio has the same investment objective as the Fund.
The Master Portfolio pursues its investment objective through the active
management of a broadly diversified portfolio of equity securities of
companies expected to experience strong growth in revenues, earnings and
assets. The Fund and Master Portfolio are designed to provide above-average
capital growth for investors willing to assume above-average risk.
The BALANCED FUND seeks to provide investors with both capital appreciation
and current income resulting in high total investment return consistent with
prudent investment risk and a balanced investment approach. The Fund pursues
this objective by investing in equity securities and debt instruments
through a balanced and diversified program. The Fund normally invests
between 30% and 70% of its assets in common stocks that are considered by
the investment adviser to have better than average prospects for growth of
capital and income. The Fund invests primarily in domestic equity securities
but may invest up to 5% of its assets in equity securities listed or traded
exclusively on a foreign exchange. The Fund's remaining assets are invested
in senior fixed-income securities, including corporate debt securities,
commercial paper and mortgage-backed and asset-backed securities, based on
the relative stability of income and principal of such securities. Debt
instruments in which the Fund invests are rated at least investment grade or
deemed comparable.
The CORPORATE STOCK FUND seeks to approximate to the extent practicable the
total rate of return of substantially all of the common stocks comprising
the Standard & Poor's 500 Composite Stock Price Index ("S&P 500 Index"). The
Fund pursues this objective by investing all of its assets in the Corporate
Stock Master Portfolio, which has an identical investment objective. The
Master Portfolio pursues this objective by investing in most of the common
stocks which comprise the S&P 500 Index.
1 PROSPECTUS
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The DIVERSIFIED INCOME FUND seeks to earn current income and a growing
stream of income over time, consistent with preservation of capital. The
Fund pursues this objective by investing primarily in income-producing debt
instruments and equity securities, including common stocks, and preferred
stocks and debt instruments that are convertible into common stocks. Debt
instruments include obligations issued or guaranteed by the U.S. Government,
its agencies and instrumentalities, high quality bonds and a broad range of
other debt instruments, such as bonds and other debt securities of domestic
companies, U.S. dollar-denominated debt obligations of foreign issuers,
including foreign corporations and foreign governments, and various
asset-backed securities. Common stocks are selected on the basis of strong
earnings growth trend, above-average prospects for future earnings growth
and diversification among industries and companies. Convertible securities
are selected on the basis of strong earnings and credit record, the ability
to provide current income and the characteristics described above with
respect to common stocks.
The EQUITY VALUE FUND seeks to provide investors with long-term capital
appreciation. The Fund pursues this objective by investing primarily in
common stocks and may invest in debt securities that are convertible into
common stocks of both domestic and foreign companies. The Fund may invest in
large, well-established companies and smaller companies with market
capitalizations exceeding $50 million. The Fund may invest up to 5% of its
assets in foreign equity securities. Income generation is a secondary
consideration in selecting investments. The Fund may purchase dividend
paying stocks of particular issuers when the issuer's dividend record may,
in the investment adviser's opinion, have a favorable influence on the
market value of the securities. The Fund also may purchase convertible
securities with the same characteristics as common stocks. Under normal
market conditions, the Fund invests at least 65% of its total assets in
common stocks and securities convertible into common stocks.
The GROWTH AND INCOME FUND seeks to earn current income and achieve
long-term capital appreciation by investing primarily in common stocks, and
preferred stocks and debt securities that are convertible into common
stocks. Common stocks are selected on the basis of strong earnings growth
trend, above-average prospects for future earnings growth and
diversification among industries and companies. Convertible securities are
selected on the basis of strong earnings and credit record, the ability to
provide current income and the same characteristics described above with
respect to common stocks.
The SMALL CAP FUND seeks above-average long-term capital appreciation in
order to provide investors with a rate of total return exceeding that of the
Russell 2000 Index (before fees and expenses) over a time horizon of three
to five years. The Fund pursues this objective by investing all of its
assets in the Small Cap Master Portfolio. The Master Portfolio has the same
investment objective as the Fund. The Master
PROSPECTUS 2
<PAGE> 7
Portfolio pursues this investment objective through the active management of
a broadly diversified portfolio consisting primarily of growth-oriented
common stocks with market capitalizations between $50 million and $1 billion
at the time of acquisition. The Master Portfolio intends to sell the common
stock of any company in its investment portfolio after such Company's market
capitalization exceeds $2 billion.
See "How the Funds Work," "Prospectus Appendix -- Additional Investment
Policies" and the SAI for further information on investments.
Q. WHAT ARE SOME OF THE POTENTIAL RISKS ASSOCIATED WITH THIS
TYPE OF INVESTMENT?
A. An investment in a Fund or Master Portfolio is not insured against loss of
principal. When the value of the securities that a Fund or Master Portfolio
owns declines, so does the value of your shares of the Fund. Therefore, you
should be prepared to accept some risk with the money you invest in the
Funds. The portfolio equity securities of the Funds and Master Portfolios
are subject to equity market risk. Equity market risk is the risk that
common stock prices will fluctuate or decline over short or even extended
periods. The portfolio debt instruments of the Funds and Master Portfolios
are subject to credit and interest-rate risk. Credit risk is the risk that
issuers of the debt instruments in which the Funds and Master Portfolios
invest may default on the payment of principal and/or interest.
Interest-rate risk is the risk that increases in market interest rates may
adversely affect the value of the debt instruments in which the Funds and
Master Portfolios invest and hence the value of your investment in a Fund.
The Capital Appreciation and Small Cap Master Portfolios and the Growth and
Income Fund may invest a significant portion of their respective assets in
securities of smaller and newer issuers. Investments in such companies may
present opportunities for capital appreciation because of high potential
earnings growth, but may present greater risks than investments in more
established companies with longer operating histories and greater financial
capacity. Investments in foreign securities by a Fund or Master Portfolio
involve special risks and considerations not usually associated with
investments in U.S. Companies. As with all mutual funds, there can be no
assurance that the Funds or Master Portfolios will achieve their investment
objectives. See "How the Funds Work -- Investment Objectives and Policies",
"How the Funds Work -- Risk Factors" and "Prospectus Appendix -- Additional
Investment Policies" below, and "Additional Permitted Investment Activities"
in the SAI for further information about the Funds' and Master Portfolios'
investments and related risks.
Q. WHO MANAGES MY INVESTMENTS?
A. Wells Fargo Bank, as the Funds' and the Master Portfolios' investment
adviser, manages your investments. Wells Fargo Bank also provides transfer
and dividend
3 PROSPECTUS
<PAGE> 8
disbursing agency services to the Funds and serves as custodian to the
Aggressive Growth, Balanced, Diversified Income, Equity Value, Growth and
Income and Small Cap Funds, and the Capital Appreciation and Small Cap
Master Portfolios. In addition, Wells Fargo Bank is a shareholder servicing
agent and a selling agent. BGFA serves as sub-adviser to the Corporate Stock
Master Portfolio. BGI serves as custodian to the Corporate Stock Fund and
Corporate Stock Master Portfolio. See "The Funds, Master Portfolios and
Management" and "Management, Distribution and Servicing Fees."
Q. HOW DO I INVEST?
A. You may invest by purchasing shares of the Funds at their public offering
price, which is the net asset value ("NAV") plus any applicable sales
charge. Class A shares are subject to a maximum front-end sales charge of
4.50%. Class B shares that are redeemed within four years of purchase are
subject to a maximum contingent deferred sales charge of 3.00% of the lesser
of NAV at purchase or NAV at redemption. Shares of the Corporate Stock Fund
are not subject to front-end or contingent deferred sales charges. In some
cases, such as for investments by certain fiduciary or retirement accounts,
the front-end sales charge may be waived. In other cases, the front-end
sales charge may be reduced. You may open an account by investing at least
$1,000 and may add to your account by making additional investments of at
least $100, although certain exceptions to these minimums may be available.
Shares may be purchased by wire, by mail or by an automatic investment
feature called the AutoSaver Plan on any day the New York Stock Exchange is
open. See "Investing in the Funds." For more details, contact Stephens (the
Funds' sponsor and distributor), a shareholder servicing agent or a selling
agent (such as Wells Fargo Bank).
Q. HOW WILL I RECEIVE DIVIDENDS AND ANY CAPITAL GAINS?
A. Dividends from net investment income of the Balanced, Corporate Stock,
Diversified Income, Equity Value and Growth and Income Funds are declared
and paid quarterly. Dividends from net investment income of the Aggressive
Growth and Small Cap Funds are declared and paid annually. Dividends are
automatically reinvested in shares of the same class of the respective Fund
at NAV without a sales charge unless you elect to receive dividends in cash.
You may also elect to reinvest dividends in shares of certain other funds in
the Stagecoach Family of Funds with which you have an established account
that has met the applicable minimum initial investment requirement. Any
capital gains are distributed at least annually in the same manner.
Investment income available for distribution to holders of a class of shares
is reduced by the class expenses payable on behalf of those shares. Class B
shares automatically convert into Class A shares of the same Fund six years
after the end of the month in which they were acquired. See "Dividends" and
"Additional Shareholder Services."
PROSPECTUS 4
<PAGE> 9
Q. HOW MAY I REDEEM SHARES?
A. You may redeem shares by telephone, by letter or by an automatic feature
called the Systematic Withdrawal Plan on any day the Fund is open for
business. Contingent deferred sales charges may be charged upon redemption
of Class B shares. The Company does not charge a fee for redemption of Class
A shares. In addition, the Company reserves the right to impose charges for
wiring redemption proceeds. See "How To Redeem Shares" and "How to Purchase
Shares -- Contingent Deferred Sales Charges -- Class B shares." For more
details, contact Stephens, a shareholder servicing agent or a selling agent
(such as Wells Fargo Bank).
Q. WHAT ARE DERIVATIVES AND DO THE FUNDS USE THEM?
A. Derivatives are financial instruments whose value is derived, at least in
part, from the price of another security or a specified asset, index or
rate. Some of the permissible investments described in this Prospectus, such
as buying and selling options and futures and entering into currency
exchange contracts or swap agreements, are considered derivatives. Some
derivatives may be more sensitive than direct securities to changes in
interest rates or sudden market moves. Some derivatives also may be
susceptible to fluctuations in yield or value due to their structure or
contract terms. If a Fund's or Master Portfolio's adviser judges market
conditions incorrectly, the use of certain derivatives could result in a
loss, regardless of the adviser's intent in using the derivatives.
Q. WHAT STEPS DO THE FUNDS TAKE TO CONTROL DERIVATIVES-
RELATED RISKS?
A. Wells Fargo Bank, as investment adviser to each Fund or Master Portfolio,
uses a variety of internal risk management procedures to ensure that
derivatives use is consistent with each Fund's investment objective, does
not expose the Fund to undue risks and is closely monitored. These
procedures include providing periodic reports to the Board of Directors
concerning the use of derivatives. Derivatives use by each Fund also is
subject to broadly applicable investment policies. For example, a Fund may
not invest more than a specified percentage of its assets in "illiquid
securities," including those derivatives that do not have active secondary
markets. Nor may a Fund use certain derivatives without establishing
adequate "cover" in compliance with SEC rules limiting the use of leverage.
For more information on the Funds' and Master Portfolios' investment
activities, see "How the Funds Work" and "Prospectus Appendix -- Additional
Investment Policies."
5 PROSPECTUS
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SUMMARY OF FUND EXPENSES
CLASS A SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
SMALL(1)
AGGRESSIVE(1) BALANCED CORPORATE(1) DIVERSIFIED EQUITY GROWTH AND CAP
GROWTH FUND FUND STOCK FUND INCOME FUND VALUE FUND INCOME FUND FUND
<S> <C> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchase (as
a percentage of offering price)........... 4.50% 4.50% None 4.50% 4.50% 4.50% 4.50%
Sales Charge Imposed on Reinvested
Dividends................................. None None None None None None None
Maximum Sales Charge Imposed on
Redemptions............................... None None None None None None None
Exchange Fees............................... None None None None None None None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
SMALL
AGGRESSIVE(1,2) BALANCED CORPORATE(2) DIVERSIFIED EQUITY GROWTH AND CAP(2)
GROWTH FUND FUND STOCK FUND INCOME FUND VALUE FUND INCOME FUND FUND
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fee.............................. 0.50% 0.60% 0.50% 0.50% 0.50% 0.50% 0.60%
Rule 12b-1 Fee.............................. 0.10% 0.10% 0.05% 0.05% 0.10% 0.05% 0.10%
Other Expenses (after waivers or
reimbursements)........................... 0.68%(3) 0.35%(3) 0.41%(3) 0.55%(3) 0.45%(3) 0.63%(3) 0.40%
---- ---- ---- ---- ---- ---- ----
TOTAL FUND OPERATING EXPENSES (after waivers
or reimbursements)........................ 1.28%(4) 1.05%(4) 0.96%(4) 1.10%(4) 1.05%(4) 1.18%(4) 1.10%
==== ==== ==== ==== ==== ==== ====
</TABLE>
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<TABLE>
<S> <C>
(1) Other mutual funds may invest in the Capital Appreciation, Corporate Stock and Small Cap Master Portfolios. Such other
funds' expenses and, accordingly, their investment returns may differ from those of the corresponding Funds.
(2) Summarizes expenses charged at the Master Portfolio level as well as at the Fund level.
(3) Other Expenses (before waivers or reimbursements) would be 0.80%, 0.67%, 0.45%, 0.76%, 0.50%, and 0.66% for such shares of
the Aggressive Growth, Balanced, Corporate Stock, Diversified Income, Equity Value, and Growth and Income Funds,
respectively.
(4) Total Fund Operating Expenses (before waivers or reimbursements) would be 1.40%, 1.37%, 1.00%, 1.31%, 1.10%, and 1.21% for
such shares of the Aggressive Growth, Balanced, Corporate Stock, Diversified Income, Equity Value, and Growth and Income
Funds, respectively.
</TABLE>
PROSPECTUS 6
<PAGE> 11
EXAMPLE OF EXPENSES
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following
expenses on a $1,000 investment in
Class A shares of the following
Funds, assuming a 5% annual return
and redemption at the end of each
time period indicated:
Aggressive Growth Fund......... $57 $84 $112 $193
Balanced Fund.................. $55 $77 $100 $167
Corporate Stock Fund........... $10 $31 $ 53 $118
Diversified Income Fund........ $56 $78 $103 $173
Equity Value Fund.............. $55 $77 $100 $167
Growth and Income Fund......... $56 $81 $107 $182
Small Cap Fund................. $56 $78 -- --
</TABLE>
7 PROSPECTUS
<PAGE> 12
SHAREHOLDER TRANSACTION EXPENSES
CLASS B SHARES
<TABLE>
<CAPTION>
SMALL
AGGRESSIVE(1) BALANCED DIVERSIFIED EQUITY VALUE GROWTH AND CAP(1)
GROWTH FUND FUND INCOME FUND FUND INCOME FUND FUND
------------- -------- ----------- ------------ ----------- ------
<S> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchase (as a
percentage of offering price)........................ None None None None None None
Sales Charge Imposed on Reinvested Dividends........... None None None None None None
Maximum Sales Charge Imposed on Redemptions............ 3.00% 3.00% 3.00% 3.00% 3.00% 3.00%
Exchange Fees.......................................... None None None None None None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
FOR CLASS B SHARES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
SMALL
AGGRESSIVE(2) BALANCED DIVERSIFIED EQUITY VALUE GROWTH AND CAP(2)
GROWTH FUND FUND INCOME FUND FUND INCOME FUND FUND
------------- -------- ----------- ------------ ----------- ------
<S> <C> <C> <C> <C> <C> <C>
Management Fee......................................... 0.50% 0.60% 0.50% 0.50% 0.50% 0.60%
Rule 12b-1 Fee......................................... 0.75% 0.75% 0.70% 0.75% 0.70% 0.75%
Other Expenses (after waivers or reimbursements)....... 0.68%(3) 0.35%(3) 0.53%(3) 0.45%(3) 0.67%(3) 0.40%
---- ---- ---- ---- ---- ----
TOTAL FUND OPERATING EXPENSES (after waivers or
reimbursements)...................................... 1.93%(4) 1.70%(4) 1.73%(4) 1.70%(4) 1.87%(4) 1.75%
</TABLE>
- -------------------
<TABLE>
<S> <C>
(1) Other mutual funds may invest in the Capital Appreciation and Small Cap Master Portfolios. Such other funds' expenses and,
accordingly, investment returns may differ from those of the corresponding Funds.
(2) Summarizes expenses charged at the Master Portfolio level as well as at the Fund level.
(3) Other Expenses (before waivers or reimbursements) would be 0.80%, 0.47%, 1.37%, 0.47%, and 1.01% for Class B shares of the
Aggressive Growth, Balanced, Diversified Income, Equity Value, Growth and Income Funds, respectively.
(4) Total Fund Operating Expenses (before waivers or reimbursements) would be 2.05%, 1.82%, 2.57%, 1.72%, and 2.21% for Class
B shares of the Aggressive Growth, Balanced, Diversified Income, Equity Value, and Growth and Income Funds, respectively.
</TABLE>
PROSPECTUS 8
<PAGE> 13
EXAMPLE OF EXPENSES
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following
expenses on a $1,000 investment in
Class B shares of the following
Funds, assuming (A) a 5% annual
return and (B) redemption at the
end of each time period indicated:
Aggressive Growth.............. $50 $71 $104 $193
Balanced Fund.................. $47 $64 $ 92 $168
Diversified Income Fund........ $48 $64 $ 94 $172
Equity Value Fund.............. $47 $64 $ 92 $168
Growth and Income Fund......... $49 $69 $101 $185
Small Cap Fund................. $48 $65 N/A N/A
You would pay the following
expenses on a $1,000 investment in
Class B shares of a Fund, assuming
a 5% annual return and no
redemption:
Aggressive Growth.............. $20 $61 $104 $193
Balanced Fund.................. $17 $54 $ 92 $168
Diversified Income Fund........ $18 $54 $ 94 $172
Equity Value Fund.............. $17 $54 $ 92 $168
Growth and Income Fund......... $19 $59 $101 $185
Small Cap Fund................. $18 $55 N/A N/A
</TABLE>
EXPLANATION OF TABLES
The purpose of the above tables is to help you understand the various costs
and expenses that a shareholder in a Fund will pay directly or indirectly. You
may purchase Fund shares directly from the Company or through Wells Fargo Bank
or other institutions that have developed various account products through which
Fund shares may be purchased, and for which customers may be charged a fee. The
tables reflect expenses at both the Fund and Master Portfolio levels where
applicable, but do not reflect any charges that may be imposed by Wells Fargo
Bank or another institution directly on certain customer accounts in connection
with an investment in a Fund.
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or sell Fund
shares. You are subject to a front-end sales charge on purchases of a Fund's
Class A shares (except for shares of the Corporate Stock Fund) and may be
subject to a contingent-deferred sales charge on a Fund's Class B shares if you
redeem such shares within a specified period. The Company reserves the right to
impose a charge for wiring redemption proceeds. In certain instances, you may
qualify for a reduction or waiver of
9 PROSPECTUS
<PAGE> 14
the front-end sales charge. There are no other sales charges, exchange fees or
redemption fees. See "Investing in the Funds -- Sales Charges."
ANNUAL FUND OPERATING EXPENSES for the Funds, except as indicated below, are
based on applicable contract amounts and amounts incurred during the most recent
fiscal year, restated to reflect voluntary fee waivers or reimbursements that
are expected to continue to reduce expenses during the current year. Annual Fund
Operating Expenses for Class A and Class B shares of the Aggressive Growth Fund
are based on the 1995 actual expenses of the Class A and Class D shares of the
Aggressive Growth Fund's predecessor fund, the Strategic Growth Fund of Overland
Express Funds, Inc. The figures shown above are adjusted to reflect the
applicable sales charges and expenses for the Aggressive Growth Fund's Class A
and Class B shares, and reflect voluntary expense waivers and expense
reimbursements that are expected to continue to reduce Fund expenses for the
current fiscal year. Annual Fund Operating Expenses for the Class A shares of
the Balanced and Equity Value Funds are based on applicable contract amounts and
derived from amounts incurred by the respective predecessor portfolios, the
Equity Value and Balanced Funds of Pacifica Funds Trust, during each such
portfolios most recent fiscal year. The amounts shown under "Other Expenses" and
"Total Fund Operating Expenses" are restated to reflect voluntary fee waivers
and expense reimbursements that are expected to continue for the current fiscal
year. Since Class B shares were not offered during the predecessor portfolios
most recent fiscal year, the percentages shown above with respect to Class B
shares under "Total Other Expenses" and "Total Fund Operating Expenses" reflect
certain anticipated voluntary fee waivers and expense reimbursements for the
current fiscal year. Wells Fargo Bank and Stephens have agreed to waive or
reimburse all or a portion of their respective fees charged to, or expenses paid
by, the Balanced or Equity Value Funds to ensure that Total Fund Operating
Expenses do not exceed, on an annual basis, 1.05% of average daily net assets
for Class A and 1.70% for Class B shares of such Funds through August 31, 1997.
Annual Fund Operating Expenses for the Class A and B shares of the Small Cap
Fund are based on applicable contract amounts currently in effect, except that
the amounts shown under "Other Expenses" and "Total Fund Operating Expenses" are
based on estimated amounts for the current fiscal year. Wells Fargo Bank and
Stephens at their sole discretion may waive or reimburse all or a portion of
their respective fees charged to, or expenses paid by, a Fund or a Master
Portfolio. Any waivers or reimbursements would reduce a Fund's or Master
Portfolio's total expenses.
Long-term shareholders of the Funds 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.
("NASD"). For more complete descriptions of the various costs and expenses you
can expect to incur as a shareholder in each Fund, please see "Investing in the
Funds -- How To Buy Shares" and "Management and Servicing Fees."
PROSPECTUS 10
<PAGE> 15
EXAMPLE OF EXPENSES is a hypothetical illustration of the expenses associated
with a $1,000 investment over stated periods, based on the expenses in the above
tables and an assumed annual rate of return of 5%. This annual rate of return
should not be considered an indication of actual or expected performance of a
Fund nor a representation of past or future expenses; actual expenses and
returns may be greater or lesser than those shown.
With regard to the combined fees and expenses of the Aggressive Growth,
Corporate Stock and Small Cap Funds and such Funds' corresponding Master
Portfolios, the Company's Board of Directors has considered whether various
costs and benefits of investing all of such Fund's assets in a corresponding
Master Portfolio rather than directly in a portfolio of securities would be more
or less than if such Fund invested in portfolio securities directly. The
Company's Board of Directors believes that the aggregate per share expenses of a
Fund will not be more than the expenses incurred by such Fund if the Fund
invested directly in the type of securities held by their corresponding Master
Portfolio. In addition to selling its interests to the Aggressive Growth Fund,
Corporate Stock Fund or Small Cap Fund, the corresponding Master Portfolio may
sell its interests to other mutual funds or accredited investors. Information
regarding these and any other investment options in a Master Portfolio may be
obtained by calling Stephens at 1-800-643-9691.
Additional information regarding such Funds' and the corresponding Master
Portfolios' expenses is included under "The Funds, Master Portfolios and
Management" and "Management, Distribution and Servicing Fees" and in the SAI
under "Management," Distributions Plans" and "Servicing Plans."
11 PROSPECTUS
<PAGE> 16
FINANCIAL HIGHLIGHTS
AGGRESSIVE GROWTH FUND
The following information for the Aggressive Growth Fund has been derived from
the Financial Highlights in the annual financial statements for the fiscal year
ended December 31, 1996 for the Class A and Class D shares of Overland Express
Funds, Inc.'s Strategic Growth Fund, the predecessor fund to the Capital
Appreciation Master Portfolio in which the Aggressive Growth Fund invests. This
information is provided to help you understand the historical performance of the
Fund and its predecessors. The audited financial statements and the report
thereon for the year ended December 31, 1995 are incorporated by reference into
the Fund's SAI. Because the predecessor fund did not convert to master/feeder
structure until February 20, 1996, the financial highlights for the periods
presented refer only to the prior operating history of the predecessor fund on a
stand-alone basis. This information should be read in conjunction with the
predecessor fund's annual financial statements and the respective notes thereto.
PROSPECTUS 12
<PAGE> 17
AGGRESSIVE GROWTH FUND --
PREDECESSOR FUND
FOR A CLASS A SHARE OUTSTANDING AS SHOWN
<TABLE>
<CAPTION>
PERIOD
YEAR ENDED YEAR ENDED ENDED
DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993(1)
---------- ---------- ----------
<S> <C> <C> <C>
Net asset value, beginning of
period............................. $13.29 $13.20 $10.00
Income from investment operations:
Net investment loss................ (0.04) (0.11) (0.03)
Net realized and unrealized gains
on investments................... 5.66 0.67 3.68
------ ------ ------
Total from investment operations 5.62 0.56 3.65
Less distributions:
Dividends from net investment
income........................... 0.00 0.00 (0.03)
Distributions from net realized
capital-gain (loss).............. (2.09) (0.33) (0.41)
Tax return of capital.............. 0.00 (0.14) (0.01)
------ ------ ------
Total distributions.................. (2.09) (0.47) (0.45)
Net asset value, end of period....... $16.82 $13.29 $13.20
====== ====== ======
Total return (not annualized)(2)..... 42.51% 4.23% 36.56%
Ratios/supplemental data:
Net assets, end of period (000).... $59,016 $26,744 $25,413
Number of shares outstanding, end
of period (000).................. 3,508 2,013 1,926
Ratios to average net assets
(annualized):
Ratio of expenses to average net
assets(3)........................ 1.28% 1.20% 0.66%
Ratio of net investment loss to
average net assets(4)............ (0.76)% (0.81)% (0.01)%
Portfolio Turnover................. 171% 149% 182%
- -------------------
(1) The predecessor fund commenced
operations on January 20, 1993.
(2) Total returns do not include any
sales charges or contingent
deferred sales charges.
(3) Ratio of Expenses to Average Net
Assets Prior to Waived Fees and
Reimbursed Expenses.............. 1.38% 1.55% 1.64%
(4) Ratio of Net Investment Loss to
Average Net Assets Prior to
Waived Fees and Reimbursed
Expenses......................... (0.86)% (1.16)% (0.99)%
</TABLE>
13 PROSPECTUS
<PAGE> 18
AGGRESSIVE GROWTH FUND --
PREDECESSOR FUND
FOR A CLASS D SHARE OUTSTANDING AS SHOWN
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED PERIOD ENDED
DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993(1)
---------- ---------- ------------
<S> <C> <C> <C>
Net asset value, beginning of period...... $16.54 $16.55 $15.00
Income from investment operations:
Net investment loss..................... (0.16) (0.24) (0.43)
Net realized and unrealized gain on
investments........................... 6.99 0.81 2.51
------ ------ ------
Total from investment operations.......... 6.83 0.57 2.08
Less distributions:
Dividends from net investment income.... 0.00 0.00 0.00
Distributions from net realized capital
gains................................. (2.58) (0.40) (0.53)
Tax return of capital................... 0.00 (0.18) 0.00
------ ------ ------
Total distributions....................... (2.58) (0.58) (0.53)
Net asset value, end of period............ $20.79 $16.54 $16.55
====== ====== ======
Total return (not annualized)(2).......... 41.54% 3.46% 13.84%
Ratios/supplemental data:
Net assets, end of period (000)......... $26,326 $15,335 $11,932
Number of shares outstanding, end of
period (000).......................... 1,266 927 721
Ratios to average net assets (annualized):
Ratio of expenses to average net
assets(3)............................. 2.02% 1.95% 0.61%
Ratio of net investment loss to average
net assets(4)......................... (1.49)% (1.56)% (1.00)%
Portfolio Turnover........................ 171% 149% 182%
- -------------------
(1) This class commenced operations on
July 1, 1993.
(2) Total returns do not include any sales
charges or contingent deferred sales
charges.
(3) Ratio of Expenses to Average Net
Assets Prior to Waived Fees and
Reimbursed Expenses................... 2.09% 2.23% 2.14%
(4) Ratio of Net Investment Loss to
Average Net Assets Prior to Waived
Fees and Reimbursed Expenses.......... (1.56)% (1.84)% (2.53)%
</TABLE>
PROSPECTUS 14
<PAGE> 19
FINANCIAL HIGHLIGHTS (continued)
BALANCED AND EQUITY VALUE FUNDS
The following information has been derived from the Financial Highlights in
the financial statements for the fiscal period ended March 31, 1996 for Pacifica
Funds Trust's Equity Value and Balanced Funds, the respective predecessor
portfolios to the Funds. This information is provided to assist you in
evaluating the performance of each Fund since its commencement of operations.
The financial information for the fiscal year ended September 30, 1995 and for
the periods through September 30, 1994 were each audited by former independent
auditors to the predecessor funds. The financial information and the report on
the audit for the year ended September 30, 1995 are incorporated by reference
into the SAI. The unaudited financial statements and the related notes for the
period ended March 31, 1996 also are incorporated by reference into the SAI.
This information should be read in conjunction with the predecessor portfolios
related financial statements and notes thereto. Financial information is not
provided in connection with Class B shares because Class B shares were not
offered during the periods presented. The shares represented in the tables for
the predecessor portfolios are the predecessor shares to the Funds' Class A
shares offered by this prospectus.
15 PROSPECTUS
<PAGE> 20
BALANCED FUND
FOR A SHARE OUTSTANDING AS SHOWN
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED SEPTEMBER 30, PERIOD ENDED
MARCH 31, ------------------------------------------------ SEPT. 30,
1996 1995 1994 1993 1992 1991 1990(1)
---------- ------ -------- ------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value -- beginning of period............ $11.84 $11.67 $12.71 $11.18 $10.80 $ 9.50 $10.00
Income from Investment Operations:
Net investment income(2)........................ 0.19 0.46 0.43 0.44 0.42 0.52 0.14
Net gain (loss) on securities (both realized and
unrealized)(2)................................ 0.58 0.68 (0.13) 1.72 0.53 1.40 (0.64)
------ ------ ------ ------ ------ ------ -------
Total from investment operations.............. 0.77 1.14 0.30 2.16 0.95 1.92 (0.50)
------ ------ ------ ------ ------ ------ -------
Less Distributions:
Dividends from net investment income............ (0.17) (0.47) (0.46) (0.43) (0.43) (0.62) --
Distributions from capital gains................ (0.05) (0.50) (0.88) (0.20) (0.14) -- --
------ ------ ------ ------ ------ ------ ------
Total distributions........................... (0.22) (0.97) (1.34) (0.63) (0.57) (0.62) --
------ ------ ------ ------ ------ ------ ------
Net asset value -- end of period................ $12.39 $11.84 $11.67 $12.71 $11.18 $10.80 $ 9.50
====== ====== ====== ====== ====== ====== ======
Total return (excluding sales load)........... 6.57% 10.62% 2.30% 19.83% 9.03% 20.78% (5.00)%
Ratios/Supplemental Data:
Net assets, end of period (000)................. $ 36,941 $89,034 $108,290 $104,434 $65,226 $50,038 $ 33,185
Ratio of expenses to average net assets......... 1.35%(3) 1.03% 1.09% 1.01% 1.02% 0.96% 0.93%
Effect of waivers on above ratio................ 0.03%(3) 0.02% 0.02% 0.05% 0.08% 0.22% 0.67%
Ratio of net investment income to average net
assets........................................ 3.13%(3) 4.05% 3.55% 3.62% 3.76% 5.88% 5.87%
Portfolio turnover rate......................... 50% 90% 35% 60% 49% 30% 12%
Average Commission Rate(4)...................... $ 0.076 -- -- -- -- -- --
</TABLE>
- ---------------
(1) Commencement of operations was on July 2, 1990.
(2) Per share data are based upon average monthly shares outstanding.
(3) Annualized.
(4) For fiscal years beginning on or after September 1, 1995, a Fund is required
to disclose its average commission rate per share for security trades on
which commissions are charged. This amount may vary from period to period
and fund to fund depending on the mix of trades executed in various markets
where trading practices and commission rate structures may differ.
PROSPECTUS 16
<PAGE> 21
EQUITY VALUE FUND
FOR A SHARE OUTSTANDING AS SHOWN
<TABLE>
<CAPTION>
PERIOD
PERIOD ENDED YEAR ENDED SEPTEMBER 30, ENDED
MARCH 31, 1996 -------------------------------------------------- SEPT. 30,
(UNAUDITED) 1995 1994 1993 1992 1991 1990(1)
-------------- -------- -------- -------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value -- beginning of period............ $ 13.27 $ 12.36 $ 13.17 $ 10.73 $ 10.45 $ 8.48 $ 10.00
Income from Investment Operations:
Net investment income(2)........................ 0.11 0.24 0.20 0.21 0.20 0.28 0.08
Net gain (loss) on securities (both realized and
unrealized)(2)................................ 1.08 1.63 0.74 2.75 0.49 1.98 (1.60)
------ -------- -------- -------- ------- ------- -------
Total from investment operations.............. 1.19 1.87 0.94 2.96 0.69 2.26 (1.52)
------ -------- -------- -------- ------- ------- -------
Less Distributions:
Dividends from net investment income............ (0.07) (0.25) (0.21) (0.23) (0.22) (0.29) --
Distributions from capital gains................ (0.55) (0.71) (1.54) (0.29) (0.19) -- --
------ -------- -------- -------- ------- ------- -------
Total distributions........................... (0.62) (0.96) (1.75) (0.52) (0.41) (0.29) --
------ -------- -------- -------- ------- ------- -------
Net asset value -- end of period................ $ 13.84 $ 13.27 $ 12.36 $ 13.17 $ 10.73 $ 10.45 $ 8.48
======== ======== ======== ======== ======= ======= =======
Total return (excluding sales load)........... 9.29% 16.58% 7.49% 28.22% 6.81% 27.05% (15.20)%
Ratios/Supplemental Data:
Net assets, end of period (000)............... $ 20,365 $170,406 $168,852 $140,551 $92,915 $68,412 $26,100
Ratio of expenses to average net assets....... 1.35%(3) 0.96% 0.99% 0.98% 1.02% 0.98% 0.91%
Effect of waivers on above ratio.............. 0.02%(3) 0.02% 0.02% 0.01% -- 0.13% 0.95%
Ratio of net investment income to average net
assets...................................... 1.72%(3) 1.97% 1.60% 1.73% 1.86% 2.69% 3.38%
Portfolio turnover rate....................... 43% 75% 41% 82% 78% 36% 21%
Average Commission Rate(4).................... $ 0.059 -- -- -- -- -- --
</TABLE>
- -------------------
<TABLE>
<S> <C>
(1) Commencement of operations was on July 2, 1990.
(2) Per share data are based upon average monthly shares outstanding.
(3) Annualized.
(4) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average commission rate per
share for security trades on which commissions are charged. This amount may vary from period to period and fund to fund
depending on the mix of trades executed in various markets where trading practices and commission rate structures may
differ.
</TABLE>
17 PROSPECTUS
<PAGE> 22
CORPORATE STOCK, DIVERSIFIED INCOME, GROWTH AND INCOME AND SMALL CAP FUNDS
The following information for the Corporate Stock, Diversified Income, and
Growth and Income Funds has been derived from the Financial Highlights in such
Funds' annual financial statements for the fiscal year ended December 31, 1996.
This information is provided to assist you in evaluating a Fund's historical
performance. Except for periods ending prior to January 1, 1992, which were
audited by other auditors whose report dated February 19, 1992, expressed an
unqualified opinion on this information, the financial statements for such Funds
were audited by KPMG Peat Marwick LLP, independent auditors. The financial
statements and the report on the audit for the year ended December 31, 1995 are
incorporated by reference into the SAI. This information should be read in
conjunction with the Funds' 1995 annual financial statements and notes thereto.
Financial information is not provided in connection with the Small Cap Fund
because it had not commenced operations during the periods presented.
CORPORATE STOCK FUND
FOR A SHARE OUTSTANDING
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993 1992 1991(1)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period......................... $ 31.42 $ 33.00 $ 31.40 $ 30.38 $ 23.60
Income from investment
operations:
Net investment income............ 0.59 0.63 0.59 0.62 0.62
Net realized and unrealized
gain/(loss) on investments..... 10.65 (0.50) 2.19 1.35 6.16
-------- -------- -------- -------- --------
Total from investment
operations..................... 11.24 0.13 2.78 1.97 6.78
Less distributions:
Dividends from net investment
income......................... (0.59) (0.63) (0.59) (0.62) 0.00
Distributions from net realized
gain........................... (0.62) (1.08) (0.59) (0.33) 0.00
-------- -------- -------- -------- --------
Total distributions.............. (1.21) (1.71) (1.18) (0.95) 0.00
Net asset value, end of period... $ 41.45 $ 31.42 $ 33.00 $ 31.40 $ 30.38
======== ======== ======== ======== ========
Total return (not
annualized)(2)................. 35.99% 0.42% 8.91% 6.59% 28.72%
Ratios/supplemental data:
Net assets, end of period
(000).......................... $327,208 $236,265 $258,327 $230,457 $204,926
Number of shares outstanding, end
of period (000)................ 7,893 7,520 7,827 7,340 6,745
Ratios to average net assets
(annualized):
Ratio of expenses to average net
assets(3)...................... 0.96% 0.97% 0.97% 0.93% 0.97%
Ratio of net investment income to
average net assets(4).......... 1.59% 1.92% 1.81% 2.05% 2.30%
Portfolio turnover............... 6% 7% 5% 4% 4%
</TABLE>
- -------------------
(1) The financial information for the fiscal periods prior to, and including,
1991 is based on the financial information for the Corporate Stock Fund
("IRA Fund") of the Wells Fargo Investment Trust for Retirement Programs
("Trust") which was reorganized into the Corporate Stock Fund on January 1,
1992.
(2) Total returns do not include any sales charges.
<TABLE>
<S> <C> <C> <C> <C> <C>
(3) Ratio of expenses to average
net assets prior to waived
fees and reimbursed
expenses..................... 1.00% 1.00% 0.99% 1.00% N/A
(4) Ratio of net investment
income to average net assets
prior to waived fees and
reimbursed expenses.......... 1.55% 1.89% 1.79% 1.98% N/A
</TABLE>
PROSPECTUS 18
<PAGE> 23
CORPORATE STOCK FUND
FOR A SHARE OUTSTANDING
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1990(1) 1989(1) 1988(1) 1987(1) 1986(1,2)
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period... $24.57 $18.93 $16.44 $15.93 $13.65
Income from investment
operations:
Net investment income
(loss)................ 0.64 0.60 0.57 0.45 0.43
Net realized and
unrealized gain/(loss)
on investments........ (1.61) 5.04 1.92 0.06 1.85
Total from investment
operations............ (0.97) 5.64 2.49 0.51 2.28
Less distributions:
Dividends from net
investment income..... 0.00 0.00 0.00 0.00 0.00
Distributions from net
realized gain......... 0.00 0.00 0.00 0.00 0.00
Total distributions..... 0.00 0.00 0.00 0.00 0.00
Net asset value, end of
period................ $23.60 $24.57 $18.93 $16.44 $15.93
Total return (not
annualized)(2)........ (3.95)% 29.79% 15.15% 3.20% 16.70%
Ratios/supplemental
data:
Net assets, end of
period (000).......... $151.742 $153,126 $115,119 $119,155 $33,667
Number of shares
outstanding, end of
period (000).......... 6,429 6,233 6,081 7,246 2,114
Ratios to average net
assets (annualized):
Ratio of expenses to
average net assets(3). 0.97 % 1.04% 1.02% 1.05% 1.02%
Ratio of net investment
income to average net
assets(4)............. 2.71 % 2.69% 3.17% 2.43% 2.75%
Portfolio turnover...... 6 % 6% 3% 12% 15%
</TABLE>
- -------------------
(1) The financial information for the fiscal periods prior to, and including,
1991 is based on the financial information for the Corporate Stock Fund
("IRA Fund") of the Wells Fargo Investment Trust for Retirement Programs
("Trust") which commenced operations on January 25, 1984 and was
reorganized into the Corporate Stock Fund on January 1, 1992.
(2) Total returns do not include any sales charges.
<TABLE>
<S> <C> <C> <C> <C> <C>
(3) Ratio of expenses to
average net assets
prior to waived fees
and reimbursed
expenses............. N/A N/A N/A N/A N/A
(4) Ratio of net
investment income to
average net assets
prior to waived fees
and reimbursed
expenses............. N/A N/A N/A N/A N/A
</TABLE>
19 PROSPECTUS
<PAGE> 24
DIVERSIFIED INCOME FUND
FOR A CLASS A SHARE OUTSTANDING AS SHOWN
<TABLE>
<CAPTION>
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993 1992(1)
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period..... $ 10.76 $ 11.08 $ 10.29 $10.00
Income from investment operations:
Net investment income.................. 0.35 0.33 0.30 0.02
Net realized and unrealized gain (loss)
on investments....................... 2.86 (0.32) 0.96 0.29
------- ------- ------- ------
Total from investment operations..... 3.21 0.01 1.26 0.31
Less distributions:
Dividends from net investment income... (0.35) (0.33) (0.30) (0.02)
Distributions from net realized gain
(loss)............................... (0.28) 0.00 (0.17) 0.00
------- ------- ------- ------
Total distributions.................. (0.63) (0.33) (0.47) (0.02)
Net asset value, end of period......... $ 13.34 $ 10.76 $ 11.08 $10.29
======= ======= ======= ======
Total return (not annualized)(2)..... 30.17% 0.08% 12.33% 3.10%
Ratios/supplemental data:
Net assets, end of period (000)........ $79,977 $45,178 $26,704 $1,379
Number of shares outstanding, end of
period(000).......................... 5,994 4,198 2,411 134
Ratios to average net assets
(annualized):
Ratio of expenses to average net
assets(3)............................ 1.10% 1.06% 0.46% 0.00%
Ratio of net investment income to
average net assets(4)................ 3.02% 3.16% 3.51% 4.09%
Portfolio turnover..................... 70% 62% 46% 1%
</TABLE>
- ---------------------
<TABLE>
<S> <C> <C> <C> <C>
(1) The Fund commenced operations on
November 18, 1992.
(2) Total returns do not include any
sales charges.
(3) Ratio of expenses to average net
assets prior to waived fees and
reimbursed expenses.................. 1.31% 1.34% 1.66% 3.49%
(4) Ratio of net investment income to
average net assets prior to waived
fees and reimbursed expenses......... 2.81% 2.88% 2.31% 0.60%
</TABLE>
PROSPECTUS 20
<PAGE> 25
DIVERSIFIED INCOME FUND
FOR A CLASS B SHARE OUTSTANDING AS SHOWN
<TABLE>
<CAPTION>
YEAR ENDED
DEC. 31,
1995
----------
<S> <C>
Net asset value, beginning of period................................ $10.00
Income from investment operations:
Net investment income............................................. 0.20
Net realized and unrealized gain on investments................... 2.75
------
Total from investment operations................................ 2.95
Less distributions:
Dividends from net investment income.............................. (0.20)
Distributions from net realized gain (loss)....................... (0.26)
------
Total distributions............................................. (0.46)
Net asset value, end of period.................................... $12.49
======
Total return (not annualized)(1)................................ 29.64%
Ratios/supplemental data:
Net assets, end of period (000)................................... $5,339
Number of shares outstanding, end of period (000)................. 428
Ratios to average net assets (annualized):
Ratio of expenses to average net assets(2)........................ 1.73%
Ratio of net investment income to average net assets(3)........... 2.40%
Portfolio turnover................................................ 70%
- -------------------
(1) Total returns do not include any sales charges.
(2) Ratio of expenses to average net assets prior to waived fees and
reimbursed expenses............................................. 2.57%
(3) Ratio of net investment income to average net assets prior to
waived fees and reimbursed expenses............................. 1.57%
</TABLE>
21 PROSPECTUS
<PAGE> 26
GROWTH AND INCOME FUND
FOR A CLASS A SHARE OUTSTANDING AS SHOWN
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993 1992 1991(1) 1990(2)
-------- -------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period................ $14.10 $14.75 $13.88 $12.84 $10.29 $10.00
Income from investment
operations:
Net investment income.... 0.19 0.22 0.23 0.27 0.41 0.26
Net realized and
unrealized gain (loss)
on investments......... 3.87 (0.27) 0.93 1.44 2.14 0.03
------ ------ ------ ------ ------ ------
Total from investment
operations............... 4.06 (0.05) 1.16 1.71 2.55 0.29
Less Distributions:
Dividends from net
investment income...... (0.19) (0.22) (0.23) (0.27) 0.00 0.00
Distributions from net
realized gain.......... (0.71) (0.38) (0.06) (0.40) 0.00 0.00
------ ------ ------ ------ ------ ------
Total distributions........ (0.90) (0.60) (0.29) (0.67) 0.00 0.00
Net asset value, end of
period................... $17.26 $14.10 $14.75 $13.88 $12.84 $10.29
====== ====== ====== ====== ====== ======
Total return (not
annualized)(3)........... 28.90% (0.29)% 8.44% 13.45% 24.77% 2.90%
Ratios/supplemental data:
Net assets, end of
period (000)........... $178,488 $113,525 $112,236 $44,883 $10,323 $430
Number of shares
outstanding, end of
period (000)........... 10,343 8,050 7,609 3,233 804 42
Ratios to average net
assets (annualized):
Ratio of expenses to
average net assets(4).. 1.18% 1.11% 0.93% 0.42% 0.05% 0.00%
Ratio of net investment
income to average net
assets(5).............. 1.23% 1.51% 1.72% 2.31% 3.50% 2.51%
Portfolio turnover....... 100% 71% 55% 80% 13% 0%
- -------------------
(1) The financial information for the fiscal periods prior to, and including, 1991 is
based on the financial information for the Select Stock Fund ("IRA Select Stock
Fund") of the Wells Fargo Investment Trust for Retirement Programs ("Trust") which
was reorganized into the Growth Stock Fund on January 2, 1992.
(2) The Fund commenced operations on August 2, 1990.
(3) Total returns do not include any sales charges.
(4) Ratio of expenses to
average net assets
prior to waived fees
and reimbursed
expenses............... 1.21% 1.15% 1.11% 1.10% 1.16% N/A
(5) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses............... 1.20% 1.47% 1.54% 1.63% 2.39% N/A
</TABLE>
PROSPECTUS 22
<PAGE> 27
GROWTH AND INCOME FUND
FOR A CLASS B SHARE OUTSTANDING AS SHOWN
<TABLE>
<CAPTION>
YEAR ENDED
DEC. 31,
1995
----------
<S> <C>
Net asset value, beginning of period................................ $10.00
Income from investment operations:
Net investment income............................................. 0.05
Net realized and unrealized gain on investments................... 2.79
------
Total from investment operations.................................... 2.84
Less Distributions:
Dividends from net investment income.............................. (0.05)
Distributions from net realized gain (loss)....................... (0.50)
------
Total distributions................................................. (0.55)
------
Net asset value, end of period...................................... $12.29
======
Total return (not annualized)(1).................................... 28.47%
Ratios/supplemental data:
Net assets, end of period (000)................................... $4,682
Number of shares outstanding, end of period (000)................. 381
Ratios to average net assets (annualized):
Ratio of expenses to average net assets(2)........................ 1.87%
Ratio of net investment income to average net assets(3)........... 0.43%
Portfolio turnover................................................ 100%
- -------------------
(1) Total returns do not include any sales charges.
(2) Ratio of expenses to average net assets prior to waived fees and
reimbursed expenses............................................. 2.21%
(3) Ratio of net investment income to average net assets prior to
waived fees and reimbursed expenses............................. 0.09%
</TABLE>
HOW THE FUNDS WORK
INVESTMENT OBJECTIVES AND POLICIES
Set forth below is a description of the investment objectives and related
policies of the Funds and the Master Portfolios. As with all mutual funds, there
can be no assurance that a Fund or Master Portfolio will achieve its investment
objective.
AGGRESSIVE GROWTH FUND
The Aggressive Growth Fund seeks to achieve its investment objective by
investing all of its assets in the Capital Appreciation Master Portfolio, which
has the same investment objective as the Fund. The investment objective of the
Capital Appreciation Master Portfolio is to provide investors with an
above-average level of capital appreciation. It seeks to achieve this objective
through the active management of a broadly-diversified portfolio of equity
securities of companies expected to experience strong growth in
23 PROSPECTUS
<PAGE> 28
revenues, earnings and assets. The Master Portfolio is designed to provide
above-average capital growth for investors willing to assume above-average risk.
See "How the Funds Work -- Master/Feeder Structure" for additional information
regarding the Fund's investment in the Master Portfolio.
The Master Portfolio invests primarily in common stocks that Wells Fargo Bank,
as the Master Portfolio's investment adviser, believes have better-than-average
prospects for appreciation. Under normal market conditions, the Master Portfolio
will hold at least 20 common stock issues spread across multiple industry
groups, with the majority of these holdings consisting of established growth
companies, turnaround or acquisition candidates, or attractive larger
capitalization companies. The Master Portfolio also may invest in securities of
foreign governmental or private issuers or in equity securities of companies in
emerging or less developed markets. The stock issues held by the Master
Portfolio may have some of the following characteristics: low or no dividends;
smaller market capitalizations; less market liquidity; relatively short
operating histories; aggressive capitalization structures (including high debt
levels); and involvement in rapidly growing/changing industries and/or new
technologies.
Additionally, it is expected that the Master Portfolio may from time to time
acquire securities through initial public offerings, and may acquire and hold
common stocks of smaller and newer issuers. It is expected that no more than 40%
of the Master Portfolio's assets will be invested in these highly aggressive
issues at one time.
Though the Master Portfolio will hold a number of larger capitalization
stocks, under normal market conditions and subject to the additional risks
described below, more than 50% of the Master Portfolio's total assets will be
invested in companies with smaller to medium capitalizations. The Master
Portfolio will invest primarily in companies with a market capitalization of $50
million or greater but may invest in companies with a market capitalization
under $50 million if the investment adviser to the Master Portfolio believes
such investments to be in the best interests of the Master Portfolio. It is
currently expected that the majority of the Master Portfolio's investments will
be in companies with market capitalizations, at the time of acquisition, of up
to $750 million.
Under ordinary market conditions, at least 65% of the value of the total
assets of the Master Portfolio will be invested in common stocks and in
securities which are convertible into common stocks that Wells Fargo Bank, as
investment adviser, believes have better-than-average prospects for
appreciation. The Master Portfolio also may invest in convertible debt
securities. At most, 5% of the Master Portfolio's net assets will be invested in
convertible debt securities that are not either rated in the four highest rating
categories by one or more nationally recognized statistical rating organizations
("NRSROs"), such as Moody's Investor Service, Inc. ("Moody's") or Standard &
Poor's Ratings Group ("S&P"), or unrated securities determined by Wells Fargo
Bank to be of comparable quality. See "Risk Factors" below.
PROSPECTUS 24
<PAGE> 29
From time to time, when the adviser, Wells Fargo Bank, determines market
conditions make pursuing the Master Portfolio's basic investment strategy
inconsistent with the best interests of the Master Portfolio's investors, the
Fund may use temporary alternative strategies, primarily designed to reduce
fluctuations in the value of the Master Portfolio's assets. In implementing
these temporary "defensive" strategies, the Master Portfolio may invest in
preferred stock or investment-grade debt securities that are convertible into
common stock and in money market instruments. Generally, these temporary
"defensive" investments will not exceed 30% of the Master Portfolio's total
assets.
A more complete description of the Master Portfolio's investments and
investment activities is contained in "Prospectus Appendix -- Additional
Investment Policies."
CORPORATE STOCK FUND
The Corporate Stock Fund seeks to achieve its investment objective by
investing all of its assets in the Corporate Stock Master Portfolio, which has
the same investment objective as the Fund. The investment objective of the
Master Portfolio is to approximate to the extent practicable the total rate of
return of substantially all the common stocks comprising the Standard & Poor's
500 Composite Stock Price Index (the "S&P 500 Index").* Because the Master
Portfolio invests in a number of different companies, its investments are
broadly "diversified" thereby tending to reduce the effect of the performance of
a single investment on the performance of the overall portfolio. Prior to April
29, 1996 the Fund invested directly in a portfolio of securities and not in the
Corporate Stock Master Portfolio. See "How the Funds Work -- Master/Feeder
Structure" for additional information regarding the Fund's investment in the
Master Portfolio.
The Master Portfolio seeks to create, to the extent feasible, a portfolio that
substantially replicates the total return of the securities comprising the S&P
500 Index. Precise replication of the performance of the securities comprising
the S&P 500 Index is not feasible, but the Master Portfolio seeks a high
correlation of at least 95% between the price and total return performance of
securities comprising the S&P Index and the investment results of the Master
Portfolio before expenses, in both rising and falling markets. A correlation of
100% would indicate a perfect correlation, which would be achieved when the net
asset value of the Master Portfolio, including the value of its
- ---------------
*The S&P 500 Index is an unmanaged index of stocks comprised of 500 companies,
including industrial, financial, utility and transportation companies. "Standard
& Poor's(R)", "S&P(R)", "S&P 500(R)" and "Standard & Poor's 500" are trademarks
of McGraw- Hill, Inc. Neither the Corporate Stock Master Portfolio nor the
Corporate Stock Fund is sponsored, endorsed, sold or promoted by Standard &
Poor's and Standard & Poor's makes no representation regarding the advisability
of investing in the Fund or Master Portfolio.
25 PROSPECTUS
<PAGE> 30
dividend and capital-gain distributions, increases or decreases in exact
proportion to changes in the S&P 500 Index. The Master Portfolio's ability to
track the S&P 500 Index, however, may be affected by, among other things,
transaction costs and the timing of interestholder purchases and redemptions.
The Master Portfolio attempts to achieve a 95% correlation by using a
statistical process known as "sampling" to select and hold in its portfolio a
representative sample of securities in the S&P 500 Index. BGFA regularly
monitors the correlation of the Master Portfolio's investments to the
composition and performance of the S&P 500 Index and seeks to adjust the Master
Portfolio's investments to the extent necessary to achieve a 95% correlation
between the investment results of the Master Portfolio and the performance of
the S&P 500 Index.
The Master Portfolio may invest some of its assets 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 shares or because
of unusual market conditions which limit the Master Portfolio's ability to
invest effectively its assets in accordance with its investment strategies. In
addition, the Master Portfolio may engage in securities lending to increase its
income and may use stock index futures and options thereon as a substitute for a
comparable market position in the underlying securities.
A more complete description of the Master Portfolio's investments and
investment activities is contained in the "Prospectus Appendix -- Additional
Investment Policies" and in the SAI.
EQUITY VALUE FUND AND BALANCED FUND
The EQUITY VALUE FUND'S investment objective is to seek to provide investors
with long-term capital appreciation. The Fund pursues this objective by
investing primarily in equity securities, including common stocks and may invest
in debt instruments that are convertible into common stocks of both domestic and
foreign companies. The Fund may invest in large, well-established companies and
smaller companies with market capitalization exceeding $50 million. The Fund may
invest up to 5% of its assets in foreign equity securities. Income generation is
a secondary consideration. The Fund may purchase dividend paying stocks of
particular issuers when the issuer's dividend record may, in the investment
adviser's opinion, have a favorable influence on the market value of the
securities. The Fund also may purchase convertible securities with the same
characteristics as common stocks. As with all mutual funds, there can be no
assurance that the Fund, which is a diversified portfolio, will achieve its
investment objective. The Fund invests, under normal market conditions,
substantially all of its total assets in income-producing securities, including
both debt instruments and equity securities,
PROSPECTUS 26
<PAGE> 31
and, under normal market conditions, at least 65% of its total assets in common
stocks and securities convertible into common stocks. Any change in the
investment objective of the Equity Value Fund by the Board of Directors may
result in the Fund having an investment objective different from the objective
which a shareholder considered appropriate at the time of investment in the
Fund.
The BALANCED FUND'S investment objective is to seek to provide investors with
both capital appreciation and current income resulting in a high total
investment return consistent with prudent investment risk and a balanced
investment approach. The Fund pursues this objective by investing in equity
securities and debt instruments through a balanced and diversified program. The
Fund normally invests between 30% and 70% of its assets in common stocks that
are considered by the investment adviser to have better than average prospects
for growth of capital and income. The Fund invests primarily in domestic equity
securities but may invest up to 5% of its assets in equity securities listed or
traded exclusively on a foreign exchange. The remaining balance of the Fund's
assets is invested in senior fixed-income securities, including corporate debt
securities, commercial paper and mortgage-backed and asset-backed securities,
based on the relative stability of income and principal of such securities. Debt
instruments in which the Fund may invest are rated at least investment grade or
deemed comparable.
In selecting senior fixed-income securities for the Balanced Fund, the adviser
seeks to select those debt instruments that appear best calculated to achieve
the Fund's investment objective within the credit and risk tolerances
established for the Fund. In accordance with those policies, the Balanced Fund
may purchase commercial paper rated "A-2" or better by S&P or "Prime-2" or
better by Moody's, corporate debt securities rated "BBB" or better by S&P or
"Baa" or better by Moody's (which contain some speculative characteristics) and
mortgage-backed and asset-backed securities rated "AA" or better by S&P or "Aa"
or better by Moody's (or the foregoing types of debt securities given equivalent
ratings by at least two other nationally recognized statistical rating
organizations ("NRSROs"), or, if any such securities are not rated, are of
comparable quality in the adviser's opinion).
The Balanced Fund may also purchase zero-coupon bonds (i.e., discount debt
obligations that do not make periodic interest payments) that are subject to
greater market fluctuations from changing interest rates than debt obligations
of comparable maturities which make current distributions of interest.
In selecting equity investments (which may include common stocks of both
domestic and foreign companies) for the Equity Value and Balanced Funds, the
adviser selects companies for investment using both quantitative and qualitative
analysis to identify those issuers that, in the adviser's opinion, exhibit
below-average valuation multiples, above-average financial strength, a strong
position in their industry and a history of steady profit growth.
27 PROSPECTUS
<PAGE> 32
The adviser also may select other equity securities in addition to common
stocks for investment by the Equity Value and Balanced Funds. Such other equity
securities are preferred stocks, high grade securities convertible into common
stocks, and warrants. Neither the Equity Value or Balanced Fund will invest more
than 5% of its net assets in warrants, no more than 2% of which will be invested
in warrants which are not listed on the New York or American Stock Exchanges.
Under normal market conditions, the Equity Value and Balanced Funds will each
invest at least 65% of its total assets in common stocks or securities
convertible into common stocks. For temporary defensive purposes, however, both
the Equity Value and Balanced Funds may invest in U.S. Government obligations
(as defined below), certificates of deposit, bankers' acceptances, commercial
paper, repurchase agreements (maturing in seven days or less) and debt
obligations of corporations (corporate bonds, debentures, notes and other
similar corporate debt instruments) that are rated investment grade or better by
S&P or Moody's.
The Equity Value and Balanced Funds also may hold short-term U.S. Government
obligations, money market instruments, repurchase agreements, securities issued
by other investment companies within the limits prescribed by the Investment
Company Act of 1940, as amended (the "1940 Act"), and cash, pending investment,
to meet anticipated redemption requests or if the investment adviser deems
suitable investments for a Fund to be unavailable. Such investments may be made
in such proportions as, in the opinion of the investment adviser, existing
circumstances may warrant, and may include obligations of foreign banks and
foreign branches of U.S. banks.
For additional descriptions of the types of securities and investment
practices used by the Equity Value and Balanced Funds, see "Prospectus
Appendix -- Additional Investment Policies" and the SAI.
DIVERSIFIED INCOME FUND
The Diversified Income Fund's investment objective is to seek current income
and a growing stream of income over time, consistent with preservation of
capital. The Fund pursues this objective by investing primarily in
income-producing debt instruments and equity securities, including common
stocks, and preferred stocks and debt instruments that are convertible into
common stocks. The Fund invests, under normal market conditions, substantially
all of its total assets in income-producing securities, including both debt
instruments and equity securities, and, under normal market conditions, at least
50% of its total assets in equity securities.
The Diversified Income Fund invests in common stocks of issuers that, in the
opinion of Wells Fargo Bank, as the Fund's investment adviser, exhibit a strong
earnings growth trend and that are believed by Wells Fargo Bank to have
above-average prospects for future earnings growth. The Fund's common stocks are
diversified among industries and companies. Emphasis is placed on common stocks
that are trading at low price-to-
PROSPECTUS 28
<PAGE> 33
earnings ratios, either relative to the overall market or to the security's
historic price-to-earnings relationship, and in common stocks of issuers that
have historically paid above-average dividends.
Under normal market conditions, at least 90% of the Diversified Income Fund's
equity securities, including, for this purpose, the convertible securities
described below, will be issued by large companies (i.e., for purposes of the
Fund, companies with a market capitalization of more than $1 billion). Some
investments also may be made in equity securities of medium- and smaller-size
companies (i.e., for purposes of the Fund, those companies with at least $250
million but less than $1 billion in capitalization) which may have the potential
to generate high levels of future revenue and earnings growth and where the
investment opportunity may not be fully reflected in the price of the securities
but which may involve greater risks than investments in larger companies. There
may be some additional risks associated with investments in smaller companies
because securities issued by such companies tend to trade less frequently and
may be less liquid than securities issued by larger companies. In addition,
smaller companies, relative to larger concerns, may depend on a small group of
key managers or may have limited product lines, financial resources or available
markets. As a result, the price of securities issued by small companies may be
more volatile than the price of securities issued by larger companies. The Fund
also may invest in securities of foreign governmental or private issuers or in
equity securities of companies in emerging or less developed markets.
The debt instruments held by the Diversified Income Fund may include
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities (including government-sponsored enterprises) ("U.S. Government
obligations") and a broad range of other debt instruments, as described in this
Prospectus or in the SAI, such as bonds and other debt securities of domestic
companies, U.S. dollar-denominated debt obligations of foreign issuers,
including foreign corporations and foreign governments, and various asset-backed
securities. Most of the debt instruments acquired by the Fund are issued by
companies or governmental entities located within the United States. All of the
nonconvertible debt instruments acquired by the Fund are rated within the four
highest rating categories by one or NRSROs, such as Moody's or S&P, or are
unrated instruments determined by the Adviser to be of comparable quality. Up to
20% of the assets of the Fund that are invested in debt instruments may be
rated, at the time of purchase, in the lowest of these four rating categories
(i.e., rated "BBB" by S&P or "Baa" by Moody's).
The Diversified Income Fund may temporarily hold assets in cash or make
short-term investments to the extent appropriate to maintain adequate liquidity
for redemption requests or other cash management needs, or for temporary
defensive purposes. The short-term investments that the Fund may purchase for
liquidity purposes include U.S. Treasury bills, shares of other mutual funds and
repurchase agreements (as described below).
29 PROSPECTUS
<PAGE> 34
A more complete description of the Fund's investments and investment
activities is contained in "Prospectus Appendix -- Additional Investment
Policies."
GROWTH AND INCOME FUND
The Growth and Income Fund seeks to earn current income and achieve long-term
capital appreciation by investing primarily in common stocks, and preferred
stocks and debt securities that are convertible into common stocks. There can be
no assurance that the Fund, which is a diversified portfolio, will achieve its
investment objective. Under normal market conditions, the Fund will invest at
least 65% of its total assets in common stocks and securities which are
convertible into common stocks and at least 65% of its total assets in
income-producing securities. Up to 25% of the Fund's assets may be invested in
securities of foreign issuers.
The Growth and Income Fund invests in common stocks of issuers that, in the
opinion of Wells Fargo Bank, as the Fund's investment adviser, exhibit a strong
earnings growth trend and that are believed by Wells Fargo Bank to have
above-average prospects for future earnings growth. The Fund maintains a
portfolio of common stocks diversified among industries and companies. The Fund
may invest in common stocks of large companies (i.e., for the purposes of the
Fund, those companies with more than $750 million in capitalization) which Wells
Fargo Bank believes offer the potential for long-term earnings growth or
above-average dividend yield. Emphasis may be placed on common stocks which are
trading at low price-to-earnings ratios, either relative to the overall market
or to the security's historic price-to-earnings relationship, and on common
stocks of issuers that have historically paid above-average dividends. Some
investments also may be made in common stocks of medium- and smaller-size
companies (i.e., for the purposes of the Fund, those companies with at least
$250 million, but less than $750 million in capitalization) which may have the
potential to generate high levels of future revenue and earnings growth and
where the investment opportunity may not be fully reflected in the price of the
securities but which may involve greater risks than investments in larger
companies. The Fund may also invest in securities of foreign governmental or
private issuers or in equity securities of companies in emerging or less
developed markets.
The Growth and Income Fund intends to invest less than 50% of its assets in
the securities of medium- and smaller-size companies and the remainder in
securities of larger-size companies. However, the actual percentages may vary
according to changes in market conditions and the judgment of the adviser of how
best to achieve the Fund's investment objective. There may be some additional
risk associated with investments in smaller companies because securities of such
companies tend to trade less frequently and may be less liquid than securities
issued by larger companies. In addition, smaller companies, relative to larger
concerns, may depend on a small group of key managers or may have limited
product lines, financial resources or available markets. As a result, the
PROSPECTUS 30
<PAGE> 35
price of securities issued by small companies may be more volatile than the
price of securities issued by larger companies.
The Growth and Income Fund may temporarily hold assets in cash or make
short-term investments to the extent appropriate to maintain adequate liquidity
for redemption requests or other cash management needs, or for temporary
defensive purposes. The short-term investments that the Fund may purchase for
liquidity purposes include U.S. Treasury bills, shares of other mutual funds and
repurchase agreements (as described below).
A more complete description of the Fund's investments and investment
activities is contained in "Prospectus Appendix -- Additional Investment
Policies."
SMALL CAP FUND
The Small Cap Fund seeks to achieve its investment objective by investing all
its assets in the Small Cap Master Portfolio, which has the same investment
objective as the Fund. The investment objective of the Master Portfolio is to
seek above-average long-term capital appreciation in order to provide investors
with a rate of total return exceeding that of the Russell 2000 Index (before
fees and expenses) over a time horizon of three to five years. The Fund and
Master Portfolio seek to provide above-average capital growth for investors
willing to assume above-average risk. The Master Portfolio seeks to achieve this
investment objective through the active management of a broadly diversified
portfolio of growth-oriented common stocks. Under normal market conditions, the
Master Portfolio invests at least 65% of its assets in companies with market
capitalizations between $50 million and $1 billion at the time of acquisition,
although it may sometimes invest in companies with capitalizations greater or
less than these amounts. The Master Portfolio invests primarily in common stocks
of domestic and foreign companies believed by Wells Fargo Bank, as investment
adviser, to be characterized by new or innovative products, services or
processes and to have above-average prospects for capital appreciation. The
Master Portfolio will sell the common stock of any company in its investment
portfolio after such company's market capitalization exceeds $2 billion.
Under normal market conditions, the Small Cap Master Portfolio holds at least
20 common stock issues spread across multiple industry groups and sectors of the
economy. The majority of these holdings consist of smaller capitalization
companies, established growth companies and turnaround or acquisition
candidates. The Master Portfolio may acquire securities through initial public
offerings of companies whose securities have been offered to the public for
three months or less ("IPOs") and may acquire and hold securities of start-up
companies and other newer issuers. It is expected that no more than 20% of the
Master Portfolio's assets will be invested in these highly aggressive issues at
one time. The Master Portfolio also may invest in securities of foreign
governmental or private issuers or in equity securities of companies in emerging
or less
31 PROSPECTUS
<PAGE> 36
developed markets. The equity securities in the Master Portfolio's investment
portfolio may have some of the following characteristics: low or no dividends;
smaller market capitalizations (less than $1 billion); less market liquidity;
newly public companies (i.e., recent initial public offering); relatively short
operating histories; aggressive capitalization structures (including high debt
levels); and involvement in rapidly growing/changing industries and/or new
technologies.
There may be some additional risks associated with investments in smaller
capitalization companies, IPOs and start-up companies or other newer issuers.
Such companies tend to have limited operating histories and their securities
tend to be less liquid than securities of larger companies. Further, the market
price of such companies' securities is generally more sensitive to changes in
the issuer's financial condition and current economic trends, and, therefore,
the prices of such companies' securities may be more volatile than those of
larger companies.
At most, 5% of the Master Portfolio's net assets will be invested in
convertible debt securities that are not either rated in the four highest rating
categories by one or more NRSROs, such as Moody's or S&P, or unrated securities
determined by Wells Fargo Bank to be of comparable quality. Securities rated in
the fourth lowest rating category (i.e., rated "BBB" by S&P or "Baa" by Moody's)
are regarded by S&P as having an adequate capacity to pay interest and repay
principal, but changes in economic conditions or other circumstances are more
likely to lead to a weakened capacity to make such repayments. Moody's considers
such securities as having speculative characteristics.
From time to time Wells Fargo Bank may determine that conditions in the
securities markets make pursuing the Small Cap Master Portfolio's basic
investment strategy inconsistent with the best interests of the Master
Portfolio's investors. At such times, Wells Fargo Bank may use temporary
alternative strategies, primarily designed to reduce fluctuations in the value
of the Master Portfolio's assets. In implementing these temporary "defensive"
strategies, the Master Portfolio may invest in preferred stock or
investment-grade debt securities and in money market securities. It is expected
that these temporary "defensive" investments will not exceed 35% of the Master
Portfolio's total assets.
The Small Cap Master Portfolio pursues an active trading investment strategy,
and the length of time the Master Portfolio has held a particular security is
not generally a consideration in investment decisions. Accordingly, the Master
Portfolio's portfolio turnover rate may be higher than that of other funds that
do not pursue an active trading investment strategy. Portfolio turnover
generally involves some expense to the Master Portfolio, including brokerage
commissions or dealer mark-ups and other transactions costs on the sale of
securities and the reinvestment in other securities. Portfolio turnover also can
generate capital gains tax consequences. These expenses and capital gain tax
consequences will be passed on to the Fund.
PROSPECTUS 32
<PAGE> 37
For additional descriptions of the types of securities and investment
practices used by the Funds and Master Portfolios, see "Risk Factors",
"Prospectus Appendix -- Additional Investment Policies" in this Prospectus and
"Investment Restrictions" and "Additional Permitted Investment Activities" in
the SAI.
MASTER/FEEDER STRUCTURE -- THE CAPITAL APPRECIATION, CORPORATE STOCK AND
SMALL CAP MASTER PORTFOLIOS.
As discussed above, the Aggressive Growth, Corporate Stock and Small Cap Funds
are feeder funds in master/feeder structures. Accordingly, each Fund invests all
of its assets in a corresponding Master Portfolio of the Master Trust which has
the identical investment objective as the Fund. See "How the Funds
Work -- Investment Objectives and Policies." The Master Trust was organized as a
Delaware business trust on August 15, 1991. In addition to selling their
respective interests to the Funds, the Master Portfolios may sell their
interests to certain other mutual funds or accredited investors.
The Company's Board of Directors believes that if other investors invest their
assets in the Master Portfolios, certain economic efficiencies may be realized
with respect to the Master Portfolios. For example, fixed expenses that
otherwise would have been borne solely by a Fund would be spread across a larger
asset base provided by more than one fund investing in a Master Portfolio. There
can be no assurance that these economic efficiencies will be achieved. Each Fund
and other entities investing (if any) in a Master Portfolio would each be liable
for all obligations of the Master Portfolio. However, the risk of a Fund
incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and the Master Trust
itself is unable to meet its obligations. Accordingly, the Company's Board of
Directors believes that the Funds and their shareholders will not be adversely
affected by reason of investing each Fund's assets in its corresponding Master
Portfolio. However, if there is no other investor in a Master Portfolio, the
economic efficiencies (e.g., spreading fixed expenses across a larger asset
base) that the Company's Board believes should be available through investment
in a Master Portfolio may not be fully achieved. In addition, given the
relatively novel nature of the master/feeder structure, accounting and
operational difficulties could occur. See "Management, Distribution and
Servicing Fees" for additional description of the Funds' and Master Portfolios'
management and expenses.
Each Fund may withdraw its investment in the corresponding Master Portfolio
only if the Board of Directors of the Company determines that such action is in
the best interests of such Fund and its shareholders. Upon such withdrawal, the
Company's Board would consider alternative investments, including investing all
of a Fund's assets in another investment company with the same investment
objective as the Fund or hiring an investment adviser to manage the Fund's
assets in accordance with the investment policies described below with respect
to the Master Portfolio.
33 PROSPECTUS
<PAGE> 38
A Master Portfolio's investment objective and other fundamental policies,
which are substantially the same as those of the corresponding Fund, cannot be
changed without approval by the holders of a majority (as defined in the 1940
Act) of the Master Portfolio's outstanding voting shares. Whenever a Fund, as a
Master Portfolio shareholder, is requested to vote on matters pertaining to any
fundamental policy of such Master Portfolio, the Fund will hold a meeting of its
shareholders to consider such matters and the Fund will cast its votes in
proportion to the votes received from Fund shareholders. Each Fund will vote
Master Portfolio shares for which it receives no voting instructions in the same
proportion as the votes received from Fund shareholders. In addition, certain
policies of each Master Portfolio that are non-fundamental can be changed by
vote of a majority of the Master Trust's Trustees without a shareholder vote. If
a Master Portfolio's investment objective or policies are changed, the
corresponding Fund could subsequently change its objective or policies to
correspond to those of the Master Portfolio or the Fund could redeem its Master
Portfolio shares and either seek a new investment company with a substantially
matching objective in which to invest or retain its own investment adviser to
manage the Fund's portfolio in accordance with its objective. In the latter
case, a Fund's inability to find a substitute investment company in which to
invest or equivalent management services could adversely affect shareholders'
investments in the Fund. A Fund's investment objective and other fundamental
policies cannot be changed without approval by the holders of a majority (as
defined in the 1940 Act) of the Fund's outstanding voting shares. Each Fund will
provide shareholders with 30 days' written notice prior to the implementation of
any change in the investment objective of the Fund or its corresponding Master
Portfolio, to the extent possible. Information on the Funds' and Master
Portfolios' investment objectives, policies and restrictions is included under
"How the Funds Work" and "Prospectus Appendix -- Additional Investment Policies"
in this Prospectus and "Investment Restrictions" and "Additional Permitted
Investment Activities" in the SAI. Additional information regarding the officers
and directors/trustees of the Company and the Master Trust is included in the
SAI under "Management."
RISK FACTORS
The price per share of each of the Funds will fluctuate with changes in value
of the investments held by a Fund. Shareholders of a Fund should, therefore,
expect the value of their shares to fluctuate with changes in the value of the
securities owned by that Fund.
The market value of a Fund's investment in fixed-income securities will change
in response to changes in interest rates and the relative financial strength of
each issuer. During periods of falling interest rates, the value of fixed-income
securities generally rises. Conversely, during periods of rising interest rates,
the value of such securities generally declines. Debt securities with longer
maturities, which tend to produce higher yields, are subject to potentially
greater capital appreciation and depreciation than
PROSPECTUS 34
<PAGE> 39
obligations with shorter maturities. Changes in the financial strength of an
issuer or changes in the ratings of any particular security also may affect the
value of these investments. Fluctuations in the market value of fixed-income
securities subsequent to their acquisition will not affect cash income from such
securities but will be reflected in a Fund's net asset value. Securities rated
in the fourth highest rating category are regarded by S&P as having an adequate
capacity to pay interest and repay principal, but changes in economic conditions
or other circumstances are more likely to lead to a weakened capacity to make
such repayments. Moody's considers such securities as having speculative
characteristics. Subsequent to its purchase by the Fund, an issue of securities
may cease to be rated or its rating may be reduced below the minimum rating
required for purchase by the Fund. The adviser will consider such an event in
determining whether the Aggressive Growth, Balanced, and Diversified Income
Funds should continue to hold the obligation. Securities rated below the fourth
highest rating category (sometimes called "junk bonds") are often considered to
be speculative and involve greater risk of default or price changes due to
changes in the issuer's credit-worthiness. The market prices of these securities
may fluctuate more than higher quality securities and may decline significantly
in periods of general economic difficulty.
There may be some additional risks associated with investments in smaller
and/or newer companies because their shares tend to be less liquid than
securities of larger companies. Further, shares of small and new companies are
generally more sensitive to purchase and sale transactions and changes in the
issuer's financial condition and, therefore, the prices of such stocks may be
more volatile than those of larger company stocks and may be subject to more
abrupt price movements than securities of larger companies.
Investing in the securities of issuers in any foreign country, including
American Depository Receipts ("ADRs") and European Depository Receipts ("EDRs")
and similar securities, involves special risks and considerations not typically
associated with investing in U.S. companies. These include differences in
accounting, auditing and financial reporting standards; generally higher
commission rates on foreign portfolio transactions; the possibility of
nationalization, expropriation or confiscatory taxation; adverse changes in
investment or exchange control regulations (which may include suspension of the
ability to transfer currency from a country); and political, social and monetary
or diplomatic developments that could affect U.S. investments in foreign
countries. Additionally, foreign securities and dividends and interest payable
on those securities may be subject to foreign taxes, including taxes withheld
from payments on those securities. Foreign securities often trade with less
frequency and volume than domestic securities and, therefore, may exhibit
greater price volatility. Additional costs associated with an investment in
foreign securities may include higher custodial fees than apply to domestic
custodial arrangements and transaction costs of foreign currency conversions.
Changes in foreign exchange rates also will affect the value of securities
denominated or quoted in currencies other than the U.S. dollar. A Fund's
performance
35 PROSPECTUS
<PAGE> 40
may be affected either unfavorably or favorably by fluctuations in the relative
rates of exchange between the currencies of different nations, by exchange
control regulations and by indigenous economic and political developments.
There are special risks involved in investing in emerging-market countries.
Most are heavily dependent on international trade, and some are especially
vulnerable to recessions in other countries. Some of these countries are also
sensitive to world commodity prices and may be subject to political and social
uncertainties. Many investments in emerging markets can be considered
speculative, and their prices can be much more volatile than in the more
developed nations of the world. This difference reflects the greater
uncertainties of investing in less established markets and economies. In
addition, the financial markets of emerging markets countries are generally less
well capitalized and thus securities of issuers based in such countries may be
less liquid.
Illiquid securities, which may include certain restricted securities, may be
difficult to sell promptly at an acceptable price. Certain restricted securities
may be subject to legal restrictions on resale. Delay or difficulty in selling
securities may result in a loss or be costly to a Fund.
The adviser may use certain derivative investments or techniques, such as
buying and selling options and futures contracts and entering into currency
exchange contracts or swap agreements, to adjust the risk and return
characteristics of a Fund's portfolio. Derivatives are financial instruments
whose value is derived, at least in part, from the price of another security or
a specified asset, index or rate. Some derivatives may be more sensitive than
direct securities to changes in interest rates or sudden market moves. Some
derivatives also may be susceptible to fluctuations in yield or value due to
their structure or contract terms. If a Fund's adviser judges market conditions
incorrectly, the use of certain derivatives could result in a loss, regardless
of the adviser's intent in using the derivatives.
The Capital Appreciation and Small Cap Master Portfolios pursue an active
trading investment strategy, and the length of time a Master Portfolio has held
a particular security is not generally a consideration in investment decisions.
Accordingly, the portfolio turnover rate for such Master Portfolios may be
higher than that of other funds that do not pursue an active trading investment
strategy. Portfolio turnover generally involves some expense to a Master
Portfolio, including brokerage commissions or dealer mark-ups and other
transaction costs on the sale of securities and the reinvestment in other
securities. Portfolio turnover also can generate short-term capital gains tax
consequences. These expenses and capital gain consequences will be passed on to
the Fund.
There is, of course, no assurance that a Fund will achieve its investment
objective or be successful in preventing or minimizing the risk of loss that is
inherent in investing in particular types of investment products. See
"Prospectus Appendix -- Additional
PROSPECTUS 36
<PAGE> 41
Investment Policies" and the SAI for further information about investment
policies and risks.
PERFORMANCE
Fund performance may be advertised from time to time in terms of average
annual total return, cumulative total return and yield. Performance figures are
based on historical results and are not intended to indicate future performance.
Performance figures are calculated separately for each class of shares of a
Fund.
Average annual total return is based on the overall dollar or percentage
change in value of a hypothetical investment in shares of a class or Fund and
assumes that all dividends and capital-gain distributions attributable to such
class or Fund are reinvested at NAV in shares of that class or Fund. The
standardized average annual total return, as calculated for Class A shares,
assumes that you have paid the maximum sales charge and, as calculated for Class
B shares, assumes that you have paid the maximum applicable contingent deferred
sales charge on your hypothetical investment. Cumulative total return is
calculated similarly except that the return figure is aggregated over the
relevant period instead of annualized.
The yield on shares of a class or shares of a Fund is calculated by dividing
the net investment income per share earned during a specified period (usually 30
days) by its public offering price per share. Standardized yield on Class A
shares is calculated assuming you have paid the maximum front-end sales charge
and, on Class B shares assuming you have paid the maximum applicable contingent
deferred sales charge. Effective yield is calculated similarly but assumes
reinvestment of the income earned from a Fund. Because of the effects of
compounding, effective yields are slightly higher than yields. The
tax-equivalent yield of a class of shares is similarly calculated but assumes
that a stated income tax rate has been applied to determine the tax-equivalent
figure.
In addition to presenting standardized total return, the Funds also may
present nonstandardized total returns, yields and, for purposes of sales
literature, distribution rates. For example, the performance figure of the
shares of a class or Fund may be calculated on the basis of an investment at the
net asset value per share or at net asset value per share plus a reduced sales
charge (see "Investing in the Funds -- How To Buy Shares") rather than the
public offering price per share. In this case, the figure might not reflect the
effect of the sales charge that you may have paid.
The performance information advertised by the Small Cap Fund for periods prior
to September 6, 1996, the date the Fund and the Master Portfolio commenced
operations, is based upon the prior performance of the Small Capitalization
Growth Fund for BRP Employee Retirement Plans, a Wells Fargo Bank Collective
Investment Fund for Business Retirement Programs (the "CIF"). The performance
information is adjusted to
37 PROSPECTUS
<PAGE> 42
reflect the Fund's and the Master Portfolio's current level of operating
expenses, including any front-end sales loads or contingent deferred sales
charges. The prior performance of the CIF is deemed relevant because the Fund
invests all of its assets in the Master Portfolio which acquired the assets of
the CIF immediately prior to the commencement of the Fund's operations. The
Master Portfolio, as successor to the assets of the CIF, is managed by Wells
Fargo in a manner that is in all material respects equivalent to the management
of the CIF.
Additional information about the performance of each Fund is contained in the
Annual Report for each Fund. The Annual Reports may be obtained free of charge
by calling the Company at 1-800-222-8222.
THE FUNDS, MASTER PORTFOLIOS AND MANAGEMENT
THE FUNDS AND MASTER PORTFOLIOS
The Funds are seven of the funds offered by the Stagecoach Family of Funds.
The Company was organized as a Maryland corporation on September 9, 1991 and
currently offers shares of the following funds: Aggressive Growth, Arizona
Tax-Free, Asset Allocation, Balanced, California Tax-Free Bond, California
Tax-Free Income, California Tax-Free Money Market Mutual, Corporate Stock,
Diversified Income, Equity Value, Ginnie Mae, Government Money Market Mutual,
Growth and Income, Intermediate Bond, Money Market Mutual, Money Market Trust,
National Tax-Free, National Tax-Free Money Market Mutual, Oregon Tax-Free, Prime
Money Market Mutual, Short-Intermediate U.S. Government Income, Small Cap,
Treasury Money Market Mutual, and U.S. Government Allocation Funds. The Arizona
Tax-Free, Balanced, California Tax-Free Bond, Equity Value, Ginnie Mae, Growth
and Income, Intermediate Bond, Money Market Mutual, National Tax-Free, Oregon
Tax-Free, Prime Money Market Mutual, Small Cap and Treasury Money Market Mutual
Funds each offer three classes of shares. The Aggressive Growth, Asset
Allocation, California Tax-Free Income, Diversified Income, Short-Intermediate
U.S. Government Income and U.S. Government Allocation Funds each offer two
classes of shares. The California Tax-Free Money Market Mutual, Corporate Stock,
Government Money Market Mutual, Money Market Trust, and National Tax-Free Money
Market Mutual Funds each offer one class of shares. Most of the Company's funds
are authorized to issue multiple classes of shares, one class generally subject
to a front-end sales charge and, in some cases, a class subject to a
contingent-deferred sales charge, that are offered to retail investors. Certain
of the Company's funds also are authorized to issue other classes of shares,
which are sold primarily to institutional investors at NAV. Each class of shares
in a fund represents an equal, proportionate interest in a fund with other
shares of the same class. Shareholders of each class bear
PROSPECTUS 38
<PAGE> 43
their pro rata portion of the fund's operating expenses, except for certain
class-specific expenses (e.g., any state securities registration fees,
shareholder servicing fees or distribution fees that may be paid under Rule
12b-1) that are allocated to a particular class and, accordingly, may affect
performance. Please contact Stagecoach Shareholder Services at 1-800-222-8222 if
you would like additional information about investment options in a Master
Portfolio or other funds or classes of shares offered.
The Company's Board of Directors supervises the Funds' activities and monitors
their contractual arrangements with various service providers. Although the
Company is not required to hold annual shareholder meetings, special meetings
may be required for purposes such as electing or removing Directors, approving
advisory contracts and distribution plans, and changing a fund's investment
objective or fundamental investment policies. All shares of the Company have
equal voting rights and are voted in the aggregate, rather than by series or
class, unless otherwise required by law (such as when the voting matter affects
only one series or class). A Fund shareholder of record is entitled to one vote
for each share owned and fractional votes for fractional shares owned. A more
detailed description of the voting rights and attributes of the shares is
contained in the "Capital Stock" section of the SAI.
MANAGEMENT
Wells Fargo Bank is the investment adviser to the Capital Appreciation,
Corporate Stock and Small Cap Master Portfolios and the Balanced, Diversified
Income, Equity Value and Growth and Income Funds. In addition, Wells Fargo Bank
serves as the Funds' transfer and dividend disbursing agent and is a shareholder
servicing agent and selling agent. Wells Fargo Bank, one of the largest banks in
the United States, was founded in 1852 and is the oldest bank in the western
United States. As of June 30, 1996, Wells Fargo Bank and its affiliates provided
investment advisory services for approximately $56 billion of assets of
individuals, trusts, estates and institutions. Wells Fargo Bank also serves as
investment adviser to the other separately managed funds (or master portfolios
in which such funds invest) of the Company, and as investment adviser or sub-
adviser to five other registered, open-end, management investment companies.
Wells Fargo Bank, a wholly owned subsidiary of Wells Fargo & Company, is located
at 420 Montgomery Street, San Francisco, California 94104.
BGFA, located at 45 Fremont Street, San Francisco, California 94105, serves as
sub-adviser to the Corporate Stock Master Portfolio. BGFA is a wholly owned
subsidiary of BGI and an indirect subsidiary of Barclays Bank PLC. As of July 1,
1996, BGFA and its affiliates provided investment advisory services for over $56
billion of assets. BGFA was created by the reorganization of Wells Fargo Nikko
Investment Advisors ("WFNIA"), a former affiliate of Wells Fargo Bank, with and
into Wells Fargo Institutional Trust Company, N.A. BGFA also serves as the
sub-adviser to other portfolios of the Master Trust
39 PROSPECTUS
<PAGE> 44
and as investment adviser or sub-adviser to five other registered, open-end,
management investment companies. Pursuant to a Sub-Advisory Agreement, BGFA,
subject to the supervision and approval of Wells Fargo Bank, provides investment
advisory assistance and the day-to-day management of the Corporate Stock Master
Portfolio's assets, subject to the overall authority of the Master Trust's Board
of Trustees and in conformity with Delaware law and the stated policies of the
Master Portfolio.
Subsequent to acquisition by Wells Fargo & Company of First Interstate Bancorp
on April 1, 1996, Wells Fargo Investment Management, Inc. ("WFIM") (formerly,
First Interstate Capital Management, Inc.) served as investment adviser to the
predecessor funds of the Balanced and Equity Value Funds. WFIM, a wholly owned
subsidiary of Wells Fargo & Company, is located at 444 Market Street, San
Francisco, California 94105. Prior to March 18, 1994, such predecessor funds'
investment adviser was San Diego Financial Capital Management, Inc. (predecessor
to First Interstate Capital Management, Inc.) which was acquired by First
Interstate Bancorp through its merger with San Diego Financial Corporation.
Mr. Brian Mulligan is responsible, as co-manager, for the day-to-day
management of the portfolio of the Growth and Income Fund. Mr. Mulligan has been
co-manager since October 1, 1995. Mr. Mulligan is also co-manager of the Wells
Fargo Core Equities Group. He is a Vice-President and Manager of the San
Francisco Investment Office, where he is primarily responsible for personal
accounts including individuals, charitable foundations and IRAs. He also covers,
from a research standpoint, the telecommunications and electric utility
industries. Mr. Mulligan has been with Wells Fargo Bank since its merger with
Crocker National Bank in 1986. Mr. Mulligan was graduated from Skidmore College
with a B.S. degree in business management. He is a Chartered Financial Analyst
and serves as a member of the staff of graders. In addition, Mr. Mulligan is a
former member of the Board of Governors for the Los Angeles Society of Financial
Analysts and a present member of the San Francisco Security Analysts Society.
Mr. Robert Bissell assumed responsibility as a co-portfolio manager for the
day-to-day management of the Equity Value Fund and assumed responsibility as a
co-portfolio manager for the day-to-day management of the equity portion of the
Balanced Fund, as of the commencement of operations of the Funds on September 6,
1996. Mr. Bissell is also responsible, as co-manager, for the day-to-day
management of the portfolios of the Diversified Income and Growth and Income
Funds. Mr. Bissell assumed these responsibilities as of February 14, 1996.
Except for a brief period between October 1, 1995 and February 14, 1996, Mr.
Bissell has been responsible for the day-to-day management of the Diversified
Income Fund since its inception, and the Growth and Income Fund since January
1992. Mr. Bissell is also responsible as co-manager for the Capital Appreciation
Master Portfolio and was, prior to its conversion to master-feeder structure,
portfolio manager of the Strategic Growth Fund of Overland Express Funds, Inc.,
the predecessor fund to the Master Portfolio. Mr. Bissell is a Senior
Vice-President
PROSPECTUS 40
<PAGE> 45
and Manager of equities at Wells Fargo Bank. Mr. Bissell joined Wells Fargo Bank
at the time of its merger with Crocker Bank and has been with the combined
organization for over 20 years. Prior to joining Wells Fargo Bank, he was
Vice-President and Investment Counsel with M. H. Edie Investment Counseling,
where he managed institutional and high-net-worth portfolios. Mr. Bissell holds
a finance degree from the University of Virginia. He is a Chartered Financial
Analyst and a member of the Los Angeles Society of Financial Analysts.
Mr. Allen Wisniewski has been responsible, as co-manager, for the day-to-day
management of the portfolio of the Diversified Income Fund since November 1992.
He also is responsible for managing equity and balanced accounts for
high-net-worth individuals and pensions. Mr. Wisniewski joined Wells Fargo Bank
in April 1987 with the acquisition of Bank of America's consumer trust services,
where he was a portfolio manager. He received his B.A. degree and M.B.A. degree
in economics and finance from the University of California at Los Angeles. He is
a member of the Los Angeles Society of Financial Analysts.
Mr. Jon Hickman, as Manager of the Growth Equity Team, is responsible as co-
manager for the Capital Appreciation Master Portfolio and has performed such
duties since the Capital Appreciation Master Portfolio's inception in March
1996. Mr. Hickman has also managed the Strategic Growth Fund, the predecessor
fund to the Capital Appreciation Master Portfolio, since its inception on
January 20, 1993. In September of 1996, Mr. Hickman assumed responsibility as
co-manager of the Small Cap Master Portfolio. Mr. Hickman had also co-managed
the Small Capitalization Growth Fund from November 1994 until the sale of its
assets to the Small Cap Master Portfolio in September 1995. In addition, he also
manages equity and balanced portfolios for individuals and employee benefit
plans. He has over ten years of experience in the investment management field
and is a member of Wells Fargo Bank's Equity Strategy Committee. Mr. Hickman has
a B.A. and an M.B.A in finance from Brigham Young University and has been with
Wells Fargo Bank since the merger with Crocker National Bank in 1986.
Mr. Steve Enos assists Mr. Bissell and Mr. Hickman with the day-to-day
management of the Capital Appreciation Master Portfolio. In addition, as
portfolio co-manager of the Small Cap Master Portfolio since its inception in
September of 1996, Mr. Enos assists Mr. Hickman with the day-to-day management
of the Master Portfolio. Mr. Enos co-managed the Small Capitalization Growth
Fund from November 1994 until the sale of its assets to the Small Cap Master
Portfolio in September, 1996. Mr. Enos joined Wells Fargo in 1993 and is a
member of the Wells Fargo Bank Growth Equity Team. He began his career with
First Interstate Bank, where he was assistant vice president and portfolio
manager. From 1991 to 1993, Mr. Enos was a principal at Dolan Capital Management
where he managed both personal and pension portfolios. Mr. Enos received his
undergraduate degree in economics from the University of California at Davis.
Mr. Enos
41 PROSPECTUS
<PAGE> 46
is a Chartered Financial Analyst and a member of the Association for Investment
Management and Research.
Ms. Sandra Thornton assists Mr. Bissell and Mr. Hickman with the day-to-day
management of the Capital Appreciation Master Portfolio. In addition, Ms.
Thornton is primarily responsible for the day-to-day management of the Small Cap
Master Portfolio. Ms. Thornton has been co-manager of the Small Cap Master
Portfolio since its inception. Ms. Thornton co-managed the Small Capitalization
Growth Fund, from November, 1994 until the sale of its assets to the Master
Portfolio in September 1996. Ms. Thornton manages equity portfolios and is a
member of the Wells Fargo Bank Growth Equity Team. Ms. Thornton joined Wells
Fargo in 1993. Prior to this, she worked in the research department of RCM
Capital Management beginning in 1991. She obtained her license as a Certified
Public Accountant from the State of California while performing tax/financial
planning services at Price Waterhouse. She holds a B.A. from Albertus Magnus
College and is a Chartered Financial Analyst.
Ms. Tamyra Thomas assumed responsibility as a co-portfolio manager for the
day-to-day management of the bond portion of the Balanced Fund as of the
commencement of operations of the Funds. She is a Senior Vice-President and the
Chief Fixed Income Investment Officer of the Investment Management Group of
Wells Fargo Bank. She is also Chair of the Investment Management Group Policy
Committee. Ms. Thomas has managed bond portfolios for over a decade. She
currently manages in excess of $1 billion of long-term taxable bond portfolios
for various foundations, defined benefit plans and other clients. Prior to
joining Wells Fargo Bank in early 1988, she held a number of senior investment
positions for the Valley Bank & Trust Company of Utah including Vice-President
and Manager of the Investment Department and Chairman of the Trust Investment
Committee. She holds a B.S. degree from the University of Utah and was past
president of the Utah Bond Club. Ms. Thomas is a Chartered Financial Analyst.
Morrison & Foerster LLP, counsel to the Company and the Master Trust and
special counsel to Wells Fargo Bank and BGFA, has advised the Company, the
Master Trust, Wells Fargo Bank and BGFA that Wells Fargo Bank and BGFA and their
affiliates may perform the services contemplated by the Advisory Contracts and
this Prospectus without violation of the Glass-Steagall Act. Such counsel has
pointed out, however, that there are no controlling judicial or administrative
interpretations or decisions and that future judicial or administrative
interpretations of, or decisions relating to, present federal or state statutes,
including the Glass-Steagall Act, and regulations relating to the permissible
activities of banks and their subsidiaries or affiliates, as well as future
changes in such statutes, regulations and judicial or administrative decisions
or interpretations, could prevent such entities from continuing to perform, in
whole or in part, such services. If any such entity were prohibited from
performing any such services, it is expected that new agreements would be
proposed or entered into with another entity or entities qualified to perform
such services.
PROSPECTUS 42
<PAGE> 47
Stephens is the Funds' sponsor and administrator, and distributes the Funds'
shares. Stephens is a full service broker/dealer and investment advisory firm
located at 111 Center Street, Little Rock, Arkansas 72201. Stephens and its
predecessor have been providing securities and investment services for more than
60 years. Additionally, they have been providing discretionary portfolio
management services since 1983. Stephens currently manages investment portfolios
for pension and profit sharing plans, individual investors, foundations,
insurance companies and university endowments.
INVESTING IN THE FUNDS
OPENING AN ACCOUNT
You can buy Fund shares in one of the ways described below. You must complete
and sign an Account Application to open an account. Additional documentation may
be required from corporations, associations and certain fiduciaries. Do not mail
cash. If you have any questions or need extra forms, please call 1-800-222-8222.
After an application has been processed and an account has been established,
subsequent purchases of different funds of the Company under the same umbrella
account do not require the completion of additional applications. A separate
application must be processed for each different umbrella account number (even
if the registration is the same). Call the number on your confirmation statement
to obtain information about what is required to change registration.
To invest in the Funds through tax-deferred retirement plans through which the
Funds are available, please contact a shareholder servicing agent or a selling
agent to receive information and the required separate application. See
"Tax-Deferred Retirement Plans" below.
The Company or Stephens may make the Prospectus available in an electronic
format. Upon receipt of a request from you or your representative, the Company
or Stephens will transmit or cause to be transmitted promptly, without charge, a
paper copy of the electronic Prospectus.
SHARE VALUE
The value of a share of each Fund or class is its "net asset value" or NAV.
Wells Fargo Bank calculates the NAV of the Funds on each Business Day (as
defined below) as of the close of regular trading on the New York Stock Exchange
("NYSE") (referred to hereafter as "the close of the NYSE"), which is currently
1:00 p.m. (Pacific time). The NAV of each Fund or class is expected to fluctuate
daily. The NAV per share of each class of a Fund is computed by dividing the
value of a Fund's assets allocable to a particular class, less the liabilities
charged to that class, by the total number of outstanding shares
43 PROSPECTUS
<PAGE> 48
of the class. All expenses, including fees paid to the investment adviser and
administrator, are accrued daily and taken into account for purposes of
computing NAV, which is expected to fluctuate daily.
Shares of a Fund may be purchased on any day the Funds are open for business.
The Funds are open for business each day the NYSE is open for trading (a
"Business Day"). Currently, the NYSE is closed on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day (each, a "Holiday"). When any Holiday falls on a weekend, the
NYSE is closed on the weekday immediately before or after such Holiday.
Except for debt obligations with remaining maturities of 60 days or less,
which are valued at amortized cost, the Funds' and Master Portfolios' other
assets are valued at current market prices, or if such prices are not readily
available, at fair value as determined in good faith by the Company's Board of
Directors. Prices used for such valuations may be provided by independent
pricing services.
HOW TO BUY SHARES
Fund shares are offered continuously at the applicable offering price (NAV
plus any applicable sales charges) next determined after a purchase order is
received in the form specified for the purchase method being used, as described
in the following sections. Payment for shares purchased through a selling agent
(as defined below) is not due from the selling agent until the settlement date,
which is normally three Business Days after the order is placed. The selling
agent is responsible for forwarding payment for shares being purchased to the
Fund promptly. Payment must accompany orders placed directly through the
transfer agent.
Payments for Fund shares are invested in full and fractional shares of the
Fund (or class) at the applicable offering price. If shares are purchased by a
check that does not clear, the Company reserves the right to cancel the purchase
and hold the investor responsible for any losses or fees incurred. In addition,
the Company may hold payment on any redemption until reasonably satisfied that
your investments made by check have been collected (which may take up to 10
days).
The minimum initial investment is generally $1,000. The minimum investment
amounts, however, are $100 through the AutoSaver Plan (described below) and $250
for any tax-deferred retirement account for which Wells Fargo Bank serves as
trustee or custodian under a prototype trust approved by the Internal Revenue
Service ("IRS") (a "Plan Account"). Generally, all subsequent investments must
be made in amounts of $100 or more. Where Fund shares are acquired in exchange
for shares of another fund in the Stagecoach Family of Funds, the minimum
initial investment amount applicable to the shares being exchanged generally
carries over. If the value of your investment in the shares of the fund from
which you are exchanging has been reduced below the
PROSPECTUS 44
<PAGE> 49
minimum initial investment amount by changes in market conditions or sales
charges (and not by redemptions), then you may carry over the lesser amount into
one of the Funds. Plan Accounts that invest in the Funds through Wells Fargo
ExpressInvestTM (available to certain Wells Fargo tax-deferred retirement plans)
are not subject to the minimum initial or subsequent investment amount
requirements. In addition, the minimum initial or subsequent purchase amount
requirements may be waived or lowered for investments effected on a group basis
by certain entities and their employees, such as pursuant to a payroll deduction
or other accumulation plan. If you have questions regarding purchases of shares,
please call 1-800-222-8222. If you have questions regarding ExpressInvest,
please call 1-800-237-8472. For additional information on tax-deferred accounts,
please refer to the section "How to Buy Shares" under Tax-Deferred Retirement
Plans or contact a shareholder servicing agent.
SALES CHARGES
Set forth below is a Front-end Sales Charge Schedule listing the front-end
sales charges applicable to purchases of Class A shares of the Aggressive
Growth, Balanced, Diversified Income, Equity Value, Growth and Income and Small
Cap Funds. Front-end sales charges are not charged on purchases of the Corporate
Stock Fund. As shown below, reductions in the rate of front-end sales charges
("Volume Discounts") are available as you purchase additional shares
(contingent-deferred sales charges applicable to Class B shares are described
below). You should consider the front-end sales charge information set forth
below and the other information contained in this Prospectus when making your
investment decisions.
FRONT-END SALES CHARGE SCHEDULE
<TABLE>
<CAPTION>
DEALER
FRONT-END FRONT-END ALLOWANCE
SALES CHARGE SALES CHARGE AS % OF
AS % OF AS % OF NET OFFERING
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED PRICE
- ------------------------------------ -------------- --------------- ---------
<S> <C> <C> <C>
Less than $50,000................... 4.50% 4.71% 4.00%
$50,000 up to $99,999............... 4.00 4.17 3.55
$100,000 up to $249,999............. 3.50 3.63 3.125
$250,000 up to $499,999............. 3.00 3.09 2.65
$500,000 up to $999,999............. 2.00 2.04 1.75
$1,000,000 and over................. 1.00 1.01 0.85
</TABLE>
Class B shares are not subject to front-end sales charges. Class B shares that
are redeemed within one, two, three or four years from the receipt of an order
to purchase such shares are subject to a contingent-deferred sales charge equal
to 3.00%, 2.00%, 1.00% and 1.00%, respectively, of the dollar amount equal to
the lesser of the NAV at the time of purchase or the NAV of such shares at the
time of redemption (the "NAV
45 PROSPECTUS
<PAGE> 50
Amount"). See "Investing in the Funds -- Contingent Deferred Sales
Charges -- Class B shares."
If Class A shares are purchased through a selling agent, Stephens reallows the
portion of the front-end sales charge shown above as the Dealer Allowance.
Stephens also compensates selling agents for sales of Class B shares and is then
reimbursed out of Rule 12b-1 Fees and contingent-deferred sales charges
applicable to such shares. When shares are purchased directly through the
transfer agent and no selling agent is involved with the purchase, the entire
sales charge is paid to Stephens.
A selling agent or shareholder servicing agent and any other person entitled
to receive compensation for selling or servicing shares may receive different
compensation for selling or servicing Class A shares as compared with Class B
shares of the same fund.
REDUCED SALES CHARGES -- CLASS A SHARES
Discounts described below pertaining to reduced sales charge for Class A
shares are based on your holdings or purchases of shares on which you have paid
or will pay a front-end sales charge. Because Class B shares do not assess a
front-end sales charge, the amount of Class B shares you hold is not considered
in determining any Volume Discount.
Volume Discounts
The Volume Discounts described in the Front-end Sales Charge Schedule are
available to you based on the combined dollar amount you invest in shares
(including the Funds Class A shares) of one or more of the Company's funds which
assess a front-end sales charge (the "Load Funds").
Right of Accumulation
The Right of Accumulation allows you to combine the amount you invest in a
Fund's Class A shares with the total NAV of shares in other Load Funds to
determine reduced front-end sales charges in accordance with the above Front-end
Sales Charge Schedule. In addition, you also may combine the total NAV of shares
that you currently have invested in any other mutual fund that assesses a
front-end sales charge and is advised by Wells Fargo Bank and sponsored by
Stephens. For example, if you own Class A shares of the Load Funds with an
aggregate NAV of $90,000 and you invest an additional $20,000 in Class A shares
of another Load Fund, the front-end sales charge on the additional $20,000
investment would be 3.50% of the offering price. To obtain the discount, you
must provide sufficient information at the time of your purchase to verify that
your purchase qualifies for the reduced front-end sales charge. Confirmation of
the order is subject to such verification. The Right of Accumulation may be
modified or discontinued at any time without prior notice with respect to all
subsequent shares purchased.
PROSPECTUS 46
<PAGE> 51
Letter of Intent
A Letter of Intent allows you to purchase shares of a Load Fund over a
13-month period at a reduced front-end sales charge based on the total amount of
Class A shares you intend to purchase plus the total NAV of shares in the Load
Funds that you already own. Each investment in shares of a Load Fund that you
make during the period may be made at the reduced front-end sales charge that is
applicable to the total amount you intend to invest. If you do not invest the
total amount within the period, you must pay the difference between the higher
front-end sales charge rate that would have been applied to the purchases you
made and the reduced front-end sales charge rate you have paid. The minimum
initial investment for a Letter of Intent is 5% of the total amount you intend
to purchase, as specified in the Letter. Shares of the Load Fund you purchased
equal to 5% of the total amount you intend to invest will be held in escrow and,
if you do not pay the difference within 20 days following the mailing of a
request, a sufficient amount of escrowed shares will be redeemed for payment of
the additional front-end sales charge. Dividends and capital gains paid on such
shares held in escrow are reinvested in additional Fund shares.
Reinvestment
You may reinvest proceeds from a redemption of Class A shares in Class A
shares of the Fund or shares of another of the Company's funds registered in
your state of residence at NAV, without a front-end sales charge, within 120
days after your redemption. However, if the other investment portfolio charges a
front-end sales charge that is higher than the front-end sales charge that you
paid in connection with the Class A shares you redeemed, you must pay the
difference between the dollar amount of the two front-end sales charges. You may
reinvest at this NAV price up to the total amount of your redemption proceeds. A
written purchase order for the shares must be delivered to the Company, a
selling agent, a shareholder servicing agent, or the transfer agent at the time
of reinvestment.
If you realized a gain on a redemption, a reinvestment would not alter the
amount of any federal capital gains tax you must pay on the gain. If you
realized a loss on your redemption, your reinvestment may cause some or all of
the loss to be disallowed as a tax deduction, depending on the number of shares
you purchase by reinvestment and the period of time that has elapsed after the
redemption and which Fund's shares are purchased; although for tax purposes, the
amount disallowed would be added to the cost of the shares you acquire upon the
reinvestment.
Reductions for Families or Fiduciaries
Reductions in front-end sales charges apply to purchases by a single "person,"
including an individual, members of a family unit, consisting of a husband, wife
and
47 PROSPECTUS
<PAGE> 52
children under the age of 21 purchasing securities for their own account, or a
trustee or other fiduciary purchasing for a single fiduciary account or single
trust estate.
Waivers for Investments of Proceeds From Other Investments
Purchases may be made at NAV, without payment of a front-end sales charge, to
the extent that: (i) you are investing proceeds from a redemption of shares of
another open-end investment company, (ii) on which you paid a front-end sales
charge, and (iii) such redemption occurred within thirty (30) days prior to the
date of the purchase order. You must notify the Fund and/or the transfer agent
at the time you place such purchase order of your eligibility for the waiver of
front-end sales charges and provide satisfactory evidence thereof (e.g., a
confirmation of the redemption and the sales charges paid). Front-end sales
charges will not be waived to the extent the redemption proceeds are from a
redemption of shares of another open-end investment company that is affiliated
with the Company on which you paid a contingent deferred sales charge upon
redemption.
Reductions for Qualified Groups
Reductions in front-end sales charges also apply to purchases by individual
members of a "qualified group." The reductions are based on the aggregate dollar
amount of Class A shares purchased by all members of the qualified group. For
purposes of this paragraph, a qualified group consists of a "company," as
defined in the 1940 Act, which has been in existence for more than six months
and which has a primary purpose other than acquiring shares of a Fund at a
reduced sales charge, and "related parties" of such company. For purposes of
this paragraph, a "related party" of a company is: (i) any individual or other
company who directly or indirectly owns, controls or has the power to vote 5%
percent or more of the outstanding voting securities of such company; (ii) any
other company of which such company directly or indirectly owns, controls or has
the power to vote 5% or more of its outstanding voting securities; (iii) any
other company under common control with such company; (iv) any executive
officer, director or partner of such company or of a related party; and (v) any
partnership of which such company is a partner. Investors seeking to rely on
their membership in a qualified group to purchase shares at a reduced sales load
must provide evidence satisfactory to the transfer agent of the existence of a
bona fide qualified group and their membership therein.
Waivers for Certain Parties
The Funds' Class A shares may be purchased at NAV, without a front-end sales
charge, by: (i) directors, officers and employees (and their spouses, parents,
children and siblings) of the Company, Stephens, its affiliates and selling
agents; (ii) present and retired directors, officers and employees (and their
spouses, parents, children and siblings) of Wells Fargo Bank and its affiliates
if Wells Fargo Bank and/or the respective
PROSPECTUS 48
<PAGE> 53
affiliates agree; (iii) employee benefit and thrift plans for such persons and
investment advisory, trust or other fiduciary accounts, including certain Plan
Accounts that are maintained, managed or advised by Wells Fargo Bank or its
affiliates ("Fiduciary Accounts"); and (iv) investors using proceeds from a
required minimum distribution from any Individual Retirement Account ("IRA"),
Simplified Employee Pension Plan or other self-directed retirement plan for
which Wells Fargo Bank serves as trustee, provided that the proceeds are
invested in the Funds within 30 days of such distribution and such distribution
is required as a result of reaching age 70 1/2. Class A shares of the Aggressive
Growth Fund are available, without a front-end sales charge, to institutions
purchasing shares for the sole purpose of creating a unit investment trust for
exclusive distribution through Wells Fargo Securities Inc.
CONTINGENT-DEFERRED SALES CHARGE -- CLASS B SHARES
The Funds' Class B shares may be subject to contingent-deferred sales charges
but are not subject to front-end sales charges. Class B shares that are redeemed
within one, two, three or four years from the receipt of a purchase order for
such shares are subject to a contingent-deferred sales charge equal to 3.00%,
2.00%, 1.00% and 1.00%, respectively, of the NAV Amount. Contingent-deferred
sales charges are not imposed on amounts representing increases in NAV above the
NAV at the time of purchase and are not assessed on Class B shares purchased
through reinvestment of dividends or capital-gain distributions. Class B shares
automatically convert into Class A shares of the same Fund six years after the
end of the month in which such Class B shares were acquired.
The amount of any contingent-deferred sales charge paid upon redemption of
Class B shares is determined in a manner designed to result in the lowest
sales-charge rate being assessed. When a redemption request is made, Class B
shares acquired pursuant to the reinvestment of dividends and capital-gain
distributions are considered to be redeemed first. After this, Class B shares
are considered redeemed on a first-in, first-out basis so that Class B shares
held for a longer period of time are considered redeemed prior to more recently
acquired Class B shares. For a discussion of the interaction between the
optional Exchange Privilege and contingent-deferred sales charges on Class B
shares, see "Additional Shareholder Services -- Exchange Privilege."
Contingent-deferred sales charges are waived on redemptions of Class B shares
of a Fund (i) following the death or disability (as defined in the Internal
Revenue Code of 1986, as amended (the "Code")) of a shareholder, (ii) to the
extent that the redemption represents a scheduled distribution from an
individual retirement account or other retirement plan to a shareholder who has
reached age 59 1/2, (iii) effected pursuant to the Company's right to liquidate
a shareholder's account if the aggregate NAV of the shareholder's account is
less than the minimum account size, or (iv) in connection with the combination
of the Company with any other registered investment company by a merger,
acquisition of assets or any other transaction.
49 PROSPECTUS
<PAGE> 54
In deciding whether to purchase Class A or Class B shares, you should compare
the fees assessed on Class A shares (including front-end sales charges) against
those assessed on Class B shares (including potential contingent-deferred sales
charges and higher Rule 12b-1 fees) in light of the amount to be invested and
the time that you anticipate owning the shares. If your purchase amount would
qualify you for a reduced sales charge on Class A shares, you should consider
carefully whether you would pay lower fees ultimately on Class A shares or on
Class B shares. (See "Investing In The Funds -- Sales Charges" for information
on reduced sales charges for Class A shares.)
You may buy shares on any Business Day by any of the methods described below.
The Company reserves the right to reject any purchase order or suspend sales at
any time. Payment for orders that are not received is returned after prompt
inquiry. The issuance of shares is recorded on the Company's books, and share
certificates are not issued.
INITIAL PURCHASES BY WIRE
1. Complete an Account Application.
2. Instruct the wiring bank to transmit the specified amount in federal funds
($1,000 or more) to:
Wells Fargo Bank, N.A.
San Francisco, California
Bank Routing Number: 121000248
Wire Purchase Account Number: 4068-000587
Attention: Stagecoach Funds (Name of Fund) (designate a class, if
applicable)
Account Name(s): Name(s) in which to be registered
Account Number: (if investing into an existing account)
3. A completed Account Application should be mailed, or sent by telefacsimile
with the original subsequently mailed, to the following address immediately
after the funds are wired, and must be received and accepted by the transfer
agent before an account can be opened:
Wells Fargo Bank, N.A.
Stagecoach Shareholder Services
P.O. Box 7066
San Francisco, California 94120-7066
Telefacsimile: 1-415-543-9538
4. Share purchases are effected at the public offering price or, in the case of
Class B shares, at the NAV next determined after the Account Application is
received and accepted.
PROSPECTUS 50
<PAGE> 55
INITIAL PURCHASES BY MAIL
1. Complete an Account Application. Indicate the services to be used.
2. Mail the Account Application and a check for $1,000 or more payable to
"Stagecoach Funds (Name of Fund) (designate a class, if applicable)," to the
address set forth in "Initial Purchases by Wire."
3. Share purchases are effected at the public offering price or, in the case of
Class B shares, at the NAV next determined after the Account Application is
received and accepted.
AUTOSAVER PLAN PURCHASES
The Company's AutoSaver Plan provides you with a convenient way to establish
and automatically add to your Fund account on a monthly basis. To participate in
the AutoSaver Plan, you must specify an amount ($100 or more) to be withdrawn
automatically by the transfer agent on a monthly basis from an account with a
bank that is designated in your Account Application and is approved by the
transfer agent ("Approved Bank Account"). You may open an Approved Bank Account
with Wells Fargo Bank. The transfer agent withdraws and uses this amount to
purchase specified Fund shares on your behalf generally on or about the day that
you have selected or, if you have not selected a day, on or about the 20th day
of each month. Certain restrictions may apply to shares held in a brokerage
account. The transfer agent requires a minimum of ten (10) Business Days to
implement your AutoSaver Plan purchases. If you hold shares through a brokerage
account, your AutoSaver Plan will comply with the terms of your brokerage
agreement. There are no separate fees charged to you by the Funds for
participating in the AutoSaver Plan.
You may change your investment amount, the date on which your AutoSaver
Purchase is effected, suspend purchases or terminate your election at any time
by providing notice to the transfer agent at least five (5) Business Days prior
to any scheduled transaction.
TAX-DEFERRED RETIREMENT PLANS
You may be entitled to invest in the Funds through a Plan Account or other
tax-deferred retirement plan. Contact a shareholder servicing agent or a selling
agent (such as Wells Fargo Bank) for materials describing Plan Accounts
available through it, and the benefits, provisions, and fees of such Plan
Accounts. The minimum initial investment amount for Fund shares acquired through
a Plan Account is $250 (the minimum initial investment amount is not applicable
if you participate in ExpressInvest through a Plan Account).
Pursuant to the Code, individuals who are not active participants (and who do
not have a spouse who is an active participant) in certain types of retirement
plans ("qualified
51 PROSPECTUS
<PAGE> 56
retirement plans") may deduct contributions to an IRA, up to specified limits.
Investment earnings in the IRA are tax-deferred until withdrawn, at which time
the individual may be in a lower tax bracket.
The maximum annual deductible contribution to an IRA for individuals under age
70 1/2 is 100% of includible compensation up to a maximum of (i) $2,000 for
single individuals; (ii) $4,000 for a married couple when both spouses earn
income; and (iii) $2,250 (increased to $4,000 for tax years beginning after
December 31, 1996) when one spouse earns, or elects for IRA purposes to be
treated as earning, no income (together, the "IRA contribution limits").
The IRA deduction is also available for single individual taxpayers and
married couples who are active participants in qualified retirement plans but
who have adjusted gross incomes that do not exceed certain specified limits. If
their adjusted gross income exceeds these limits, the amount of the deductible
contribution is phased down and eventually eliminated.
Any individual who works may make nondeductible contributions to an IRA in
addition to any deductible contributions. Total aggregate deductible and
nondeductible contributions are limited to the IRA contribution limits discussed
above. Nondeductible contributions in excess of the applicable IRA contribution
limit are "nondeductible excess contributions." In addition, contributions made
to an IRA for the year in which an individual attains the age of 70 1/2, or any
year thereafter, are also nondeductible excess contributions. Nondeductible
excess contributions are subject to a 6% excise tax penalty which is charged
each year that the nondeductible excess contribution remains in the IRA.
An employer may also contribute to an individual's IRA as part of a Simplified
Employee Pension Plan, known as a "SEP-IRA," established prior to January 1,
1996, or a Savings Incentive Match Plan for Employees, or "SIMPLE plan,"
established after December 31, 1996, both through a shareholder servicing agent
or a selling agent. Participating employers may make an annual contribution to
each employee through a SEP-IRA in an amount up to the lesser of 15% of such
employee's earned income or $30,000, subject to certain provisions of the Code.
Under a SIMPLE plan, an employee may contribute up to $6,000 annually to his or
her own IRA, and the employer must generally match such contributions up to 3%
of the employee's annual salary. Alternatively, the employer may elect under the
SIMPLE formula to contribute to the employee's IRA 2% of the lesser of his or
her earned income or $150,000. In any case, all contributions and investment
earnings will be tax-deferred until withdrawn.
The foregoing discussion regarding IRAs is based on the Code and federal
regulations in effect as of the date of this Prospectus and summarizes only some
of the important federal tax considerations generally affecting IRA
contributions made by individuals or their employers. It is not intended as a
substitute for careful tax planning. Investors
PROSPECTUS 52
<PAGE> 57
should consult their tax advisors regarding their specific tax situations and
state and local taxes. Further federal tax information is contained under the
heading "Taxes" in this Prospectus and in the SAI.
A shareholder servicing agent or selling agent also may offer other types of
tax-deferred or tax-advantaged plans, including a Keogh retirement plan for
self-employed professional persons, sole proprietors and partnerships.
Application materials for opening a tax-deferred retirement plan can be
obtained from a shareholder servicing agent or a selling agent. Return your
completed tax-deferred retirement plan application to your shareholder servicing
agent or a selling agent for approval and processing. If your tax-deferred
retirement plan application is incomplete or improperly filled out, there may be
a delay before a Fund account is opened. You should ask your shareholder
servicing agent or selling agent about the investment options available to your
tax-deferred retirement plan, since some of the funds in the Stagecoach Family
of Funds may be unavailable as options. Moreover, certain features described
herein, such as the AutoSaver Plan and the Systematic Withdrawal Plan, may not
be available to individuals or entities who invest through a tax-deferred
retirement plan.
ADDITIONAL PURCHASES
You may make additional purchases of $100 or more by instructing the Funds'
transfer agent to debit your Approved Bank Account, by wire by instructing the
wiring bank to transmit the specified amount as directed above for initial
purchases, or by mail with a check payable to "Stagecoach Funds (Name of Fund)
(designate a class, if applicable)" to the address set forth under "Initial
Purchases by Wire." Write your Fund account number on the check and include the
detachable stub from your Statement of Account or a letter providing your Fund
account number.
PURCHASES THROUGH SELLING AGENTS
You may place a purchase order for shares of the Funds through a broker/dealer
or financial institution that has entered into a selling agreement with
Stephens, as the Funds' Distributor ("Selling Agent"). If your order is placed
by the close of the NYSE, the purchase order is executed on the same day if the
order is received by the transfer agent before the close of business. If your
purchase order is received by a Selling Agent after the close of the NYSE or by
the transfer agent after the close of business, then your purchase order is
executed on the next Business Day following the day your order is placed. The
Selling Agent is responsible for the prompt transmission of your purchase order
to the Company. Because payment for shares of the Funds is not due until
settlement date, the Selling Agent might benefit from the temporary use of your
payment. A financial institution that acts as a Selling Agent, shareholder
servicing agent or in certain other capacities may be required to register as a
dealer pursuant to applicable
53 PROSPECTUS
<PAGE> 58
state securities laws, which may differ from federal law and any interpretations
expressed herein.
PURCHASES THROUGH SHAREHOLDER SERVICING AGENTS
Purchase orders for Fund shares may be transmitted to the transfer agent
through any entity that has entered into a shareholder servicing agreement with
the Funds ("Shareholder Servicing Agent"), such as Wells Fargo Bank. See
"Management, Distribution and Servicing Fees -- Shareholder Servicing Agent."
The Shareholder Servicing Agent may transmit a purchase order to the transfer
agent, on your behalf, including a purchase order for which payment is to be
transferred from your Approved Bank Account or wired from a financial
institution. If your order is transmitted by the Shareholder Servicing Agent, on
your behalf, to the transfer agent before the close of the NYSE, the purchase
order generally will be executed on the same day. If your Shareholder Servicing
Agent transmits your purchase order to the transfer agent after the close of the
NYSE, then your order generally is executed on the next Business Day following
the day your order is received. The Shareholder Servicing Agent is responsible
for the prompt transmission of your purchase order to the transfer agent.
STATEMENTS AND REPORTS
The Company, or a Shareholder Servicing Agent on its behalf, typically sends
you a confirmation or statement of your account after every transaction that
affects your share balance or your Fund account registration. A statement with
tax information for the previous year will be mailed to you, by January 31 of
each year, and also will be filed with the IRS. At least twice a year, you will
receive financial statements.
DIVIDENDS
The Funds (other than the Aggressive Growth and Small Cap Funds) intend to
declare quarterly dividends of substantially all of their net investment income.
The Aggressive Growth and Small Cap Funds intend to declare annual dividends of
substantially all of their net investment income. The Funds distribute any
capital gains at least annually. You have several options for receiving
dividends and capital-gain distributions. They are discussed under "Additional
Shareholder Services -- Dividend and Distribution Options."
Dividends and capital-gain distributions have the effect of reducing the NAV
per share by the amount distributed. Although dividends and distributions paid
to you on newly issued shares shortly after your purchase would represent, in
substance, a return of your capital, the dividends and distributions would
ordinarily be taxable to you. All expenses, such as state securities
registration fees and transfer agency fees, that are attributable to
PROSPECTUS 54
<PAGE> 59
a particular class also may affect the relative dividends and/or capital gains
distributions of Class A and Class B shares.
HOW TO REDEEM SHARES
You may redeem Fund shares on any Business Day. Your shares are redeemed at
the NAV next calculated after the Company has received your redemption request
in proper form. Redemption proceeds may be more or less than the amount invested
and, therefore, a redemption of shares may result in a gain or loss for federal
and state income tax purposes. The Company ordinarily remits redemption
proceeds, net of any contingent deferred sales charge applicable with respect to
Class B shares (the "redemption proceeds"), within seven days after your
redemption order is received in proper form, unless the SEC permits a longer
period under extraordinary circumstances. Such extraordinary circumstances could
include a period during which an emergency exists as a result of which (a)
disposal by a Fund of securities owned by it is not reasonably practicable or
(b) it is not reasonably practicable for a Fund fairly to determine the value of
its net assets, or a period during which the SEC by order permits deferral of
redemptions for the protection of security holders of such Fund. In addition,
the Company may hold payment on your redemptions until reasonably satisfied that
your investments made by check have been collected (which can take up to 10 days
from the purchase date). To ensure acceptance of your redemption request, please
follow the procedures described below. In addition, the Funds reserve the right
to impose charges for wiring redemption proceeds.
All redemptions of shares generally are made in cash, except that the
commitment to redeem shares in cash extends only to redemption requests made by
each Fund shareholder during any 90-day period of up to the lesser of $250,000
or 1% of the net asset value of the Fund at the beginning of such period. This
commitment is irrevocable without the prior approval of the SEC and is a
fundamental policy of the Fund that may not be changed without shareholder
approval. In the case of redemption requests by shareholders in excess of such
amounts, the Board of Directors reserves the right to have the Fund make
payment, in whole or in part, in securities or other assets, in case of an
emergency or any time a cash distribution would impair the liquidity of the Fund
to the detriment of the existing shareholders. In this event, the securities
would be valued in the same manner as the securities of the Fund are valued. If
the recipient were to sell such securities, he or she would incur brokerage
costs in converting such securities to cash.
Due to the high cost of maintaining Fund accounts with small balances, the
Company reserves the right to close your account and send you the proceeds if
the balance falls below the applicable minimum balance because of a redemption
(including a redemption of shares of a Fund after an investor has made only the
applicable minimum
55 PROSPECTUS
<PAGE> 60
initial investment). However, you will be given 30 days' notice to make an
additional investment to increase your account balance to $1,000 or more. Plan
Accounts are not subject to minimum Fund account balance requirements. For a
discussion of applicable minimum balance requirements, see "Investing in the
Funds -- How To Buy Shares."
REDEMPTIONS BY TELEPHONE
Telephone redemption or exchange privileges are made available to you
automatically upon opening an account, unless you specifically decline the
privileges. Telephone redemption privileges authorize the transfer agent to act
on telephone instructions from any person representing himself or herself to be
the investor and reasonably believed by the transfer agent to be genuine. The
Company requires the transfer agent to employ reasonable procedures, such as
requiring a form of personal identification, to confirm that instructions are
genuine and, if it does not follow such procedures, the Company and the transfer
agent may be liable for any losses due to unauthorized or fraudulent
instructions. Neither the Company nor the transfer agent will be liable for
following telephone instructions reasonably believed to be genuine.
REDEMPTIONS BY MAIL
1. Write a letter of instruction. Indicate the class, if applicable, and the
dollar amount or number of Fund shares you want to redeem. Refer to your Fund
account number and give your taxpayer identification number ("TIN"), which
generally is your social security or employer identification number.
2. Sign the letter in exactly the same way the account is registered. If there
is more than one owner of the shares, all must sign.
3. Signature guarantees are not required for redemption requests unless
redemption proceeds of $5,000 or more are to be paid to someone other than
you at your address of record or your Approved Bank Account, or other unusual
circumstances exist which cause the transfer agent to determine that a
signature guarantee is necessary or prudent to protect against unauthorized
redemption requests. If required, a signature must be guaranteed by an
"eligible guarantor institution," which includes a commercial bank that is an
FDIC member, a trust company, a member firm of a domestic stock exchange, a
savings association, or a credit union that is authorized by its charter to
provide a signature guarantee. Signature guarantees by notaries public are
not acceptable. Further documentation may be requested from corporations,
administrators, executors, personal representatives, trustees or custodians.
4. Mail your letter to the transfer agent at the address set forth under
"Investing in the Funds -- Initial Purchases by Wire."
PROSPECTUS 56
<PAGE> 61
Unless other instructions are given in proper form, a check for your net
redemption proceeds is sent to your address of record.
EXPEDITED REDEMPTIONS BY MAIL OR TELEPHONE
You may request an expedited redemption of shares of a Fund by letter, in
which case your receipt of redemption proceeds, but not the Fund's receipt of
your redemption request, is expedited. In addition, you also may request an
expedited redemption of shares of a Fund by telephone on any Business Day, in
which case both your receipt of redemption proceeds and the Fund's receipt of
your redemption request is expedited. You may request expedited redemption by
telephone only if the total value of the shares redeemed is $100 or more.
You may request expedited redemption by telephone by calling the transfer
agent at the telephone number listed on your transaction confirmation or by
calling 1-800-222-8222.
You may request expedited redemption by mail by mailing your expedited
redemption request to the transfer agent at the mailing address set forth under
"Investing in the Funds -- Initial Purchases by Wire."
Upon request, net redemption proceeds of your expedited redemptions of $5,000
or more are wired or credited to an Approved Bank Account designated in your
Account Application or wired to the Selling Agent designated in your Account
Application. The Company reserves the right to impose a charge for wiring
redemption proceeds. When proceeds of your expedited redemption are to be paid
to someone else, to an address other than that of record, or to your Approved
Bank Account or Selling Agent that you have not predesignated in your Account
Application, your expedited redemption request must be made by letter and the
signature(s) on the letter may be required to be guaranteed, regardless of the
amount of the redemption. If your expedited redemption request is received by
the transfer agent by the close of the NYSE on a Business Day, your redemption
proceeds are transmitted to your Approved Bank Account or Selling Agent on the
next Business Day (assuming your investment check has cleared as described
above), absent extraordinary circumstances. Such extraordinary circumstances
could include those described above as potentially delaying redemptions and also
could include situations involving an unusually heavy volume of wire transfer
orders on a national or regional basis or communication or transmittal delays
that could cause a brief delay in the wiring or crediting of funds. A check for
net redemption proceeds is mailed to your address of record or, at your
election, credited to your Approved Bank Account.
During periods of drastic economic or market activity or changes, you may
experience problems implementing an expedited redemption by telephone. In the
event you are unable to reach the transfer agent by telephone, you should
consider using overnight
57 PROSPECTUS
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mail to implement an expedited redemption. The Company reserves the right to
modify or terminate the expedited telephone redemption privilege at any time.
SYSTEMATIC WITHDRAWAL PLAN
The Company's Systematic Withdrawal Plan provides you with a convenient way to
have Fund shares redeemed from your account and the net redemption proceeds
distributed to you on a monthly basis. You may participate in the Systematic
Withdrawal Plan only if you have a Fund account valued at $10,000 or more as of
the date of your election to participate, your dividends and capital-gain
distributions are being reinvested automatically, and you are not participating
in the AutoSaver Plan at any time while participating in the Systematic
Withdrawal Plan. You specify an amount ($100 or more) to be distributed by check
to your address of record or deposited in your Approved Bank Account. The
transfer agent redeems sufficient shares and mails or deposits your net
redemption proceeds as instructed on or about the fifth Business Day prior to
the end of each month. There are no separate fees charged to you by the Company
for participating in the Systematic Withdrawal Plan. However, you should not
participate in the Systematic Withdrawal Plan if you also are purchasing shares
of a Fund subject to a sales charge.
It may take up to ten (10) days after receipt of your request to establish
your participation in the Systematic Withdrawal Plan. You may change your
withdrawal amount, suspend withdrawals or terminate your election at any time by
notifying the transfer agent at least five (5) Business Days prior to any
scheduled transaction. Your participation in the Systematic Withdrawal Plan is
terminated automatically if your Fund account is closed, or, in some cases, if
your Approved Bank Account is closed.
REDEMPTIONS THROUGH SELLING AGENTS
If your redemption order is received by a Selling Agent before the close of
the NYSE and received by the transfer agent before the close of business on the
same day, the order is executed at the NAV determined as of the close of the
NYSE on that day. If your redemption order is received by a Selling Agent after
the close of the NYSE, or is not received by the transfer agent prior to the
close of business, your order is executed at the NAV determined as of the close
of the NYSE on the next Business Day. The Selling Agent is responsible for the
prompt transmission of your redemption order to the Company.
Unless you have made other arrangements with the Selling Agent, and the
transfer agent has been informed of such arrangements, net redemption proceeds
of a redemption order made by you through a Selling Agent are credited to your
Approved Bank Account. If no such account is designated, a check for the net
redemption proceeds are mailed to your address of record or, if such address is
no longer valid, the net proceeds are credited to your account with the Selling
Agent. You may request a check
PROSPECTUS 58
<PAGE> 63
from the Selling Agent or elect to retain the net redemption proceeds in such
account. The Selling Agent may charge you a service fee. In addition, it may
benefit from the use of your redemption proceeds until the check it issues to
you has cleared or until such proceeds have been disbursed or reinvested on your
behalf.
REDEMPTIONS THROUGH SHAREHOLDER SERVICING AGENTS
You may request a redemption of shares of a Fund through your Shareholder
Servicing Agent. Any redemption request made by telephone through your
Shareholder Servicing Agent must redeem shares with a total value equal to $100
or more. If your redemption order is transmitted by the Shareholder Servicing
Agent, on your behalf, to the transfer agent before the close of the NYSE, the
redemption order is executed at the NAV determined as of the close of the NYSE
on that day. If your Shareholder Servicing Agent transmits your redemption order
to the transfer agent after the close of the NYSE, then your order is executed
on the next Business Day following the date your order is received. The
Shareholder Servicing Agent is responsible for the prompt transmission of your
redemption order to the Company.
Unless you have made other arrangements with your Shareholder Servicing Agent,
and the transfer agent has been informed of such arrangements, net redemption
proceeds of a redemption order made by you through your Shareholder Servicing
Agent are credited to your Approved Bank Account. If no such account is
designated, a check for the net redemption proceeds is mailed to your address of
record or, if such address is no longer valid, the net redemption proceeds are
credited to your account with your Shareholder Servicing Agent or to another
account designated in your agreement with your Shareholder Servicing Agent. The
shareholder servicing agent may charge you a fee. In addition, the shareholder
servicing agent may benefit from the use of proceeds credited to your account
until any check it issues to you has cleared or until such proceeds have been
disbursed or reinvested on your behalf.
ADDITIONAL SHAREHOLDER SERVICES
The Company offers you a number of optional services. As noted above, you can
take advantage of the AutoSaver Plan, Tax-Deferred Retirement Plans, the
Systematic Withdrawal Plan and Expedited Redemptions by Letter and Telephone. In
addition, you have several dividend and distribution payment options and an
exchange privilege, which are described below.
59 PROSPECTUS
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DIVIDEND AND DISTRIBUTION OPTIONS
When you fill out your Account Application, you can choose from the following
dividend and distribution options listed below. If you have questions about the
dividend and distribution options available to you, please call 1-800-222-8222.
A. The AUTOMATIC REINVESTMENT OPTION provides for the reinvestment of your
dividends and capital-gain distributions in additional shares of the same class
of the Fund which paid such dividends or capital-gain distributions. Dividends
and distributions declared in a month generally are reinvested in additional
shares at NAV on the last business day of such month. You are assigned this
option automatically if you make no choice on your Account Application.
B. The FUND PURCHASE OPTION lets you use your dividends and/or capital-gain
distributions from a Fund to purchase, at NAV, shares of another fund in the
Stagecoach Family of Funds with which you have an established account that has
met the applicable minimum initial investment requirement. Dividends and
distributions paid on Class A or Class B shares may be invested in Class A or
Class B shares, respectively, of another fund, in Retail shares of a fund
offered by another investment company in the Stagecoach Family of Funds, in
Class A shares of the Government Money Market Mutual, Money Market Mutual, Prime
Money Market Mutual or Treasury Money Market Mutual Funds or in shares of the
California Tax-Free Money Market Mutual or National Tax-Free Money Market Mutual
Funds (the California Tax-Free Money Market Mutual, Government Money Market
Mutual, Money Market Mutual, National Tax-Free Money Market Mutual, Prime Money
Market Mutual and Treasury Money Market Mutual Funds are, collectively the
"Money Market Mutual Funds"). Dividends and distributions paid on Class A shares
may also be invested in shares of a non-money market fund with a single class of
shares (a "single class fund"). Dividends and distributions paid on Class B
shares may not be invested in shares of a single class fund. Dividends and
distributions paid on shares of the Corporate Stock Fund may be invested in
Class A shares, shares of a single class fund or shares of one of the Money
Market Mutual Funds.
C. The AUTOMATIC CLEARING HOUSE OPTION permits you to have dividends and
capital-gain distributions deposited in your Approved Bank Account. In the event
your Approved Bank Account is closed and such distribution is returned to the
Funds' dividend disbursing agent, the distribution is reinvested in your Fund
account at the NAV next determined after the distribution has been returned.
Your Automatic Clearing House Option is then converted automatically to the
Automatic Reinvestment Option.
D. The CHECK PAYMENT OPTION lets you receive a check for all dividends and
capital-gain distributions, which generally is mailed either to your designated
address or your Approved Bank Account shortly following declaration. If the U.S.
Postal Service cannot deliver your checks, or if your checks remain uncashed for
six months, those checks are reinvested in your Fund account at the NAV next
determined after the earlier of the
PROSPECTUS 60
<PAGE> 65
date the checks have been returned to the dividend disbursing agent or the date
six months after the payment of such dividend or distribution. Your Check
Payment Option is then converted automatically to the Automatic Reinvestment
Option.
The Company forwards moneys to the dividend disbursing agent so that it may
issue you dividend checks under the Check Payment Option. The dividend
disbursing agent may benefit from the temporary use of such moneys until these
checks clear. The Company takes reasonable efforts to locate investors whose
checks are returned or uncashed after six months.
EXCHANGE PRIVILEGE
Wells Fargo Bank advises a variety of other funds, each with its own
investment objective and policies. The exchange privilege is a convenient way to
buy shares in other funds of the Stagecoach Family of Funds that are registered
in your state of residence, and allows you to respond to changes in your
investment and savings goals or in market conditions. Class A and Class B shares
of each Fund generally may be exchanged for Class A and Class B shares,
respectively, of another fund, or for Class A shares of the Government Money
Market Mutual, Money Market Mutual, Prime Money Market Mutual or Treasury Money
Market Mutual Funds or in shares of the California Tax-Free Money Market Mutual
or National Tax-Free Money Market Mutual Funds. Class A shares may also be
exchanged for shares of a single class fund or for Retail shares of a fund
offered by another investment company in the Stagecoach Family of Funds. Shares
of the Corporate Stock Fund may be exchanged for Class A shares, shares of a
single class fund or shares of one of the Money Market Mutual Funds.
Before making an exchange from a Fund into another fund of the Stagecoach
Family of Funds, please observe the following:
- Obtain and carefully read the prospectus of the fund into which you want to
exchange.
- If you exchange into another fund with a front-end sales charge, you must
pay the difference between that fund's sales charge and any sales charge you
already have paid in connection with the shares you are exchanging.
- If you exchange Class B shares for Class B shares of another fund, Class A
shares of the Government Money Market Mutual, Money Market Mutual, Prime
Money Market Mutual or Treasury Money Market Mutual Funds or shares of the
California Tax-Free Money Market Mutual or National Tax-Free Money Market
Mutual Funds, a contingent-deferred sales charge is not imposed upon the
exchange.
- Each exchange, in effect, represents the redemption of shares of one fund
and the purchase of shares of another, which may produce a gain or loss for
federal income tax purposes. A confirmation of each exchange transaction is
sent to you.
61 PROSPECTUS
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- The dollar amount of shares you exchange generally must meet the minimum
initial and/or subsequent investment amounts of the fund from which you are
exchanging. If the value of your investment in the fund from which you are
exchanging has been reduced below the minimum initial investment amount by
changes in market conditions or sales charges (and not by redemptions), you
may carry over the lesser amount into the Fund you are acquiring.
- The Company reserves the right to limit the number of times shares may be
exchanged between funds, to reject any telephone exchange order, or
otherwise to modify or discontinue exchange privileges at any time. Under
SEC rules, subject to limited exceptions, the Company must notify you 60
days before it modifies or discontinues the exchange privilege.
- If you exchange Class B shares for Class B shares of another fund, Class A
shares of the Government Money Market Mutual, Money Market Mutual, Prime
Money Market Mutual or Treasury Money Market Mutual Funds or shares of the
California Tax-Free Money Market Mutual or National Money Market Mutual
Funds, any remaining period of time that the contingent deferred sales
charge applicable to such shares remains in effect is computed from the time
of initial purchase of the previously held shares. For example, if you
exchange Class B shares of a Fund for shares of the California Tax-Free
Money Market Mutual Fund and then redeem the shares of the California
Tax-Free Money Market Mutual Fund within four years of the purchase of the
exchanged Class B shares, you are required to pay a contingent-deferred
sales charge equal to the charge that would have been applicable if you were
redeeming the original Class B shares at that time.
- If you exchange Class B shares for shares of one of the Money Market Mutual
Funds as described above, you subsequently may re-exchange the acquired
shares only for Class B shares of one of the Company's funds or for shares
of another Money Market Mutual Fund.
The procedures applicable to Fund share redemptions also apply to Fund share
exchanges.
In particular, exchange orders received before 1:00 p.m. (Pacific time) on
each Business Day are processed at the offering price based on the NAV next
determined as of that Business Day's close of market (provided it is a Business
Day for each fund involved in the transaction). In addition, a signature
guarantee may be required for exchanges between shareholder accounts registered
in identical names if the amount being exchanged is more than $25,000. If you
have questions, please call 1-800-222-8222.
To exchange shares, write the transfer agent at the mailing address under
"Investing in the Funds -- Initial Purchases by Wire" or (unless you have
specifically declined telephone exchange privileges) call the transfer agent at
the telephone number listed on your transaction confirmation, or contact your
Shareholder Servicing Agent or Selling
PROSPECTUS 62
<PAGE> 67
Agent. The procedures applicable to telephone redemptions, including the
discussion regarding the responsibility for the authenticity of telephone
instructions, are also applicable to telephone exchange requests. See "How to
Redeem Shares -- Expedited Redemptions by Letter and Telephone."
CONVERSION
A Fund's Class B shares that have been outstanding for six years after the end
of the month in which the shares were initially purchased automatically convert
to Class A shares of such Fund and, consequently, will no longer be subject to
the higher Rule 12b-1 Fees applicable to Class B shares. Such conversion is on
the basis of the relative NAV of the two Classes, without the imposition of any
sales charge or other charge except that the lower Rule 12b-1 Fees applicable to
Class A shares shall thereafter be applied to such converted shares. Because the
per share NAV of the Class A shares may be higher than that of the Class B
shares at the time of conversion, a shareholder may receive fewer Class A shares
than the number of Class B shares converted, although the dollar value will be
the same. Reinvestments of dividends and distributions on Class B shares are
considered new purchases for purposes of the conversion feature. A conversion
should not produce a gain or loss for federal income tax purposes.
If a shareholder effects one or more exchanges among Class B shares of any
Fund, Class A shares of the Government Money Market Mutual, Money Market Mutual
or Treasury Money Market Mutual Funds or among shares of the California Tax-Free
Money Market Mutual or National Tax-Free Money Market Mutual Funds during the
six-year period, and exchanges back into Class B shares, the holding period for
shares so exchanged is counted toward the six-year period, and any Class B
shares held at the end of six years are converted into Class A shares.
MANAGEMENT, DISTRIBUTION AND SERVICING FEES
INVESTMENT ADVISER
Subject to the overall supervision of the Company's Board of Directors, Wells
Fargo Bank, as the investment adviser to the Balanced, Diversified Income,
Equity Value, Growth and Income Funds and the Capital Appreciation, Corporate
Stock and Small Cap Master Portfolios, provides investment guidance and policy
direction in connection with the management of the Funds' and Master Portfolios'
assets. Wells Fargo Bank furnishes the Company's Board of Directors and the
Master Trust's Board of Trustees with periodic reports on the Funds' and Master
Portfolios' investment strategy and performance.
63 PROSPECTUS
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For its services as investment adviser to the Balance Fund and Small Cap
Master Portfolio, Wells Fargo Bank is entitled to monthly investment advisory
fees at the annual rate of 0.60% of each Fund's and Master Portfolio's
respective average daily net assets. For its services as investment adviser to
the Capital Appreciation Master Portfolio and Diversified Income and Equity
Value Funds, Wells Fargo Bank is entitled to monthly investment advisory fees at
the annual rate of 0.50% of the Master Portfolio's and Funds' respective average
daily net assets. For its services as investment adviser to the Corporate Stock
Master Portfolio and the Growth and Income Fund, Wells Fargo Bank is entitled to
monthly investment advisory fees at the annual rate of 0.50% of the first $250
million of such Master Portfolio's or Fund's average daily net assets, 0.40% of
the next $250 million, and 0.30% of the average daily net assets in excess of
$500 million. From time to time, Wells Fargo Bank may waive its advisory fees in
whole or in part. Any such waiver will reduce expenses of the Funds, and,
accordingly, have a favorable impact on the Funds' performance. From time to
time, each of the Funds, consistent with its investment objective, policies and
restrictions, may invest in securities of companies with which Wells Fargo Bank
has a lending relationship. The Corporate Stock Master Portfolio, in accordance
with its investment objective and subject to SEC relief may invest in stock of
Wells Fargo & Co. so long as Wells Fargo & Co. is included in the S&P 500
Composite Stock Price Index.
Wells Fargo Bank has delegated certain advisory responsibilities relating to
the Corporate Stock Master Portfolio to BGFA. Nevertheless, Wells Fargo Bank has
retained continuing and exclusive authority over the management of such Master
Portfolio, and the investment and disposition of the Master Portfolio's assets,
and Wells Fargo Bank may reject any investment recommendations or decisions for
the Master Portfolio if Wells Fargo Bank determines that such recommendations or
decisions are not consistent with the best interests of the Master Portfolio.
Wells Fargo Bank has agreed to pay BGFA for its sub-advisory services an annual
fee equal to $40,000 plus .08% of the average daily net assets of the Master
Portfolio.
For the year ended December 31, 1995, the Diversified Income and Growth and
Income Funds paid advisory fees at the annual rates of 0.50% and 0.50% of each
portfolio's respective average daily net assets to Wells Fargo Bank. For the
fiscal period ended September 30, 1995, the predecessor funds of the Balanced
and Equity Value Funds paid advisory fees at the annual rates of 0.60% and 0.60%
of each portfolio's respective average daily net assets to First Interstate
Capital Management ("FICM"), 7501 E. McCormick Parkway, Scottsdale, Arizona,
which served as investment advisor to the predecessor portfolios. FICM was an
indirect, wholly owned subsidiary of First Interstate Bancorp.
Prior to the Corporate Stock Fund's conversion to master/feeder structure,
Wells Fargo Bank provided investment advisory services directly to the Fund. For
its services as investment adviser, Wells Fargo Bank was entitled to receive a
monthly fee at the annual
PROSPECTUS 64
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rate of 0.50% of the first $250 million of the Fund's average daily net assets,
0.40% of the next $250 million, and 0.30% of the Corporate Stock Fund's average
daily net assets in excess of $500 million. WFNIA, the sub-adviser to the Fund
prior to January 1, 1996, was entitled to receive from Wells Fargo Bank an
annual fee equal to $40,000 plus .08% of the average daily net assets of the
Fund. For the year ended December 31, 1995, the Company paid to Wells Fargo
Bank, on behalf of the Corporate Stock Fund, an amount equal to 0.50% of the
average daily net assets of the Fund as compensation for its services as
investment adviser to the Fund. For the year ended December 31, 1995, Wells
Fargo Bank paid an amount equal to 0.09% of the average daily net assets of the
Fund to WFNIA as compensation for its services as sub-adviser to the Fund.
Prior to February 20, 1996, the Strategic Growth Fund of Overland Express
Funds, Inc. (the predecessor fund to the Capital Appreciation Master Portfolio
in which the Aggressive Growth Fund invests) directly retained Wells Fargo Bank
as investment adviser. For the year ended December 31, 1995, the predecessor
fund paid Wells Fargo Bank an amount equal to 0.50% of its average daily net
assets as compensation for its advisory services.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
Wells Fargo Bank serves as custodian to each Fund, other than the Corporate
Stock Fund, for which BGI serves as Custodian. BGI, located at 45 Fremont
Street, San Francisco, California 94105, is a special purpose trust company that
is owned indirectly by Barclays Bank PLC. BGFA is a wholly owned subsidiary of
BGI. Under the Custody Agreement with Wells Fargo Bank, a Fund may, at times,
borrow money from Wells Fargo Bank as needed to satisfy temporary liquidity
needs. Wells Fargo Bank charges interest on such overdrafts at a rate determined
pursuant to the Custody Agreement. Wells Fargo Bank serves as each Fund's
transfer and dividend disbursing agent. Wells Fargo Bank performs its custodial
and transfer and dividend disbursing agency services at 525 Market Street, San
Francisco, California 94105.
SHAREHOLDER SERVICING AGENT
The Funds have entered into shareholder servicing agreements with Wells Fargo
Bank on behalf of each Fund or class, and may enter into similar agreements with
other entities. Under such agreements, Shareholder Servicing Agents (including
Wells Fargo Bank) agree, as agents for their customers, to provide
administrative services with respect to Fund shares, which include aggregating
and transmitting shareholder orders for purchases, exchanges and redemptions;
maintaining shareholder accounts and records, aggregating and placing purchase,
exchange and redemption transactions, and providing such other related services
as the Company or a shareholder may reasonably request. For these services, a
Shareholder Servicing Agent is entitled to receive a fee at an annual rate of up
to (i) 0.30% of the average daily net assets attributable to the shares
65 PROSPECTUS
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of the Corporate Stock Fund or the Class A or Class B shares of the Diversified
Income and Growth and Income Funds, or (ii) 0.25% of the average daily net
assets attributable to the Class A or B shares of the Aggressive Growth,
Balanced, Equity Value and Small Cap Funds, owned during the period by investors
with whom the Shareholder Servicing Agent maintains a servicing relationship.
With regard to shares of the Corporate Stock Fund and Class A or B shares of the
other Funds, in no event will the fees paid exceed the maximum amount payable to
the Shareholder Servicing Agent under applicable laws, regulations or rules,
including the Rules of Fair Practice of the NASD ("NASD Rules"). In no event
will the portion of such fees that constitutes a "service fee," as that term is
used by the NASD, exceed 0.25% of the average net asset value attributable to
the Class A and Class B shares of the Diversified Income and Growth and Income
Funds or shares of the Corporate Stock Fund.
Shareholder Servicing Agents also may impose certain conditions on their
customers, subject to the terms of this Prospectus, in addition to or different
from those imposed by the Company, such as requiring a higher minimum initial
investment or payment of a separate fee for additional services. Each
Shareholder Servicing Agent is required to agree to disclose any fees it may
directly charge its customers who are shareholders of a Fund and to notify them
in writing at least 30 days before it imposes any transaction fees.
SPONSOR, ADMINISTRATOR AND DISTRIBUTOR
Subject to the overall supervision of the Company's Board of Directors,
Stephens provides the Funds with administrative services, including general
supervision of each Fund's operation, coordination of the other services
provided to each Fund, compilation of information for reports to the SEC and the
state securities commissions, preparation of proxy statements and shareholder
reports, and general supervision of data compilation in connection with
preparing periodic reports to the Company's Directors and officers. Stephens
also furnishes office space and certain facilities to conduct each Fund's
business and compensates the Company's Directors, officers and employees who are
affiliated with Stephens. For these services, Stephens is entitled to receive
from the Aggressive Growth, Corporate Stock, Diversified Income and Growth and
Income Funds, a monthly fee at the annual rate of 0.03% of each Fund's average
daily net assets. From the Balanced, Equity Value and Small Cap Funds, Stephens
is entitled to receive a monthly fee at the annual rate of 0.05% of each Fund's
average daily net assets. From time to time, Stephens may waive its fees from a
Fund in whole or in part. Any such waiver will reduce a Fund's expenses and,
accordingly, have a favorable impact on such Fund's yield and total return.
Stephens, as the principal underwriter of the Funds within the meaning of the
1940 Act, has entered into a Distribution Agreement with the Company pursuant to
which Stephens is responsible for distributing shares of the Funds. The Company
also has adopted a Distribution Plan on behalf of each Fund or class of shares
under the SEC's
PROSPECTUS 66
<PAGE> 71
Rule 12b-1 ("Plans"). Under the Plan for the Corporate Stock Fund and Class A
Plan for the other Funds, each Fund may defray all or part of the cost of
preparing and printing prospectuses and other promotional materials and of
delivering prospectuses and those materials to prospective Class A shareholders
paying on an annual basis up to 0.05% of the average daily net assets
attributable to such shares of the Aggressive Growth, Corporate Stock,
Diversified Income and Growth and Income Funds, and up to 0.10% of the average
daily net assets attributable to the Class A shares of the Balanced, Equity
Value and Small Cap Funds. The Class A Plans for the Balanced, Equity Value, and
Small Cap Funds provide for payments to compensate the Distribution and Selling
Agents for sales support services also. Under the Class B Plans, each Fund may
defray all or part of such costs and pay compensation to the Distributor and
Selling Agents for sales support services. The Class B Plans provide for
payments, on an annual basis, of up to 0.70% of the average daily net assets
attributable to the Class B shares of the Aggressive Growth, Corporate Stock,
Diversified Income and Growth and Income Funds, and up to 0.75% of the average
daily net assets attributable to the Class A shares of the Balanced, Equity
Value and Small Cap Funds, each Fund. Other distribution-related services may
include, among other services, costs and expenses for advertisements, sales
literature, direct mail or any other form of advertising; expenses of sales
employees or agents of the Distributor, including salary, commissions, travel
and related expenses; payments to broker/dealers and financial institutions for
services in connection with the distribution of shares, including promotional
incentives and fees calculated with reference to the average daily net asset
value of shares held by shareholders who have a brokerage or other service
relationship with the broker/dealer or other institution receiving such fees;
and other similar services as the Directors determine to be reasonably
calculated to result in the sale of a Fund's shares.
In addition, the Plans contemplate that, to the extent any fees payable
pursuant to a shareholder servicing agreement (discussed above) are deemed to be
for distribution-related services, such payments are approved and payable
pursuant to the Plans, subject to any limits under applicable law, regulations
or rules, including the NASD Rules. Financial institutions acting as Selling
Agents, Shareholder Servicing Agents or in certain other capacities may be
required to register as dealers pursuant to applicable state securities laws
which may differ from federal law and any interpretations expressed herein.
The Distribution Agreement provides that Stephens shall act as agent for the
Funds for the sale of their shares, and may enter into selling agreements with
Selling Agents that wish to make available shares of the Funds to their
respective customers. The Funds may participate in joint distribution activities
with any of the other funds of the Company, in which event, expenses reimbursed
out of the assets of the Funds may be attributable, in part, to the
distribution-related activities of another fund of the Company. Generally, the
expenses attributable to joint distribution activities will be allocated among
each Fund and the other funds of the Company in proportion to their relative net
67 PROSPECTUS
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asset sizes, although the Company's Board of Directors may allocate such
expenses in any other manner that it deems fair and equitable.
Stephens has established a cash and non-cash compensation program, pursuant to
which broker/dealers or financial institutions that sell shares of the Company's
funds may earn additional compensation in the form of trips to sales seminars or
vacation destinations, tickets to sporting events, theater or other
entertainment, opportunities to participate in golf or other outings and gift
certificates for meals or merchandise or the cash value of a non-cash
compensation item.
FUND EXPENSES
From time to time, Wells Fargo Bank and Stephens may waive their respective
fees in whole or in part and reimburse expenses payable to others. Any such
waivers or reimbursements will reduce a Fund's expenses and, accordingly, have a
favorable impact on such Fund's performance. Except for the expenses borne by
Wells Fargo Bank and Stephens, each Fund bears all costs of its operations,
including its pro rata portion of Company expenses such as fees and expenses of
its independent auditors and legal counsel, and compensation of the Company's
directors who are not affiliated with the adviser, administrator or any of their
affiliates; advisory, transfer agency, custody and administration fees; and any
extraordinary expenses. Expenses attributable to each fund or class are charged
against the assets of the fund or class. General expenses of the Company are
allocated among all of the funds of the Company, including the Funds, in a
manner proportionate to the net assets of each fund, on a transactional basis,
or on such other basis as the Company's Board of Directors deems equitable. The
Aggressive Growth, Corporate Stock and Small Cap Funds also bear a pro rata
portion of the costs of the Master Portfolio in which each Fund invests.
The Small Cap Master Portfolio's Investment Advisory Contract and the
Administration Agreements with the Master Portfolio and the Fund provide that,
if in any fiscal year, the total aggregate expenses of the Master Portfolio and
the Fund incurred by, or allocated to, the Master Portfolio and the Fund
(excluding taxes, interest, brokerage commissions and other portfolio
transaction expenses, expenditures that are capitalized in accordance with
generally accepted accounting principles, extraordinary expenses and amounts
accrued or paid under a Plan) exceed the most restrictive expense limitation
applicable to a Fund imposed by the securities laws or regulations of the states
in which the Fund's shares are registered for sale, Wells Fargo and Stephens
shall waive their fees proportionately under the Investment Advisory Contract
and the Administration Agreements, respectively, for the fiscal year to the
extent of the excess, or reimburse the excess, but only to the extent of their
respective fees. The Investment Advisory Contract and the Administration
Agreements further provide that the total expenses shall be reviewed monthly so
that, to the extent the annualized expenses for such month exceed the most
restrictive applicable annual expense limitation, the monthly fees under the
PROSPECTUS 68
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Investment Advisory Contract and the Administration Agreements shall be reduced
as necessary. Currently, the most stringent applicable state expense ratio
limitation is 2.50% of the first $30 million of the Fund's average net assets
for its current fiscal year, 2% of the next $70 million of such assets, and
1.50% of such assets in excess of $100 million.
TAXES
The Company intends to qualify each Fund as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), as long as such qualification is in the best interest of each Fund's
shareholders. Each Fund will be treated as a separate entity for tax purposes
and thus the provisions of the Code applicable to regulated investment companies
will generally be applied to each Fund, rather than to the Company as a whole.
In addition, net capital gains, net investment income, and operating expenses
will be determined separately for each Fund. By complying with the applicable
provisions of the Code, each Fund will not be subject to federal income taxes
with respect to net investment income and net realized capital gains distributed
to its shareholders. Each Fund intends to pay out substantially all of its net
investment income and net realized capital gains (if any) for each year.
Dividends from net investment income (including net short-term capital gains,
if any) declared and paid by a Fund will be taxable as ordinary income to its
shareholders. Whether you take dividend payments and capital-gain distributions
in cash or have them automatically reinvested in additional shares in the Fund,
they will be taxable to you. Generally, dividends and capital-gain distributions
are taxable to shareholders when they are received. However, dividends and
capital-gain distributions declared payable as of a record date in October,
November or December of any calendar year are deemed under the Code to have been
distributed by a Fund and received by the shareholders on December 31 of that
calendar year, if the dividends and capital-gain distributions are actually paid
in the following January. Such dividends and capital-gain distributions will,
accordingly, be taxable to the recipient shareholders in the year in which the
record date falls. You may be eligible to defer the taxation of dividend and
capital-gain distributions on Fund shares which are held under a qualified
tax-deferred retirement plan. See "Investing in the Fund -- Tax-Deferred
Retirement Plans" above.
Corporate shareholders of the Funds may be eligible for the dividends-received
deduction on dividends paid out of a Fund's net investment income attributable
to dividends received from domestic corporations, which, if received directly,
would qualify for such deduction. In order to qualify for the dividends-received
deduction, a corporate shareholder must hold Fund shares paying the dividends
upon which the deduction is based for at least 46 days.
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The Aggressive Growth Fund, Corporate Stock, and Small Cap Funds seek to
qualify as regulated investment companies by investing all of their assets in
respective Master Portfolios. Each Master Portfolio will be treated as a
non-publicly traded partnership rather than as a regulated investment company or
a corporation under the Code, and as such, shall not be subject to federal
income tax. As a non-publicly traded partnership, any interest, dividends, gains
and losses of each Master Portfolio shall be deemed to have been "passed
through" to its corresponding Fund (and other investors, if any) in proportion
to the Fund's ownership interest in the Master Portfolio. If the Master
Portfolio were to accrue but not distribute any interest, dividends or gains,
the Fund would be deemed to have realized and recognized its proportionate share
of such income, regardless of whether or not such income has been distributed by
the Master Portfolio. However, each Master Portfolio will seek to minimize
recognition by its corresponding Fund and other investors, if any, of interest,
dividends and gains without a corresponding distribution.
The Funds, or your Shareholder Servicing Agent on their behalf, will inform
you no later than January 31 of the amount and nature of such Fund's dividends
and capital-gain distributions with respect to the previous year. You should
keep all statements you receive to assist in your personal record keeping. Each
Company is required to withhold, subject to certain exemptions, at a rate of 31%
on dividends paid or credited to individual shareholders of the Funds, if a
shareholder has not complied with IRS regulations or if a correct taxpayer
identification number, certified when required, is not on file with the Company
or the transfer agent. In connection with this withholding requirement, you will
be asked to certify on your Account Application that the social security or
taxpayer identification number you provide is correct and that you are not
subject to 31% back-up withholding for previous underreporting to the IRS.
Foreign shareholders may be subject to different tax treatment, including a
withholding tax. See "Federal Income Taxes -- Foreign Shareholders" in the SAIs.
The foregoing discussion regarding dividends, distributions and taxes is based
on tax laws and federal regulations which were in effect as of the date of this
Prospectus and summarizes only some of the important federal tax considerations
generally affecting the Funds and their shareholders. It is not intended as a
substitute for careful tax planning; you should consult your tax advisor with
respect to your specific tax situation as well as with respect to state and
local taxes. Further federal tax considerations are discussed in the SAI for
each Fund.
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PROSPECTUS APPENDIX --
ADDITIONAL INVESTMENT POLICIES
FUND AND MASTER PORTFOLIO INVESTMENTS
Set forth below, except where otherwise indicated, is a description of certain
investments and additional investment policies for each Fund and master
portfolio.
Temporary Investments
From time to time, for temporary defensive purposes, the Funds and Master
Portfolios may hold assets in cash or make short-term investments, to the extent
appropriate, to maintain adequate liquidity for redemption requests or other
cash management needs or for temporary defensive purposes. The short-term
investments that the Funds and Master Portfolios may purchase for liquidity
purposes include U.S. Treasury bills, shares of other mutual funds and
repurchase agreements (as discussed below). Other permissible investments
include: (i) obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities (including government-sponsored enterprises)
("U.S. Government obligations"); (ii) negotiable certificates of deposit,
bankers' acceptances and fixed time deposits and other obligations of domestic
banks (including foreign branches) that have more than $1 billion in total
assets at the time of investment and are members of the Federal Reserve System
or are examined by the Comptroller of the Currency or whose deposits are insured
by the FDIC; (iii) commercial paper rated at the date of purchase "P-1" by
Moody's or "A-1+" or "A-1" by S&P, or, if unrated, of comparable quality as
determined by Wells Fargo Bank, as investment adviser; and (iv) short-term, U.S.
dollar-denominated obligations of foreign banks (including U.S. branches) that,
at the time of investment: (a) have more than $10 billion, or the equivalent in
other currencies, in total assets; (b) are among the 75 largest foreign banks in
the world as determined on the basis of assets; (c) have branches or agencies in
the United States; and (d) in the opinion of Wells Fargo Bank, as investment
adviser, are of comparable quality to obligations of U.S. banks which may be
purchased by the Funds or Master Portfolios.
U.S. Government Obligations
U.S. Government obligations include securities issued or guaranteed as to
principal and interest by the U.S. Government and supported by the full faith
and credit of the U.S. Treasury. U.S. Treasury obligations differ mainly in the
length of their maturity. Treasury bills, the most frequently issued marketable
government securities, have a maturity of up to one year and are issued on a
discount basis. U.S. Government obligations also include securities issued or
guaranteed by federal agencies or
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instrumentalities, including government-sponsored enterprises. Some obligations
of agencies or instrumentalities of the U.S. Government are supported by the
full faith and credit of the United States or U.S. Treasury guarantees; others,
by the right of the issuer or guarantor to borrow from the U.S. Treasury; still
others, by the discretionary authority of the U.S. Government to purchase
certain obligations of the agency or instrumentality; and others, only by the
credit of the agency or instrumentality issuing the obligation. In the case of
obligations not backed by the full faith and credit of the United States, the
investor must look principally to the agency or instrumentality issuing or
guaranteeing the obligation for ultimate repayment, which agency or
instrumentality may be privately owned. There can be no assurance that the U.S.
Government will provide financial support to its agencies or instrumentalities
where it is not obligated to do so. In addition, U.S. Government obligations are
subject to fluctuations in market value due to fluctuations in market interest
rates. As a general matter, the value of debt instruments, including U.S.
Government obligations, declines when market interest rates increase and rises
when market interest rates decrease. Certain types of U.S. Government
obligations are subject to fluctuations in yield or value due to their structure
or contract terms.
Floating- and Variable-Rate Instruments
Certain of the debt instruments that the Funds and Master Portfolios may
purchase bear interest at rates that are not fixed, but vary, for example with
changes in specified market rates or indices or specified intervals. Certain of
these instruments may carry a demand feature that would permit the holder to
tender them back to the issuer at par value prior to maturity. The Funds and
Master Portfolios may, in accordance with SEC rules, account for these
instruments as maturing at the next interest rate readjustment date or the date
at which the Funds and Master Portfolios may tender the instrument back to the
issuer, whichever is later. The floating- and variable-rate instruments that the
Funds and Master Portfolios may purchase include certificates of participation
in such obligations.
Wells Fargo Bank, as investment adviser, monitors on an ongoing basis the
ability of an issuer of a demand instrument to pay principal and interest on
demand. Events affecting the ability of the issuer of a demand instrument to
make payment when due may occur between the date a Fund or Master Portfolio
elects to demand payment and the date payment is due. Such events may affect the
ability of the issuer of the instrument to make payment when due, thereby
affecting a Fund's or Master Portfolio's ability to obtain payment at par,
except when such demand instruments permit same-day settlement. Demand
instruments whose demand feature is not exercisable within seven days may be
treated as liquid, provided that an active secondary market exists.
The Balanced and Equity Funds may also hold derivative instruments that have
interest rates that re-set inversely to changing current market rates and/or
have embedded interest rate floors and caps that require the issuer to pay an
adjusted interest rate if market rates fall below or rise above a specified
rate. These instruments represent
PROSPECTUS A-2
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relatively recent innovations in the bond markets, and the trading market for
these instruments is less developed than the markets for traditional types of
debt instruments. It is uncertain how these instruments will perform under
different economic and interest-rate scenarios. Because certain of these
instruments are leveraged, their market values may be more volatile than other
types of bonds and may present greater potential for capital-gain or loss. In
some cases, it may be difficult to determine the fair value of a structured or
derivative instrument because of a lack of reliable objective information and an
established secondary market for some instruments may not exist. As new types of
derivative securities are developed and offered to investors, the adviser will,
consistent with each Fund's investment objective, policies and quality
standards, consider making investments in such new types of derivative
securities.
Repurchase Agreements
The Funds and Master Portfolios may enter into repurchase agreements wherein
the seller of a security to a Fund or Master Portfolio agrees to repurchase that
security from such Fund or Master Portfolio at a mutually agreed-upon time and
price. The period of maturity is usually quite short, often overnight or a few
days, although it may extend over a number of months. A Fund or Master Portfolio
may enter into repurchase agreements only with respect to other obligations that
could otherwise be purchased by the Fund or Master Portfolio. All repurchase
agreements must be collateralized at 102% based on values that are
marked-to-market daily. Although the maturities of the underlying securities in
a repurchase agreement transaction entered into by a Fund or Master Portfolio
may be greater than one year, the term of the repurchase agreement must be less
than one year. If the seller defaults and the value of the underlying securities
has declined, a Fund may incur a loss. In addition, if bankruptcy proceedings
are commenced with respect to the seller of the security, a Fund's or Master
Portfolio's disposition of the security may be delayed or limited. The Funds and
Master Portfolios may enter into repurchase agreements only with primary
reporting dealers and commercial banks that meet guidelines established by the
applicable Board of Directors or Trustees and are not affiliated with a Fund's
or Master Portfolio's investment adviser or sub-adviser. The Funds and Master
Portfolios may participate in pooled repurchase agreement transactions with
other funds advised by Wells Fargo Bank.
Loans of Portfolio Securities
The Funds and Master Portfolios may lend securities from their portfolios to
brokers, dealers and financial institutions (but not individuals) if cash, U.S.
Government obligations or other high-quality debt instruments equal to at least
100% of the current market value of the securities loan (including accrued
interest thereon) plus the interest payable to a Fund with respect to the loan
is maintained with such Fund or Master Portfolio. In determining whether to lend
a security to a particular broker, dealer or financial institution, a Fund's or
Master Portfolio's investment adviser considers all
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relevant facts and circumstances, including the creditworthiness of the broker,
dealer or financial institution. Any loans of portfolio securities are fully
collateralized based on values that are marked-to-market daily. The Funds and
Master Portfolios will not enter into any portfolio security lending arrangement
having a duration of longer than one year. Any securities that a Fund or Master
Portfolio may receive as collateral do not become part of the portfolio of such
Fund or Master Portfolio at the time of the loan and, in the event of a default
by the borrower, such Fund or Master Portfolio, if permitted by law, will
dispose of such collateral except for such part thereof that is a security in
which the Fund or Master Portfolio is permitted to invest. During the time
securities are on loan, the borrower agrees to pay such Fund or Master Portfolio
any accrued income on those securities, and such Fund or Master Portfolio may
invest the cash collateral and earn additional income or receive an agreed-upon
fee from a borrower that has delivered cash-equivalent collateral. The Funds and
Master Portfolios will not lend securities having a value that exceeds one-third
of the current value of their respective total assets. Loans of securities by a
Fund or Master Portfolio will be subject to termination at the Fund's, Master
Portfolio's or the borrower's option. The Funds and Master Portfolios may pay
reasonable administrative and custodial fees in connection with a securities
loan and may pay a negotiated portion of the interest or fee earned with respect
to the collateral to the borrower or the placing broker. Except consistent with
the SEC's rules, regulations, published positions and/or exemptions, borrowers
and placing brokers may not be affiliated, directly or indirectly, with the
Company, the investment adviser, or the Distributor.
Convertible Securities
The Funds and Master Portfolios may invest in convertible securities that
provide current income and are issued by companies with the characteristics
described above for each Fund and that have a strong earnings and credit record.
The Funds may purchase convertible securities that are fixed-income debt
securities or preferred stocks, and which may be converted at a stated price
within a specified period of time into a certain quantity of the common stock of
the same issuer. Convertible securities, while usually subordinate to similar
nonconvertible securities, are senior to common stocks in an issuer's capital
structure. Convertible securities offer flexibility by providing the investor
with a steady income stream (which generally yield a lower amount than similar
nonconvertible securities and a higher amount than common stocks) as well as the
opportunity to take advantage of increases in the price of the issuer's common
stock through the conversion feature. Fluctuations in the convertible security's
price can reflect changes in the market value of the common stock or changes in
market interest rates. At most, 5% of each Fund's net assets will be invested,
at the time of purchase, in convertible securities that are not rated in the
four highest rating categories by one or more NRSROs, such as Moody's or S&P, or
unrated but determined by the Adviser to be of comparable quality.
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Other Investment Companies
The Funds and Master Portfolios may invest in shares of other open-end,
management investment companies, subject to the limitations of Section 12(d)(1)
of the 1940 Act, provided that any such purchases will be limited to temporary
investments in shares of unaffiliated investment companies and the investment
adviser waives its advisory fees for that portion of a Fund's or Master
Portfolio's assets so invested, except when such purchase is part of a plan of
merger, consolidation, reorganization or acquisition. Notwithstanding any other
investment policy or limitation (whether or not fundamental), as a matter of
fundamental policy, the Aggressive Growth, Balanced, Corporate Stock, Equity
Value and Small Cap Funds may each invest all of its assets in the securities of
a single open-end, management investment company with substantially the same
fundamental investment objective, policies and limitations as such Fund. Subject
to the limitations of the 1940 Act, the Funds may purchase shares of
exchange-listed, closed-end funds consistent with pursuing their investment
objectives.
Foreign Obligations and Securities
The Capital Appreciation and Small Cap Master Portfolios and the Diversified
Income and Growth and Income Funds each may invest up to 25% of their respective
assets in securities of foreign governmental and private issuers that are
denominated in and pay interest in U.S. dollars. The Corporate Stock Master
Portfolio may invest up to 25% of its assets in high-quality, short-term debt
obligations of foreign branches of U.S. banks or U.S. branches of foreign banks
that are denominated in and pay interest in U.S. dollars, and similar
obligations of foreign governmental and private issuers. The Balanced and Equity
Value Funds may invest up to 5% of their respective assets in equity securities
listed or traded exclusively on a foreign exchange. These securities may take
the form of American Depositary Receipts ("ADRs"), Canadian Depositary Receipts
("CDRs"), European Depositary Receipts ("EDRs"), International Depositary
Receipts ("IDRs") and Global Depositary Receipts ("GDRs") or other similar
securities convertible into securities of foreign issuers. These securities may
not necessarily be denominated in the same currency as the securities into which
they may be converted. ADRs (sponsored or unsponsored) are receipts typically
issued by a U. S. bank or trust company and traded on a U.S. stock exchange, and
CDRs are receipts typically issued by a Canadian bank or trust company, that
evidence ownership of underlying foreign securities. Issuers of unsponsored ADRs
are not contractually obligated to disclose material information in the U.S.
and, therefore, such information may not correlate to the market value of the
unsponsored ADR. EDRs and IDRs are receipts typically issued by European banks
and trust companies, and GDRs are receipts issued by either a U.S. or non-U.S.
banking institution, that evidence ownership of the underlying foreign
securities. Generally, ADRs in registered form are designed for use in U.S.
securities markets and EDRs and IDRs in bearer form are designed primarily for
use in Europe.
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Investments in foreign securities involve certain considerations that are not
typically associated with investing in domestic securities. There may be less
publicly available information about a foreign issuer than about a domestic
issuer. Foreign issuers also are not generally subject to the same accounting,
auditing and financial reporting standards or governmental supervision as
domestic issuers. In addition, with respect to certain foreign countries,
interest may be withheld at the source under foreign income tax laws, and there
is a possibility of expropriation or confiscatory taxation, political, social
and monetary instability or diplomatic developments that could adversely affect
investments in, the liquidity of, and the ability to enforce contractual
obligations with respect to, securities of issuers located in those countries.
Emerging Markets
The Capital Appreciation and Small Cap Master Portfolios, and the Diversified
Income and Growth and Income Funds each may invest up to 15% of their respective
assets in equity securities of companies in "emerging markets." The Funds and
Master Portfolios consider countries with emerging markets to include the
following: (i) countries with an emerging stock market as defined by the
International Finance Corporation; (ii) countries with low- to middle-income
economies according to the International Bank for Reconstruction and Development
(more commonly referred to as the World Bank); and (iii) countries listed in
World Bank publications as developing. The adviser may invest in those emerging
markets that have a relatively low gross national product per capita, compared
to the world's major economies, and which exhibit potential for rapid economic
growth. The adviser believes that investment in equity securities of emerging
market issuers offers significant potential for long-term capital appreciation.
Equity securities of emerging market issuers may include common stock,
preferred stocks (including convertible preferred stocks) and warrants; bonds,
notes and debentures convertible into common or preferred stock; equity
interests in foreign investment funds or trusts and real estate investment trust
securities. The Capital Appreciation and Small Cap Master Portfolios and the
Diversified Income and Growth and Income Funds may invest in ADRs, CDRs, GDRs,
EDRs, and IDRs of such issuers.
Emerging market countries include, but are not limited to: Argentina, Brazil,
Chile, China, the Czech Republic, Columbia, Ecuador, Greece, Hong Kong,
Indonesia, India, Malaysia, Mexico, the Philippines, Poland, Portugal, Peru,
Russia, Singapore, South Africa, Thailand, Taiwan and Turkey. A company is
considered in a country, market or region if it conducts its principal business
activities there, namely, if it derives a significant portion (at least 50%) of
its revenues or profits from goods produced or sold, investments made, or
services performed therein or has at least 50% of its assets situated in such
country, market or region.
There are special risks involved in investing in emerging-market countries.
Most are heavily dependent on international trade, and some are especially
vulnerable to recessions in other countries. Many of these countries are also
sensitive to world
PROSPECTUS A-6
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commodity prices. Some countries may still have obsolete financial systems,
economic problems or archaic legal systems. In addition, many of these nations
are experiencing political and social uncertainties. Many investments in
emerging markets can be considered speculative, and their prices can be much
more volatile than in the more developed nations of the world. This difference
reflects the greater uncertainties of investing in less established markets and
economies. The financial markets of emerging markets countries are generally
less well capitalized and thus securities of issuers based in such countries may
be less liquid.
Money Market Instruments
The Funds and Master Portfolios may invest in the following types of high
quality money market instruments that have remaining maturities not exceeding
one year: (i) U.S. Government obligations; (ii) negotiable certificates of
deposit, bankers' acceptances and fixed time deposits and other obligations of
domestic banks (including foreign branches) that have more than $1 billion in
total assets at the time of investment and are members of the Federal Reserve
System or are examined by the Comptroller of the Currency or whose deposits are
insured by the FDIC; (iii) commercial paper rated at the date of purchase
"Prime-1" by Moody's or "A-1" or "A-1+" by S&P, or, if unrated, of comparable
quality as determined by Wells Fargo Bank, as investment adviser; (iv)
repurchase agreements; and (v) for the Corporate Stock Master Portfolio only,
non-convertible corporate debt securities (e.g., bonds and debentures) with
remaining maturities at the date of purchase of no more than one year that are
rated at least "Aa" by Moody's or "AA" by S&P. The Master Portfolios also may
invest in short-term U.S. dollar-denominated obligations of foreign banks
(including U.S. branches) that at the time of investment: (i) have more than $10
billion, or the equivalent in other currencies, in total assets; (ii) are among
the 75 largest foreign banks in the world as determined on the basis of assets;
(iii) have branches or agencies in the United States; and (iv) in the opinion of
Wells Fargo Bank, as investment adviser, are of comparable quality to
obligations of U.S. banks which may be purchased by the Master Portfolios.
Options
The Balanced and Equity Funds and the Capital Appreciation, Corporate Stock
and Small Cap Master Portfolios may purchase or sell options on individual
securities or options on indices of securities as described below. The purchaser
of an option risks a total loss of the premium paid for the option if the price
of the underlying security does not increase or decrease sufficiently to justify
exercise. The seller of an option, on the other hand, will recognize the premium
as income if the option expires unrecognized but foregoes any capital
appreciation in excess of the exercise price in the case of a call option and
may be required to pay a price in excess of current market value in the case of
a put option.
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Call and Put Options on Specific Securities. The Balanced and Equity Funds and
the Capital Appreciation and Small Cap Master Portfolios may invest in call and
put options on a specific security. The Capital Appreciation Master Portfolio
may invest up to 15% of its assets, represented by the premium paid, in the
purchase of call and put options in respect of specific securities (or groups of
"baskets" of specific securities). Each of the Balanced and Equity Funds may
purchase put and call options listed on a national securities exchange and
issued by the Options Clearing Corporation in an amount not exceeding 5% of its
net assets.
A call option gives the purchaser of the option the right to buy, and
obligates the writer to sell, an underlying security at the exercise price at
any time during the option period. Conversely, a put option gives the purchaser
of the option the right to sell, and obligates the writer to buy, an underlying
security at the exercise price at any time during the option period. Investments
by a Fund or Master Portfolio in off-exchange options will be treated as
"illiquid" and therefore subject to the Master Portfolio's policy of not
investing more than 15% of its net assets in illiquid securities.
The Balanced and Equity Funds and the Small Cap Master Portfolio may write
covered call option contracts and secured put options as Wells Fargo deems
appropriate. A covered call option is a call option for which the writer of the
option owns the security covered by the option. Covered call options written by
a Fund or Master Portfolio expose the Fund or Master Portfolio during the term
of the option (i) to the possible loss of opportunity to realize appreciation in
the market price of the underlying security or (ii) to possible loss caused by
continued holding of a security which might otherwise have been sold to protect
against depreciation in the market price of the security. If a Fund or Master
Portfolio writes a secured put option, it assumes the risk of loss should the
market value of the underlying security decline below the exercise price of the
option. The aggregate value of the securities subject to options written by a
Fund or the Master Portfolio will not exceed 25% of the value of the assets of
the Balanced or Equity Funds or 15% of the net assets of the Small Cap Master
Portfolio. The use of covered call options and securities put options will not
be a primary investment technique of the Funds or Master Portfolio, and they are
expected to be used infrequently. If the adviser is incorrect in its forecast of
market value or other factors when writing the foregoing options, a Fund would
be in a worse position than it would have been had the foregoing investment
techniques not been used.
Each Fund and the Master Portfolio may engage in unlisted over-the-counter
options with broker/dealers deemed creditworthy by the adviser. Closing
transactions for such options are usually effected directly with the same
broker/dealer that effected the original option transaction. A Fund bears the
risk that the broker/dealer will fail to meet its obligations. There is no
assurance that a liquid secondary trading market exists for closing out an
unlisted option position. Furthermore, unlisted options are not subject to the
protections afforded purchasers of listed options by the Options Clearing
PROSPECTUS A-8
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Corporation, which performs the obligations of its members who fail to perform
in connection with the purchase or sale of options.
Stock Index Options. The Small Cap and the Corporate Stock Master Portfolios
may each purchase call and put options and write covered call options on stock
indices listed on national securities exchanges or traded in the
over-the-counter market to the extent of 15% of the value of its net assets.
The effectiveness of purchasing or writing stock index options will depend
upon the extent to which price movements in the Master Portfolio's investment
portfolio correlate with price movements of the stock index selected. Because
the value of a stock index option depends upon changes to the price of all
stocks comprising the index rather than the price of a particular stock, whether
the Master Portfolio will realize a gain or loss from the purchase or writing of
options on an index depends upon movements in the price of all stocks in the
index, rather than movements in the price of a particular stock. Accordingly,
successful use by a Master Portfolio of options on stock indexes will be subject
to Wells Fargo's ability to correctly analyze movements in the direction of the
stock market generally or of particular industry or market segments.
Forward Commitments, When-Issued Purchases and Delay-Delivery Transactions
Each Fund and Master Portfolio may purchase or sell securities on a
when-issued or delayed-delivery basis and make contracts to purchase or sell
securities for a fixed price at a future date beyond customary settlement time.
Securities purchased or sold on a when-issued, delayed-delivery or forward
commitment basis involve a risk of loss if the value of the security to be
purchased declines, or the value of the security to be sold increases, before
the settlement date. Although a Fund will generally purchase securities with the
intention of acquiring them, a Fund may dispose of securities purchased on a
when-issued, delayed-delivery or a forward commitment basis before settlement
when deemed appropriate by the adviser.
For additional information relating to option trading practices, including the
particular risks thereof, see the SAI.
Futures Contracts
The Balanced and Equity Funds and the Corporate Stock Master Portfolio may
engage in futures transactions as discussed below. A futures transaction
involves a firm agreement to buy or sell a commodity or financial instrument at
a particular price on a specified future date, while an option transaction
generally involves a right, which may or may not be exercised, to buy or sell a
commodity of financial instrument at a particular price on a specified future
date. Futures contracts and options are standardized and exchange-traded, where
the exchange serves as the ultimate counterparty for all contracts.
Consequently, the only credit risk on futures contracts is the creditworthiness
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of the exchange. Futures contracts, however, are subject to market risk (i.e.,
exposure to adverse price changes).
The Corporate Stock Master Portfolio may trade futures contracts and options
on futures contracts in U.S. domestic markets, such as the Chicago Board of
Trade and the International Monetary Market of the Chicago Mercantile Exchange.
The Master Portfolios' futures transactions must constitute permissible
transactions pursuant to regulations promulgated by the Commodity Futures
Trading Commission. In addition, the Master Portfolio may not engage in futures
transactions if the sum of the amount of initial margin deposits and premiums
paid for unexpired options on futures contracts, other than those contracts
entered into for bona fide hedging purposes, would exceed 5% of the liquidation
value of the Master Portfolio's assets, after taking into account unrealized
profits and unrealized losses on such contracts; provided, however, that in the
case of an option on a futures contract that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%
liquidation amount. Pursuant to regulations and/or published positions of the
SEC, the Master Portfolio may be required to segregate cash, U.S. Government
obligations or other high-quality debt instruments in connection with its
futures transactions in an amount generally equal to the entire value of the
underlying commitment.
Initially, when purchasing or selling futures contracts the Master Portfolio
will be required to deposit with the Master Portfolio's custodian in the
broker's name an amount of cash or cash equivalents up to approximately 10% of
the contract amount. This amount is subject to change by the exchange or board
of trade on which the contract is traded, and members of such exchange or board
of trade may impose their own higher requirements. This amount is known as
"initial margin" and is in the nature of a performance bond or good faith
deposit on the contract that is returned to the Master Portfolio upon
termination of the futures position, assuming all contractual obligations have
been satisfied. Subsequent payments, known as "variation margin", to and from
the broker will be made daily as the price of the index or securities underlying
the futures contract fluctuates, making the long and short positions in the
futures contract more or less valuable. At any time prior to the expiration of a
futures contract, the Master Portfolio may elect to close the position by taking
an opposite position, at the then prevailing price, thereby terminating its
existing position in the contract.
Although the Master Portfolio intends to purchase or sell futures contracts
only if there is an active market for such contracts, no assurance can be given
that a liquid market will exist for any particular contract at any particular
time. Many futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single trading day. Once the daily
limit has been reached in a particular contract, no trades may be made that day
at a price beyond that limit or trading may be suspended for specified periods
during the trading day. Futures contracts prices could move to the limit for
several consecutive trading days with little or no trading, thereby preventing
prompt liquidation of futures positions and potentially subjecting the Master
PROSPECTUS A-10
<PAGE> 85
Portfolio and the Fund to substantial losses. If it is not possible, or the
Master Portfolio determines not, to close a futures position in anticipation of
adverse price movements, the Master Portfolio will be required to make daily
cash payments of variation margin.
An option on a futures contract gives the purchaser the right, in return for
the premium paid, to assume a position in a futures contract (a long position if
the option is a call and a short position if the option is a put) at a specified
exercise price at any time during the option exercise period. The writer (i.e.,
seller) of the option is required upon exercise to assume an offsetting futures
position (a short position if the option is a call and a long position if the
option is a put). Upon exercise of the option, the assumption of offsetting
futures positions by both the writer and the holder of the option will be
accompanied by delivery of the accumulated cash balance in the writer's futures
margin account in the amount by which the market price of the futures contract,
at exercise, exceeds (in the case of a call) or is less than (in the case of a
put) the exercise price of the option on the futures contract.
ADDITIONAL INVESTMENT POLICIES -- BALANCED AND EQUITY FUNDS
Mortgage-Related Securities
Mortgage pass-through securities are securities representing interests in
"pools" of mortgages in which payments of both interest and principal on the
securities are made monthly, in effect "passing through" monthly payments made
by the individual borrowers on the residential mortgage loans which underlie the
securities (net of fees paid to the issuer or guarantor of the securities).
Early repayment of principal on mortgage pass-through securities (arising from
prepayments of principal due to sale of the underlying property, refinancing, or
foreclosure, net of fees and costs which may be incurred) may expose a Fund to a
lower rate of return upon reinvestment of principal. Also, if a security subject
to prepayment has been purchased at a premium, in the event of prepayment the
value of the premium would be lost. Like other fixed-income securities, when
interest rates rise, the value of a mortgage-related security generally will
decline; however, when interest rates decline, the value of mortgage-related
securities with prepayment features may not increase as much as other
fixed-income securities. Payment of principal and interest on some mortgage
pass-through securities (but not the market value of the securities themselves)
may be guaranteed by the full faith and credit of the U.S. Government or its
agencies or instrumentalities. Mortgage pass-through securities created by
non-government issuers (such as commercial banks, savings and loan institutions,
private mortgage insurance companies, mortgage bankers and other secondary
market issuers) may be supported by various forms of insurance or guarantees,
including individual loan, title, pool and hazard insurance, and letters of
credit, which may be issued by governmental entities, private insurers or the
mortgage poolers. The Balanced Fund may also invest in investment grade
Collateralized Mortgage Obligations ("CMOs"). CMOs may be collateralized by
whole mortgage loans but are more typically collateralized by portfolios of
mortgage pass-through securities
A-11 PROSPECTUS
<PAGE> 86
guaranteed by GNMA, FHLMC or FNMA. CMOs are structured into multiple classes,
with each class bearing a different stated maturity. Payments of principal,
including prepayments, are first returned to investors holding the shortest
maturity class; investors holding the longer maturity classes receive principal
only after the first class has been retired. As new types of mortgage-related
securities are developed and offered to investors, the Adviser will, consistent
with a Fund's investment objective, policies and quality standards, consider
making investments in such new types of mortgage-related securities.
Other Asset-Backed Securities
The Balanced and Equity Funds may purchase asset-backed securities unrelated
to mortgage loans. These asset-backed securities may consist of undivided
fractional interests in pools of consumer loans or receivables held in trust.
Examples include certificates for automobile receivables (CARS) and credit card
receivables (CARDS). Payments of principal and interest on these asset-backed
securities are "passed through" on a monthly or other periodic basis to
certificate holders and are typically supported by some form of credit
enhancement, such as a letter of credit, surety bond, limited guaranty, or
subordination. The extent of credit enhancement varies, but usually amounts to
only a fraction of the asset-backed security's par value until exhausted.
Ultimately, asset-backed securities are dependent upon payment of the consumer
loans or receivables by individuals, and the certificate holder frequently has
no recourse to the entity that originated the loans or receivables. The actual
maturity and realized yield will vary based upon the prepayment experience of
the underlying asset pool and prevailing interest rates at the time of
prepayment. Asset-backed securities are relatively new instruments and may be
subject to greater risk of default during periods of economic downturn than
other instruments. Also, the secondary market for certain asset-backed
securities may not be as liquid as the market for other types of securities,
which could result in a Fund experiencing difficulty in valuing or liquidating
such securities.
Stripped Obligations
To the extent consistent with their respective investment objectives, the
Funds may purchase Treasury receipts and other "stripped" securities that
evidence ownership in either the future interest payments or the future
principal payments on U.S. Government and other obligations. These
participations, which may be issued by the U.S. Government (or a U.S. Government
agency or instrumentality) or by private issuers such as banks and other
institutions, are issued at a discount to their "face value," and, with respect
to the Balanced Fund, may include stripped mortgage-backed securities ("SMBS").
Stripped securities, particularly, SMBS, may exhibit greater price volatility
than ordinary debt securities because of the manner in which their principal and
interest are returned to investors.
PROSPECTUS A-12
<PAGE> 87
Custodial Receipts for Treasury Securities
To the extent consistent with their respective investment objectives, the
Funds may purchase participations in trusts that hold U.S. Treasury securities
(such as TIGRs and CATS) or other obligations where the trust participations
evidence ownership in either the future interest payments or the future
principal payments on the obligations. These participations are normally issued
at a discount to their "face value," and can exhibit greater price volatility
than ordinary debt securities because of the way in which their principal and
interest are returned to investors. Investments by a Fund in such participations
will not exceed 5% of the value of that Fund's total assets.
Forward Currency Transactions
The Equity Value and Balanced Funds may enter into forward foreign currency
exchange contracts in order to protect against uncertainty in the level of
future foreign exchange rates. See the SAI for further information concerning
foreign currency transactions.
ADDITIONAL INVESTMENT POLICIES -- CAPITAL APPRECIATION AND SMALL CAP
MASTER PORTFOLIOS
Privately Issued Securities (Rule 144A)
The Capital Appreciation and Small Cap Master Portfolios may invest in
privately issued securities which may be resold in accordance with Rule 144A
under the Securities Act of 1933 ("Rule 144A Securities"). Rule 144A Securities
are restricted securities which are not publicly traded. Accordingly, the
liquidity of the market for specific Rule 144A Securities may vary. Wells Fargo
Bank, using guidelines approved by the Board of Directors of the Company,
evaluates the liquidity characteristics of each Rule 144A Security proposed for
purchase by the Master Portfolios on a case-by-case basis and considers the
following factors, among others, in their evaluation: (1) the frequency of
trades and quotes for the Rule 144A Security; (2) the number of dealers willing
to purchase or sell the Rule 144A Security and the number of other potential
purchasers; (3) dealer undertakings to make a market in the Rule 144A Security;
and (4) the nature of the Rule 144A Security and the nature of the marketplace
trades (e.g., the time needed to dispose of the Rule 144A Security, the method
of soliciting offers and the mechanics of transfer). Privately issued securities
that are determined by the Master Portfolios' investment adviser to be
"illiquid" are subject to the Master Portfolios' policy of not investing more
than 15% of its net assets in illiquid securities.
Corporate Reorganizations
The Capital Appreciation and Small Cap Master Portfolios may invest in
securities for which a tender or exchange offer has been made or announced, and
in securities of companies for which a merger, consolidation, liquidation or
similar reorganization
A-13 PROSPECTUS
<PAGE> 88
proposal has been announced if, in the judgment of Wells Fargo Bank, there is a
reasonable prospect of capital appreciation significantly greater than the added
portfolio turnover expenses inherent in the short term nature of such
transactions. The principal risk associated with such investments is that such
offers or proposals may not be consummated within the time and under the terms
contemplated at the time of the investment, in which case, unless such offers or
proposals are replaced by equivalent or increased offers or proposals which are
consummated, the Master Portfolios may sustain a loss.
ADDITIONAL INVESTMENT POLICIES -- CORPORATE STOCK MASTER PORTFOLIO
Warrants
The Capital Appreciation and Small Cap Master Portfolios each may invest no
more than 5% of their respective net assets at the time of purchase in warrants
(other than those that have been acquired in units or attached to other
securities) and not more than 2% of each of their net assets in warrants which
are not listed on the New York or American Stock Exchange. Warrants represent
rights to purchase securities at a specific price valid for a specific period of
time. The prices of warrants do not necessarily correlate with the prices of the
underlying securities. The Master Portfolios may only purchase warrants on
securities in which the Master Portfolios may invest directly.
Stock Index Futures and Options on Stock Index Futures
The Corporate Stock Master Portfolio may invest in stock index futures and
options on stock index futures as a substitute for a comparable market position
in the underlying securities. The Balanced and Equity Funds may each invest in
stock index futures in order to protect the value of common stock investments or
to maintain liquidity, provided not more than 5% of a Fund's net assets are
committed to such transactions. A stock index future obligates the seller to
deliver (and the purchaser to take), effectively, an amount of cash equal to a
specific dollar amount times the difference between the value of a specific
stock index at the close of the last trading day of the contract and the price
at which the agreement is made. No physical delivery of the underlying stocks in
the index is made. With respect to stock indices that are permitted investments,
the Master Portfolio intends to purchase and sell futures contracts on the stock
index for which it can obtain the best price with consideration also given to
liquidity. There can be no assurance that a liquid market will exist at the time
when a Fund or the Master Portfolio seeks to close out a futures contract or a
futures option position. Lack of a liquid market may prevent liquidation of an
unfavorable position.
Interest-Rate Futures Contracts and Options on Interest-Rate Futures Contracts
The Corporate Stock Master Portfolio may invest in interest-rate futures
contracts and options on interest-rate futures contracts as a substitute for a
comparable market position in the underlying securities. The Master Portfolio
may also sell options on
PROSPECTUS A-14
<PAGE> 89
interest-rate futures contracts as part of closing purchase transactions to
terminate its options positions. No assurance can be given that such closing
transactions can be effected or the degree of correlation between price
movements in the options on interest rate futures and price movements in the
Master Portfolio's portfolio securities which are the subject of the
transaction.
Interest-Rate and Index Swaps
The Corporate Stock Master Portfolio enter into interest-rate and index swaps
in pursuit of its investment objective. Interest-rate swaps involve the exchange
by the Master Portfolio with another party of their respective commitments to
pay or receive interest (for example, an exchange of floating-rate payments for
fixed-rate payments). Index swaps involve the exchange by the Master Portfolio
with another party of cash flows based upon the performance of an index of
securities or a portion of an index of securities that usually include dividends
or income. In each case, the exchange commitments can involve payments to be
made in the same currency or in different currencies. The Master Portfolio will
usually enter into swaps on a net basis. In so doing, the two payment streams
are netted out, with the Master Portfolio receiving or paying, as the case may
be, only the net amount of the two payments. If the Master Portfolio enters into
a swap, it will maintain a segregated account on a gross basis, unless the
contract provides for a segregated account on a net basis. If there is a default
by the other party to such a transaction, the Master Portfolio will have
contractual remedies pursuant to the agreements related to the transaction.
The use of interest-rate and index swaps is a highly specialized activity
which involves investment techniques and risks different from those associated
with ordinary portfolio security transactions. There is no limit, except as
provided below, on the amount of swap transactions that may be entered into by
the Master Portfolio. These transactions generally do not involve the delivery
of securities or other underlying assets or principal. Accordingly, the risk of
loss with respect to swaps generally is limited to the net amount of payments
that the Master Portfolio is contractually obligated to make. There is also a
risk of a default by the other party to a swap, in which case the Master
Portfolio may not receive net amount of payments that the Master Portfolio
contractually is entitled to receive.
The permissible investments described herein are considered "derivative"
securities because their value is derived, at least in part, from the price of
another security or a specified asset, index or rate. The futures contracts and
options on futures contracts that the Master Portfolio may purchase are
considered derivatives. The Master Portfolio may only purchase or sell these
contracts or options as substitutes for comparable market positions in the
underlying securities. Also, asset-backed securities issued or guaranteed by
U.S. Government agencies or instrumentalities and certain floating- and
variable-rate instruments can be considered derivatives. Some derivatives may be
more sensitive than direct securities to changes in interest rates or sudden
market moves. Some
A-15 PROSPECTUS
<PAGE> 90
derivatives also may be susceptible to fluctuations in yield or value due to
their structure or contract terms.
Wells Fargo Bank and BGFA use a variety of internal risk management procedures
to ensure that derivatives use is consistent with the investment objectives of
the Fund and Master Portfolio, does not expose the Fund or Master Portfolio to
undue risk and is closely monitored. These procedures include providing periodic
reports to the Board of Trustees of MIT and the Board of Directors of the
Company concerning the use of derivatives.
The use of derivatives by the Master Portfolio also is subject to broadly
applicable investment policies. For example, a Master Portfolio may not invest
more than a specified percentage of its assets in "illiquid securities,"
including those derivatives that do not have active secondary markets. Nor may
the Master Portfolio use certain derivatives without establishing adequate
"cover" in compliance with SEC positions regarding the use of leverage.
INVESTMENT POLICIES AND RESTRICTIONS
Each Fund's investment objective, as set forth in "How the Funds
Work -- Investment Objectives and Policies," is fundamental; that is, it may not
be changed without approval by the vote of the holders of a majority of a Fund's
outstanding voting securities, as described under "Capital Stock" in the SAI for
each Fund. If the Board of Directors determines, however, that a Fund's
investment objective can best be achieved by a substantive change in a
nonfundamental investment policy or strategy, the Company may make such change
without shareholder approval and will disclose any such material changes in the
then-current Prospectus.
As matters of fundamental policy, the Funds: (i) may not purchase securities
of any issuer, except U.S. Government obligations (securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities for the
Corporate Stock Fund), if as a result, more than 5% of the value of such Fund's
total assets would be invested in the securities of such issuer or a Fund would
own more than 10% of the outstanding voting securities of such issuer, provided
that the Corporate Stock may invest all its assets in a diversified, open-end
management investment company, or a series thereof, with the same investment
objective, policies and restrictions as such Fund, without regard to the
limitations set forth in such clause (i); (ii) each such Fund may borrow from
banks up to 10% (20% for the Corporate Stock Fund) of the current value of its
net assets for temporary purposes only in order to meet redemptions, and these
borrowings may be secured by the pledge of up to 10% (20% for the Corporate
Stock Fund) of the current value of its net assets (but investments may not be
purchased by a Fund while any such outstanding borrowings exceed 5% of the
Fund's net assets); (iii) each such Fund may make loans of portfolio securities
in accordance with its investment policies; and (iv) each such Fund may not
invest 25% or more of its assets (i.e., concentrate) in any particular industry,
except that (a) the Corporate Stock Fund is permitted to concentrate
PROSPECTUS A-16
<PAGE> 91
its assets in any one industry for the same period as does the S&P 500 Index,
and (b) a Fund may invest 25% or more of its assets in U.S. Government
obligations (securities issued or guaranteed by the U.S. Government, its
agencies of instrumentalities for the Corporate Stock Fund). With respect to
fundamental investment policy (i) above, the Aggressive Growth, Diversified
Income and Small Cap Funds are subject to this restriction only with respect to
75% of their respective assets, and, with regard to the Funds, it may be
possible that the Company would own more than 10% of the outstanding voting
securities of the issuer. With respect to fundamental investment policy (iii)
above, the Diversified Income Fund does not intend to make loans of its
portfolio securities during the coming year. The Corporate Stock Fund may invest
all of its assets in a diversified, open-end management investment company or a
series thereof, with the same investment objective, policies and restrictions as
the Fund, without regard to these limitations. With respect to fundamental
policy (ii) above, the Corporate Stock Fund presently does not intend to put at
risk more than 5% of its assets during the coming year. With respect to
fundamental policy (iii) above, the Small Cap Fund may not make loans of
portfolio securities having a value that exceeds 33 1/3% of the current value of
its net assets.
As a matter of nonfundamental policy, the Diversified Income Fund and Growth
and Income Fund may each invest up to 10% of the current value of its respective
net assets in illiquid securities. The Aggressive Growth Fund, Balanced Fund,
Corporate Stock Fund, Equity Value Fund and Small Cap Fund (and the
corresponding Master Portfolios of the Aggressive Growth, Corporate Stock and
Small Cap Funds) may each invest up to 15% of its respective net assets in
illiquid securities. For these purposes, illiquid securities include, among
others, (a) securities that are illiquid by virtue of the absence of a readily
available market or legal or contractual restrictions on resale, (b) fixed time
deposits that are subject to withdrawal penalties and that have maturities of
more than seven days and (c) repurchase agreements not terminable within seven
days.
Illiquid securities shall not include securities eligible for resale pursuant
to Rule 144A under the Securities Act of 1933 (the "1933 Act") that have been
determined to be liquid by the adviser, pursuant to guidelines established by
the Company's Board of Directors, and commercial paper that is sold under
Section 4(2) of the 1933 Act that (i) is not traded flat or in default as to
interest or principal and (ii) is rated in one of the two highest categories by
at least two NRSROs and the adviser, pursuant to guidelines established by the
Company's Board of Directors, has determined the commercial paper to be liquid;
or (iii) is rated in one of the two highest categories by one NRSRO and the
adviser, pursuant to guidelines established by the Company's Board of Directors,
has determined that the commercial paper is of equivalent quality and is
liquid), if by any reason thereof the value of its aggregate investment in such
classes of securities will exceed 10% of its total assets.
A-17 PROSPECTUS
<PAGE> 92
Advised by WELLS FARGO BANK, N.A., INC.
Sponsored/Distributed by
Stephens Inc., Member NYSE/SIPC
LOGO
NOT FDIC INSURED
<PAGE> 93
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE> 94
SPONSOR, DISTRIBUTOR AND ADMINISTRATOR
Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
INVESTMENT ADVISER, TRANSFER AND
DIVIDEND DISBURSING AGENT AND
CUSTODIAN
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
LEGAL COUNSEL
Morrison & Foerster LLP
2000 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
FOR MORE INFORMATION ABOUT THE FUNDS,
SIMPLY CALL 1-800-222-8222, OR WRITE:
Stagecoach Funds, Inc.
c/o Stagecoach Shareholder Services
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
STAGECOACH FUNDS:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- are NOT insured by the FDIC or U.S. Government
- are NOT obligations or deposits of Wells Fargo Bank nor
guaranteed by the Bank LOGO
- involve investment risk, including possible loss
</TABLE>
LOGO
Printed on Recycled Paper SC0221 (9/96)
<PAGE> 95
LOGO
P.O. Box 7066
San Francisco, CA 94120-7066
STAGECOACH FUNDS:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- are NOT insured by the FDIC or U.S. Government
- are NOT obligations or deposits of Wells Fargo Bank nor
guaranteed by the Bank
- involve investment risk, including possible loss of LOGO
principal
</TABLE>
LOGO
Printed on Recycled Paper SC0221 (9/96)
<PAGE> 96
<TABLE>
<S> <C>
------------------
LOGO BULK RATE
P.O. Box 7066 U.S. POSTAGE
San Francisco, CA 94120-7066 PAID
DALLAS, TEXAS
Permit No. 1808
------------------
- -------------------------------------------------------------------------------
STAGECOACH FUNDS:
-------------------------------------------------------------------------
- are NOT insured by the FDIC or U.S. Government
- are NOT obligations or deposits of Wells Fargo Bank
nor guaranteed by the Bank LOGO
- involve investment risk, including possible loss of
principal
- -------------------------------------------------------------------------------
</TABLE>
<PAGE> 97
[LOGO]
------------------------------
PROSPECTUS
------------------------------
ARIZONA TAX-FREE FUND
CALIFORNIA TAX-FREE BOND FUND
CALIFORNIA TAX-FREE INCOME FUND
NATIONAL TAX-FREE FUND
OREGON TAX-FREE FUND
CLASS A AND CLASS B
SEPTEMBER 6, 1996
<PAGE> 98
STAGECOACH FUNDS(R)
ARIZONA TAX-FREE, CALIFORNIA TAX-FREE BOND,
CALIFORNIA TAX-FREE INCOME, NATIONAL TAX-FREE,
AND OREGON TAX-FREE FUNDS
CLASS A AND CLASS B SHARES
Stagecoach Funds, Inc. (the "Company") is an open-end management investment
company. This Prospectus contains information about Class A and Class B shares
offered by five funds of the Stagecoach Family of Funds -- the CALIFORNIA
TAX-FREE BOND FUND, CALIFORNIA TAX-FREE INCOME FUND (the "California Funds"),
ARIZONA TAX-FREE FUND, OREGON TAX-FREE FUND (collectively, with the California
Funds, the "State Tax-Free Funds") and the NATIONAL TAX-FREE FUND (each, a
"Fund" and, collectively, the "Funds").
The ARIZONA TAX-FREE FUND seeks to provide investors with income exempt from
federal income tax and Arizona personal income tax. The CALIFORNIA TAX-FREE BOND
FUND seeks to provide investors with a high level of income exempt from federal
income taxes and California personal income taxes, while preserving capital, by
investing in medium- to long-term, investment-grade municipal securities. The
CALIFORNIA TAX-FREE INCOME FUND seeks to provide investors with a high level of
income exempt from federal income taxes and California personal income taxes,
while preserving capital. The NATIONAL TAX-FREE FUND seeks to provide investors
with income exempt from federal income tax. The OREGON TAX-FREE FUND seeks to
provide investors with income exempt from federal income tax and Oregon personal
income tax.
Please read this Prospectus before investing and retain it for future
reference. It is designed to provide you with important information and to help
you decide if a Fund's goals match your own. A Statement of Additional
Information ("SAI"), dated September 6, 1996, containing additional information
about the Funds, has been filed with the Securities and Exchange Commission
("SEC") and is incorporated by reference into this Prospectus. The SAI is
available without charge by writing to Stagecoach Funds, Inc., c/o Stagecoach
Shareholder Services, Wells Fargo Bank, N.A., P.O. Box 7066, San Francisco, CA
94120-7066 or by calling 1-800-222-8222.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THESE AUTHORITIES PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
FUND SHARES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR ISSUED, ENDORSED OR
GUARANTEED BY, WELLS FARGO BANK, N.A. ("WELLS FARGO BANK") OR ANY OF ITS
AFFILIATES. SUCH SHARES ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT,
THE FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"), THE FEDERAL RESERVE BOARD OR
ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN A FUND INVOLVES CERTAIN RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
PROSPECTUS DATED SEPTEMBER 6, 1996
PROSPECTUS
<PAGE> 99
Under ordinary market conditions, substantially all of a State Tax-Free Fund's
assets consist of municipal obligations the interest on which is exempt from
federal income tax and the respective state's personal income tax.
WELLS FARGO BANK IS THE INVESTMENT ADVISER AND IS COMPENSATED FOR PROVIDING
THE FUNDS WITH CERTAIN OTHER SERVICES. STEPHENS INC. ("STEPHENS"), WHICH
IS NOT AFFILIATED WITH WELLS FARGO BANK, IS THE FUNDS' SPONSOR,
ADMINISTRATOR AND DISTRIBUTOR.
THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL NOR THE SOLICITATION OF AN
OFFER TO BUY NOR SHALL THERE BE ANY SALE OF SECURITIES THAT ARE NOT REGISTERED
IN A STATE WHERE SUCH OFFER WOULD BE UNLAWFUL UNDER THE SECURITIES LAWS OF THE
STATE.
PROSPECTUS
<PAGE> 100
TABLE OF CONTENTS
-------
PROSPECTUS SUMMARY 1
SUMMARY OF FUND EXPENSES 5
FINANCIAL HIGHLIGHTS 10
HOW THE FUNDS WORK 17
THE FUNDS AND MANAGEMENT 23
INVESTING IN THE FUNDS 26
DIVIDENDS 36
HOW TO REDEEM SHARES 36
ADDITIONAL SHAREHOLDER SERVICES 41
MANAGEMENT, DISTRIBUTION AND SERVICING FEES 45
TAXES 48
PROSPECTUS APPENDIX - ADDITIONAL INVESTMENT POLICIES A-1
PROSPECTUS
<PAGE> 101
PROSPECTUS SUMMARY
The Funds provide you with a convenient way to invest in various portfolios of
securities selected and supervised by professional management. The following
provides you with summary information about each Fund. For more information,
please refer to the identified Prospectus sections and generally to the
Prospectus and SAI.
Q. WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?
A. The ARIZONA TAX-FREE FUND seeks to provide investors with income exempt from
federal income tax and Arizona personal income tax.
The CALIFORNIA TAX-FREE BOND FUND seeks to provide investors with a high
level of income exempt from federal income taxes and California personal
income taxes, while preserving capital, by investing in medium- to
long-term, investment-grade municipal securities.
The CALIFORNIA TAX-FREE INCOME FUND seeks to provide investors with a high
level of income exempt from federal income taxes and California personal
income taxes, while preserving capital.
The NATIONAL TAX-FREE FUND seeks to provide investors with income exempt
from federal income tax.
The OREGON TAX-FREE FUND seeks to provide investors with income exempt from
federal income tax and Oregon personal income tax.
Under normal market conditions, substantially all of each Fund's assets are
invested in municipal obligations that are exempt from federal income tax
and, for the State Tax-Free Funds, exempt from each respective state's
personal income tax; and except during temporary defensive periods or when
acceptable securities are unavailable for investment by a Fund, at least 65%
of each State Tax-Free Fund's total net assets will be invested in municipal
obligations of issuers exempt from each respective state's personal income
tax. Additionally, except during periods of unusual market condition, each
Fund will have at least 80% of its net assets invested in securities the
interest on which is exempt from federal income tax. See "How the Funds
Work" and "Prospectus Appendix -- Additional Investment Policies" for
further information on investments.
Q. WHAT ARE SOME OF THE POTENTIAL RISKS ASSOCIATED WITH THIS TYPE OF
INVESTMENT?
A. An investment in a Fund is not insured against loss of principal. When the
value of the securities that a Fund owns declines, so does the value of your
Fund's shares. Therefore, you should be prepared to accept some risk with
the money you invest in a Fund. The portfolio debt instruments of a Fund are
subject to interest-rate risk
1 PROSPECTUS
<PAGE> 102
and credit risk. Interest-rate risk is the risk that increases in market
interest rates may adversely affect the value of the municipal securities in
which each Fund invests and hence the value of your investment in a Fund;
the value of such securities generally changes inversely to changes in
market interest rates. Credit risk is the risk that the issuers of the debt
instruments in which a Fund may invest may default on the payment of
principal and/or interest. In addition, each Fund may invest a portion of
its assets in municipal securities that are considered to have speculative
characteristics.
Since each State Tax-Free Fund invests primarily in securities issued by
Arizona, California or Oregon, and its respective agencies and
municipalities, events in those states are more likely to affect the
respective Fund's investments.
Each Fund is nondiversified, which means that its assets may be invested
among fewer issuers and therefore the value of its assets may be invested
among fewer issuers and therefore the value of assets may be subject to
greater impact by events affecting one of its investments.
See "How the Funds Work -- Investment Objectives and Policies -- Risk
Factors" and "Additional Permitted Investment Activities" in the SAI for
further information about the Funds' investments and related risks. As with
all mutual funds, there can be no assurances that a Fund will achieve its
investment objective.
Q. WHO MANAGES MY INVESTMENTS?
A. Wells Fargo Bank, as the Funds' investment adviser, manages your
investments. Wells Fargo Bank also provides the Funds with transfer agency,
dividend disbursing agency and custodial services. In addition, Wells Fargo
Bank is a shareholder servicing agent and a selling agent for the Funds.
See "The Funds and Management" and "Management, Distribution and Servicing
Fees."
Q. HOW DO I INVEST?
A. You may invest by purchasing Fund shares at their public offering price,
which is the net asset value per share ("NAV") plus any applicable sales
charge. The Funds' Class A shares are subject to a maximum front-end sales
charge of 4.50% (except the California Tax-Free Income Fund, which is
subject to a maximum sales charge of 3.00%). Class B shares that are
redeemed within four years of purchase are subject to a maximum
contingent-deferred sales charge of 3.00% of the lesser of net asset value
at purchase or net asset value at redemption. In some cases, the front-end
or contingent-deferred sales charges may be waived or reduced. You may open
an account by making an initial investment of at least $1,000, and you may
add to your account by making additional investments of at least $100, with
certain exceptions. Shares may be purchased by wire, by mail or by an
automatic investment feature called the AutoSaver Plan on any day the Fund
is open. Fund shares may not be
PROSPECTUS 2
<PAGE> 103
suitable for tax-exempt investors, since such investors would not benefit
from the exempt status of the Funds' dividends. See "Investing in the Funds"
for more details, or contact Stephens (the Funds' distributor), a
shareholder servicing agent or a selling agent (such as Wells Fargo Bank).
Q. HOW WILL I RECEIVE DIVIDENDS AND ANY CAPITAL GAINS?
A. Dividends from net investment income are declared daily and paid monthly.
Dividends are automatically reinvested in additional shares of the same
class of the Fund at net asset value (without a sales charge) unless you
elect to receive dividends credited to your Wells Fargo Bank account, paid
in cash or in shares of certain other funds in the Stagecoach Family of
Funds in which you have an established account that has met the applicable
minimum initial investment requirement. Any capital gains are distributed at
least annually in the same manner as dividends. Investment income available
for distribution to holders of a class of shares is reduced by the class
expenses payable on behalf of those shares. See "Dividends" and "Additional
Shareholder Services."
Q. ARE EXCHANGES TO OTHER FUNDS PERMITTED?
A. Yes. The exchange privilege enables you to exchange Fund shares for shares
of another fund offered by the Company, or shares of certain other funds
offered by other investment companies in the Stagecoach Family of Funds, to
the extent such shares are offered for sale in your state of residence. See
"Additional Shareholder Services -- Exchange Privilege."
Q. HOW MAY I REDEEM SHARES?
A. You may redeem shares by telephone, by letter or, on a regular monthly
basis, by an automatic feature called the Systematic Withdrawal Plan on any
day the Fund is open for business. Except for any contingent-deferred sales
charge applicable to Class B shares, the Company imposes no charge for
redeeming shares. The Company reserves the right to impose charges for
wiring redemption proceeds. See "How To Redeem Shares" and "How to Purchase
Shares -- Contingent-Deferred Sales Charges -- Class B Shares" for more
details, or contact Stephens, a shareholder servicing agent or a selling
agent (such as Wells Fargo Bank).
Q. WHAT ARE DERIVATIVES AND DO THE FUNDS USE THEM?
A. Derivatives are financial instruments whose value is derived, at least in
part, from the price of another security or a specified asset, index or
rate. Some of the permissible investments described in this Prospectus, such
as variable-rate instruments that have an interest rate that is reset
periodically based on an index, are considered derivatives. Some derivatives
may be more sensitive than direct securities to changes in interest rates or
sudden market moves. Some derivatives also may be susceptible to
fluctuations in yield or value due to their structure or contract terms.
3 PROSPECTUS
<PAGE> 104
Q. WHAT STEPS DO THE FUNDS TAKE TO CONTROL DERIVATIVES-RELATED RISKS?
A. Wells Fargo Bank, as investment adviser, uses a variety of internal risk
management procedures to ensure that derivatives use is consistent with a
Fund's investment objective, does not expose the Fund to undue risks and is
closely monitored. These procedures include providing periodic reports to
the Board of Directors concerning the use of derivatives. Derivatives use by
each Fund also is subject to broadly applicable investment policies. For
example, a Fund may not invest more than a specified percentage of its
assets in "illiquid securities," including derivatives that do not have
active secondary markets. Nor may a Fund use certain derivatives without
establishing adequate "cover" in compliance with SEC rules limiting the use
of leverage. For more information on each Funds investment activities, see
"How the Funds Work" and "Prospectus Appendix -- Additional Investment
Policies."
PROSPECTUS 4
<PAGE> 105
SUMMARY OF FUND EXPENSES
CLASS A SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
ARIZONA CALIFORNIA CALIFORNIA NATIONAL OREGON
TAX-FREE TAX-FREE TAX-FREE TAX-FREE TAX-FREE
FUND BOND FUND INCOME FUND FUND FUND
-------- --------- ----------- -------- --------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge
Imposed on Purchases (as
a percentage of offering
price)................... 4.50% 4.50% 3.00% 4.50% 4.50%
Sales Charge Imposed on
Reinvested Dividends..... None None None None None
Sales Charge Imposed on
Redemptions.............. None None None None None
Exchange Fees.............. None None None None None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
ARIZONA CALIFORNIA CALIFORNIA NATIONAL OREGON
TAX-FREE TAX-FREE TAX-FREE TAX-FREE TAX-FREE
FUND BOND FUND INCOME FUND FUND FUND
-------- --------- ----------- -------- --------
<S> <C> <C> <C> <C> <C>
Management Fee (after
waiver or
reimbursements)(1)....... 0.15% 0.50% 0.43% 0.00% 0.15%
Rule 12b-1 Fee............. 0.05% 0.05% 0.05% 0.00% 0.05%
Other Expenses (after
waiver or
reimbursements)(2)....... 0.40% 0.13% 0.17% 0.35% 0.40%
---- ---- ---- ---- ----
TOTAL FUND OPERATING
EXPENSES (after waivers
or
reimbursements)(3)....... 0.60% 0.68% 0.65% 0.35% 0.60%
==== ==== ==== ==== ====
</TABLE>
- -------------------------------
(1) Management Fees (before waivers or reimbursements) would be
0.50%, 0.50%, 0.48%, 0.50% and 0.50%, respectively.
(2) Other Expenses (before waivers or reimbursements) would be 0.61%,
0.52%, 0.69%, 0.60%, and 0.58%, respectively.
(3) Total Fund Operating Expenses (before waivers or reimbursements)
would be 1.16%, 1.07%, 1.22%, 1.10% and 1.13%, respectively.
5 PROSPECTUS
<PAGE> 106
EXAMPLE OF EXPENSES
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following
expenses on a $1,000 investment in
Class A shares of the following
Funds, assuming a 5% annual return
and redemption at the end of each
time period indicated:
Arizona Tax-Free Fund.......... $ 51 $63 $77 $117
California Tax-Free Bond
Fund......................... $ 52 $66 $81 $126
California Tax-Free Income
Fund......................... $ 36 $50 $65 $109
National Tax-Free Fund......... $ 48 $56 $64 $ 87
Oregon Tax-Free Fund........... $ 51 $63 $77 $117
</TABLE>
PROSPECTUS 6
<PAGE> 107
SUMMARY OF FUND EXPENSES
CLASS B SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
ARIZONA CALIFORNIA NATIONAL OREGON
TAX-FREE TAX-FREE TAX-FREE TAX-FREE
FUND BOND FUND FUND FUND
-------- --------- -------- --------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price).................. None None None None
Sales Charge Imposed on Reinvested
Dividends........................ None None None None
Sales Charge Imposed on
Redemptions...................... 3.00% 3.00% 3.00% 3.00%
Exchange Fees........................ None None None None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
ARIZONA CALIFORNIA NATIONAL OREGON
TAX-FREE TAX-FREE TAX-FREE TAX-FREE
FUND BOND FUND FUND FUND
-------- --------- -------- --------
<S> <C> <C> <C> <C>
Management Fee (after waivers or
reimbursements)(1)................. 0.15% 0.50% 0.00% 0.15%
Rule 12b-1 Fee....................... 0.75% 0.70% 0.75% 0.75%
Other Expenses(2).................... 0.40% 0.12% 0.35% 0.40%
-------- --------- -------- --------
TOTAL FUND OPERATING EXPENSES (after
waivers or reimbursements)(3).... 1.30% 1.32% 1.10% 1.30%
========= =========== ========= =========
</TABLE>
- -------------------------------
(1) Management Fees (before waivers or reimbursements) would be
0.50%, 0.50%, 0.50%, and 0.50%, respectively.
(2) Other Expenses (before waivers or reimbursements) would be 0.61%,
0.52%, 0.60%, and 0.58%, respectively.
(3) Total Fund Operating Expenses (before waivers or reimbursements)
would be 1.86%, 1.72%, 1.85%, and 1.83%, respectively.
7 PROSPECTUS
<PAGE> 108
EXAMPLE OF EXPENSES
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following
expenses on a $1,000 investment in
Class B shares of the following
Funds, assuming a 5% annual return
and redemption at the end of each
time period indicated:
Arizona Tax-Free Fund.......... $ 43 $71 $ 101 $187
California Tax-Free Bond
Fund........................... $ 44 $52 $ 73 $126
National Tax-Free Fund......... $ 43 $71 $ 101 $187
Oregon Tax-Free Fund........... $ 43 $71 $ 101 $187
</TABLE>
EXPLANATION OF TABLES
The purpose of the above tables is to help you understand the various costs
and expenses that a shareholder in a Fund will pay directly or indirectly. You
may purchase Fund shares directly from the Company or through a Wells Fargo Bank
or other institutions that have developed various account products through which
Fund shares may be purchased, and for which customers may be charged a fee. The
tables do not reflect any charges that may be imposed by a Wells Fargo Bank or
another institution directly on certain customer accounts in connection with an
investment in a Fund.
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or sell Fund
shares. You are subject to a front-end sales charge on purchases of a Fund's
Class A shares and may be subject to a contingent-deferred sales charge on
purchases of a Fund's Class B shares if you redeem such shares within a
specified period. In certain instances, you may qualify for a reduction or
waiver of the front-end sales charge. See "Investing in the Funds -- Sales
Charges." There are no exchange fees. The Company reserves the right to impose a
charge for wiring redemption proceeds.
ANNUAL FUND OPERATING EXPENSES for the California Funds are based on amounts
incurred during the most recent fiscal year, restated to include voluntary fee
waivers and expense reimbursements that are expected to continue to reduce
expenses during the current fiscal year. Annual fund operating expenses for the
other Funds' Class A shares are based on applicable contract amounts and derived
from amounts incurred by the respective predecessor portfolios, the Arizona
Tax-Exempt, National Tax-Exempt and Oregon Tax-Exempt Funds of Pacifica Funds
Trust, during its most recent fiscal year, restated to reflect voluntary fee
waivers and expense reimbursements that are expected to continue during the
Company's current fiscal year. Since Class B shares were not offered during the
predecessor portfolios' most recent fiscal year, the percentages shown
PROSPECTUS 8
<PAGE> 109
above with respect to Class B shares under "Total Other Expenses" and "Total
Fund Operating Expenses" reflect certain anticipated voluntary fee waivers and
expense reimbursements for the current fiscal year. Wells Fargo Bank and
Stephens have agreed to waive or reimburse all or a portion of the respective
fees charged to, or expenses paid by, each Fund to ensure that the Total Fund
Operating Expenses do not exceed, on an annual basis, 0.60%, 0.68%, 0.65%, 0.35%
and 0.60% of the average daily net assets of Class A Shares of the Arizona
Tax-Free, California Tax-Free Bond, California Tax-Free Income, National
Tax-Free and Oregon Tax-Free Funds, respectively, through August 31, 1997. Any
waivers or reimbursements would reduce a Fund's total expenses. There can be no
assurance that waivers or reimbursements will continue after that date. The
Funds understand that a shareholder servicing agent also may impose certain
conditions on its customers, subject to the terms of this Prospectus, in
addition to or different from those imposed by a Fund, such as requiring a
higher minimum initial investment or payment of a separate fee for additional
services. Long-term shareholders of the Funds 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. ("NASD"). For more complete descriptions of the various costs and
expenses you can expect to incur as a shareholder in each Fund, please see
"Investing in the Funds -- How to Buy Shares" and "Management, Distribution and
Servicing Fees."
EXAMPLE OF EXPENSES is a hypothetical illustration of the expenses associated
with a $1,000 investment over stated periods, based on the expenses in the above
tables and an assumed annual rate of return of 5%. The rate of return should not
be considered an indication of actual or expected performance of a Fund nor a
representation of past or future expenses; actual expenses and returns may be
greater or lesser than those shown.
9 PROSPECTUS
<PAGE> 110
FINANCIAL HIGHLIGHTS
For the California Funds, the following information has been derived from the
Financial Highlights in the Funds' December 31, 1995 fiscal year financial
statements. The financial statements, which are incorporated by reference into
the SAI, were audited by KPMG Peat Marwick LLP, independent auditors, whose
report dated February 14, 1996 also is incorporated by reference into the SAI.
This information should be read in conjunction with the California Funds' 1995
financial statements and notes thereto.
For the Arizona Tax-Free, National Tax-Free and Oregon Tax-Free Funds, the
following information has been derived from the Financial Highlights in the
annual and semi-annual financial statements for the fiscal periods ended
September 30, 1995 and March 31, 1996 for Pacifica Funds Trust's Arizona
Tax-Exempt, National Tax-Exempt and Oregon Tax-Exempt Funds, the respective
predecessor portfolios to the Funds. This information is provided to assist you
in evaluating the performance of each Fund since its commencement of operations.
The financial information for the fiscal year ended September 30, 1995 and for
the periods through September 30, 1994 were each audited by former independent
accountants to the predecessor portfolios. The financial information and the
report on the audit for the fiscal year ended September 30, 1995 are
incorporated by reference in the SAI. The unaudited financial information and
the related notes for the period ended March 31, 1996 also is incorporated by
reference into the SAI. This information should be read in conjunction with the
predecessor portfolios related financial statements and notes thereto.
Financial information is not provided in connection with Class B shares of the
Arizona Tax-Free, National Tax-Free and Oregon Tax-Free Funds because Class B
shares for these Funds were not offered during the periods presented. The shares
represented in the tables for the predecessor portfolios are the predecessor
shares of the Fund's Class A shares offered by this prospectus.
PROSPECTUS 10
<PAGE> 111
ARIZONA TAX-FREE FUND(1)
FOR A SHARE OUTSTANDING AS SHOWN
<TABLE>
<CAPTION>
FOUR-MONTH PERIOD
PERIOD ENDED YEAR ENDED MAY 31, ENDED
SEPT. 30, -------------------------- MAY 31,
1995(2) 1995 1994 1993 1992
SIX-MONTH ------------ ------- ------- ------- -------
PERIOD ENDED
MARCH 31, 1996
--------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net asset
value -- beginning
of period........... $10.71 $10.68 $10.48 $10.64 $10.09 $10.00
Income from Investment
Operations:
Net investment
income............ 0.24 0.17 0.51 0.50 0.49 0.09
Net gain (loss) on
investments (both
realized and
unrealized)....... (0.10) 0.06 0.23 (0.15) 0.55 0.08
Total income from
investment
operations.......... 0.14 0.23 0.74 0.35 1.04 0.17
Less Distributions:
Dividends from net
investment
income............ (0.24) (0.20) (0.53) (0.50) (0.49) (0.08)
Distributions from
net realized gain
on investments.... (0.02) (0.00) (0.01) (0.01) (0.00) (0.00)
Total
distributions... (0.26) (0.20) (0.54) (0.51) (0.49) (0.08)
Net asset
value -- end of
period............ $10.59 $10.71 $10.68 $10.48 $10.64 $10.09
====== ====== ====== ====== ====== ======
Total return
(excluding sales
load)............... 1.37% 6.55% 7.35% 3.28% 10.50% 7.02%
Ratios/Supplemental
Data:
Net assets, end of
period (000)...... $8,020 $24,622 $24,581 $25,153 $22,430 $4,690
Ratio of expenses to
average net
assets............ 0.60%(3) 0.45%(3) 0.40% 0.31% 0.20% 0.68%(3)
Ratio of net
investment income
to average net
assets............ 4.50%(3) 4.73%(3) 4.89% 4.72% 4.98% 4.32%(3)
Ratio of expenses to
average net assets
without fee
waivers........... 1.19%(3) 1.38%(3) 1.13% 1.00% 1.18% 2.08%(3)
Ratio of net
investment income
to average net
assets without fee
waivers........... 3.91%(3) 3.80%(3) 4.16% 4.03% 4.00% 2.92%(3)
Portfolio turnover
rate(4)........... 27% 62% 14% 28% 4% 0.00%
</TABLE>
- -------------------
(1) The Fund operated as the Arizona Intermediate Tax-Free Fund of Westcore
Trust from its commencement of operations on March 2, 1992 until its
reorganization as a portfolio of the Trust on October 1, 1995. During the
periods shown, the Fund was advised by First Interstate Bank of Arizona,
N.A. In connection with the Fund's reorganization, FICM assumed investment
advisory responsibilities for the Fund.
(2) The Fund changed its fiscal year from May 31 to September 30.
(3) Annualized.
(4) A portfolio turnover rate is, in general, the percentage computed by taking
the lesser of purchases or sales of portfolio securities (excluding
securities with a maturity date of one year or less at the time of
acquisition) for a period and dividing it by the monthly average of the
market value of such securities during the period.
11 PROSPECTUS
<PAGE> 112
CALIFORNIA TAX-FREE BOND FUND
FOR A CLASS A SHARE OUTSTANDING AS SHOWN
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993 1992
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period... $ 9.84 $11.20 $10.41 $10.00
Income from investment
operations:
Net investment income
(loss).............. 0.55 0.56 0.56 0.53
Net realized and
unrealized gain
(loss) on
investments......... 1.21 (1.36) 0.84 0.41
------ ------ ------ ------
Total from investment
operations............ 1.76 (0.80) 1.40 0.94
Less distributions:
Dividends from net
investment income... (0.55) (0.56) (0.56) (0.53)
Distributions from net
realized capital
gains............... 0.00 0.00 (0.05) 0.00
------ ------ ------ ------
Total distributions..... (0.55) (0.56) (0.61) (0.53)
------ ------ ------ ------
Net asset value, end
of period........... $11.05 $ 9.84 $11.20 $10.41
====== ====== ====== ======
Total return (not
annualized)(1)........ 18.24% (7.27)% 13.82% 10.35%
Ratios/supplemental
data:
Net assets, end of
period (000)........ $296,417 $305,847 $532,848 $242,409
Number of shares
outstanding, end of
period (000)........ 26,827 31,078 47,580 23,298
Ratios to average net
assets (annualized):
Ratio of expenses to
average net
assets(2)........... 0.68% 0.65% 0.64% 0.19%
Ratio of net
investment income to
average net
assets(3)........... 5.18% 5.35% 5.05% 5.67%
Portfolio turnover.... 9% 3% 7% 18%
- -------------------
(1) Total returns do not
include any sales
charges
(2) Ratio of expenses to
average net assets
prior to waived fees
and reimbursed
expenses............ 1.07% 1.06% 1.01% 1.07%
(3) Ratio of net
investment income to
average net assets
prior to waived fees
and reimbursed
expenses............ 4.79% 4.94% 4.68% 4.79%
</TABLE>
PROSPECTUS 12
<PAGE> 113
CALIFORNIA TAX-FREE BOND FUND
FOR A CLASS B SHARE OUTSTANDING AS SHOWN
<TABLE>
<CAPTION>
YEAR ENDED
DEC. 31,
1995(1)
----------
<S> <C>
Net asset value beginning of period..................... $10.00
Income from investment operations:
Net investment income (loss).......................... 0.48
Net realized and unrealized gain (loss) on
investments......................................... 1.26
Total from investment operations........................ 1.74
Less distributions:
Dividends from net investment income.................. (0.48)
Distributions from net realized gain.................. 0.00
Total distributions..................................... (0.48)
Net asset value, end of period.......................... $11.26
Total return (not annualized)2.......................... 17.72%
Ratios/supplemental data:
Net assets, end of period (000)....................... $26,916
Number of shares outstanding, end of period (000)..... 2,390
Ratios to average net assets (annualized):
Ratio of expenses to average net assets3.............. 1.32%
Ratio of net investment income to average net
assets4............................................. 4.31%
Portfolio turnover.................................... 9%
- -------------------
(1) Class B Shares of the Fund commenced operations on
January 1, 1995.
(2) Total returns do not include any sales charges.
(3) Ratio of expenses to average net assets prior to
waived fees and reimbursed expenses................. 1.72%
(4) Ratio of net investment income to average net assets
prior to waived fees and reimbursed expenses........ 3.91%
</TABLE>
13 PROSPECTUS
<PAGE> 114
CALIFORNIA TAX-FREE INCOME FUND
FOR A SHARE OUTSTANDING AS SHOWN
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993 1992(1)
---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of
period............... $9.84 $10.36 $10.05 $10.00
Income from investment
operations:
Net investment
income............. 0.38 0.40 0.39 0.02
Net realized and
unrealized capital
gains (losses) on
investments........ 0.51 (0.52) 0.31 0.05
Total from investment
operations........... 0.89 (0.12) 0.70 0.07
Less distributions:
Dividends from net
investment
income............. (0.38) (0.40) (0.39) (0.02)
Distributions from
net realized
capital gains...... 0.00 0.00 0.00 0.00
Total distributions.... (0.38) (0.40) (0.39) (0.02)
Net asset value, end of
period............... $10.35 $9.84 $10.36 $10.05
Total return (not
annualized)(2)....... 9.14% (1.10)% 7.10% 0.84%
Ratios/supplemental
data:
Net assets, end of
period (000)....... $77,965 $48,998 $52,873 $7,821
Number of shares
outstanding, end of
period (000)....... 7,536 4,979 5,105 778
Ratios to average net
assets (annualized):
Ratio of expenses to
average net
assets(3).......... 0.65% 0.16% 0.34% 0.00%
Ratio of net
investment income
to average net
assets(4).......... 3.70% 4.03% 3.74% 3.56%
Portfolio turnover... 31% 33% 11% 0%
- -------------------
(1) The Fund commenced
operations on
November 18, 1992.
(2) Total returns do
not include any sales
charges.
(3) Ratio of expenses
to average net
assets prior to
waived fees and
reimbursed
expenses........... 1.22% 1.21% 1.23% 1.55%
(4) Ratio of net
investment income
to average net
assets prior to
waived fees and
reimbursed
expenses........... 3.13% 2.98% 2.85% 2.01%
</TABLE>
PROSPECTUS 14
<PAGE> 115
NATIONAL TAX-FREE FUND(1)
FOR A SHARE OUTSTANDING AS SHOWN
<TABLE>
<CAPTION>
PERIOD ENDED FOUR-MONTH YEAR ENDED MAY
SIX-MONTH PERIOD ENDED 31,
MARCH 31, SEPT. 30, ----------------- PERIOD ENDED
1996 19952 1995 1994 MAY 31, 1993
------------- -------------- ------- ------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net Asset Value
Beginning of
Period............. $15.34 $ 15.28 $ 14.98 $ 15.17 $15.00
Income from Investment
Operations:
Net Investment
Income............. 0.36 0.24 0.68 0.64 0.17
Net Investments Gain
(Loss) (Both
Realized and
Unrealized)........ (0.05) 0.08 0.32 (0.17) 0.15
Total From Investment
Operations........... 0.31 0.32 1.00 0.47 0.32
Less Distributions:
Dividends From Net
Investment
Income............. (0.36) (0.26) (0.70) (0.64) (0.15)
Distributions Gain On
Investments........ (0.00) (0.00) (0.00) (0.02) (0.00)
Total Distributions.... (0.36) (0.26) (0.70) (0.66) (0.15)
------ ------- ------- ------- ------
Net Asset Value -- End
Of Period............ $15.29 $ 15.34 $ 15.28 $ 14.98 $15.17
====== ======= ======= ======= ======
Total return (excluding
sales load).......... 2.01% 6.53% 6.97% 3.07% 5.65%(3)
Ratios/Supplemental
Data:
Net Assets, End of
Period (000)....... $5,926 $14,305 $14,458 $13,600 $7,457
Ratio of Expenses to
Average Net
Assets............. 0.40%(3) 0.35%(3) 0.35% 0.27% 0.25%(3)
Ratio of Net
Investment Income
to Average Net
Assets............. 4.65%(3) 4.65%(3) 4.59% 4.29% 3.88%(3)
Ratio of Expenses to
Average Net Assets
Without Fee
Waivers............ 1.07%(3) 1.85%(3) 1.51% 1.58% 1.99%(3)
Ratio of Net
Investment Income
to Average Net
Assets Without Fee
Waivers............ 3.98%(3) 3.15%(3) 3.43% 2.98% 2.14%(3)
Portfolio Turnover
Rate4.............. 40% 86% 23% 19% 18%
</TABLE>
- -------------------
(1) The Fund operated as the Quality Tax-Exempt Income Fund of Westcore Trust
from its commencement of operations on January 15, 1993 until its
reorganization as a portfolio of the Trust on October 1, 1995. During the
periods shown, the Fund was advised by First Interstate Bank of Oregon, N.A.
and First Interstate Bank of Washington, N.A. In connection with the Fund's
reorganization, FICM assumed investment advisory responsibilities for the
Fund.
(2) The Fund changed its fiscal year from May 31 to September 30.
(3) Annualized.
(4) A portfolio turnover rate is, in general, the percentage computed by taking
the lesser of purchases or sales of portfolio securities (excluding
securities with a maturity date of one year or less at the time of
acquisition) for a period and dividing it by the monthly average of the
market value of such securities during the period.
15 PROSPECTUS
<PAGE> 116
OREGON TAX-FREE FUND(1)
FOR A SHARE OUTSTANDING AS SHOWN
<TABLE>
<CAPTION>
SIX-MONTH FOUR-MONTH
PERIOD PERIOD
ENDED ENDED YEAR ENDED MAY 31,
MARCH 31, SEPT. 30, -----------------------------------------------------------------------
1996 1995(2) 1995 1994 1993 1992 1991 1990 1989
---------- -------- ------ ------ ------ ------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value -- Beginning of
Period........................ $16.38 $16.47 $16.17 $16.79 $16.07 $15.74 $15.27 $15.35 $15.00
Income from Investment
Operations:
Net investment income......... 0.40 0.28 0.82 0.84 0.86 0.91 0.94 0.93 0.93
Net gain (loss) on investments
(both realized and
unrealized)................. (0.01) (0.08) 0.39 (0.43) 0.76 0.38 0.47 (0.06) 0.31
------- ------- ------- ------- ------- ------- ------- ------ ------
Total from investment
operations................ 0.39 0.20 1.21 0.41 1.62 1.29 1.41 0.87 1.24
------- ------- ------- ------- ------- ------- ------- ------ ------
Less Distributions:
Dividends from net investment
income...................... (0.40) (0.29) (0.87) (0.82) (0.86) (0.92) (0.94) (0.93) (0.89)
Distributions from gain on
investments................. (0.00) (0.00) (0.04) (0.21) (0.04) (0.04) (0.00) (0.02) (0.00)
------- ------- ------- ------- ------- ------- ------- ------ ------
Total distributions......... (0.40) (0.29) (0.91) (1.03) (0.90) (0.96) (0.94) (0.95) (0.89)
------- ------- ------- ------- ------- ------- ------- ------ ------
Net asset value -- end of
period........................ $16.37 $16.38 $16.47 $16.17 $16.79 $16.07 $15.74 $15.27 $15.35
======= ======= ======= ======= ======= ======= ======= ====== ======
Total return (excluding
sales load)............... 2.35% 3.67% 7.92% 2.33% 10.36% 8.45% 9.58% 5.80% 8.55%
Ratios/Supplemental Data:
Net assets, end of period
(000)....................... $36,735 $50,077 $52,245 $53,846 $45,435 $25,002 $14,607 $7,550 $3,175
Ratio of expenses to average
net assets.................. 0.81%(3) 0.70%(3) 0.70% 0.62% 0.60% 0.60% 0.55% 0.50% 0.50%
Ratio of net investment income
to average net assets....... 4.79%(3) 5.01%(3) 5.19% 4.90% 5.34% 5.81% 6.27% 6.26% 6.64%
Ratio of expenses to average
net assets without fee
waivers..................... 1.07%(3) 1.01%(3) 0.90% 0.84% 0.91% 0.98% 1.03% 1.35% 3.29%
Ratio of net investment income
to average net assets
without fee waivers......... 4.53%(3) 4.70%(3) 4.99% 4.68% 5.03% 5.43% 5.79% 5.41% 3.85%
Portfolio turnover rate(4).... 3% 57% 15% 22% 6% 17% 23% 94% 9%
</TABLE>
- -------------------
(1) The Fund operated as the Oregon Tax-Exempt Fund of Westcore Trust from its
commencement of operations on June 1, 1988 until its reorganization as a
portfolio of the Trust on October 10, 1995. During the periods shown, the
Fund was advised by First Interstate Bank of Oregon, N.A. In connection with
the Fund's reorganization, FICM assumed investment advisory responsibilities
for the Fund.
(2) The Fund changed its fiscal year from May 31 to September 30.
(3) Annualized.
(4) A portfolio turnover rate is, in general, the percentage computed by taking
the lesser of purchases or sales of portfolio securities (excluding
securities with a maturity date of one year or less at the time of
acquisition) for a period and dividing it by the monthly average of the
market value of such securities during the period.
PROSPECTUS 16
<PAGE> 117
HOW THE FUNDS WORK
INVESTMENT OBJECTIVES AND POLICIES
As stated above, the investment objectives of the ARIZONA TAX-FREE, NATIONAL
TAX-FREE, AND OREGON TAX-FREE FUNDS are to seek to provide investors with income
exempt from federal income tax and, for the Arizona Tax-Free and Oregon Tax-Free
Funds, exempt from Arizona or Oregon personal income tax, respectively. The
Arizona Tax-Free, National Tax-Free, and Oregon Tax-Free Funds have no
restrictions as to the minimum or maximum maturity of any individual security
held by it. Each Fund's average portfolio maturity will vary from time to time
in light of current market and economic conditions, the comparative yields on
instruments with different maturities and other factors.
The CALIFORNIA TAX-FREE BOND FUND seeks to provide investors with a high level
of income exempt from federal income taxes and California personal income taxes,
while preserving capital, by investing in medium- to long-term, investment-grade
municipal securities. Medium- and long-term securities include those securities
with remaining maturities of 2 to 10 years and 10 or more years, respectively.
The California Tax-Free Income Fund seeks to provide investors with a high level
of income exempt from federal income taxes and California personal income taxes,
while preserving capital. It pursues this objective by investing primarily in
short- and intermediate-term, investment-grade municipal securities. Short-term
securities are securities with remaining maturities of less than 2 years.
Intermediate-term securities are securities with remaining maturities of 2 to 10
years.
Each Fund's assets are primarily invested in debt instruments issued by or on
behalf of states, territories and possessions of the United States, the District
of Columbia and their respective authorities, agencies, instrumentalities and
political subdivisions ("municipal obligations"). Each of the State Tax-Free
Funds expects that, except during temporary defensive periods or when acceptable
securities are unavailable for investment by the Fund, at least 65% of such
Fund's total assets will be invested in municipal obligations of issuers located
in a particular state ("Arizona Obligations," "California Obligations," or
"Oregon Obligations," respectively), and issuers of the Virgin Islands, Guam and
Puerto Rico, which are exempt from Arizona, California and Oregon personal
income tax. The amount of each Fund's assets invested in such obligations may
vary from time to time.
As a matter of general operating policy, however, each California Fund seeks
to have substantially all of its assets invested in such municipal obligations.
In addition, under normal market conditions, at least 65% of the California
Tax-Free Bond Fund's total assets are invested in municipal bonds, as opposed to
municipal notes or commercial paper, and at least 65% of the California Tax-Free
Income Fund's total assets are invested
17 PROSPECTUS
<PAGE> 118
in short- and intermediate-term municipal obligations. As a matter of general
operating policy, the California Tax-Free Income Fund intends that, under normal
market conditions, the average expected duration of its portfolio securities
will be from one to five years.
In seeking to achieve its investment objective, each Fund may invest in
municipal obligations that are private activity bonds the interest on which is
subject to the Federal alternative minimum tax (though investments in such
securities, under normal market conditions, will not exceed 20% of each Fund's
total assets when added together with any taxable investments held by the Fund).
Moreover although each Fund does not presently intend to do so on a regular
basis, it may invest 25% or more of its assets in industrial development bonds
issued before August 7, 1986 that are not subject to the Federal alternative
minimum tax and in municipal obligations the interest on which is paid solely
from revenue of similar projects if such investment is deemed necessary or
appropriate by the Fund's adviser.
As a fundamental policy, each Fund will have at least 80% of its respective
net assets invested in securities, the interest on which is exempt from federal
income tax, except during periods of unusual market conditions. For purposes of
this investment limitation, securities are considered taxable if the interest
payable on them is treated as a specific tax preference item under the federal
alternative minimum tax. The Funds' investment adviser may rely on an opinion of
either counsel to the issuer of the municipal obligations or bond counsel
regarding the tax treatment of these obligations.
Municipal obligations acquired by a Fund will be rated in one of the three
highest investment-grade categories at the time of purchase by a nationally
recognized statistical rating organization ("NRSRO"). (See the Appendix to the
SAI for a description of the applicable rating categories). In addition, the
State Tax-Free Funds may purchase investment-grade obligations within the fourth
highest category when acceptable obligations with higher ratings are unavailable
for investment by such Funds. While obligations rated within the fourth highest
category are regarded as having an adequate capacity to pay principal and
interest, such obligations lack outstanding investment characteristics and in
fact have speculative characteristics as well. Changes in economic conditions or
other circumstances are more likely to lead to a weakened capacity to make
principal and interest payments than is the case with higher grade bonds. The
Funds also may invest in unrated municipal securities that are determined by
Wells Fargo Bank, as investment adviser, to be of comparable quality to
municipal securities that are rated investment grade. No more than 10% of the
Arizona Tax-Free Fund's total assets will be invested in municipal obligations
that are rated at the time of purchase below one of the three highest
categories.
If, subsequent to its purchase by a Fund, an issue of debt securities should
cease to be rated by one or more of a Fund's selected NRSROs due to factors
relating to the value of the security, or if its rating should be reduced by one
or more of such NRSROs below
PROSPECTUS 18
<PAGE> 119
the minimum rating required for purchase by such Fund, the investment adviser
will consider such event in determining whether the Fund should continue to hold
the security. Furthermore, unrated obligations purchased by a Fund will be
determined by the investment adviser to be comparable in quality to instruments
that are so rated.
Each Fund also may acquire tax-exempt commercial paper rated within the
highest rating category or, when deemed advisable by the Fund's investment
adviser, rated within the second highest rating category. Each Fund may acquire
municipal notes and variable rate demand obligations rated within one of the two
highest rating categories.
Each Fund may from time to time invest a portion of its assets on a temporary
basis (for example, when appropriate municipal obligations are unavailable) or
for temporary defensive purposes in short-term taxable money market instruments,
in securities issued by other investment companies that invest in taxable or
tax-exempt money market instruments and in U.S. Government obligations. In
addition, each Fund may hold uninvested cash reserves pending investment, during
temporary defensive periods, or if, in the opinion of the investment adviser,
suitable tax-exempt obligations are unavailable. The Funds also may purchase
zero-coupon bonds (i.e., discount debt obligations that do not make periodic
interest payments) that are subject to greater market fluctuations from changing
interest rates than debt obligations of comparable maturities that make current
distributions of interest.
Each Fund may temporarily invest some of its assets in open-end tax-free funds
with a similar fundamental investment objective and which pay interest that is
exempt from federal income tax and not subject to the federal alternative
minimum tax, subject to the limitations of the Investment Company Act of 1940,
as amended (the "1940 Act"). Each Fund also may invest temporarily in cash
reserves or certain high-quality, taxable money market instruments, or may
engage in other investment activities. Each Fund may elect to invest temporarily
up to 20% of its net assets in certain permitted taxable investments, which
include cash reserves, U.S. Government obligations, obligations of domestic
banks, commercial paper, taxable municipal obligations, and certain repurchase
agreements. The Funds may make loans of portfolio securities. Such temporary
investments would most likely be made when there is an unexpected or abnormal
level of investor purchases or redemptions of shares of a Fund or because of
unusual market conditions. The income from these temporary investments and
investment activities may be subject to federal income tax and California
personal income tax. However, as stated above, Wells Fargo Bank seeks to invest
substantially all of the Funds' assets in securities exempt from such taxes.
Additional description of tax-free municipal obligations, taxable money market
instruments, and other investment activities is contained in the "Prospectus
Appendix -- Additional Investment Policies" and in the SAI.
The investment objectives for the Arizona Tax-Free, National Tax-Free and
Oregon Tax-Free Funds are not fundamental and may be changed without shareholder
approval.
19 PROSPECTUS
<PAGE> 120
The investment objectives for the California Funds are fundamental and may be
charged only with shareholder approval. Any such change may result in a Fund
having an investment objective different from the objective that the shareholder
considered appropriate at the time of investment in the Fund. As with all mutual
funds, there can be no assurance that the Funds will achieve their investment
objectives. Wells Fargo Bank, as investment adviser to the Funds, pursues each
Fund's objective by investing (under normal market conditions) substantially all
of the Funds' assets in various types of municipal obligations as described
above. These municipal obligations and the taxable investments described below
may bear interest at rates that are not fixed ("floating- and variable-rate
instruments"). For additional descriptions of tax-free municipal obligations,
taxable money market instruments, and other investment activities, see the
"Prospectus Appendix -- Additional Investment Policies."
For additional descriptions of the types of securities and investment
practices used by the Funds, see "Risk Factors," "Prospectus
Appendix -- Additional Investment Policies" in this Prospectus and "Investment
Restrictions" and "Additional Permitted Investment Activities" in the SAI.
RISK FACTORS
As noted above and discussed further in the SAI, some of the securities
purchased by the State Tax-Free Funds may be rated below the three highest
rating categories, and may be rated in the lowest investment grade category, by
NRSROs.
The price per share of each of the Funds will fluctuate with changes in value
of the investments held by a Fund. Shareholders of a Fund should, therefore,
expect the value of their shares to fluctuate with changes in the value of the
securities owned by that Fund.
The market value of a Fund's investment in fixed-income securities changes in
response to changes in interest rates and the relative financial strength of
each issuer. During periods of falling interest rates, the value of fixed-income
securities generally rises. Conversely, during periods of rising interest rates,
the value of such securities generally declines. Debt securities with longer
maturities, which tend to produce higher yields, are subject to potentially
greater capital appreciation and depreciation than obligations with shorter
maturities. Changes in the financial strength of an issuer or changes in the
ratings of any particular security also may affect the value of these
investments. Fluctuations in the market value of fixed-income securities
subsequent to their acquisition will not affect cash income from such securities
but will be reflected in a Fund's net asset value.
Each Fund may invest 25% or more of its assets municipal obligations that are
related in such a way that an economic, business or political development or
change affecting one such obligation would also affect the other obligations;
for example, a Fund may
PROSPECTUS 20
<PAGE> 121
own different municipal obligations which pay interest based on the revenues of
similar types of projects. To the extent that a Fund's assets are concentrated
in municipal obligations payable from revenues on similar projects, the Fund
will be subject to the peculiar risks presented by such projects to a greater
extent than it would be if the Fund's assets were not so concentrated.
Furthermore, for the Arizona Tax-Free, National Tax-Free and Oregon Tax-Free
Funds payment of municipal obligations of certain projects may be secured by
mortgages or deeds of trust. In the event of a default, enforcement of the
mortgages or deeds of trust will be subject to statutory enforcement procedures
and limitations, including rights of redemption and limitations on obtaining
deficiency judgments. In the event of a foreclosure, collection of the proceeds
of the foreclosure may be delayed and the amount of proceeds from the
foreclosure may not be sufficient to pay the principal of and accrued interest
on the defaulted municipal obligations.
Each Fund is classified as non-diversified under the 1940 Act. Investment
return on a non-diversified portfolio typically is dependent upon the
performance of a smaller number of securities relative to the number held in a
diversified portfolio. Consequently, the change in value of any one security may
affect the overall value of a non-diversified portfolio more than it would a
diversified portfolio, and thereby subject the market-based net asset value per
share of the non-diversified portfolio to greater fluctuations. In addition, a
non-diversified portfolio may be more susceptible to economic, political and
regulatory developments than a diversified investment portfolio with a similar
objective may be.
The concentration of the State Tax-Free Funds in municipal obligations of
particular states raises additional considerations. Payment of the interest on
and the principal of these obligations is dependent upon the continuing ability
of state issuers and/or obligors of state, municipal and public authority debt
obligations to meet their obligations thereunder. Investors should consider the
greater risk inherent in a Fund's concentration in such obligations versus the
safety that comes with a less geographically concentrated investment portfolio
and should compare the yield available on a portfolio of state-specific issues
with the yield of a more diversified portfolio including issues of other states
before making an investment decision.
The State Tax-Free Funds have constitutional and/or statutory restrictions
that affect government revenues. Because of the nature of the various
restrictions, certain possible ambiguities and inconsistencies in their terms
and the scope of various exemptions and exceptions, as well as the impossibility
of predicting the level of future appropriations for state and local
governmental entities, it is not presently possible to determine the impact of
these restrictions and related measures on the ability of governmental issuers
in Oregon and Arizona to pay interest or repay principal on their obligations.
There have, however, been certain adverse developments with respect to municipal
obligations of governmental issuers in these states over the past several years.
21 PROSPECTUS
<PAGE> 122
In addition to the risk of nonpayment of state and local governmental debt, if
such debt declines in quality and is downgraded by the NRSROs, it may become
ineligible for purchase by a Fund. Since there are a number of buyers of such
debt that may be similarly restricted, the supply of eligible securities could
become inadequate at certain times. Similarly, there is a relatively small
active market for Arizona Obligations, California Obligations and Oregon
Obligations and the market price of such bonds may therefore be volatile. If any
of the State Tax-Free Funds were forced to sell a large volume of Arizona
Obligations, California Obligations or Oregon Obligations for any reason, such
as to meet redemption requests for a large number of shares, there is a risk
that the large sale itself would adversely offset the value of the Fund's
portfolio.
A more detailed description of special factors affecting investment in Arizona
Obligations, California Obligations or Oregon Obligations is set forth in
"Special Considerations Affecting Arizona Municipal Securities," "Special
Considerations Affecting California Municipal Securities" and "Special
Considerations Affecting Oregon Municipal Securities" in the SAI.
Illiquid securities, which may include certain restricted securities, may be
difficult to sell promptly at an acceptable price. Certain restricted securities
may be subject to legal restrictions on resale. Delay or difficulty in selling
securities may result in a loss or be costly to a Fund.
There is, of course, no assurance that a Fund will achieve its investment
objective or be successful in preventing or minimizing the risk of loss that is
inherent in investing in particular types of investment products. See
"Prospectus Appendix -- Additional Investment Policies" and the SAI for further
information about investment policies and risks.
PERFORMANCE
The performance of each class of shares of the Funds may be advertised from
time to time in terms of yield, tax-equivalent yield and average annual total
return. These performance figures, are based on historical results and are not
intended to indicate future performance.
The yield of a class of shares is calculated by dividing the net investment
income per share earned during a specified period (usually 30 days or one month)
for Class A shares by its public offering price per share (which includes the
maximum sales charge), or for Class B shares by its net asset value (which does
not include the maximum contingent-deferred sales charge), on the last day of
such period and annualizing the result. That is, the amount of income generated
by an investment during the month is assumed to be generated each month during
the year and is shown as a percentage of the investment. The effective yield is
calculated similarly but, when annualized, the income earned is assumed to be
reinvested. The effective yield is slightly
PROSPECTUS 22
<PAGE> 123
higher than the yield because of the compounding effect of this assumed
reinvestment. The tax-equivalent yield of a class of shares is similarly
calculated but assumes that a stated federal and/or state income tax rate has
been applied to determine the tax-equivalent figure. In addition to presenting a
standardized total return, from time to time, the Funds also may present
nonstandardized cumulative or other total returns, yields, and distribution
rates for purposes of advertising and/or sales literature. For example, the
performance figure of the shares of a class may be calculated on the basis of an
investment at the net asset value per share or at the net asset value per share
plus a reduced sales charge (see "Investing in the Funds -- How To Buy Shares"),
rather than the public offering price per share. In this case, the figures might
not reflect the effect of the sales charge that you may have paid.
Standardized and nonstandardized total return figures for the Funds also may
be presented. Average annual total return of the shares of a class is based on
the overall dollar or percentage change in value of a hypothetical investment in
such shares and assumes that all Fund dividends and capital gain distributions
are reinvested in the shares of that class. The standardized average annual
total return for Class A shares is calculated assuming you have paid the maximum
sales charge, and for Class B shares assuming on a one-year investment, you have
paid the maximum contingent-deferred sales charge, on your hypothetical
investment.
Because of differences in the fees and/or expenses borne by Class B shares,
the net performance quotations are on such shares can be expected, at any given
time, to be lower than the net performance quotations on Class A shares.
Performance quotations are computed separately for Class A shares and Class B
shares. The Funds' performance calculations may reflect waivers and/or
reimbursements that, if effective, increase the yields and returns payable to
shareholders. Any fees that may be imposed by a shareholder servicing agent
directly on its customer accounts are not reflected in the performance
calculations. Any such fees, if charged, will reduce the actual return received
by customers on their investments.
Additional information about the performance of each Fund is contained in the
Annual Report for each Fund. The Annual Reports may be obtained free of charge
by calling the Company at 1-800-222-8222 or by writing the Company at the
address shown on the front cover of the Prospectus.
THE FUNDS AND MANAGEMENT
The Funds are three funds of the Stagecoach Family of Funds. The Company was
organized as a Maryland corporation on September 9, 1991 and currently offers
shares of the following funds: Aggressive Growth, Arizona Tax-Free, Asset
Allocation, Balanced, California Tax-Free Bond, California Tax-Free Income,
California Tax-Free Money
23 PROSPECTUS
<PAGE> 124
Market Mutual, Corporate Stock, Diversified Income, Equity Value, Intermediate
Bond, Ginnie Mae, Government Money Market Mutual, Growth and Income, Money
Market Mutual, Money Market Trust, National Tax-Free, National Tax-Free Money
Market Mutual, Oregon Tax-Free, Prime Money Market Mutual, Short-Intermediate
U.S. Government Income, Small Cap, Treasury Money Market Mutual, and U.S.
Government Allocation Funds. The Arizona Tax-Free, Balanced, California Tax-Free
Bond, Equity Value, Ginnie Mae, Growth and Income, Intermediate Bond, Money
Market Mutual, National Tax-Free, Oregon Tax-Free, Prime Money Market Mutual,
Small Cap and Treasury Money Market Mutual Funds each offer three classes of
shares. The Aggressive Growth, Asset Allocation, California Tax-Free Income,
Diversified Income, Short-Intermediate U.S. Government Income and U.S.
Government Allocation Funds each offer two classes of shares. The California
Tax-Free Money Market Mutual, Corporate Stock, Government Money Market Mutual,
Money Market Trust, and National Tax-Free Money Market Mutual Funds each offer
one class of shares. Most of the Company's funds are authorized to issue
multiple classes of shares, one class generally subject to a front-end sales
charge and, in some cases, a class subject to a contingent-deferred sales
charge, that are offered to retail investors. Certain of the Company's funds
also are authorized to issue other classes of shares, which are sold primarily
to institutional investors at NAV. Each class of shares in a fund represents an
equal, proportionate interest in a fund with other shares of the same class.
Shareholders of each class bear their pro rata portion of the fund's operating
expenses, except for certain class-specific expenses (e.g., any state securities
registration fees, shareholder servicing fees or distribution fees that may be
paid under Rule 12b-1) that are allocated to a particular class and,
accordingly, may affect performance. Please contact Stagecoach Shareholder
Services at 1-800-222-8222 if you would like additional information about other
funds or classes of shares offered.
The Board of Directors of the Company supervises the Funds' activities and
monitors their contractual arrangements with various service providers. Although
the Company is not required to hold annual shareholder meetings, special
meetings may be required for purposes such as electing or removing Directors,
approving advisory contracts and distribution plans, and changing a fund's
investment objective or fundamental investment policies. All shares of the
Company have equal voting rights and will be voted in the aggregate, rather than
by series or class, unless otherwise required by law (such as when the voting
matter affects only one series or class). As a Fund shareholder, you are
entitled to one vote for each share owned and fractional votes for fractional
shares owned. A more detailed description of the voting rights and attributes of
the shares is contained in the "Capital Stock" section of each Fund's SAI.
MANAGEMENT
Wells Fargo Bank is the Funds' investment adviser, transfer and dividend
disbursing agent and custodian. In addition, Wells Fargo Bank serves as
shareholder servicing agent of the Funds and a selling agent under a selling
agreement with the Funds' distributor.
PROSPECTUS 24
<PAGE> 125
Wells Fargo Bank, one of the largest banks in the United States, was founded in
1852 and is the oldest bank in the western United States. As of June 30, 1996,
Wells Fargo Bank and its affiliates provided investment advisory services for
approximately $56 billion of assets of individuals, trusts, estates and
institutions. Wells Fargo Bank also serves as the investment adviser to the
other separately managed funds (or the master portfolio in which a fund invests)
of the Company, and as investment adviser or sub-adviser to separately managed
funds of five other registered, open-end, management investment companies. Wells
Fargo Bank, a wholly owned subsidiary of Wells Fargo & Company, is located at
420 Montgomery Street, San Francisco, California 94104.
Subsequent to its acquisition by Wells Fargo & Company on April 1, 1996, Wells
Fargo Investment Management, Inc. ("WFIM") (formerly, First Interstate Capital
Management, Inc.) served as investment adviser to the predecessor portfolios.
WFIM, a wholly owned subsidiary of Wells Fargo & Company, is located at 444
Market Street, San Francisco, California 94105. Prior to October 1, 1995,
affiliates of First Interstate Capital Management, Inc. served as investment
advisers to the predecessor portfolios as follows: First Interstate Bank of
Oregon, N.A, served as investment adviser to the Oregon Tax-Exempt Fund; First
Interstate Bank of Arizona, N.A. served as investment adviser to the Arizona
Tax-Exempt Fund; and First Interstate Bank of Washington, N.A. served as co-
investment advisers to the National Tax-Exempt Fund.
Ms. Laura Milner assumed sole responsibility for the day-to-day management of
the portfolios of the Arizona Tax-Free and National Tax-Free Funds as of the
commencement of operations of the Funds and assumed sole responsibility for the
day-to-day management of the California Tax-Free Income Fund on June 1, 1995.
Ms. Milner had been a co-manager of the California Tax-Free Income Fund since
November 1992. Ms. Milner's current position with Wells Fargo Bank is Senior
Tax-Exempt Specialist/Portfolio Manager. Her background includes over seven
years experience specializing in short- and long-term municipal securities with
Salomon Brothers. She is a member of the National Federation of Municipal
Analysts and its California chapter.
Mr. David Klug assumed sole responsibility for the day-to-day management of
the portfolio of the Oregon Tax-Free Fund as of the commencement of operations
of the Fund and assumed sole responsibility for the day-to-day management of the
California Tax-Free Bond Fund on June 1, 1995. Mr. Klug had been a co-manager of
the California Tax-Free Bond Fund since January 1992. Mr. Klug's current
position with Wells Fargo Bank is Senior Tax-Exempt Specialist/Portfolio
Manager. He has managed municipal bond portfolios for Wells Fargo Bank for over
nine years. Prior to joining Wells Fargo Bank, he managed the municipal bond
portfolio for a major property and casualty insurance company. Mr. Klug holds an
M.B.A. from the University of Chicago, and is a member of the National
Federation of Municipal Analysts and its California chapter.
25 PROSPECTUS
<PAGE> 126
Morrison & Foerster LLP, counsel to the Company and special counsel to Wells
Fargo Bank has advised the Company and Wells Fargo Bank that Wells Fargo Bank
and its affiliates may perform the services contemplated by the Advisory
Contracts and this Prospectus without violation of the Glass-Steagall Act. Such
counsel has pointed out, however, that there are no controlling judicial or
administrative interpretations or decisions and that future judicial or
administrative interpretations of, or decisions relating to, present federal or
state statutes, including the Glass-Steagall Act, and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as future changes in such statutes, regulations and judicial or
administrative decisions or interpretations, could prevent such entities from
continuing to perform, in whole or in part, such services. If any such entity
were prohibited from performing any such services, it is expected that new
agreements would be proposed or entered into with another entity or entities
qualified to perform such services.
Stephens is the Funds' sponsor and administrator and distributes the Funds'
shares. Stephens is a full service broker/dealer and investment advisory firm
located at 111 Center Street, Little Rock, Arkansas 72201. Stephens and its
predecessor have been providing securities and investment services for more than
60 years. Additionally, they have been providing discretionary portfolio
management services since 1983. Stephens currently manages investment portfolios
for pension and profit sharing plans, individual investors, foundations,
insurance companies and university endowments.
INVESTING IN THE FUNDS
OPENING AN ACCOUNT
You can buy Fund shares in one of the several ways described below. You must
complete and sign an Account Application to open an account. Additional
documentation may be required from corporations, associations and certain
fiduciaries. Do not mail cash. If you have any questions or need extra forms,
please call 1-800-222-8222.
After an application has been processed and an account has been established,
subsequent purchases of different funds of the Company under the same umbrella
account do not require the completion of additional applications. A separate
application must be processed for each different umbrella account number (even
if the registration is the same). Call the number on your confirmation statement
to obtain information about what is required to change registration.
The Company or Stephens may make the Prospectus available in an electronic
format. Upon receipt of a request from you or your representative, the Company
or Stephens will
PROSPECTUS 26
<PAGE> 127
transmit or cause to be transmitted promptly, without charge, a paper copy of
the electronic Prospectus.
SHARE VALUE
The value of a Fund share is its "net asset value" or NAV. Wells Fargo Bank
calculates the NAV of the Funds each Business Day (as defined below) as of the
close of regular trading on the New York Stock Exchange ("NYSE") (referred to
hereafter as "the close of the NYSE"), which is currently 1:00 p.m. (Pacific
time). The NAV per share for each class of a Fund is computed by dividing the
value of a Fund's assets allocable to a particular class, less the liabilities
charged to that class by the total number of the outstanding shares of that
class. All expenses, including fees paid to the investment adviser and
administrator, are accrued daily and taken into account for the purpose of
computing the NAV, which is expected to fluctuate daily.
Shares of a Fund may be purchased on any day the Funds are open for business.
The Funds are open for business each day the NYSE is open for trading (a
"Business Day"). Currently, the NYSE is closed on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day (each a "Holiday"). When any Holiday falls on a weekend, the
NYSE typically is closed on the weekday immediately before or after such
Holiday.
Except for debt obligations with remaining maturities of 60 days or less,
which are valued at amortized cost, the Funds' other assets are valued at
current market prices, or if such prices are not readily available, at fair
value as determined in good faith by the Company's Board of Directors. Prices
used for such valuations may be provided by independent pricing services.
HOW TO BUY SHARES
Class A and Class B shares of the Funds are offered continuously at the
applicable offering price (the NAV plus any applicable sales charge) next
determined after a purchase order is received in the form specified for the
purchase method being used, as described in the following sections. Payment for
shares purchased through a selling agent is not due from the selling agent until
the settlement date, normally three Business Days after the order is placed. The
selling agent is responsible for forwarding payment for shares being purchased
to the Funds promptly. Payment must accompany orders placed directly through the
transfer agent.
Payments for shares of each class are invested in full and fractional shares
at the applicable offering price. If shares are purchased by a check that does
not clear, the Company reserves the right to cancel the purchase and hold the
investor responsible for any losses or fees incurred. In addition, the Company
may hold payment on any
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redemption until reasonably satisfied that your investments made by check have
been collected (which may take up to 10 days).
The minimum initial investment is $100 through the AutoSaver Plan (described
below) and otherwise $1,000. Generally, all subsequent investments must be at
least $100 or more. Where Fund shares are acquired in exchange for shares of
another fund in the Stagecoach Family of Funds, the minimum initial investment
amount applicable to the shares being exchanged generally carries over. However,
if the value of your investment in the shares you are exchanging has been
reduced below the minimum initial investment amount by changes in market
conditions or sales charges (and not by redemptions), you may carry over the
lesser amount into one of the Funds. In addition, the minimum initial or
subsequent purchase amount requirements may be waived or lowered for investments
effected on a group basis by certain entities and their employees, such as
pursuant to a payroll deduction or other accumulation plan. If you have
questions regarding purchases of shares, please contact the Company at
1-800-222-8222, or contact a shareholder servicing agent or selling agent.
Shares of the Funds may not be suitable investments for tax-exempt
institutions or tax-sheltered retirement plans, since such investors would not
benefit from the exempt status of the Funds' dividends. See "Federal Income
Taxes -- Special Tax Considerations" in the Funds' SAI.
SALES CHARGES
Set forth below is a Front-end Sales Charge Schedule listing the front-end
sales charges applicable to purchases of the Funds' Class A shares. As shown
below, reductions in the rate of front-end sales charges ("Volume Discounts")
are available as you purchase additional Class A shares (contingent-deferred
sales charges applicable to Class B shares are described below). You should
consider the front-end sales charge information set forth below and the other
information contained in this Prospectus when making your investment decisions.
FRONT-END SALES CHARGE SCHEDULE --
CLASS A SHARES
<TABLE>
<CAPTION>
FRONT-END FRONT-END DEALER
SALES CHARGE SALES CHARGE ALLOWANCE
AS % OF AS % OF NET AS % OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
- ----------------------------- -------------- --------------- --------------
<S> <C> <C> <C>
Less than $50,000............ 4.50% 4.71% 4.00
$50,000 up to $99,999........ 4.00 4.17 3.55
$100,000 up to $249,999...... 3.50 3.73 3.125
$250,000 up to $499,999...... 3.00 3.09 2.625
$500,000 up to $999,999...... 2.00 2.04 1.75
$1,000,000 and over.......... 1.00 1.01 0.85
</TABLE>
PROSPECTUS 28
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The Funds' Class B shares are not subject to front-end sales charges. Class B
shares that are redeemed within one, two, three or four years from the receipt
of a purchase order affecting such shares are subject to a contingent-deferred
sales charge equal to 3.00%, 2.00%, 1.00% or 1.00%, respectively, of the dollar
amount equal to the lesser of the NAV at the time of purchase of the shares
being redeemed or the NAV of such shares at the time of redemption (the "NAV
Amount"). See "Investing in the Funds -- Contingent-Deferred Sales
Charges -- Class B Shares."
If Class A shares are purchased through a selling agent, Stephens reallows the
portion of the front-end sales charge shown above as the Dealer Allowance.
Stephens also compensates selling agents for sales of Class B shares and is then
reimbursed out of Rule 12b-1 fees and contingent-deferred sales charges
applicable to such shares. When shares are purchased directly through the
transfer agent and no selling agent is involved with the purchase, the entire
sales charge is paid to Stephens.
A selling agent or shareholder servicing agent and any other person entitled
to receive compensation for selling or servicing shares may receive different
compensation for selling or servicing Class A shares as compared with Class B
shares of the same fund.
REDUCED SALES CHARGES -- CLASS A SHARES
Because Class B shares are not subject to a front-end sales charge, the amount
of Class B shares you hold is not considered in determining any reduced sales
charges on Class A shares described below.
Volume Discounts
The Volume Discounts described in the Front-end Sales Charge Schedules are
available to you based on the combined dollar amount you invest in Class A
shares of one or more of the Company's funds that assess a front-end sales
charge (the "Load Funds").
Right of Accumulation
The Right of Accumulation allows you to combine the amount you invest in a
Fund's Class A shares with the total NAV of Class A shares in other Load Funds
to determine reduced front-end sales charges in accordance with the above
Front-end Sales Charge Schedule. In addition, you also may combine the total NAV
of Class A shares that you currently have invested in any other mutual fund that
assesses a front-end sales charge and is advised or sub-advised by Wells Fargo
Bank and sponsored by Stephens. For example, if you own Class A shares of the
Load Funds with an aggregate NAV of $90,000 and you invest an additional $20,000
in Class A shares of a Load Fund, the front-end sales charge on the additional
$20,000 investment would be 3.50% of the offering price. To obtain such a
discount, you must provide sufficient information at the time of your purchase
to verify that your purchase qualifies for the reduced front-end sales charge.
29 PROSPECTUS
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Confirmation of the order is subject to such verification. The Right of
Accumulation may be modified or discontinued at any time without prior notice on
all subsequent shares purchased.
Letter of Intent
A Letter of Intent allows you to purchase a Fund's Class A shares over a
13-month period at a reduced front-end sales charge based on the total amount of
Class A shares you intend to purchase plus the total NAV of Class A shares in
any of the Load Funds you already own. Each investment in Class A shares that
you make during the period may be made at the reduced front-end sales charge
that is applicable to the total amount you intend to invest. If you do not
invest the total amount within the period, you must pay the difference between
the higher front-end sales charge rate that would have been applicable to the
purchases you made and the reduced front-end sales charge rate you have paid.
The minimum initial investment for a Letter of Intent is 5% of the total amount
you intend to purchase, as specified in the Letter. Class A shares of the Fund
equal to 5% of the amount you intend to invest will be held in escrow and, if
you do not pay the difference within 20 days following the mailing of a request,
a sufficient amount of escrowed shares will be redeemed for payment of the
additional front-end sales charge. Dividends and capital gains paid on the Class
A shares held in escrow will be reinvested in additional Class A shares of the
Fund.
Reinvestment
You may reinvest proceeds from a redemption of a Fund's Class A shares in
Class A shares of the Fund, or in shares of another of the Company's funds
registered in your state of residence at NAV, without payment of a front-end
sales charge, within 120 days after your redemption. However, if the other
investment portfolio charges a front-end sales charge that is higher than the
one you paid in connection with the shares you have redeemed, you must pay the
difference between the dollar amount of the two front-end sales charges. You may
reinvest at this NAV price up to the total amount of the redemption proceeds. A
written purchase order for the shares must be delivered to the Company, a
selling agent, a shareholder servicing agent, or the transfer agent at the time
of reinvestment.
If you realized a gain on your redemption, such gain is ordinarily taxable,
notwithstanding your reinvestment. If you realized a loss on your redemption,
your reinvestment may cause some or all of the loss to be disallowed as a
federal income tax deduction, depending on the number of shares you purchase by
reinvestment, which fund's shares are purchased and the period of time that
elapses after the redemption for federal income tax purposes, the amount
disallowed is added to the cost of the shares you acquire upon the reinvestment.
PROSPECTUS 30
<PAGE> 131
Reductions for Families or Fiduciaries
Reductions in front-end sales charges apply to purchases by a single "person,"
including an individual, members of a family unit, consisting of a husband, wife
and children under the age of 21 purchasing securities for their own account, or
a trustee or other fiduciary purchasing for a single fiduciary account or single
trust estate.
Waivers for Investments of Proceeds From Other Investments
Purchases may be made at NAV, without payment of a front-end sales charge, to
the extent that: (i) you are investing proceeds from a redemption of shares of
another open-end investment company, (ii) on which you paid a front-end sales
charge, and (iii) such redemption occurred within thirty (30) days prior to the
date of the purchase order. You must notify the Fund and/or the transfer agent
at the time you place such purchase order of your eligibility for the waiver of
front-end sales charges and provide satisfactory evidence thereof (e.g., a
confirmation of the redemption and the sales charges paid). Such purchases may
not be made at net asset value to the extent the proceeds are from a redemption
of shares of another open-end investment company that is affiliated with the
Company on which you paid a contingent-deferred sales charge upon redemption.
Reductions for Qualified Groups
Reductions in front-end sales charges also apply to purchases by individual
members of a "qualified group." The reductions are based on the aggregate dollar
amount of Class A shares purchased by all members of the qualified group. For
purposes of this paragraph, a qualified group consists of a "company", as
defined in the 1940 Act, which has been in existence for more than six months
and which has a primary purpose other than acquiring Fund shares at a reduced
front-end sales charge, and the "related parties" of such company. For purposes
of this paragraph, a "related party" of a company is: (i) any individual or
other company who directly or indirectly owns, controls or has the power to vote
5% or more of the outstanding voting securities of such company; (ii) any other
company of which such company directly or indirectly owns, controls or has the
power to vote 5% or more of its outstanding voting securities; (iii) any other
company under common control with such company; (iv) any executive officer,
director or partner of such company or of a related party; and (v) any
partnership of which such company is a partner. Investors seeking to rely on
their membership in a qualified group to purchase shares at a reduced sales load
must provide evidence satisfactory to the transfer agent of the existence of a
bona fide qualified group and their membership therein.
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Waivers for Certain Parties
The Funds' Class A shares may be purchased at NAV, without payment of a
front-end sales charge, by directors, officers and employees (and their spouses,
parents, children, and siblings) of the Company, Stephens, its affiliates and
selling agents. The Funds' Class A shares also may be purchased at NAV, without
payment of a front-end sales charge, by present and retired directors, officers
and employees (and their spouses, parents, children, and siblings) of Wells
Fargo Bank and its affiliates. The Funds' Class A shares also may be purchased
at NAV, without payment of a front-end sales charge, by employee benefit and
thrift plans for such persons and by any investment advisory, trust or other
fiduciary account, including certain Plan Accounts, that are maintained, managed
or advised by Wells Fargo Bank or its affiliates. In addition, you may purchase
Class A shares at NAV, without payment of a sales charge, with proceeds from a
required minimum distribution from any Individual Retirement Account ("IRA"),
Simplified Employee Pension Plan or other self-directed retirement plan for
which Wells Fargo Bank serves as trustee, provided that the proceeds are
invested in the Funds within 30 days of such distribution and such distribution
is required as a result of reaching age 70 1/2.
CONTINGENT-DEFERRED SALES CHARGE -- CLASS B SHARES
The Funds' Class B shares are not subject to front-end sales charges but may
be subject to contingent-deferred sales charges. Class B shares that are
redeemed within one, two, three or four years from receipt of a purchase order
for such shares are subject to a contingent-deferred sales charge equal to
3.00%, 2.00%, 1.00% and 1.00%, respectively, of the dollar amount equal to the
lesser of the NAV at the time of purchase of the shares being redeemed or the
NAV of such shares at the time of redemption. Contingent-deferred sales charges
are not imposed on amounts representing increases in NAV above the NAV at the
time of purchase and are not assessed on Class B shares purchased through
reinvestment of dividends or capital gain distributions. Class B shares
automatically convert to Class A shares of the same Fund six years after the end
of the month in which such Class B shares were acquired, and such conversions
are ordinarily not taxable.
The amount of any contingent-deferred sales charge paid upon redemption of
Class B shares is determined in a manner designed to result in the lowest sales
charge rate being assessed. When a redemption request is made, Class B shares
acquired pursuant to the reinvestment of dividends and capital-gain
distributions are considered to be redeemed first. After this, Class B shares
are considered redeemed on a first-in, first-out basis so that Class B shares
held for a longer period of time are considered redeemed prior to more recently
acquired Class B shares. For a discussion of the interaction between the
optional Exchange Privilege and contingent-deferred sales charges on Class B
shares, see "Additional Shareholder Services -- Exchange Privilege."
PROSPECTUS 32
<PAGE> 133
Contingent-deferred sales charges are waived on redemptions of Class B shares
(i) following the death or disability (as defined in the Internal Revenue Code
of 1986, as amended (the "Code")) of a shareholder, (ii) to the extent that the
redemption represents a scheduled distribution from an IRA or other retirement
plan to a shareholder who has reached age 59 1/2, (iii) effected pursuant to the
Company's right to liquidate a shareholder's account if the aggregate NAV of the
shareholder's account is less than the minimum account size, or (iv) in
connection with the combination of the Company with any other registered
investment company by a merger, acquisition of assets, or any other transaction.
In deciding whether to purchase Class A or Class B shares, you should compare
the fees assessed on Class A shares (including front-end sales charges) against
those assessed on Class B shares (including potential contingent-deferred sales
charges and higher Rule 12b-1 fees than Class A shares) in light of the amount
to be invested and the anticipated time that the shares will be owned. If your
purchase amount would qualify you for a reduced sales charge on Class A shares,
you should consider carefully whether you would pay lower fees ultimately on
Class A shares or on Class B shares. (See "Investing In The Funds -- Sales
Charges" for information on reduced sales charges for Class A shares.)
You may buy shares on any Business Day by any of the methods described below.
The Company reserves the right to reject any purchase order or suspend sales at
any time. Payment for orders that are not received is returned after prompt
inquiry. The issuance of shares is recorded on the Company's books, and share
certificates are not issued.
INITIAL PURCHASES BY WIRE
1. Complete an Account Application.
2. Instruct the wiring bank to transmit the specified amount in federal funds
($1,000 or more) to:
Wells Fargo Bank, N.A.
San Francisco, California
Bank Routing Number: 121000248
Wire Purchase Account Number: 4068-000587
Attention: Stagecoach Funds (Name of Fund) (designate Class A or B)
Account Name(s): Name(s) in which to be registered
Account Number: (if investing into an existing account)
33 PROSPECTUS
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3. A completed Account Application should be mailed, or sent by telefacsimile
with the original subsequently mailed, to the following address immediately
after funds are wired and must be received and accepted by the transfer
agent before an account can be opened:
Wells Fargo Bank, N.A.
Stagecoach Shareholder Services
P.O. Box 7066
San Francisco, California 94120-7066
Telefacsimile: 1-415-543-9538
4. Share purchases are effected at the public offering price or, in the case of
Class B shares, at the NAV next determined after the Account Application is
received and accepted.
INITIAL PURCHASES BY MAIL
1. Complete an Account Application. Indicate the services to be used.
2. Mail the Account Application and a check for $1,000 or more, payable to
"Stagecoach Funds (Name of Fund) (designate the applicable class)" to the
address set forth in "Initial Purchases by Wire."
3. Share purchases are effected at the public offering price or, in the case of
Class B shares, at the NAV next determined after the Account Application is
received and accepted.
AUTOSAVER PLAN PURCHASES
The Company's AutoSaver Plan provides you with a convenient way to establish
and automatically add to your Fund account on a monthly basis. To participate in
the AutoSaver Plan, you must specify an amount ($100 or more) to be withdrawn
automatically by the transfer agent on a monthly basis from an account with a
bank that is designated in your Account Application and is approved by the
transfer agent ("Approved Bank Account"). You may open an Approved Bank Account
with Wells Fargo Bank. The transfer agent draws and uses this amount to purchase
specified shares of the designated Fund and class on your behalf each month on
or about the day that you have selected, or, if you have not selected a day, on
or about the 20th day of each month. If you hold shares through a brokerage
account, the AutoSaver Plan will comply with the terms of your brokerage
agreement. The transfer agent requires a minimum of ten (10) Business Days to
implement your AutoSaver Plan purchases or to process your request to change the
day on which the AutoSaver purchase is processed. There are no separate fees
charged to you by the Company for participating in the AutoSaver Plan.
PROSPECTUS 34
<PAGE> 135
You may change your investment amount, the date on which your AutoSaver
purchase is effected, suspend purchases or terminate your election at any time
by notifying the transfer agent at least five (5) Business Days prior to any
scheduled transaction.
ADDITIONAL PURCHASES
You may make additional purchases of $100 or more by instructing the Funds
transfer agent to debit your designated Approved Bank Account, by wire by
instructing the wiring bank to transmit the specified amount as directed above
for initial purchases, or by mail with a check payable to "Stagecoach Funds
(Name of Fund) (designate the applicable class)" to the address set forth in
"Initial Purchases by Wire." Write your Fund account number on the check and
include the detachable stub from your Account Statement or a letter providing
your Fund account number.
PURCHASES THROUGH SELLING AGENTS
You may place a purchase order for Fund shares through a broker/dealer or
financial institution that has entered into a selling agreement with Stephens,
as the Funds' Distributor ("Selling Agent"). If your order for Fund shares is
placed by the close of the NYSE, the purchase order is executed on the same day
if the order is received by the transfer agent before the close of business. If
your purchase order is received by a Selling Agent after the close of the NYSE
or by the transfer agent after the close of business, then your purchase order
is executed on the next Business Day after the day your order is placed. The
Selling Agent is responsible for the prompt transmission of your purchase order
to the Company. Because payment for shares of the Funds is not due until the
settlement date, the Selling Agent might benefit from temporary use of your
payment. A financial institution that acts as a Selling Agent, shareholder
servicing agent or in certain other capacities may be required to register as a
dealer pursuant to applicable state securities laws, which may differ from
federal law and any interpretations expressed herein.
PURCHASES THROUGH SHAREHOLDER SERVICING AGENTS
Purchase orders for Fund shares may be transmitted to the transfer agent
through any entity that has entered into a shareholder servicing agreement with
the Company ("Shareholder Servicing Agent"), such as Wells Fargo Bank. See
"Management, Distribution and Servicing Fees -- Shareholder Servicing Agent." A
Shareholder Servicing Agent may transmit your purchase order to the transfer
agent, including a purchase order for which payment is to be transferred from
your Approved Bank Account or wired from a financial institution. If your order
is transmitted by a Shareholder Servicing Agent on your behalf to the transfer
agent before the close of the NYSE, the purchase order is executed on the same
day. If your Shareholder Servicing Agent transmits your purchase order to the
transfer agent after the close of the NYSE, then your
35 PROSPECTUS
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order generally is executed on the next Business Day after the day your order is
received. The Shareholder Servicing Agent is responsible for the prompt
transmission of your purchase order to the transfer agent.
STATEMENTS AND REPORTS
The Company, or a Shareholder Servicing Agent on their behalf, typically sends
you a confirmation or statement of your account after every transaction that
affects your share balance or your Fund account registration. A statement with
tax information for each year is mailed to you by January 31 of the following
year and also is filed with the Internal Revenue Service ("IRS"). At least twice
a year, you will receive financial statements.
DIVIDENDS
Dividends from net investment income of the Funds are declared daily payable
to shareholders of record as of the close of regular trading of the NYSE, which
is currently 1:00 p.m. (Pacific time). Dividends are paid generally on the last
Business Day of each month. You begin earning dividends on the Business Day
after the date your purchase order is effective and continue to earn dividends
through the day you redeem your shares. All expenses, such as applicable Rule
12b-1 fees, state securities registration fees and transfer agency fees, that
are attributable to a particular class may affect the relative dividends and/or
capital-gain distributions of Class A shares and Class B shares.
If you redeem shares before the dividend payment date, any dividends credited
to you are paid on the following dividend payment date unless you have redeemed
all of the shares in your account, in which case you receive your accrued
dividends together with your redemption proceeds. The Funds distribute any
capital gains at least annually.
Dividends for a Saturday, Sunday or Holiday are declared payable to
shareholders of record as of the preceding Business Day. Dividends declared in a
month generally are paid on the last Business Day of each month. You have
several options for receiving dividends and any capital-gain distributions. They
are discussed under "Additional Shareholder Services -- Dividend and
Distribution Options."
HOW TO REDEEM SHARES
You may redeem Fund shares on any Business Day. Your shares are redeemed at
the NAV per share next calculated after the Company has received your redemption
request in proper form. Redemption proceeds may be more or less than the amount
invested and, therefore, a redemption may result in a recognized gain or loss
for federal income tax purposes. The Company ordinarily remits your redemption
proceeds, net of any
PROSPECTUS 36
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contingent-deferred sales charge applicable to Class B shares (the "net
redemption proceeds"), within seven days after your redemption order is received
in proper form, unless the SEC permits a longer period under extraordinary
circumstances. Such extraordinary circumstances could include a period during
which an emergency exists as a result of which (a) disposal by a Fund of
securities owned by it is not reasonably practicable or (b) it is not reasonably
practicable for a Fund fairly to determine the value of its net assets, or a
period during which the SEC by order permits deferral of redemptions for the
protection of security holders of a Fund. In addition, a Fund may hold payment
on your redemptions until reasonably satisfied that your investments made by
check have been collected (which can take up to 10 days from the purchase date).
To ensure acceptance of your redemption request, please follow the procedures
described below. Although it is not the Funds' current intention, the Funds may
make payment of redemption proceeds in securities if conditions warrant, subject
to regulation by some state securities commissions. Such redemptions would also
ordinarily be taxable to redeeming shareholders. In addition, the Company
reserves the right to impose charges for wiring redemption proceeds.
Due to the high cost of maintaining Fund accounts with small balances, the
Company reserves the right to close your account and send you the proceeds if
the balance falls below the applicable minimum balance because of a redemption
(including a redemption of shares of a Fund after you have made only the
applicable minimum initial investment). You will be given 30 days' notice to
make an additional investment to increase your account balance to the minimum
balance. For a discussion of applicable minimum balance requirements, see
"Investing in the Funds -- How to Buy Shares."
All redemptions of Fund shares generally are made in cash, except that the
commitment to redeem shares in cash extends only to redemption requests made by
each Fund shareholder during any 90-day period of up to the lesser of $250,000
or 1% of the net asset value of the Fund at the beginning of such period. This
commitment is irrevocable without the prior approval of the SEC and is a
fundamental policy of the Fund that may not be changed without shareholder
approval. In the case of redemption requests by shareholders in excess of such
amounts, the Board of Directors reserves the right to have the Fund make
payment, in whole or in part, in securities or other assets, in case of an
emergency or any time a cash distribution would impair the liquidity of the Fund
to the detriment of the existing shareholders. In this event, the securities
would be valued in the same manner as the securities of the Fund are valued. If
the recipient were to sell such securities, he or she would incur brokerage
costs in converting such securities to cash.
REDEMPTIONS BY TELEPHONE
Telephone redemption or exchange privileges are made available to you
automatically upon opening an account, unless you specifically decline the
privileges. Telephone
37 PROSPECTUS
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redemption privileges authorize the transfer agent to act on telephone
instructions from any person representing himself or herself to be the investor
and reasonably believed by the transfer agent to be genuine. The Company
requires the transfer agent to employ reasonable procedures, such as requiring a
form of personal identification, to confirm that instructions are genuine and,
if it does not follow such procedures, the Company and the transfer agent may be
liable for any losses due to unauthorized or fraudulent instructions. Neither
the Company nor the transfer agent will be liable for following telephone
instructions reasonably believed to be genuine.
REDEMPTIONS BY MAIL
1. Write a letter of instruction. Indicate the class and the dollar amount or
number of Fund shares you want to redeem. Refer to your Fund account number
and give your taxpayer identification number ("TIN"), which is generally your
social security or employer identification number.
2. Sign the letter in exactly the same way the account is registered. If there
is more than one owner of the shares, all must sign.
3. Signature guarantees are not required for redemption requests unless
redemption proceeds of $5,000 or more are to be paid to someone other than
you at your address of record or your Approved Bank Account, or other unusual
circumstances exist that cause the transfer agent to determine that a
signature guarantee is necessary or prudent to protect against unauthorized
redemption requests. If required, a signature must be guaranteed by an
"eligible guarantor institution", which includes a commercial bank that is an
FDIC member, a trust company, a member firm of a domestic stock exchange, a
savings association, or a credit union that is authorized by its charter to
provide a signature guarantee. Signature guarantees by notaries public are
not acceptable. Further documentation may be requested from corporations,
administrators, executors, personal representatives, trustees or custodians.
4. Mail your letter to the transfer agent at the mailing address set forth under
"Investing in the Funds -- Initial Purchases by Wire."
Unless other instructions are given in proper form, a check for your net
redemption proceeds is sent to your address of record.
EXPEDITED REDEMPTIONS BY MAIL OR TELEPHONE
You may request an expedited redemption of Fund shares by letter, in which
case your receipt of redemption proceeds, but not the Fund's receipt of your
redemption request, would be expedited. In addition, you also may request an
expedited redemption of shares of a Fund by telephone on any Business Day, in
which case both your receipt of redemption proceeds and a Fund's receipt of your
redemption request would be
PROSPECTUS 38
<PAGE> 139
expedited. You may request expedited redemption by telephone only if the total
value of the shares redeemed is $100 or more.
You may request expedited redemption by telephone by calling the transfer
agent at the telephone number listed on your transaction confirmation or by
calling 1-800-222-8222.
You may request expedited redemption by mail by mailing your expedited
redemption request to the transfer agent at the mailing address set forth under
"Investing in the Funds -- Initial Purchases by Wire."
Upon request, net redemption proceeds of expedited redemptions of $5,000 or
more are wired or credited to your Approved Bank Account or wired to the Selling
Agent designated in your Account Application. The Company reserves the right to
impose a charge for wiring redemption proceeds. When proceeds of your expedited
redemption are to be paid to someone else, to an address other than that of
record, or to an Approved Bank Account or Selling Agent that you have not
predesignated in your Account Application, your expedited redemption request
must be made by letter and the signature(s) on the letter may be required to be
guaranteed, regardless of the amount of the redemption.
If your expedited redemption request for shares is received by the transfer
agent by the close of the NYSE on a Business Day, your redemption proceeds are
transmitted to your Approved Bank Account or Selling Agent on the next Business
Day (assuming your investment check has cleared as described above), absent
extraordinary circumstances. Extraordinary circumstances could include those
described above as potentially delaying redemptions, and also could include
situations involving an unusually heavy volume of wire transfer orders on a
national or regional basis or communication or transmittal delays that could
cause a brief delay in the wiring or crediting of funds. A check for net
redemption proceeds of less than $5,000 is mailed to your address of record or,
at your election, credited to your Approved Bank Account.
During periods of drastic economic or market activity or changes, you may
experience problems implementing an expedited redemption by telephone. In the
event you are unable to reach the transfer agent by telephone, you should
consider using overnight mail to implement an expedited redemption. The Company
reserves the right to modify or terminate the expedited telephone redemption
privilege at any time.
SYSTEMATIC WITHDRAWAL PLAN
The Company's Systematic Withdrawal Plan provides you with a convenient way to
have Fund shares redeemed from your account and the net redemption proceeds
distributed to you on a monthly basis. You may participate in the Systematic
Withdrawal Plan only if you have a Fund account valued at $10,000 or more as of
the date of your election to participate, your dividends and capital gain
distributions are being
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reinvested automatically, and you are not participating in the AutoSaver Plan at
any time while participating in the Systematic Withdrawal Plan. You specify an
amount ($100 or more) to be distributed by check to your address of record or
deposited in your Approved Bank Account. The transfer agent redeems sufficient
shares and mails or deposits your net redemption proceeds as instructed on or
about the fifth Business Day prior to the end of each month. There are no
separate fees charged to you by the Company for participating in the Systematic
Withdrawal Plan. However, you should not participate in the Systematic
Withdrawal Plan if you also are purchasing shares of a Fund that is subject to a
front-end sales charge.
It may take up to ten (10) days after receipt of your request to establish
your participation in the Systematic Withdrawal Plan. You may change your
withdrawal amount, suspend withdrawals or terminate your election at any time by
notifying the transfer agent at least five (5) Business Days prior to any
scheduled transaction. Your participation in the Systematic Withdrawal Plan is
terminated automatically if your Fund account is closed, or, in some cases, if
your Approved Bank Account is closed.
REDEMPTIONS THROUGH SELLING AGENTS
If your redemption order is received by a Selling Agent before the close of
the NYSE and received by the Transfer agent before the close of business on the
same day, the order is executed at the NAV determined as of the close of the
NYSE on that day. If your redemption order is received by a Selling Agent after
the close of the NYSE, or is not received by the transfer agent prior to the
close of business, your order is executed at the NAV determined as of the close
of the NYSE on the next Business Day. The Selling Agent is responsible for the
prompt transmission of your redemption order to the Company.
Unless you have made other arrangements with a Selling Agent and the transfer
agent has been informed of such arrangements, net redemption proceeds of a
redemption order made by you through a Selling Agent are credited to your
Approved Bank Account. If no such account is designated, a check for the net
redemption proceeds is mailed to your address of record or, if such address is
no longer valid, the net redemption proceeds are credited to your account with
the Selling Agent. You may request a check from the Selling Agent or may elect
to retain the net redemption proceeds in such account. The Selling Agent may
charge you a service fee. In addition, it may benefit from the use of your
redemption proceeds until the check it issues to you has cleared or until such
proceeds have been disbursed or reinvested on your behalf.
REDEMPTIONS THROUGH SHAREHOLDER SERVICING AGENTS
You may request a redemption of Fund shares through your Shareholder Servicing
Agent. Any redemption request made by telephone through your Shareholder
Servicing Agent must redeem shares with a total value equal to $100 or more. If
your redemption
PROSPECTUS 40
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order is transmitted by the Shareholder Servicing Agent on your behalf to the
transfer agent before the close of the NYSE, the redemption order is executed at
the NAV determined as of the close of the NYSE on that day. If your Shareholder
Servicing Agent transmits your redemption order to the transfer agent after the
close of the NYSE, then your order is executed on the next Business Day after
the date your order is received. The Shareholder Servicing Agent is responsible
for the prompt transmission of your redemption order to the Company.
Unless you have made other arrangements with your Shareholder Servicing Agent,
and the transfer agent has been informed of such arrangements, net redemption
proceeds of a redemption order made by you through your Shareholder Servicing
Agent are credited to your Approved Bank Account. If no such account is
designated, a check for the net redemption proceeds is mailed to your address of
record or, if such address is no longer valid, the net redemption proceeds are
credited to your account with your Shareholder Servicing Agent or to another
account designated in your agreement with your Shareholder Servicing Agent. The
Shareholder Servicing Agent may charge you a service fee. In addition, it may
benefit from the use of your redemption proceeds until any check it issues for
you has cleared or until such proceeds have been disbursed or reinvested on your
behalf.
ADDITIONAL SHAREHOLDER SERVICES
The Company offers you a number of optional services. As noted above, you can
take advantage of the AutoSaver Plan, the Systematic Withdrawal Plan, and
Expedited Redemptions by Letter and Telephone. In addition, you have several
dividend and distribution payment options and an exchange privilege, which are
described below.
DIVIDEND AND DISTRIBUTION OPTIONS
When you fill out your Account Application, you can choose from the following
dividend and distribution options listed below. If you have questions about the
dividend and distribution options available to you, please call 1-800-222-8222.
A. The AUTOMATIC REINVESTMENT OPTION provides for the reinvestment of your
dividends and capital-gain distributions in additional shares of the same
class of the Fund that paid such dividends or capital-gain distributions.
Dividends and distributions declared in a month generally are reinvested in
additional shares at NAV on the last Business Day of such month. You are
assigned this option automatically if you make no choice on your Account
Application.
B. The FUND PURCHASE OPTION lets you use your dividends and/or capital-gain
distributions from the Funds to purchase, at NAV, shares of another fund in
the Stagecoach Family of Funds with which you have an established account
that has
41 PROSPECTUS
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met the applicable minimum initial investment requirement. Dividends and
distributions paid on Class A or Class B shares may be invested in Class A
or Class B shares, respectively, of another fund, in Retail shares of a
fund offered by another investment company in the Stagecoach Family of
Funds, in Class A shares of the Government Money Market Mutual, Money
Market Mutual, Prime Money Market Mutual or Treasury Money Market Mutual
Funds or in shares of the California Tax-Free Money Market Mutual or
National Tax-Free Money Market Mutual Funds (the California Tax-Free Money
Market Mutual, Government Money Market Mutual, Money Market Mutual,
National Tax-Free Money Market Mutual, Prime Money Market Mutual and
Treasury Money Market Mutual Funds are collectively, the "Money Market
Mutual Funds"). Dividends and distributions paid on Class A shares may also
be invested in shares of a non-money market fund with a single class of
shares (a "single class fund"). Dividends and distributions paid on Class B
shares may not be invested in shares of a single class fund.
C. The AUTOMATIC CLEARING HOUSE OPTION permits you to have dividends and
capital-gain distributions deposited in your Approved Bank Account. In the
event your Approved Bank Account is closed, and such distribution is
returned to the Funds' dividend disbursing agent, the distribution is
reinvested in your Fund account at the NAV next determined after the
distribution has been returned. In addition, your Automatic Clearing House
Option is then converted to the Automatic Reinvestment Option.
D. The CHECK PAYMENT OPTION lets you receive a check for all dividends and
capital-gain distributions, which generally is mailed either to your
designated address or your designated Approved Bank Account shortly
following declaration. If the U.S. Postal Service cannot deliver your
checks, or if your checks remain uncashed for six months, those checks are
reinvested in your Fund account at the NAV next determined after the
earlier of the date the checks have been returned to the dividend
disbursing agent or the date six months after the payment of such dividend
or distribution. In addition, your Check Payment Option is then converted
to the Automatic Reinvestment Option.
The Company forwards moneys to the dividend disbursing agent so that it may
issue you dividend checks under the Check Payment Option. The dividend
disbursing agent may benefit from the temporary use of such moneys until these
checks clear. The Company takes reasonable efforts to locate investors whose
checks are returned or uncashed after six months.
EXCHANGE PRIVILEGE
Wells Fargo Bank advises a variety of other funds, each with its own
investment objective and policies. The exchange privilege is a convenient way
for you to buy shares in other funds of the Stagecoach Family of Funds that are
registered in your state of
PROSPECTUS 42
<PAGE> 143
residence and allows you to respond to changes in your investment and savings
goals or in market conditions. Class A and Class B shares of each Fund may be
exchanged for Class A or Class B shares, respectively, of another fund, for
Class A shares of the Government Money Market Mutual, Money Market Mutual, Prime
Money Market Mutual or Treasury Money Market Mutual Funds or for shares of the
California Tax-Free Money Market Mutual or National Tax-Free Money Market Mutual
Funds. Class A shares may also be exchanged for shares of a single class fund or
for Retail Class shares of funds offered by another investment company in the
Stagecoach Family of Funds.
Before making an exchange from a Fund into another fund of the Stagecoach
Family of Funds, please observe the following:
- Obtain and carefully read the prospectus of the fund into which you want to
exchange.
- If you exchange into another fund with a front-end sales charge, you must
pay the difference between that fund's sales charge and any sales charge you
already have paid in connection with the shares you are exchanging.
- If you exchange Class B shares for Class B shares of another fund, Class A
shares of the Government Money Market Mutual, Money Market Mutual, Prime
Money Market Mutual or Treasury Money Market Mutual Funds or shares of the
California Tax-Free Money Market Mutual or National Tax-Free Money Market
Mutual Funds, a contingent-deferred sales charge is not imposed upon the
exchange.
- Each exchange, in effect, represents the redemption of shares of one fund
and the purchase of shares of another, which may produce a gain or loss for
federal income tax purposes. A confirmation of each exchange transaction is
sent to you.
- The dollar amount of shares you exchange generally must meet the minimum
initial and/or subsequent investment amounts of the fund from which you are
exchanging. If the value of your investment in the fund from which you are
exchanging has been reduced below the minimum initial investment amount by
changes in market conditions or sales charges (and not by redemption), you
may carry over the lesser amount into the Fund you are acquiring.
- The Company reserves the right to limit the number of times shares may be
exchanged between funds, to reject any telephone exchange order, or
otherwise to modify or discontinue exchange privileges at any time. Under
SEC rules, subject to limited exceptions, the Company ordinarily must notify
you 60 days before it modifies or discontinues the exchange privilege.
- If you exchange Class B shares for Class B shares of another fund, Class A
shares of the Government Money Market Mutual, Money Market Mutual, Prime
Money Market Mutual or Treasury Money Market Mutual Funds or shares of the
California Tax-Free Money Market Mutual or National Tax-Free Money Market
Mutual Funds, any
43 PROSPECTUS
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remaining period of time that the contingent-deferred sales charge
applicable to such shares is in effect is computed from the time of initial
purchase of the previously held shares. For example, if you exchange Class B
shares of the Oregon Tax-Free Fund for shares of the National Tax-Free Money
Market Mutual Fund and then redeem the shares of the National Tax-Free Money
Market Mutual Fund within four years of the initial purchase of the
exchanged Class B shares, you are required to pay a contingent-deferred
sales charge equal to the charge that would have been applicable if you were
redeeming the original Class B shares at that time.
- If you exchange Class B shares for shares of one of the Money Market Mutual
Funds as described above, you subsequently may re-exchange the acquired
shares only for Class B shares of one of the Company's funds or for shares
of another Money Market Mutual Fund.
The procedures applicable to redemptions generally apply to exchanges. In
particular, exchange orders received before 1:00 p.m. (Pacific time) on each
Business Day are processed at the offering price based on the NAV next
determined as of that Business Day's close of market (provided it is a Business
Day for each fund involved in the transaction). In addition, a signature
guarantee may be required for exchanges between shareholder accounts registered
in identical names if the amount being exchanged is more than $25,000. If you
have questions, please call 1-800-222-8222.
To exchange shares, write the transfer agent at the mailing address under
"Investing in the Funds -- Initial Purchases by Wire" or call the transfer agent
at the telephone number listed on your transaction confirmation, or contact your
Shareholder Servicing Agent or Selling Agent. The procedures applicable to
telephone redemptions, including the discussion regarding the responsibility for
the authenticity of telephone instructions, are also applicable to telephone
exchange requests. See "How to Redeem Shares -- Expedited Redemptions by Letter
and Telephone."
CONVERSION
Class B shares that have been outstanding for six years after the end of the
month in which the shares were initially purchased automatically convert to
Class A shares of the same Fund and, consequently, will no longer be subject to
the higher Rule 12b-1 fees applicable to Class B shares of such Fund. Such
conversion is effected on the basis of the relative NAV of the two classes,
without the imposition of any sales charge or other charge except that the lower
Rule 12b-1 fees applicable to Class A shares shall thereafter be applied to such
converted shares. Because the NAV of the Class A shares may be higher than that
of the Class B shares at the time of conversion, a shareholder may receive fewer
Class A shares than the number of Class B shares converted, although the dollar
value will be the same. A conversion should not result in a gain or loss for
federal income tax purposes. Reinvestments of dividends and distributions in
Class B shares are considered new purchases for purposes of the conversion
feature.
PROSPECTUS 44
<PAGE> 145
If a shareholder effects one or more exchanges among Class B shares of any
fund, Class A shares of the Government Money Market Mutual, Money Market Mutual,
or Treasury Money Market Mutual Funds or shares of the California Tax-Free Money
Market Mutual or National Tax-Free Money Market Mutual Funds during the six-year
period and exchanges back into Class B shares, the holding period for the shares
so exchanged is counted toward the six-year period, and any Class B shares held
at the end of six years are converted into Class A shares.
MANAGEMENT, DISTRIBUTION AND SERVICING FEES
INVESTMENT ADVISER
Subject to the overall supervision of the Company's Board of Directors, Wells
Fargo Bank, as the Funds' investment adviser, provides investment guidance and
policy direction in connection with the management of the Funds' assets. The
adviser also furnishes the Board of Directors with periodic reports on the
Funds' investment strategy and performance. For these services, the adviser is
entitled to a monthly investment advisory fee at the annual rate of 0.50% of the
average daily net assets of each Fund. From time to time, each Fund, consistent
with its investment objective, policies and restrictions, may invest in
securities of companies with which Wells Fargo Bank has a lending relationship.
For the fiscal period ended September 30, 1995, the previous investment adviser
to the Oregon Tax-Free Fund was paid advisory fees (after waivers) at the annual
rate of 0.24% of the average daily net assets of the Fund. For the same period,
the previous investment adviser waived all advisory fees payable on behalf of
the Arizona Tax-Free and National Tax-Free Funds. For the year ended December
31, 1995, the Company paid amounts equal to 0.50% and 0.43% of the average daily
net assets of the California Tax-Free Bond Fund and California Tax-Free Income
Fund to Wells Fargo Bank for its services as investment adviser
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
Wells Fargo Bank serves as the Funds' custodian and transfer and dividend
disbursing agent. Under the Custody Agreement, a Fund may, at times, borrow
money from Wells Fargo Bank as needed to satisfy temporary liquidity needs.
Wells Fargo Bank charges interest on such overdrafts at a rate determined
pursuant to the Custody Agreement. Wells Fargo Bank performs its custodial and
transfer and dividend disbursing agency services at 525 Market Street, San
Francisco, California 94105.
45 PROSPECTUS
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SHAREHOLDER SERVICING AGENT
The Funds have entered into shareholder servicing agreements with Wells Fargo
Bank, on behalf of each class of Fund shares, and may enter into similar
agreements with other entities. Under such agreements, Shareholder Servicing
Agents (including Wells Fargo Bank) agree, as agent for their customers, to
provide shareholder administrative services, with respect to Fund shares, which
include aggregating and transmitting shareholder orders for purchases, exchanges
and redemptions; maintaining shareholder accounts and records; and providing
such other related services as the Company or a shareholding may reasonably
request. For these services, a Shareholder Servicing Agent is entitled to
receive fees, at the annual rate of up to 0.30% of the average daily net assets
attributable to the Class A or Class B shares of the California Funds, as the
case may be, for which payment is being made, owned during the period by
investors with whom the Shareholder Servicing Agent maintains a servicing
relationship, or an amount which equals the maximum amount payable to the
Shareholder Servicing Agent under applicable laws, regulations or rules,
including the Rules of Fair Practice of the NASD ("NASD Rules"). A Shareholder
Servicing Agent is entitled to receive fees from the Arizona Tax-Free, National
Tax-Free and Oregon Tax-Free Funds at annual rate of up to 0.25% of the average
daily net assets attributable to the Class A or Class B shares of the other
Funds or an amount which equals the maximum amount payable to the Shareholder
Servicing Agent under applicable laws, regulations or rules, including the NASD
Rules.
In no event will the shareholder servicing fees for the California Tax-Free
Income Fund, as calculated on an annualized basis for the Fund's then current
fiscal year, exceed the lesser of (1) 0.30% of the average daily net assets of
the Fund represented by shares owned during the period for which payment is
being made by investors with whom the Shareholder Servicing Agent maintains a
servicing relationship, or (2) an amount which equals the maximum amount payable
to the Shareholder Servicing Agent under applicable laws, regulations or rules,
including the NASD Rules. In no event will the portion of such fees that
constitutes a "service fee," as that term is used by the NASD, exceed 0.25% of
each such Fund's average NAV.
Shareholder Servicing Agents also may impose certain conditions and/or fees on
its customers, subject to the terms of this Prospectus, in addition to or
different from those imposed by a Fund, such as requiring a higher minimum
initial investment or payment of a separate fee for additional services. Each
Shareholder Servicing Agent has agreed to disclose any fees it may directly
charge its customers who are shareholders of a Fund and to notify them in
writing at least 30 days before it imposes any transaction fees.
SPONSOR, ADMINISTRATOR AND DISTRIBUTOR
Subject to the overall supervision of the Company's Board of Directors,
Stephens provides the Funds with administrative services, including general
supervision of each
PROSPECTUS 46
<PAGE> 147
Fund's operation, coordination of other services provided to each Fund,
compilation of information for reports to the SEC and the state securities
commissions, preparation of proxy statements and shareholder reports, and
general supervision of data compilation in connection with preparing periodic
reports to the Company's Directors and officers. Stephens also furnishes office
space and certain facilities to conduct each Fund's business and compensates the
Company's Directors and officers who are affiliated with Stephens. For these
services, Stephens is entitled to a monthly fee at the annual rate of 0.03% of
the average daily net assets of the California Funds and 0.05% of the Arizona
Tax-Free, National Tax-Free and Oregon Tax-Free Funds average daily net assets.
Stephens, as the Funds' principal underwriter within the meaning of the 1940
Act, has entered into a Distribution Agreement with the Company pursuant to
which Stephens is responsible for distributing Fund shares. The Company also has
adopted a Distribution Plan on behalf of each Fund's Class A and B shares under
the SEC's Rule 12b-1 ("Plans"). Under the Class A Plan, a Fund may defray all or
part of the cost of preparing and printing prospectuses and other promotional
materials and of delivering prospectuses and those materials to prospective
shareholders and may pay compensation to the Distributor and Selling Agents for
sales support service. The Class A Plan provides for payments at an annual rate
of up to 0.05% of the average daily net assets attributable to the Class A
shares. The Class B Plan is similar but provides for payment, at an annual rate
of up to 0.70% of the average daily net assets attributable to the Class B
shares of the California Tax-Free Bond Fund and 0.75% of the average daily net
assets attributable to the Class B shares of the Arizona Tax-Free, National
Tax-Free and Oregon Tax-Free Funds. Other distribution-related services may
include, among other services, costs and expenses for advertisements, sales
literature, direct mail or any other form of advertising; expenses of sales
employees or agents of the Distributor, including salary, commissions, travel
and related expenses; payments to brokers/dealers and financial institutions for
services in connection with the distribution of shares, including promotional
incentives and fees calculated with reference to the average daily net asset
value of shares held by shareholders who have a brokerage or other service
relationship with the broker/dealer or other institution receiving such fees;
and other similar services as the Directors determine to be reasonably
calculated to result in the sale of a Fund's shares.
Under the Distribution Agreement, Stephens may enter into selling agreements
with Selling Agents that wish to make available Fund shares to their respective
customers. Each Fund may participate in joint distribution activities with any
of the other funds of the Company, in which event, expenses reimbursed out of
the assets of a Fund may be attributable, in part, to the distribution-related
activities of another fund of the Company. Generally, the expenses attributable
to joint distribution activities are allocated among each Fund and the other
funds of the Company in proportion to their relative net asset sizes, although
the Company's Board of Directors may allocate such expenses in any other manner
that it deems fair and equitable.
47 PROSPECTUS
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In addition, the Plans contemplate that, to the extent any fees payable
pursuant to a shareholder servicing agreement (discussed above) are deemed to be
for distribution-related services, such payments are approved and payable
pursuant to the Plans, subject to any limits under applicable law, regulations
or rules, including the NASD Rules. Financial institutions acting as Selling
Agents, Shareholder Servicing Agents, or in certain other capacities may be
required to register as dealers pursuant to applicable state securities laws
that may differ from federal law and any interpretations expressed herein.
Stephens has established a cash and non-cash compensation program, pursuant to
which broker/dealers or financial institutions that sell shares of the Company's
funds may earn additional compensation in the form of trips to sales seminars or
vacation destinations, tickets to sporting events, theater or other
entertainment, opportunities to participate in golf or other outings and gift
certificates for meals or merchandise, or the cash value of a non-cash
compensation item.
FUND EXPENSES
From time to time, Wells Fargo Bank and Stephens may waive their respective
fees in whole or in part and reimburse expenses payable to others. Any such
waivers or reimbursements will reduce a Fund's expenses and, accordingly, have a
favorable impact on the Fund's performance. Except for the expenses borne by
Wells Fargo Bank and Stephens, each Fund of the Company bears all costs of its
operations, including its pro rata portion of Company expenses such as fees and
expenses of its independent auditors and legal counsel, compensation of the
Company's directors who are not affiliated with the adviser, administrator or
any of their affiliates; advisory, transfer agency, custody and administration
fees, and any extraordinary expenses. Expenses attributable to each Fund or
class, are charged against the assets of the Fund or class. General expenses of
the Company are allocated among all of the funds of the Company, including the
Fund, in a manner proportionate to the net assets of each Fund, on a
transactional basis, or on such other basis as the Company's Board of Directors
deems equitable.
TAXES
The Company intends to qualify each Fund each year as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), as long as such qualification is in the best interest of each Fund's
shareholders. Each Fund will be treated as a separate entity for federal income
tax purposes and thus the provisions of the Code applicable to regulated
investment companies will be applied to each Fund separately, rather than to the
Company as a whole. In addition, net capital gains, net investment income, and
operating expenses will be determined separately for each Fund. By complying
with the applicable provisions of
PROSPECTUS 48
<PAGE> 149
the Code, each Fund will not be subject to federal income taxes with respect to
net investment income (including, interest on tax-exempt securities and, for
this purpose, the excess of net short-term capital gains over net long-term
capital gains) and any net realized capital gains (that is, the excess of net
long-term capital gains over net short-term capital gains) distributed to its
shareholders. Each Fund intends to annually distribute substantially all of its
net investment income and any net realized capital gains each year.
In general, each Fund's shareholders will not be subject to federal income
taxes on any Fund dividends attributable to interest from tax-exempt securities.
However, dividends attributable to a Fund's other net investment income will be
taxable to shareholders as ordinary income, and capital gain distributions
attributable to a Fund's net realized capital gains will generally be taxable to
shareholders as long-term capital gain, regardless of the length of time that
the Fund's shares have been held. Such dividends and distributions will be
taxable to a shareholder irrespective of whether the shareholder takes them in
cash or has them automatically reinvested in additional Fund shares. None of the
Funds' dividends will qualify for the dividends-received deduction allowed to
corporate shareholders.
Interest on indebtedness incurred or continued to purchase or carry Fund
shares will not be deductible to the extent that Fund dividends are exempt from
federal income tax. In addition, federal alternative minimum tax ("AMT") rules
ensure that at least a minimum amount of tax is paid by taxpayers who obtain
significant benefit from certain tax deductions and exemptions. Some of these
deductions and exemptions have been designated "tax preference items" which must
be added back to taxable income for purposes of calculating AMT. Among the "tax
preference items" is tax-exempt interest from "private activity bonds" issued
after August 7, 1986. To the extent that a Fund invests in private activity
bonds, shareholders who pay AMT will be required to report that portion of Fund
dividends attributable to income from the bonds as a tax preference item in
determining their AMT. Shareholders will be notified of the tax status of
distributions made by the Funds. Persons who may be "substantial users" (or
"related persons" of substantial users) of facilities financed by private
activity bonds should consult their tax advisors before purchasing shares in the
Funds. With respect to corporate shareholders of such Funds, exempt-interest
dividends paid by a Fund are included in the corporate shareholder's "adjusted
current earnings" as part of its AMT calculation, and may also affect its
federal "environmental tax" liability. As of the printing of this Prospectus,
individuals are subject to an AMT at a maximum rate of 28% and corporations at a
maximum rate of 20%. Shareholders with questions or concerns about AMT should
also consult their tax advisors.
The Company or your Shareholder Servicing Agent on its behalf will regularly
inform shareholders of the amount and nature of each Fund's dividends and
capital gain distributions. You should keep all statements you receive to assist
in your personal
49 PROSPECTUS
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record keeping. In addition, a shareholder must provide a valid taxpayer
identification number, generally a social security or employer identification
number ("TIN") upon opening or reopening an account. Failure to furnish a valid
TIN to the Company could subject the shareholder to penalties imposed by the
IRS. In addition, the Company may be required to withhold, subject to certain
exemptions, at a rate of 31% ("backup withholding") on certain dividends,
capital gain distributions, and redemption proceeds (including proceeds from
exchanges) paid or credited to an individual Fund shareholder, unless the
shareholder certifies that the TIN provided is correct and that he or she is not
subject to backup withholding, or the IRS notifies the Company that the
shareholder's TIN is incorrect or that he or she is subject to backup
withholding. Such withholding does not constitute any additional tax imposed on
the shareholder, and may be claimed as a tax payment on his or her federal
income tax return.
Foreign shareholders may be subject to different tax treatment, including a
withholding tax. See "Federal Income Taxes -- Foreign Shareholders" in the
Fund's SAI.
STATE TAXES
ARIZONA STATE INCOME TAXES
Individuals, trusts and estates who are subject to Arizona income tax will not
be subject to such tax on dividends paid by the Arizona Tax-Free Fund, to the
extent that such dividends qualify as exempt-interest dividends of a regulated
investment company under Section 852(b)(5) of the Code and are attributable to
either (i) obligations of the State of Arizona or its political subdivisions
thereof or (ii) obligations issued by the governments of Guam, Puerto Rico, or
the Virgin Islands. In addition, dividends paid by the Arizona Tax-Free Fund
that are attributable to interest payments on direct obligations of the U.S.
government will not be subject to Arizona income tax to the extent the Arizona
Tax-Free Fund qualifies as a regulated investment company under Subchapter M of
the Code. Other distributions from the Arizona Tax-Free Fund, however, such as
distributions of short-term or long-term capital gains, will generally not be
exempt from Arizona income tax.
There are no municipal income taxes in Arizona. Moreover, because shares of
the Arizona Tax-Free Fund are intangibles, they are not subject to Arizona
property tax. Shareholders of the Arizona Tax-Free Fund should consult their tax
advisors about other state and local tax consequences of their investment in the
Arizona Tax-Free Fund.
CALIFORNIA STATE INCOME TAXES
Individuals, trusts and estates resident in California will not be subject to
California personal income tax on dividends from the California Tax-Free Bond
Fund and California Tax-Free Income Fund that represent tax-exempt interest paid
on municipal obligations of the State of California, its political subdivisions,
direct obligations of the
PROSPECTUS 50
<PAGE> 151
U.S. government and certain other issuers, including Puerto Rico, Guam, and the
U.S. Virgin Islands. Such individuals, trusts and estates will be subject to
California personal income tax on other distributions received from the
California Tax-Free Bond Fund and California Tax-Free Income Fund, including
distributions of interest on municipal obligations issued by other issuers and
all long-term and short-term capital gains.
Except as noted above with respect to California personal income taxation of
individuals, trusts and estates resident in California, dividends and
distributions from the California Tax-Free Bond Fund and California Tax-Free
Income Fund may be taxable to investors under state or local law as dividend
income even though all or a portion of such distributions may be derived from
interest on tax-exempt obligations which, if realized directly, would be exempt
from such income taxes.
Shareholders of the California Tax-Free Bond Fund and California Tax-Free
Income Fund, including part-year residents of California, should consult their
tax advisors about other state and local tax consequences of their investments
in the California Tax-Free Bond Fund and California Tax-Free Income Fund, which
may have different consequences from those under federal income tax law. The
Company makes no representations as to California state and local taxes that may
be imposed on a corporate investor in the California Tax-Free Bond Fund,
California Tax-Free Income, or other Funds, and such investors should consult
with their tax advisors.
OREGON STATE INCOME TAXES
Individuals, trusts and estates resident in Oregon will not be subject to
Oregon personal income tax on distributions from the Oregon Tax-Free Fund that
represent tax-exempt interest paid on municipal obligations of the State of
Oregon and its political subdivisions and certain other issuers, including
Puerto Rico and Guam. Such individuals, trusts and estates will be subject to
Oregon personal income tax on other types of distributions received from the
Oregon Tax-Free Fund, including distributions of interest on municipal
obligations issued by other issuers and all long-term and short-term capital
gains. Except as noted above with respect to Oregon personal income taxation of
individuals, trusts and estates resident in Oregon, distributions from the
Oregon Tax-Free Fund may be taxable to investors under state or local law as
dividend income even though all or a portion of such distributions may be
derived from interest on tax-exempt obligations which, if realized directly,
would be exempt from such income taxes.
Corporations subject to the Oregon corporate excise tax will generally be
subject to tax on all distributions from the Oregon Tax-Free Fund, including
distributions of income that is exempt for federal tax purposes. Shares of the
Oregon Tax-Free Fund will not be subject to the Oregon property tax.
51 PROSPECTUS
<PAGE> 152
Shareholders of the Oregon Tax-Free Fund, including part-year residents of
Oregon, should consult their tax advisors about other state and local tax
consequences of their investments in the Oregon Tax-Free Fund, which may have
different consequences from those under federal income tax law.
NATIONAL TAX-EXEMPT FUND -- STATE AND LOCAL TAXES
Investors are advised to consult their tax advisors concerning the application
of state and local taxes, which may have different consequences from those under
federal income tax law.
The foregoing discussion is based on tax laws in effect as of the date of this
Prospectus and summarizes only some of the important federal income tax and
certain state income tax considerations generally affecting the Funds and their
shareholders. It is not intended as a substitute for careful tax planning; you
should consult your tax advisor with respect to your specific tax situation
particularly with respect to state and local taxes. Further tax considerations
are discussed in the SAI.
PROSPECTUS 52
<PAGE> 153
PROSPECTUS APPENDIX --
ADDITIONAL INVESTMENT POLICIES
FUND INVESTMENTS
Municipal Securities
The Funds may invest in municipal bonds rated at the date of purchase "Baa" or
better by Moody's or "BBB" or better by S&P, or unrated bonds that are
considered by the investment adviser to be of comparable quality. Bonds rated
"Baa" and "BBB" have speculative characteristics and are more likely than
higher-rated bonds to have a weakened capacity to pay principal and interest in
times of adverse economic conditions; all are considered investment grade.
Municipal bonds generally have a maturity at the time of issuance of up to 40
years.
The Funds may invest in municipal notes rated at the date of purchase "MIG 2"
(or "VMIG 2" in the case of an issue having a variable rate with a demand
feature) or better by Moody's or "SP-2" or better by S&P, or unrated notes that
are considered by the investment adviser to be of comparable quality. Municipal
notes generally have maturities at the time of issuance of three years or less.
Municipal notes are generally issued in anticipation of the receipt of tax
funds, of the proceeds of bond placements, or of other revenues. The ability of
an issuer to make payments on notes is therefore especially dependent on such
tax receipts, proceeds from bond sales or other revenues, as the case may be.
The Funds may invest in municipal commercial paper rated at the date of
purchase "Prime-1" or "Prime-2" by Moody's or "A-1+," "A-1" or "A-2" by S&P, or
unrated commercial paper that is considered by the investment adviser to be of
comparable quality. Municipal commercial paper is a debt obligation with a
stated maturity of 270 days or less that is issued to finance seasonal working
capital needs or as short-term financing in anticipation of longer-term debt.
In the event a security purchased by a California Fund is downgraded below
investment grade, the Fund may retain such security, although the Fund may not
have more than 5% of its assets invested in securities rated below investment
grade at any time. A description of the ratings is contained in the Appendix to
the Funds SAI.
Municipal obligations also may include "moral obligation" securities, which
are normally issued by special purpose public authorities. If the issuer of
moral obligation securities is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a
moral commitment but not a legal obligation of the state or municipality which
created the issuer.
A-1 PROSPECTUS
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Certain of the municipal obligations held by the Funds may be insured as to
the timely payment of principal and interest. The insurance policies will
usually be obtained by the issuer of the municipal obligation at the time of its
original issuance. In the event that the issuer defaults on an interest or
principal payment, the insurer will be notified and will be required to make
payment to the bondholders. There is, however, no guarantee that the insurer
will meet its obligations. In addition, such insurance will not protect against
market fluctuations caused by changes in interest rates and other factors.
The Arizona Tax-Free, National Tax-Free and Oregon Tax-Free Funds may purchase
municipal obligations known as "certificates of participation" which represent
undivided proportional interests in lease payments by a governmental or
nonprofit entity. The lease payments and other rights under the lease provide
for and secure the payments on the certificates. Lease obligations may be
limited by applicable municipal charter provisions or the nature of the
appropriation for the lease. In particular, lease obligations may be subject to
periodic appropriation. Lease obligations also may be abated if the leased
property is damaged or becomes unsuitable for the lessee's purpose. If the
entity does not appropriate funds for future lease payments, the entity cannot
be compelled to make such payments. Furthermore, a lease may or may not provide
that the certificate trustee can accelerate lease obligations upon default. If
the trustee could not accelerate lease obligations upon default, the trustee
would only be able to enforce lease payments as they became due. In the event of
a default or failure of appropriation, it is unlikely that the trustee would be
able to obtain an acceptable substitute source of payment. Certificates of
participation are generally subject to redemption by the issuing municipal
entity under specified circumstances. If a specified event occurs, a certificate
is callable at par either at any interest payment date or, in some cases, at any
time. As a result, certificates of participation are not as liquid or marketable
as other types of municipal obligations and are generally valued at par or less
than par in the open market.
The Funds' investment adviser, under the supervision of the Board of
Directors, makes determinations concerning the liquidity of a municipal lease
obligation based on all relevant factors. The Arizona Tax-Free, National
Tax-Free and Oregon Tax-Free Funds also may purchase unrated municipal lease
obligations. The Funds' investment adviser, under the supervision of the Board
of Directors, determines the credit quality of such leases on an ongoing basis,
including an assessment of the likelihood that the underlying lease will not be
canceled.
Opinions relating to the validity of municipal obligations and to the
exemption of interest thereon from regular federal income tax (and to the
exemption of interest from state personal income tax) are rendered by bond
counsel to the respective issuers at the time of issuance. Neither the Funds,
the Funds' investment adviser nor their counsel will review the proceedings
relating to the issuance of municipal obligations or the bases for such
opinions.
PROSPECTUS A-2
<PAGE> 155
For a further discussion of factors affecting purchases of municipal
obligations by the State Tax-Free Funds, see "Special Considerations Affecting
Arizona Municipal Securities," "Special Considerations Affecting California
Municipal Securities" and "Special Considerations Affecting Oregon Municipal
Securities" in the SAI.
Taxable Investments
Pending the investment of proceeds from the sale of shares of the Funds or
proceeds from sales of portfolio securities or in anticipation of redemptions or
to maintain a "defensive" posture when, in the opinion of Wells Fargo Bank, as
investment adviser, it is advisable to do so because of market conditions, each
Fund may elect to invest temporarily up to 20% of the current value of its net
assets in cash reserves, in instruments that pay interest which is exempt from
federal income taxes, but not, for the State Tax-Free Funds, from a respective
state's personal income tax, or the following taxable high-quality money market
instruments: (i) U.S. Government obligations; (ii) negotiable certificates of
deposit, bankers' acceptance and fixed time deposits and other obligations of
domestic banks (including foreign branches) that have more than $1 billion in
total assets at the time of investment and are members of the Federal Reserve
System or are examined by the Comptroller of the Currency or whose deposits are
insured by the FDIC; (iii) commercial paper rated at the date of purchase
"Prime-1" by Moody's or "A-1+" or "A-1" by S&P; (iv) certain repurchase
agreements; and (v) high-quality municipal obligations, the income from which
may or may not be exempt from federal income taxes.
U.S. Government Obligations
U.S. Government obligations include securities issued or guaranteed as to
principal and interest by the U.S. Government and supported by the full faith
and credit of the U.S. Treasury. U.S. Treasury obligations differ mainly in the
length of their maturity. Treasury bills, the most frequently issued marketable
government securities, have a maturity of up to one year and are issued on a
discount basis. U.S. Government obligations also include securities issued or
guaranteed by federal agencies or instrumentalities, including
government-sponsored enterprises. Some obligations of agencies or
instrumentalities of the U.S. Government are supported by the full faith and
credit of the United States or U.S. Treasury guarantees; others, by the right of
the issuer or guarantor to borrow from the U.S. Treasury; still others, by the
discretionary authority of the U.S. Government to purchase certain obligations
of the agency or instrumentality; and others, only by the credit of the agency
or instrumentality issuing the obligation. In the case of obligations not backed
by the full faith and credit of the United States, the investor must look
principally to the agency or instrumentality issuing or guaranteeing the
obligation for ultimate repayment, which agency or instrumentality may be
privately owned. There can be no assurance that the U.S. Government will provide
financial support to its agencies or instrumentalities where it is not obligated
to do so. In
A-3 PROSPECTUS
<PAGE> 156
addition, U.S. Government obligations are subject to fluctuations in market
value due to fluctuations in market interest rates. As a general matter, the
value of debt instruments, including U.S. Government obligations, declines when
market rates increase and rises when market interest rates decrease. Certain
types of U.S. Government obligations are subject to fluctuations in yield or
value due to their structure or contract terms.
Forward Commitments, When-Issued Purchases, Stand-by Commitments and Delayed-
Delivery Transactions
The Funds may purchase or sell securities on a when-issued or delayed-delivery
basis and make contracts to purchase or sell securities for a fixed price at a
future date beyond customary settlement time. Securities purchased or sold on a
when-issued, delayed-delivery or forward-commitment basis involve a risk of loss
if the value of the security to be purchased declines, or the value of the
security to be sold increases, before the settlement date. Although a Fund will
generally purchase securities with the intention of acquiring them, a Fund may
dispose of securities purchased on a when-issued, delayed-delivery or a
forward-commitment basis before settlement when deemed appropriate by the
adviser. When issued securities are subject to market fluctuation, and no income
accrues to the purchaser during the period prior to issuance. The purchase price
and the interest rate received on debt securities are fixed at the time the
purchaser enters into the commitment. Purchasing a security on a when-issued
basis can involve a risk that the market price at the time of delivery may be
lower than the agreed-upon purchase price, in which case there could be an
unrealized loss at the time of delivery.
The Arizona Tax-Free, Oregon Tax-Free and National Tax-Free Funds also may
acquire "stand-by commitments" with respect to municipal obligations held in
their respective portfolios. Under a stand-by commitment, a dealer agrees to
purchase at a Fund's option specified municipal obligations at a price equal to
their amortized cost value plus accrued interest. The Funds will acquire
stand-by commitments solely to facilitate portfolio liquidity and do not intend
to exercise their respective rights thereunder for trading purposes.
Each Fund establishes a segregated account in which it maintains cash, U.S.
Government obligations or other high-quality debt instruments in an amount at
least equal in value to its respective commitments to engage in when-issued
purchases and delayed delivery transactions. If the value of these assets
declines, the Fund places additional liquid assets in the account on a daily
basis so that the value of the assets in the account is equal to the amount of
such commitments.
Other Mutual Funds
Subject to the limitations of the 1940 Act, the Funds may invest in shares of
other unaffiliated open-end investment companies that have a fundamental policy
of investing,
PROSPECTUS A-4
<PAGE> 157
under normal circumstances, at least 80% of their net assets in obligations that
are exempt from federal income taxes and are not subject to the federal
alternative minimum tax. Such investment companies can be expected to charge
management fees and other operating expenses that would be in addition to those
charged to the Funds. However, the Funds' investment adviser has undertaken to
waive its advisory fees with respect to assets so invested.
In no event may any Fund, together with any company or companies controlled by
it, own more than 3% of the total outstanding voting stock of any such company,
nor may any Fund, together with any such company or companies, invest more than
5% of its assets in any one such company or invest more than 10% of its assets
in securities of all such companies combined.
Notwithstanding any other investment policy or limitation (whether or not
fundamental), as a matter of fundamental policy, each Fund (except the
California Tax-Free Bond Fund) may invest all of its assets in the securities of
a single open-end, management investment company with substantially the same
fundamental investment objective, policies and limitations as the Fund.
Floating- and Variable-Rate Instruments
Certain of the debt instruments that the Funds may purchase bear interest at
rates that are not fixed, but vary, for example, with changes in specified
market rates or indices or at specified intervals. Certain of these instruments
may carry a demand feature that would permit the holder to tender them back to
the issuer at par value prior to maturity. The Funds may, in accordance with SEC
rules, account for these instruments as maturing at the next interest rate
readjustment date or the date at which the Funds may tender the instrument back
to the issuer, whichever is later. The floating- and variable-rate instruments
that the Funds may purchase include certificates of participation in such
obligations.
Wells Fargo Bank, as investment adviser to the Funds, will monitor on an
ongoing basis the ability of an issuer of a demand instrument to pay principal
and interest on demand. Events affecting the ability of the issuer of a demand
instrument to make payment when due may occur between the time a Fund elects to
demand payment and the time payment is due, thereby affecting such Fund's
ability to obtain payment at par. Demand instruments whose demand feature is not
exercisable within seven days, may be treated as liquid provided that an active
secondary market exists.
Illiquid Securities
The Arizona Tax-Free, California Tax-Free Income Fund, National Tax-Free and
Oregon Tax-Free Funds will not knowingly invest more than 15% (10% for the
California Tax-Free Bond Fund) of the value of its net assets is securities that
are illiquid because
A-5 PROSPECTUS
<PAGE> 158
of restrictions on transferability or other reasons. Illiquid securities shall
not include securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933 (the "1933 Act") that have been determined to be liquid
by the adviser, pursuant to guidelines established by the Company's Board of
Directors, and commercial paper that is sold under Section 4(2) of the 1933 Act
(I) is not traded flat or in default as to interest or principal and (ii) is
rated in one of the two highest categories by at least two nationally recognized
statistical rating organizations and the adviser, pursuant to guidelines
established by the Company's Board of Directors, has determined the commercial
paper to be liquid; or (iii) is rated in one of the two highest categories by
one nationally recognized statistical rating agency and the adviser, pursuant to
guidelines established by the Company's Board of Directors, has determined that
the commercial paper is of equivalent quality and is liquid), if by any reason
thereof the value of its aggregate investment in such classes of securities will
exceed the applicable limitation described above with respect to its total
assets.
Repurchase Agreements
The California Funds may enter into repurchase agreements wherein the seller
of a security to a Fund agrees to repurchase that security from the Funds at a
mutually agreed-upon time and price. The period of maturity is usually quite
short, often overnight or a few days, although it may extend over a number of
months. The Funds may enter into repurchase agreements only with respect to U.S.
Government obligations and other obligations that could otherwise be purchased
by the participating Fund. All repurchase agreements will be fully
collateralized based on values that are marked to market daily. The maturities
of the underlying securities in a repurchase agreement transaction entered into
by a Fund may be greater than one year, however, the term of the agreement will
always be less than one year. If the seller defaults and the value of the
underlying securities has declined, the participating Fund may incur a loss. In
addition, if bankruptcy proceedings are commenced with respect to the seller of
the security, the participating Fund's disposition of the security may be
delayed or limited. The Funds will enter into repurchase agreements only with
registered broker/dealers and commercial banks that meet guidelines established
by the Company's Board of Directors and that are not affiliated with Wells Fargo
Bank. The Funds may participate in pooled repurchase agreement transactions with
other funds advised by Wells Fargo Bank.
Loans of Portfolio Securities
Each California Fund may lend securities from its portfolios to brokers,
dealers and financial institutions (but not individuals) if cash, U.S.
Government obligations or other high-quality debt instruments equal to at least
100% of the current market value of the securities loan (including accrued
interest thereon) plus the interest payable to a Fund with respect to the loan
is maintained with such Fund. In determining whether to lend a security to a
particular broker, dealer or financial institution, the Funds' investment
PROSPECTUS A-6
<PAGE> 159
adviser will consider all relevant facts and circumstances, including the
creditworthiness of the broker, dealer or financial institution. Any loans of
portfolio securities must be fully collateralized based on values that are
marked-to-market daily. Any securities that a Fund may receive as collateral
will not become part of such Fund's portfolio at the time of the loan and, in
the event of a default by the borrower, such Fund, if permitted by law, will
dispose of such collateral except for such part thereof that is a security in
which such Fund is permitted to invest. During the time securities are on loan,
the borrower will pay such Fund any accrued income on those securities, and such
Fund may invest the cash collateral and earn additional income or receive an
agreed-upon fee from a borrower that has delivered cash-equivalent collateral.
The Funds will not lend securities having a value that exceeds one-third of the
current value of each of their total assets. Loans of securities by a Fund will
be subject to termination at the Fund's or the borrower's option. Each Fund may
pay reasonable administrative and custodial fees in connection with a securities
loan and may pay a negotiated portion of the interest or fee earned with respect
to the collateral to the borrower or the placing broker. Borrowers and placing
brokers may not be affiliated, directly or indirectly, with the Company, the
investment adviser, or the Distributor.
Derivative Securities
The Funds may invest in structured notes, bonds or other instruments with
interest rates that are determined by reference to changes in the value of other
interest rates, indices or financial indicators ("References") or the relative
in two or more References. The Funds may also hold derivative instruments that
have interest rates that re-set inversely to changing current market rates
and/or have embedded interest rate floors and caps that require the issuers to
pay an adjusted interest rate if market rates fall below or rise above a
specified rate. These instruments represent relatively recent innovations in the
bond markets, and the trading market for these instruments is less developed
than the markets for traditional types of debt instruments. It is uncertain how
these instruments will perform under different economic and interest-rate
scenarios. Because certain of these instruments are leveraged, their market
values may be more volatile than other types of bonds and may present greater
potential for capital gain or loss. On the other hand, the imbedded option
features of other derivative instruments could limit the amount of appreciation
a Fund can realize on its investment, could cause a Fund to hold a security it
might otherwise sell or could force the sale of a security at inopportune times
or for prices that do not reflect current market value. The possibility of
default by the issuer or the issuer's credit provider may be greater for these
structured and derivative instruments than for other types of instruments. In
some cases it may be difficult to determine the fair value of a structured or
derivative instrument because of a lack of reliable objective information and an
established secondary market for some instruments may not exist.
A-7 PROSPECTUS
<PAGE> 160
INVESTMENT POLICIES AND RESTRICTIONS
Any fundamental investment policy may not be changed without approval by the
vote of the holders of a majority of such Fund's outstanding voting securities,
as described under "Capital Stock" in the Funds' SAI. If the Company's Board of
Directors determines, however, that a Fund's investment objective can best be
achieved by a substantive change in a nonfundamental investment policy or
strategy, the Company's Board may make such change without shareholder approval
and will disclose any such material changes in the then-current prospectus. The
following description summarizes several of the Funds fundamental restrictions,
which are set forth in full in the SAI.
As matters of fundamental policy:
1. The Arizona Tax-Free, National Tax-Free or Oregon Tax-Free Funds may not
purchase securities (except U.S. Government securities and repurchase agreements
collateralized by such securities) if more than 5% of its total assets at the
time of purchase will be invested in securities of any one issuer, except that
up to 50% of a Fund's total assets may be invested without regard to this 5%
limitation.
2. The Arizona Tax-Free, National Tax-Free and Oregon Tax-Free Funds may not
invest 25% or more of its total assets at the time of purchase in securities of
issuers whose principal business activities are in the same industry and the
California Funds may not purchase the securities of issuers conducting their
principal business activity in the same industry, if immediately after the
purchase and as a result thereof, the value of a Fund's investments in that
industry would be 25% or more of the current value of the Fund's total assets,
provided that there is no limitation with respect to investments in (a)
municipal securities (for the purpose of this restriction, private activity
bonds shall not be deemed municipal securities if the payment of principal and
interest on such bonds is the ultimate responsibility of nongovernmental users)
and (b) U.S. Government obligations.
3. No Fund may borrow money except in amounts up to 10% of the value of its
total assets at the time of borrowing (for the California Funds, only from banks
for temporary purposes in order to meet redemptions, and these borrowings may be
secured by the pledge of up to 10% of the current value of each of their net
assets (but investments may not be purchased by a Fund while any such
outstanding borrowings exceed 5% of its net assets)).
4. The Arizona Tax-Free, National Tax-Free and Oregon Tax-Free Funds will not
at any time knowingly have more than 15% of their respective net assets in
illiquid securities. However, if a percentage restriction on the investment or
use of assets set forth in this Prospectus is adhered to at the time a
transaction is effected, later changes in percentage resulting from changing
values will not be considered a violation.
PROSPECTUS A-8
<PAGE> 161
5. The California Tax-Free Bond Fund may make loans of portfolio securities in
accordance with its investment policies.
As matters of nonfundamental policy:
1. Neither the California Tax-Free Bond Fund nor the California Tax-Free
Income Fund may invest more than 10% or 15%, respectively, of the current value
of the Fund's net assets in securities that are illiquid by virtue of the
absence of a readily available market or because of legal or contractual
restrictions on resale or maturities of more than seven days, unless the Board
or investment adviser, pursuant to guidelines adopted by the Board, determines
that a liquid trading market exists. For a discussion of whether a certain
security is excluded from a Fund's limitation see "Illiquid Securities" in this
Appendix.
2. The Arizona Tax-Free, National Tax-Free and Oregon Tax-Free Funds may
invest up to 15% of the current value of each Fund's net assets in illiquid
securities.
For purposes of complying with the Code, each California Fund will diversify
its holdings so that, at the end of each quarter of the taxable year: (i) at
least 50% of the market value of each Fund's assets is represented by cash, U.S.
Government obligations and other securities limited in respect of any one issuer
to an amount not greater than 5% of the Fund's assets and 10% of the outstanding
voting securities of such issuer; and (ii) not more than 25% of the value of its
assets is invested in the securities of any one issuer (other than U.S.
Government obligations and the securities of other regulated investment
companies), or of two or more issuers which the taxpayer controls and which are
determined to be engaged in the same or similar trades or businesses or related
trades or businesses. With respect to paragraph (i), it may be possible that the
Company would own more than 10% of the outstanding voting securities of an
issuer.
A-9 PROSPECTUS
<PAGE> 162
Advised by WELLS FARGO BANK, N.A., INC.
Sponsored/Distributed by
Stephens Inc., Member NYSE/SIPC
[LOGO]
NOT FDIC INSURED
<PAGE> 163
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE> 164
SPONSOR, DISTRIBUTOR AND ADMINISTRATOR
Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
INVESTMENT ADVISOR, TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
LEGAL COUNSEL
Morrison & Foerster LLP
2000 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
FOR MORE INFORMATION ABOUT THE FUNDS, SIMPLY CALL 1-800-222-8222, OR WRITE:
Stagecoach Funds, Inc.
c/o Stagecoach Shareholder Services
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
STAGECOACH FUNDS:
- --------------------------------------------------------------------------------
- are NOT FDIC insured
- are NOT guaranteed by Wells Fargo Bank
- are NOT deposits or obligations of the Bank [LOGO]
- involve investment risk, including possible loss of
principal
[LOGO]
Printed on Recycled Paper SC0222 (9/96)
<PAGE> 165
[LOGO]
P.O. Box 7066
San Francisco, CA 94120-7066
STAGECOACH FUNDS:
- --------------------------------------------------------------------------------
- are NOT FDIC insured
- are NOT guaranteed by Wells Fargo Bank
- are NOT deposits or obligations of the Bank [LOGO]
- involve investment risk, including possible loss of
principal
[LOGO]
Printed on Recycled Paper SC0222 (9/96)
<PAGE> 166
LOGO
------------------------------
PROSPECTUS
------------------------------
GINNIE MAE FUND
INTERMEDIATE BOND FUND
SHORT-INTERMEDIATE U.S. GOVERNMENT
INCOME FUND
CLASS A AND CLASS B
SEPTEMBER 6, 1996
<PAGE> 167
STAGECOACH FUNDS(R)
GINNIE MAE, INTERMEDIATE BOND, AND SHORT-INTERMEDIATE
U.S. GOVERNMENT INCOME FUNDS
CLASS A AND CLASS B
Stagecoach Funds, Inc. (the "Company") is an open-end management investment
company. This Prospectus contains information about Class A and Class B shares
of the GINNIE MAE and INTERMEDIATE BOND FUNDS and the Class A shares of the
SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND -- (each, a "Fund" and,
collectively, the "Funds").
The GINNIE MAE FUND seeks to provide investors with a long-term total rate of
return through preserving capital and earning high interest income by investing
principally in a portfolio of U.S. Government mortgage pass-through securities,
consisting primarily of securities issued by the Government National Mortgage
Association (popularly called "Ginnie Maes"), Federal National Mortgage
Association and Federal Home Loan Mortgage Corporation. The INTERMEDIATE BOND
FUND seeks to provide investors with a high level of current income consistent
with the preservation of capital and maintenance of liquidity. The
SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND seeks to provide investors with
current income, while preserving capital, by investing primarily in a portfolio
consisting of short- to intermediate-term securities issued or guaranteed by the
U.S. Government, its agencies and instrumentalities.
Please read this Prospectus before investing and retain it for future
reference. It is designed to provide you with important information and to help
you decide if a Fund s goals match your own. A Statement of Additional
Information ("SAI"), dated September 6, 1996, containing additional information
about each Fund, has been filed with the Securities and Exchange Commission
("SEC") and is incorporated by reference into this Prospectus. The SAI is
available without charge by writing to Stagecoach Funds, Inc., c/o Stagecoach
Shareholder Services, Wells Fargo Bank, N.A., P.O. Box 7066, San Francisco, CA
94120-7066 or by calling 1-800-222-8222. If you hold shares in an IRA, please
call 1-800-BEST-IRA for information or assistance.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THESE AUTHORITIES PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
FUND SHARES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR ISSUED, ENDORSED OR
GUARANTEED BY, WELLS FARGO BANK, N.A. ("WELLS FARGO BANK") OR ANY OF ITS
AFFILIATES. SUCH SHARES ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT,
THE FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"), THE FEDERAL RESERVE BOARD OR
ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN A FUND INVOLVES CERTAIN RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
PROSPECTUS DATED SEPTEMBER 6, 1996
PROSPECTUS
<PAGE> 168
ALTHOUGH CERTAIN PORTFOLIO INSTRUMENTS HELD BY THE GINNIE MAE AND SHORT-
INTERMEDIATE U.S. GOVERNMENT INCOME FUNDS MAY BE INSURED OR GUARANTEED BY THE
UNITED STATES OR ANY FEDERAL AGENCY OR INSTRUMENTALITY, SHARES OF THE FUNDS ARE
NOT.
WELLS FARGO BANK IS THE INVESTMENT ADVISER AND IS COMPENSATED FOR PROVIDING
THE FUNDS WITH CERTAIN OTHER SERVICES. STEPHENS, INC. ("STEPHENS") WHICH
IS NOT AFFILIATED WITH WELLS FARGO BANK, IS THE FUNDS SPONSOR,
ADMINISTRATOR AND DISTRIBUTOR.
PROSPECTUS
<PAGE> 169
TABLE OF CONTENTS
-------
PROSPECTUS SUMMARY 1
SUMMARY OF FUND EXPENSES 6
FINANCIAL HIGHLIGHTS 11
HOW THE FUNDS WORK 16
THE FUNDS AND MANAGEMENT 24
INVESTING IN THE FUNDS 27
DIVIDENDS 40
HOW TO REDEEM SHARES 40
ADDITIONAL SHAREHOLDER SERVICES 45
MANAGEMENT, DISTRIBUTION AND SERVICING FEES 49
TAXES 53
PROSPECTUS APPENDIX - ADDITIONAL INVESTMENT POLICIES A-1
PROSPECTUS
<PAGE> 170
PROSPECTUS SUMMARY
The Funds provide you with a convenient way to invest in various portfolios of
securities selected and supervised by professional management. The following
provides you with summary information about the Funds. For more information,
please refer to the identified Prospectus sections and generally to the
Prospectus and SAI.
Q. WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?
A. The GINNIE MAE FUND seeks to provide investors with a long-term total rate of
return through preserving capital and earning high interest income by
investing principally in a portfolio of U.S. Government mortgage pass-through
securities, consisting primarily of securities issued by the Government
National Mortgage Association ("GNMA"), Federal National Mortgage Association
("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC"). Under normal
market conditions, the Fund will invest at least 65% of its assets in
securities issued by GNMA.
The INTERMEDIATE BOND FUND seeks to provide investors with a high level of
current income consistent with the preservation of capital and maintenance of
liquidity. In pursuing its investment objective, the Fund may invest in a
broad range of corporate debt obligations, such as fixed- and variable-rate
bonds, zero coupon bonds, debentures, obligations convertible into common
stock, and various types of demand instruments, obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities, and
U.S. dollar-denominated debt obligations of foreign issuers, including
foreign corporations and foreign governments, and money market instruments.
The Fund also may acquire obligations issued by state and local governments
("municipal obligations"), mortgage-backed and certain other asset-backed
securities. Under normal market conditions, the Fund expects to maintain a
dollar-weighted average portfolio maturity between three and ten years and
the policy of the Fund is to invest at least 65% of the total value of its
assets in corporate and government bonds.
The SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND seeks to provide investors
with current income, while preserving capital, by investing primarily in a
portfolio consisting of short- to intermediate-term securities issued or
guaranteed by the U.S. Government, its agencies and instrumentalities. The
Fund invests primarily in U.S. Treasury securities, notes and bonds and
obligations issued or guaranteed by federal agencies or instrumentalities,
including government-sponsored enterprises such as GNMA and FNMA. Under
normal market conditions, at least 65% of the Fund's total assets will be
invested in U.S. Government obligations and the dollar-weighted effective
average maturity of the portfolio is expected to be between two and five
years. The Fund may also invest in investment-grade
1 PROSPECTUS
<PAGE> 171
corporate debt obligations. The Fund is designed for investors with
investment horizons of two to five years.
See "How the Funds Work -- Investment Objectives and Policies" and
"Prospectus Appendix -- Additional Investment Policies" for further
information on investments.
Q. WHAT ARE SOME OF THE POTENTIAL RISKS ASSOCIATED WITH THIS TYPE OF INVESTMENT?
A. Investments in a Fund are not insured against loss of principal. When the
value of the securities that a Fund owns declines, so does the value of the
Fund's shares. Therefore, you should be prepared to accept some risk with the
money you invest in a Fund.
The market value of investments in fixed-income securities changes in
response to changes in interest rates and the relative financial strength of
each issuer. During periods of falling interest rates, the value of fixed-
income securities generally rises. Conversely, during periods of rising
interest rates, the value of such securities generally declines. Debt
securities with longer maturities, which tend to produce higher yields, are
subject to potentially greater capital appreciation and depreciation than
obligations with shorter maturities. Changes in the financial strength of an
issuer or changes in the ratings of any particular security may also affect
the value of these investments. Fluctuations in the market value of fixed-
income securities subsequent to their acquisition does not affect cash income
from such securities but is reflected in the Fund's net asset value. Each
Fund may also purchase zero-coupon bonds (i.e., discount debt obligations
that do not make periodic interest payments) that are subject to greater
market fluctuations from changing interest rates than debt obligations of
comparable maturities which make current distributions of interest. The
Intermediate Bond and Short-Intermediate U.S. Government Income Funds may
invest in certain foreign securities. Investing in the securities of issuers
in any foreign country involves special risks and considerations not
typically associated with investing in U.S. companies.
For the Ginnie Mae and Short-Intermediate U.S. Government Income Funds, each
Fund invests primarily in U.S. Government obligations including securities
issued or guaranteed as to principal and interest by the U.S. Government and
supported by the full faith and credit of the U.S. Treasury. U.S. Government
obligations also include securities issued or guaranteed by federal agencies
or instrumentalities, including government-sponsored enterprises. Some
obligations of agencies or instrumentalities of the U.S. Government are
supported by the full faith and credit of the United States or U.S. Treasury
guarantees; others, by the right of the issuer or guarantor to borrow from
the U.S. Treasury; still others, by the discretionary authority of the U.S.
Government to purchase certain obligations of the agency or
PROSPECTUS 2
<PAGE> 172
instrumentality; and others, only by the credit of the agency or
instrumentality issuing the obligation. In the case of obligations not backed
by the full faith and credit of the United States, the investor must look
principally to the agency or instrumentality issuing or guaranteeing the
obligation for ultimate repayment, which agency or instrumentality may be
privately owned. There can be no assurance that the U.S. Government will
provide financial support to its agencies or instrumentalities where it is
not obligated to do so. Certain types of U.S. Government obligations are
subject to fluctuations in yield or value due to their structure or contract
terms. In addition, the corporate debt securities are subject to credit risk,
which is the risk that the issuer cannot pay all or a portion of the
obligation represented by a particular security. The adjustable rate feature
of the mortgages underlying the adjustable rate mortgage securities ("ARMS")
and the collateralized mortgage obligations ("CMOs") in which the
Short-Intermediate U.S. Government Income Fund invests should reduce, but
will not eliminate, price fluctuations in such securities.
The net asset value ("NAV") of shares of the Funds will fluctuate. As with
all mutual funds, there can be no assurance that a Fund will achieve its
investment objective. See "How the Funds Work -- Investment Objectives and
Policies -- Risk Factors" below and "Additional Permitted Investment
Activities" in the SAI for further information about the Funds investments
and related risks. As with all mutual funds, there can be no assurances that
a Fund will achieve its investment objective.
Q. WHO MANAGES MY INVESTMENTS?
A. Wells Fargo Bank, as the Funds' investment adviser, manages your investments.
Wells Fargo Bank also provides transfer agency, dividend disbursing agency
and custodial services to the Fund. In addition, Wells Fargo Bank is a
shareholder servicing agent and a selling agent of the Funds. See "The Funds
and Management" and "Management, Distribution and Servicing Fees" for further
information.
Q. HOW DO I INVEST?
A. You may invest by purchasing shares of the Funds at their public offering
price, which is the net asset value ("NAV") per share plus any applicable
sales charge. The Class A shares of the Ginnie Mae and Intermediate Bond
Funds are subject to a maximum front-end sales charge of 4.50% and Class A
shares of the Short-Intermediate U.S. Government Income Fund are subject to a
maximum front-end sales charge of 3.00%. Class B shares of the Ginnie Mae and
Intermediate Bond Funds that are redeemed within four years of purchase are
subject to a maximum contingent-deferred sales charge of 3.00% of the lesser
of net asset value at purchase or net asset value at redemption. In some
cases, such as for investments by certain fiduciary or retirement accounts,
the front-end or contingent-deferred sales charges may be waived or reduced.
You may open an account by making an initial
3 PROSPECTUS
<PAGE> 173
investment of at least $1,000, and you may add to your account by making
additional investments of at least $100, with certain exceptions. Shares may
be purchased by wire, by mail or by an automatic investment feature called
the AutoSaver Plan on any day the Fund is open. See "Investing in the Funds"
for more details, or contact Stephens (the Funds distributor), a shareholder
servicing agent or a selling agent (such as Wells Fargo Bank).
Q. HOW WILL I RECEIVE DIVIDENDS AND ANY CAPITAL GAINS?
A. Dividends from net investment income of the Intermediate Bond, Ginnie Mae and
Short-Intermediate U.S. Government Income Funds are declared daily and paid
monthly. Dividends paid by the Funds are automatically reinvested in shares
of the same class of the respective Fund at NAV (without a sales charge). You
may also elect to receive dividends credited to your Wells Fargo Bank
account, paid in cash, or in shares of certain other funds in the Stagecoach
Family of Funds in which you have an established account that meets the
applicable minimum initial investment requirement. Any capital gains are
distributed at least annually in the same manner as dividends. Investment
income available for distribution to holders of a class of shares is reduced
by the class expenses payable on behalf of those shares. See "Dividends" and
"Additional Shareholder Services."
Q. ARE EXCHANGES TO OTHER FUNDS PERMITTED?
A. Yes. The exchange privilege enables you to exchange Fund shares for shares of
another fund offered by the Company, or shares of certain other funds offered
by other investment companies in the Stagecoach Family of Funds, to the
extent such shares are offered for sale in your state of residence. See
"Additional Shareholder Services -- Exchange Privilege."
Q. HOW MAY I REDEEM SHARES?
A. You may redeem shares by telephone, by letter or by an automatic feature
called the Systematic Withdrawal Plan on any day the New York Stock Exchange
is open for business. Except for any contingent-deferred sales charge
applicable to Class B Shares, the Company imposes no charge for redeeming
shares. The Company reserves the right to impose charges for wiring
redemption proceeds. See "How To Redeem Shares" and "How to Purchase Shares
-- Contingent-Deferred Sales Charges -- Class B Shares" for more details, or
contact Stephens, a shareholder servicing agent or a selling agent (such as
Wells Fargo Bank).
Q. WHAT ARE DERIVATIVES AND DO THE FUNDS USE THEM?
A. Derivatives are financial instruments whose value is derived, at least in
part, from the price of another security or a specified asset, index or rate.
Some of the permissible investments described in this Prospectus, such as
floating- and variable-rate instruments, structured notes and certain U.S.
Government obligations, are
PROSPECTUS 4
<PAGE> 174
considered derivatives. Some derivatives may be more sensitive than direct
securities to changes in interest rates or sudden market moves. Some
derivatives also may be susceptible to fluctuations in yield or value due to
their structure or contract terms.
Q. WHAT STEPS DO THE FUNDS TAKE TO CONTROL DERIVATIVES-RELATED RISKS?
A. Wells Fargo Bank, as investment adviser to the Funds, uses a variety of
internal risk management procedures to ensure that derivatives' use is
consistent with a Fund's investment objective, does not expose the Fund to
undue risks and is closely monitored. These procedures include providing
periodic reports to the Board of Directors concerning the use of derivatives.
Derivatives use by a Fund also is subject to broadly applicable investment
policies. For example, a Fund may not invest more than a specified percentage
of its assets in "illiquid securities," including derivatives that do not
have active secondary markets. Nor may the Fund use certain derivatives
without establishing adequate "cover" in compliance with SEC rules limiting
the use of leverage. For more information on the Funds' investment
activities, see "How the Funds Work" and "Prospectus Appendix -- Additional
Investment Policies."
5 PROSPECTUS
<PAGE> 175
SUMMARY OF FUND EXPENSES
CLASS A SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
SHORT-INTERMEDIATE
GINNIE MAE INTERMEDIATE U.S. GOVERNMENT
FUND BOND FUND INCOME FUND
---------- ------------ ------------------
<S> <C> <C> <C>
Maximum Sales Charge
Imposed on Purchases (as
a percentage of offering
price)................... 4.50% 4.50% 3.00%
Sales Charge Imposed on
Reinvested Dividends..... None None None
Sales Charge Imposed on
Redemptions.............. None None None
Exchange Fees.............. None None None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
SHORT-INTERMEDIATE
GINNIE MAE INTERMEDIATE U.S. GOVERNMENT
FUND BOND FUND INCOME FUND
---------- ------------ ------------------
<S> <C> <C> <C>
Management Fee (after
waivers or
reimbursements)(1)....... 0.50% 0.40% 0.27%
Rule 12b-1 Fee............. 0.05% 0.05% 0.05%
Other Expenses (after
waivers or
reimbursements)(2)....... 0.27% 0.35% 0.39%
---- ---- ----
TOTAL FUND OPERATING
EXPENSES (after waivers
or reimbursements)(3).... 0.82% 0.80% 0.71%
==== ==== ====
- ---------------------------
(1) Management Fees (before waivers or reimbursements) for the Class A
shares of the Intermediate Bond Fund and the Short-Intermediate
U.S. Government Income Fund shares would be payable at a maximum
annual rate of 0.50%, and 0.50%, respectively.
(2) Other Expenses (before waivers or reimbursements) would be 0.60%,
0.59% and 1.12%, respectively.
(3) Total Fund Operating Expenses (before waivers or reimbursements)
would be 1.15%, 1.14% and 1.67%, respectively.
</TABLE>
PROSPECTUS 6
<PAGE> 176
EXAMPLE OF EXPENSES
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following
expenses on a $1,000 investment in
Class A shares of the following
Funds, assuming a 5% annual return
and redemption at the end of each
time period indicated:
Ginnie Mae Fund................ $ 53 $70 $88 $142
Intermediate Bond Fund......... $ 53 $70 $88 $142
Short-Intermediate U.S.
Government Income Fund......... $ 37 $52 $68 $116
</TABLE>
7 PROSPECTUS
<PAGE> 177
SUMMARY OF FUND EXPENSES
CLASS B SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
GINNIE MAE INTERMEDIATE
FUND BOND FUND
---------- ------------
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases (as
a percentage of offering price)............ None None
Sales Charge Imposed on Reinvested
Dividends.................................. None None
Sales Charge Imposed on Redemptions.......... 3.00% 3.00%
Exchange Fees................................ None None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
GINNIE MAE INTERMEDIATE
FUND BOND FUND
---------- ------------
<S> <C> <C>
Management Fee (before waivers or
reimbursements)(1)......................... 0.50% 0.40%
Rule 12b-1 Fee............................... 0.70% 0.75%
Other Expenses (after waivers or
reimbursements)(2)......................... 0.27% 0.35%
---- ----
TOTAL FUND OPERATING EXPENSES (after waivers
or reimbursements)(3)...................... 1.47% 1.50%
</TABLE>
- ---------------------------------
(1) Management Fee (before waivers or reimbursements) for the Intermediate Bond
Fund would be payable at a maximum annual rate of 0.50%.
(2) Other Expenses (before waivers or reimbursements) would be 0.92% and 0.59%,
respectively.
(3) Total Fund Operating Expenses (before waivers or reimbursements) would be
2.12% and 1.84%, respectively.
PROSPECTUS 8
<PAGE> 178
EXAMPLE OF EXPENSES
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following
expenses on a $1,000 investment in
Class B shares of the following
Funds, assuming a 5% annual return
and redemption at the end of each
time period indicated:
Ginnie Mae Fund................ $ 45 $ 56 $80 $142
Intermediate Bond Fund......... $ 45 $ 57 N/A N/A
You would pay the following
expenses on a $1,000 investment in
Class B shares of the following
Fund, assuming a 5% annual return
and no redemption:
Ginnie Mae Fund................ $ 15 $ 46 $80 $142
Intermediate Bond Fund......... $ 15 $ 47 N/A N/A
</TABLE>
EXPLANATION OF TABLES
The purpose of the above tables is to help you understand the various costs
and expenses that a shareholder in the Funds will pay directly or indirectly.
You may purchase Fund shares directly from the Company or through a Wells Fargo
Bank or other institutions that have developed various account products through
which Fund shares may be purchased, and for which customers may be charged a
fee. The tables do not reflect any charges that may be imposed by a Wells Fargo
Bank or another institution directly on certain customer accounts in connection
with an investment in the Funds.
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or sell
shares of the Funds. You are subject to a front-end sales charge on purchases of
Class A shares of the Ginnie Mae, Intermediate Bond and Short-Intermediate U.S.
Government Income Funds. You may be subject to a contingent-deferred sales
charge on the Ginnie Mae or Intermediate Bond Funds Class B shares if you redeem
such shares within a specified period. In certain instances, you may qualify for
a reduction or waiver of the front-end sales charge. See "Investing in the
Fund -- Sales Charges." There are no exchange fees. The Company reserves the
right to impose a charge for wiring redemption proceeds.
ANNUAL FUND OPERATING EXPENSES for the Intermediate Bond Fund's Class A shares
are based on applicable contract amounts and derived from amounts incurred by
the predecessor portfolio, the Intermediate Bond Fund of Pacifica Funds Trust,
during the predecessor portfolio's most recent fiscal year, restated to reflect
voluntary fee waivers
9 PROSPECTUS
<PAGE> 179
and expense reimbursements that are expected to continue during the Company's
current fiscal year. Since Class B shares were not offered during the
predecessor portfolio's most recent fiscal year, the percentages shown above
with respect to Class B shares under "Other Expenses" and "Total Fund Operating
Expenses" reflect certain anticipated voluntary fee waivers and expense
reimbursements for the current fiscal year. Annual Fund Operating Expenses for
the Ginnie Mae and Short-Intermediate U.S. Government Income Funds 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
to reduce expenses during the current fiscal year. Wells Fargo Bank and Stephens
have agreed to waive or reimburse all or a portion of their respective fees
charged to, or expenses paid by, the Ginnie Mae, Intermediate Bond or Short-
Intermediate U.S. Government Income Funds to ensure that the Total Fund
Operating Expenses do not exceed, on an annual basis, 0.82%, 0.80% or 0.71% of
the average daily net assets of each Fund's Class A shares, respectively,
through August 31, 1997. Any waivers or reimbursements will reduce the Fund's
total expenses. There can be no assurance that waivers or reimbursements will
continue after that date. The Fund understands that a shareholder servicing
agent also may impose certain conditions on its customers, subject to the terms
of this Prospectus, in addition to or different from those imposed by the Fund,
such as requiring a higher minimum initial investment or payment of a separate
fee for additional services. Long-term shareholders of the 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. ("NASD"). For more complete descriptions of the
various costs and expenses you can expect to incur as a shareholder in each
Fund, please see "Investing in the Fund -- How To Buy Shares" and "Management,
Distribution and Servicing Fees."
EXAMPLE OF EXPENSES is a hypothetical illustration of the expenses associated
with a $1,000 investment over stated periods, based on the expenses in the above
tables and an assumed annual rate of return of 5%. The rate of return should not
be considered an indication of actual or expected performance of a Fund nor a
representation of past or future expenses; actual expenses and returns may be
greater or lesser than those shown.
PROSPECTUS 10
<PAGE> 180
FINANCIAL HIGHLIGHTS
For the Intermediate Bond Fund, the following information has been derived
from the Financial Highlights in the annual and semi-annual financial statements
for the fiscal periods ended September 30, 1995 and March 31, 1996 for Pacifica
Funds Trust's Intermediate Bond Fund, the predecessor portfolio to the Fund.
This information is provided to assist you in evaluating the performance of the
Fund since its commencement of operations. The financial information for the
periods through September 30, 1995 has been audited by former independent
accountants to the predecessor portfolio. The financial information and the
reports for the period ended September 30, 1995 and the year ended May 31, 1995
on such audits are incorporated by reference into the SAI. The unaudited
financial information and the related notes for the six-month period ended March
31, 1996, also are incorporated by reference into the SAI. This information
should be read in conjunction with the predecessor portfolio's related annual
financial statements and notes thereto.
The Investor shares represented in the tables for the predecessor portfolio
are the predecessor shares to the Class A shares of the Intermediate Bond Fund
offered by this prospectus. Financial information is not provided in connection
with Class B shares of the Intermediate Bond and Short-Intermediate U.S.
Government Income Funds because Class B shares were not offered during the
periods presented.
11 PROSPECTUS
<PAGE> 181
INTERMEDIATE BOND FUND(1)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
<TABLE>
<CAPTION>
INVESTOR
SHARES*
------------ INSTITUTIONAL SHARES
SIX-MONTH ---------------------------------------------------------------------------------
PERIOD ENDED PERIOD ENDED YEAR ENDED MAY 31,
MARCH 31, SEPT. 30, -------------------------------------------------------------------
1996 1995(2) 1995 1994 1993 1992 1991 1990 1989
------------ ------------ ------- ------- ------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value -- beginning of
period.......................... $14.76 $ 14.77 $ 14.36 $ 15.72 $ 15.69 $ 15.52 $ 15.08 $ 15.13 $ 15.00
Income from investment operations:
Net investment income........... 0.43 0.30 0.91 0.99 1.17 1.14 1.25 1.26 1.22
Net realized and unrealized gain
(loss) on investments......... 1.11 (0.01) 0.47 (0.90) 0.40 0.65 0.54 (0.05) 0.08
------ ------- ------- ------- ------- ------- ------- ------- -------
Total income from investment
operations.................. 1.54 0.29 1.38 0.09 1.57 1.79 1.79 1.21 1.30
------ ------- ------- ------- ------- ------- ------- ------- -------
Dividends and distributions to
shareholders:
Dividends from net investment
income........................ (0.43) (0.30) (0.97) (0.85) (1.04) (1.41) (1.25) (1.26) (1.17)
Distributions from net realized
gain on investments........... (1.23) (0.00) (0.00) (0.60) (0.50) (0.21) (0.10) -- --
------ ------- ------- ------- ------- ------- ------- ------- -------
Total dividends and
distributions to
shareholders................ (1.66) (0.30) (0.97) (1.45) (1.54) (1.62) (1.35) (1.26) (1.17)
------ ------- ------- ------- ------- ------- ------- ------- -------
Net asset value -- end of
period.......................... $14.64 $ 14.76 $ 14.77 $ 14.36 $ 15.72 $ 15.69 $ 15.52 $ 15.08 $ 15.13
====== ======= ======= ======= ======= ======= ======= ======= =======
Total return (excluding sales
load)....................... 2.17% 6.14%(3) 10.13% 0.35% 10.42% 11.96% 12.36% 8.25% 9.07%
Ratios/Supplemental Data:
Net assets, end of period
(000)......................... $2,825 $55,628 $56,087 $58,199 $61,207 $54,203 $54,074 $79,471 $74,002
Ratio of expenses to average net
assets........................ 0.83%(3) 0.89%(3) 0.81% 0.79% 0.76% 0.68% 0.66% 0.68% 0.69%
Ratio of net investment income
to average net assets......... 5.79%(3) 5.94%(3) 6.35% 5.33% 6.01% 7.14% 8.00% 8.25% 8.25%
Ratio of expenses to average net
assets without fee waivers.... 1.00%)3) 0.94%(3) 0.85% 0.82% 0.79% 0.73% 0.71% 0.73% 0.74%
Ratio of net investment income
to average net assets without
fee waivers................... 5.62%(3) 5.89%(3) 6.31% 5.30% 5.98% 7.09% 7.95% 8.20% 8.20%
Portfolio turnover rate(4)...... 18% 54% 76% 163% 146% 102% 78% 32% 36%
</TABLE>
- ---------------
* The Investor Shares commenced operations on October 1, 1995.
(1) The Fund commenced operations as the Bonds Plus Fund of Westcore Trust from
June 1, 1988, and was advised by First Interstate Bank of Oregon, N.A. until
the reorganization as a portfolio of Pacifica Funds Trust on October 1,
1995, when First Interstate Capital Management, Inc. ("FICM") assumed
investment advisory responsibilities. In connection with the merger of First
Interstate Bancorp into Wells Fargo & Co. on April 1, 1996, FICM was renamed
as Wells Fargo Investment Management, Inc.
(2) The Fund changed its fiscal year from May 31 to September 30.
(3) Annualized.
(4) A portfolio turnover rate is, in general, the percentage computed by taking
the lesser of purchases or sales of portfolio securities (excluding
securities with a maturity date of one year or less at the time of
acquisition) for a period and dividing it by the monthly average of the
market value of such securities during the period.
PROSPECTUS 12
<PAGE> 182
For the Ginnie Mae and Short-Intermediate U.S. Government Income Funds, the
following information has been derived from the Financial Highlights in the
Funds' 1995 annual financial statements. The financial statements are
incorporated by reference into the SAI for each Fund. Except for periods ending
prior to January 1, 1992, which were audited by other auditors whose report
dated February 19, 1992, expressed an unqualified opinion on this information,
the Financial Statements have been audited by KPMG Peat Marwick LLP, independent
auditors, whose report dated February 14, 1996 also is incorporated by reference
into the SAIs. This information should be read in conjunction with the Funds'
1995 annual financial statements and the notes thereto. The SAI for each Fund
has been incorporated by reference into this Prospectus.
GINNIE MAE FUND
FOR A CLASS A SHARE OUTSTANDING AS SHOWN
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED(1)
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period......................... $ 10.18 $ 11.31 $ 11.34 $ 11.42 $10.00
Income from investment
operations:
Net investment income (loss)..... 0.76 0.77 0.83 0.83 0.83
Net realized and unrealized gain
(loss) on investments.......... 0.97 (1.13) (0.03) (0.08) 0.59
Total from investment
operations..................... 1.73 (0.36) 0.80 0.75 1.42
Less distributions:
Dividends from net investment
income......................... (0.76) (0.77) (0.83) (0.83) 0.00
Distributions from net realized
capital gain................... 0.00 0.00 0.00 0.00 0.00
Total from distributions......... (0.76) (0.77) (0.83) (0.83) 0.00
Net asset value, end of period... $ 11.15 $ 10.18 $ 11.31 $ 11.34 $11.42
Total return (not
annualized)(2)................. 17.53% (3.23)% 7.19% 6.86% 14.30%
Ratios/supplemental data:
Net assets, end of period
(000).......................... $166,157 $171,288 $303,530 $184,692 $4,870
Number of shares outstanding, end
of period (000)................ 14,904 16,618 26,835 16,289 3,053
Ratios of average net assets
(annualized):
Ratio of expenses to average net
assets(3)...................... 0.82% 0.73% 0.46% 0.46% 1.04%
Ratio of net investment income to
average net assets(4).......... 7.09% 7.20% 7.19% 7.93% 7.66%
Portfolio turnover............... 118% 69% 121% 73% 241%
(1) The Fund commenced operations on January 3, 1991. The financial information for the
fiscal period ended December 31, 1991 is based on the financial information for the
Ginnie Mae Fund ("IRA Ginnie Mae Fund") of the Wells Fargo Investment Trust for
Retirement Programs ("Trust") which was reorganized into the Ginnie Mae Fund on
January 1, 1992.
(2) Total returns do not include any sales charges.
(3) Ratio of expenses to average
net assets prior to waived fees
and reimbursed expenses...... 1.15% 1.07% 1.02% 1.26% 1.05%
(4) Ratio of net investment income
to average net assets prior to
waived fees and reimbursed
expenses..................... 6.76% 6.86% 6.63% 7.13% 7.65%
</TABLE>
13 PROSPECTUS
<PAGE> 183
GINNIE MAE FUND
FOR A CLASS B SHARE OUTSTANDING AS SHOWN
<TABLE>
<CAPTION>
YEAR ENDED
DEC. 31,
1995(1)
----------
<S> <C>
Net asset value, beginning of period............................. $ 10.00
Income from investment operations:
Net investment income (loss)..................................... 0.66
Net realized and unrealized gain (loss) on investments........... 0.97
--------
Total from investment operations................................. 1.63
Less distributions:
Dividends from net investment income............................. (0.66)
Distributions from net realized capital gain..................... 0.00
--------
Total from distributions......................................... (0.66)
--------
Net asset value, end of period................................... $ 10.97
========
Total return (not annualized)(2)................................. 16.69%
Ratios/supplemental data:
Net assets, end of period (000).................................. $ 12,227
Number of shares outstanding, end of period (000)................ 1,115
Ratios of average net assets (annualized):
Ratio of expenses to average net assets(3)....................... 1.47%
Ratio of net investment income to average net assets(4).......... 6.01%
Portfolio turnover............................................... 118%
(1) The Class B Shares of the Fund commenced operations on January
1, 1995.
(2) Total Returns do not include any sales charges.
(3) Ratio of expenses to average net assets prior to waived fees
and reimbursed expenses........................................ 2.12%
(4) Ratio of net investment income to average net assets prior to
waived fees and reimbursed expenses............................ 5.36%
</TABLE>
PROSPECTUS 14
<PAGE> 184
SHORT-INTERMEDIATE U.S. GOVERNMENT
INCOME FUND
FOR A SHARE OUTSTANDING AS SHOWN
<TABLE>
<CAPTION>
PERIOD
YEAR ENDED YEAR ENDED ENDED(3)
DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993
---------- ---------- --------
<S> <C> <C> <C>
Net asset value, beginning of period.......... $ 9.39 $ 9.99 $10.00
Income from investment operations:
Net investment income......................... 0.55 0.46 0.06
Net realized and unrealized gain (loss) on
investments................................. 0.61 (0.60) (0.01)
-------- ------- ------
Total from investment operations.............. 1.16 (0.14) 0.05
Less distributions:
Dividends from net investment income.......... (0.55) (0.46) (0.06)
Distributions from net realized capital
gains....................................... 0.00 0.00 0.00
-------- -------- ------
Total distributions........................... (0.55) (0.46) (0.06)
Net asset value, end of period................ $ 10.00 $ 9.39 $ 9.99
======== ======== ======
Total return (not annualized)(4).............. 12.67% (1.42)% 0.40%
Ratios/supplemental data:
Net assets, end of period (000)............... $ 39,928 $ 11,602 $8,557
Number of shares outstanding, end of period
(000)....................................... 3,994 1,236 857
Ratios to average net assets (annualized):
Ratio of expenses to average net assets(1).... 0.71% 0.25% 0.00%
Ratio of net investment income to average net
assets(2)................................... 5.64% 4.75% 3.49%
Portfolio turnover............................ 472% 288% N/A
(1) Ratio of expenses to average net assets
prior to waived fees and reimbursed
expenses.................................... 1.67% 2.28% 2.45%
(2) Ratio of net investment income to average
net assets prior to waived fees and
reimbursed expenses......................... 4.68% 2.72% 1.04%
(3) The Fund commenced operations on October 27,
1993.
(4) Total returns do not include any sales
charges
</TABLE>
15 PROSPECTUS
<PAGE> 185
HOW THE FUNDS WORK
INVESTMENT OBJECTIVES AND POLICIES
GINNIE MAE FUND
The Ginnie Mae Fund seeks to provide investors with a long-term total rate of
return through preserving capital and earning high interest income by investing
principally in a portfolio of U.S. Government mortgage pass-through securities,
consisting primarily of securities issued by GNMA, FNMA and FHLMC. This
investment objective is fundamental and cannot be changed without shareholder
approval. Under normal market conditions, the Fund will invest at least 65% of
its total assets in GNMA securities. These securities may bear interest at rates
that are not fixed ("floating- and variable-rate instruments") or may be
purchased on a "when-issued" or "firm commitment basis." The Fund also may
invest in U.S. Treasury securities, which are backed by the full faith and
credit of the U.S. Government, and repurchase agreements.
GNMAs, FNMAs and FHLMCs are mortgage-backed securities representing part
ownership of a pool of residential mortgage loans. A "pool" or group of such
mortgages is assembled and, after being approved by the entity, is offered to
investors through securities dealers. Once approved by GNMA, a government
corporation within the U.S. Department of Housing and Urban Development, GNMA
guarantees the timely payment of interest and principal. GNMA securities are
backed by the full faith and credit of the U.S. Government. FNMA and FHLMC are
federally chartered corporations supervised by the U.S. Government, acting as
government-sponsored enterprises. FNMA and FHLMC securities are not direct
obligations of the U.S. Treasury, and are supported by the credit of FNMA or
FHLMC only. FNMA guarantees timely payment of interest and principal on its
securities; FHLMC guarantees timely payment of interest and ultimate payment of
principal only.
The Ginnie Mae Fund may temporarily invest some of its assets in shares of
unaffiliated registered, open-end investment companies, subject to the
limitations of the Investment Company Act of 1940, as amended (the "1940 Act").
The Fund may also invest in high-quality money market instruments, which include
U.S. Government obligations, obligations of domestic and foreign banks, and
short-term corporate debt obligations. Such temporary investments would most
likely be made when there is an unexpected or abnormal level of investor
purchases or redemptions of Fund shares or because of unusual market conditions.
The Fund also may lend its portfolio securities. A more complete description of
the Fund's investments and investment activities is contained in the "Prospectus
Appendix -- Additional Investment Policies" and in the Fund's SAI.
PROSPECTUS 16
<PAGE> 186
INTERMEDIATE BOND FUND
The Intermediate Bond Fund seeks to provide investors with a high level of
current income consistent with the preservation of capital and maintenance of
liquidity. In pursuing its investment objective, the Fund may invest in a broad
range of corporate debt obligations such as fixed and variable-rate bonds, zero
coupon bonds, debentures, obligations convertible into common stock and various
types of demand instruments, obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, dollar-denominated debt
obligations of foreign issuers, including foreign corporations and foreign
governments, and money market instruments. The Fund is also permitted to acquire
obligations issued by state and local governments ("municipal obligations"). The
purchase of municipal obligations may be advantageous when, as a result of
prevailing economic, regulatory or other circumstances, the yield of such
securities, on a pre-tax basis, is comparable to that of corporate or U.S.
Government obligations. The Fund may also purchase mortgage-backed and certain
other asset-backed securities. During normal market conditions, the Fund will
maintain a dollar-weighted average portfolio maturity between three and ten
years.
In acquiring particular portfolio securities, the Advisor will consider, among
other things, historical yield relationships between corporate and government
bonds, intermarket yield relationships among various industry sectors, current
economic cycles and the attractiveness and creditworthiness of particular
issuers. Depending upon its analysis of these and other factors, the Fund's
holdings in issuers in particular industry sectors may be overweighted when
compared to the relative industry weightings in the Shearson Lehman Brothers
Intermediate Index or other recognized indexes.
The policy of the Fund is to invest at least 65% of the total value of its
assets in corporate and government bonds during normal market conditions. Debt
obligations acquired by the Fund will be investment grade at the time of
purchase -- that is, obligations rated "AAA", "AA", "A" or "BBB" by Standard &
Poor's Ratings Group ("S&P") or "Aaa", "Aa", "A" or "Baa" by Moody's Investors
Service, Inc. ("Moody's"). Debt obligations may also be unrated but deemed by
the Investment Advisor to be comparable in quality to instruments that are so
rated. The Fund's dollar weighted average portfolio quality of the corporate
bond portion of the Fund's portfolio is expected to be "A" or better.
Obligations rated in the lowest of the top four rating categories ("Baa" by
Moody's or "BBB" by S&P) are considered to have speculative characteristics. See
the Appendix in the SAI for a description of applicable S&P and Moody's debt
ratings.
The Fund may also invest in obligations convertible into common stocks, and
may purchase common stocks, warrants or other rights to buy shares if they are
attached to a fixed income obligation. As a general matter, however, the Fund
will not invest in common stocks. Common stock received through the conversion
of convertible debt obligations will normally be sold in an orderly manner as
soon as possible. Up to 20% of
17 PROSPECTUS
<PAGE> 187
the total assets of the Fund may be invested directly in dollar-denominated debt
obligations of foreign issuers. These obligations may include obligations of
foreign corporations as well as investments in obligations of foreign
governments and their political subdivisions (which will be limited to direct
government obligations and government-guaranteed securities). The Fund may
invest no more than 5% of its net assets at the time of purchase in warrants
(other than those that have been acquired in units or attached to other
securities) and not more than 2% of its net assets in warrants which are not
listed on the New York or American Stock Exchange.
The Fund may also hold short-term U.S. Government obligations, money market
instruments, repurchase agreements, securities issued by other investment
companies within the limits prescribed by the 1940 Act, and cash, pending
investment, to meet anticipated redemption requests or if, in the opinion of the
Advisor, suitable investments for a Fund are unavailable. Such investments may
be made in such proportions as, in the opinion of the Advisor, existing
circumstances may warrant, and may include obligations of foreign banks and
foreign branches of U.S. banks. For additional descriptions of the types of
securities and investment practices used by the Funds, see "Prospectus
Appendix -- Additional Investment Policies."
The Fund may also purchase zero-coupon bonds (i.e., discount debt obligations
that do not make periodic interest payments) which are subject to greater market
fluctuations from changing interest rates than debt obligations of comparable
maturities which make current distributions of interest.
SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND
The Short-Intermediate U.S. Government Income Fund (sometimes, the "Income
Fund") seeks to provide investors with current income, while preserving capital,
by investing primarily in a portfolio consisting of short- to intermediate-term
securities issued or guaranteed by the U.S. Government, its agencies and
instrumentalities. This investment objective is fundamental and cannot be
changed without shareholder approval.
The Income Fund may invest in obligations of any maturity. Under ordinary
circumstances, the dollar-weighted effective average maturity of the Fund's
portfolio is generally expected to be between two and five years and at least
65% of the value of its total assets will be invested in U.S. Government
obligations. The Fund seeks to enhance its total return by shortening the
average maturity of portfolio securities when interest rates are expected to
increase and lengthening the maturity of such portfolio securities when interest
rates are expected to decline. Portfolio turnover generally involves some
expense to the Fund, including dealer mark-ups.
The Income Fund's assets will be invested and reinvested in U.S. Government
obligations and in investment-grade corporate debt obligations rated at the date
of
PROSPECTUS 18
<PAGE> 188
purchase in the top four rating groups by Standard & Poor's Rating Group ("S&P")
or Moody's Investor Services, Inc. ("Moody's"), i.e., AAA/Aaa, AA/Aa, A/A, and
BBB/Baa by S&P and Moody's, respectively. Securities rated BBB/Baa have
speculative characteristics. In addition, it is possible that securities in
which the Fund may invest could be downgraded by a ratings group subsequent to
purchase by the Fund. The Fund will not hold more than 5% of its assets in
securities that have been downgraded below investment grade subsequent to
purchase. The Fund may also purchase securities which represent the interest
portion or the principal portion (sometimes referred to as "STRIPs") of
securities in which the Fund may otherwise invest. STRIPs have significantly
different investment characteristics than the instruments from which they
derive. S&P and Moody's assign ratings based upon their judgement of the risk of
default of the securities underlying the STRIPs. However, investors should
understand that most of the risk of these securities comes from interest rate
risk and not from the risk of default. STRIPs may have significantly greater
interest rate risk than traditional government securities with identical
ratings.
The Income Fund may invest in ARMS whose interest rates are periodically reset
when market rates change. The Fund is designed for investors who seek a
relatively stable NAV while providing high current income relative to
high-quality, short-term investment alternatives. ARMS are pass-through
certificates representing ownership interests in a pool of adjustable rate
mortgages and the resulting cash flow from those mortgages. The ARMS in which
the Fund may invest are issued or guaranteed by GNMA, FNMA or FHLMC. Unlike
conventional debt securities, which provide for periodic (usually semi-annual)
payments of interest and payments of principal at maturity or on specified call
dates, ARMS provide for monthly payments based on a pro rata share of both
periodic interest and principal payments and prepayments of principal on the
underlying mortgage pool (less GNMA's, FNMA's or FHLMC's fees and any applicable
loan servicing fees.)
The Income Fund also may invest in the adjustable rate portions of
collateralized mortgage obligations ("CMOs") issued by government agencies,
instrumentalities or government-sponsored enterprises including, primarily, FNMA
and FHLMC, and collateralized by pools of mortgage loans. Payments of principal
and interest on the collateral mortgages are used to pay debt service on the
CMOs. All CMOs purchased by the Fund will be rated, at the time of purchase, AAA
by S&P or Aaa by Moody's. S&P and Moody's assign ratings based upon their
judgement of the risk of default (i.e., the risk that the issuer or guarantor
may default in the payment of principal and/or interest) of the securities
underlying the CMOs. However, investors should understand that most of the risk
of these securities comes from interest rate risk (i.e., the risk that market
interest rates may adversely affect the value of the securities in which the
Fund invests) and not from the risk of default. CMOs may have significantly
greater interest rate risk than traditional government securities with identical
ratings. The adjustable rate portions of CMOs have significantly less interest
rate risk.
19 PROSPECTUS
<PAGE> 189
The Income Fund, on a temporary basis, may invest cash balances in U.S.
Treasury bills, engage in repurchase agreements and lend its portfolio
securities, provided the value of such loans of portfolio securities does not
exceed one-third of the current value of its total assets. Such temporary
investments would most likely be made when there is an unexpected or abnormal
level of investor purchases or redemptions of Fund shares or because of unusual
market conditions.
For additional descriptions of the types of securities and investment
practices used by the Funds see "Risk Factors," "Prospectus
Appendix -- Additional Investment Policies" in this Prospectus and "Investment
Restrictions" and "Additional Permitted Investment Activities" in the SAI.
RISK FACTORS
For the Ginnie Mae, Intermediate Bond and Short-Intermediate U.S. Government
Income Funds, illiquid securities, which may include certain restricted
securities, may be difficult to sell promptly at an acceptable price. Certain
restricted securities may be subject to legal restrictions on resale. Delay or
difficulty in selling securities may result in a loss or be costly to a Fund.
The adviser may use certain derivative investments or techniques, such as
investments in floating- and variable-rate instruments, structured notes and
certain U.S. Government obligations, to adjust the risk and return
characteristics of a Fund's portfolio. Derivatives are financial instruments
whose value is derived, at least in part, from the price of another security or
a specified asset, index or rate. Some derivatives may be more sensitive than
direct securities to changes in interest rates or sudden market moves. Some
derivatives also may be susceptible to fluctuations in yield or value due to
their structure or contract terms. If a Fund's adviser judges market conditions
incorrectly, the use of certain derivatives could result in a loss, regardless
of the adviser's intent in using the derivatives.
INTERMEDIATE BOND FUND
The price per share of the Intermediate Bond Fund will fluctuate with changes
in value of the investments held by the Fund. Shareholders of the Fund should,
therefore, expect the value of their shares to fluctuate with changes in the
value of the securities owned by the Fund.
The market value of the Intermediate Bond Fund's investment in fixed income
securities will change in response to changes in interest rates and the relative
financial strength of each issuer. During periods of falling interest rates, the
value of fixed income securities generally rises. Conversely, during periods of
rising interest rates the value of such securities generally declines. Debt
securities with longer maturities, which tend to
PROSPECTUS 20
<PAGE> 190
produce higher yields, are subject to potentially greater capital appreciation
and depreciation than obligations with shorter maturities. Changes in the
financial strength of an issuer or changes in the ratings of any particular
security may also affect the value of these investments. Fluctuations in the
market value of fixed income securities subsequent to their acquisition will not
affect cash income from such securities, but will be reflected in the Fund's net
asset value.
For the Intermediate Bond Fund, investing in the securities of issuers in any
foreign country, including American Depositary Receipts ("ADRs") and European
Depositary Receipts ("EDRs"), involves special risks and considerations not
typically associated with investing in U.S. companies. These include differences
in accounting, auditing and financial reporting standards; generally higher
commission rates on foreign portfolio transactions; the possibility of
nationalization, expropriation or confiscatory taxation; adverse changes in
investment or exchange control regulations (which may include suspension of the
ability to transfer currency from a country); and political instability which
could affect U.S. investments in foreign countries. Additionally, foreign
securities and dividends and interest payable on those securities may be subject
to foreign taxes, including taxes withheld from payments on those securities.
Foreign securities often trade with less frequency and volume than domestic
securities and, therefore, may exhibit greater price volatility. Additional
costs associated with an investment in foreign securities may include higher
custodial fees than apply to domestic custodial arrangements and transaction
costs of foreign currency conversions. Changes in foreign exchange rates also
will affect the value of securities denominated or quoted in currencies other
than the U.S. dollar. The Fund's objective may be affected either unfavorably or
favorably by fluctuations in the relative rates of exchange between the
currencies of different nations, by exchange control regulations and by
indigenous economic and political developments. See the SAI for further
information about foreign securities.
There is, of course, no assurance that the Fund will achieve its investment
objective or be successful in preventing or minimizing the risk of loss that is
inherent in investing in particular types of investment products.
GINNIE MAE AND SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUNDS
Although GNMA securities are guaranteed by the U.S. Government as to timely
payment of principal and interest and ARMS are guaranteed by the U.S.
Government, its agencies or instrumentalities (including government-sponsored
enterprises as noted above), the market value of these securities, upon which
the Funds' daily net asset value is based, will fluctuate. The Funds are subject
to interest-rate risk, that is, the risk that increases in interest rates may
adversely affect the value of the securities in which the Funds invest, and
hence the value of your investment in the Funds. The value of the securities in
which a Fund invests generally changes inversely to changes in interest
21 PROSPECTUS
<PAGE> 191
rates. However, the adjustable-rate feature of the mortgages underlying the ARMS
and the CMOs in which the Income Fund may invest should reduce, but will not
eliminate, price fluctuations in such securities, particularly during periods of
extreme fluctuations in market interest rates.
The full and timely payment of principal and interest on GNMA ARMS is
guaranteed by GNMA and backed by the full faith and credit of the U.S.
Government. FNMA also guarantees full and timely payment of both interest and
principal, while FHLMC guarantees full and timely payment of interest and
ultimate payment of principal. FNMA and FHLMC ARMS are not backed by the full
faith and credit of the U.S. Government. However, because FNMA and FHLMC are
government-sponsored enterprises, these securities are considered by some
investors to be high-quality investments that present minimal credit risks. The
yields provided by these ARMS have historically exceeded the yields on other
types of U.S. Government securities with comparable maturities. Of course, there
can be no assurance that this historical performance will continue or that
either Fund, which are diversified funds, will meet its investment objective.
Moreover, no assurance can be given that the U.S. Government would supply
financial support to U.S. Government- sponsored enterprises such as FNMA and
FHLMC in the event of a default in payment on the underlying mortgages which the
government-sponsored enterprise is unable to make good. Principal on the
mortgages underlying the mortgage pass-through securities in which the Funds may
invest may be prepaid in advance of maturity. Such prepayments tend to increase
when interest rates decline and may present a Fund with more principal to invest
at lower rates. The converse also tends to be the case. Portfolio turnover
should not adversely affect the Funds since portfolio transactions ordinarily
are made directly with principals on a net basis and, consequently, the Funds do
not incur brokerage expenses.
Furthermore, there can be no assurance that the U.S. Government would supply
financial support to its agencies or instrumentalities, where it is not
obligated to do so. Principal on the mortgages underlying the mortgage
pass-through securities in which the Short-Intermediate U.S. Government Income
Fund invests may be prepaid in advance of maturity; these prepayments tend to
increase when interest rates decline, presenting the Fund with more principal to
invest at lower rates. The converse also tends to be the case when interest
rates rise.
S&P and Moody's assign ratings based upon their judgment of the risk of
default (i.e., the risk that the issuer or guarantor may default in the payment
of principal and/or interest) of the securities underlying the CMOs. However,
investors should understand that most of the risk of these securities comes from
interest-rate risk (i.e., the risk that market interest rates may adversely
affect the value of the securities in which a Fund invests) and not from the
risk of default. CMOs may have significantly greater interest rate risk than
traditional government securities with identical ratings. The adjustable-rate
portions of CMOs have significantly less interest rate risk.
PROSPECTUS 22
<PAGE> 192
U.S. Government obligations have been selected by Wells Fargo Bank as the
Income Fund's principal investments because of their relatively low purchase and
sale transaction costs and because of the low default risk associated with them
(i.e., they are issued or guaranteed as to principal and interest by the U.S.
Government, its agencies or instrumentalities).
See "Prospectus Appendix -- Additional Investment Policies" and the SAI for
further information about investment policies and risks.
PERFORMANCE
Fund performance may be advertised from time to time in terms of average
annual total return, cumulative total return and yield. Performance figures are
based on historical results and are not intended to indicate future performance.
Performance figures are calculated separately for each class of shares of a
Fund.
Average annual total return of a class of shares is based on the overall
dollar or percentage change in value of a hypothetical investment in the class
during a specified period and assumes that all Fund dividends and capital gain
distributions are reinvested in shares of that class. The standardized average
annual total return for Class A shares assumes that you have paid the maximum
front-end sales charge and, for Class B shares on a one-year investment, assumes
that you have paid the maximum contingent-deferred sales charge, on the
hypothetical investment. Cumulative total return is calculated similarly, but
assumes the investment is at NAV and the total return is aggregated over the
relevant time period instead of annualized.
The yield of a class of shares is calculated by dividing the net investment
income per share earned during a specified period (usually 30 days) by the NAV
of the class on the last day of the period and annualizing the result. Effective
yield is calculated similarly but assumes reinvestment of the income earned from
a Fund. Because of the effects of compounding, effective yields are slightly
higher than yields. The tax-equivalent yield of a class of shares is similarly
calculated but assumes that a stated income tax rate has been applied to
determine the tax-equivalent figure.
For purposes of advertising, from time to time, a Fund also may present
nonstandardized total returns, yields and, in sales literature, distribution
rates. For example, the performance figure of the shares of a class may be
calculated on the basis of an investment at the net asset value per share or at
net asset value per share plus a reduced sales charge (see "Investing in the
Funds -- How To Buy Shares"), rather than the public offering price per share.
In this case, the figure might not reflect the effect of the sales charge that
you may have paid.
Because of differences in the fees and/or expenses borne by shares of each
class of the Fund, the performance figures on such shares can be expected, at
any given time, to vary from the performance figures for other classes of the
Fund. Performance figures are
23 PROSPECTUS
<PAGE> 193
computed separately for each class of Fund shares. The Fund's performance
figures calculations may reflect waivers and/or reimbursements that, if
effective, would increase the yields and returns payable to shareholders. Any
fees that may be imposed by a selling agent or shareholder servicing agent
directly on its customer accounts are not reflected in the performance
calculations. Any such fees, if charged, will reduce the actual return received
by customers on their investments.
Additional performance information is contained in the SAI and the Annual
Report, which are available upon request free of charge by calling the Company
at 1-800-222-8222 or by writing the Company at the address shown on the front
cover of the Prospectus.
THE FUNDS AND MANAGEMENT
The Funds are three of the funds of the Stagecoach Family of Funds. The
Company was organized as a Maryland corporation on September 9, 1991 and
currently offers shares of the following funds: Aggressive Growth, Arizona
Tax-Free, Asset Allocation, Balanced, California Tax-Free Bond, California
Tax-Free Income, California Tax-Free Money Market Mutual, Corporate Stock,
Diversified Income, Equity Value, Ginnie Mae, Government Money Market Mutual,
Growth and Income, Intermediate Bond, Money Market Mutual, Money Market Trust,
National Tax-Free, National Tax-Free Money Market Mutual, Oregon Tax-Free, Prime
Money Market Mutual, Short-Intermediate U.S. Government Income, Small Cap,
Treasury Money Market Mutual, and U.S. Government Allocation Funds. The Arizona
Tax-Free, Balanced, California Tax-Free Bond, Equity Value, Ginnie Mae, Growth
and Income, Intermediate Bond, Money Market Mutual, National Tax-Free, Oregon
Tax-Free, Prime Money Market Mutual, Small Cap and Treasury Money Market Mutual
Fund each offer three classes of shares. The Aggressive Growth, Asset
Allocation, California Tax-Free Income, Diversified Income, Short-Intermediate
U.S. Government Income and U.S. Government Allocation Funds each offer two
classes of shares. The California Tax-Free Money Market Mutual, Corporate Stock,
Government Money Market Mutual, Money Market Trust, and National Tax-Free Money
Market Mutual Funds each offer one class of shares. Most of the Company's funds
are authorized to issue multiple classes of shares, one class to a
contingent-deferred sales charge, that are offered to retail investors. Certain
of the Company's funds also are authorized to issue other classes of shares,
which are sold primarily to institutional investors at NAV. Each class of shares
in a fund represents an equal, proportionate interest in a fund with other
shares of the same class. Shareholders of each class bear their pro rata portion
of the fund's operating expenses, except for certain class-specific expenses
(e.g., any state securities registration fees, shareholder servicing fees or
distribution fees that may be paid under Rule 12b-1) that are allocated to a
particular class and, accordingly, may affect performance. Please
PROSPECTUS 24
<PAGE> 194
contact Stagecoach Shareholder Services at 1-800-222-8222 if you would like
additional information about other funds or classes of shares offered.
The Company's Board of Directors supervises each Fund's activities and
monitors its contractual arrangements with various service-providers. Although
the Company is not required to hold annual shareholder meetings, special
meetings may be required for purposes such as electing or removing Directors,
approving advisory contracts and distribution plans, and changing a Fund's
investment objective or fundamental investment policies. All shares of the
Company have equal voting rights and are voted in the aggregate, rather than by
series or class, unless otherwise required by law (such as when the voting
matter affects only one series or class). A Fund shareholder of record is
entitled to one vote for each share owned and fractional votes for fractional
shares owned. A more detailed description of the voting rights and attributes of
the shares is contained under "Capital Stock" in the SAI.
MANAGEMENT
Wells Fargo Bank serves as the Funds' investment adviser, transfer and
dividend disbursing agent, and custodian. In addition, Wells Fargo Bank is a
shareholder servicing agent and a selling agent of the Funds. Wells Fargo Bank,
one of the largest banks in the United States, was founded in 1852 and is the
oldest bank in the western United States. As of June 30, 1996, Wells Fargo Bank
and its affiliates provided investment advisory services for approximately $56
billion of assets of individuals, trusts, estates and institutions. Wells Fargo
Bank also serves as the investment adviser to other separately managed funds (or
the master portfolio in which a fund invests) of the Company, and as investment
adviser or sub-adviser to separately managed funds of five other registered,
open-end, management investment companies. Wells Fargo Bank, a wholly owned
subsidiary of Wells Fargo & Company, is located at 420 Montgomery Street, San
Francisco, California 94104.
Subsequent to its acquisition by Wells Fargo & Company on April 1, 1996, Wells
Fargo Investment Management, Inc. ("WFIM") (formerly, First Interstate Capital
Management, Inc.) served as investment adviser to the predecessor portfolios.
WFIM, a wholly owned subsidiary of Wells Fargo & Company, is located at 444
Market Street, San Francisco, California 94105. Prior to October 1, 1995, First
Interstate Bank of Oregon, N.A, a subsidiary of First Interstate Bancorp and an
affiliate of First Interstate Capital Management, Inc., served as investment
adviser to the predecessor portfolio.
Ms. Tamyra Thomas assumed responsibility as a co-portfolio manager for the
day-to-day management of the Intermediate Bond Fund as of the commencement of
operations of the Fund. She is a Senior Vice-President and the Chief Fixed
Income Investment Officer of the Investment Management Group of Wells Fargo
Bank. She is also Chair of the Investment Management Group Policy Committee. Ms.
Thomas has managed bond portfolios for over a decade. She currently manages in
excess of $1 billion of long-term
25 PROSPECTUS
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taxable bond portfolios for various foundations, defined benefit plans and other
clients. Prior to joining Wells Fargo Bank in early 1988, she held a number of
senior investment positions for the Valley Bank & Trust Company of Utah
including Vice-President and Manager of the Investment Department and Chairman
of the Trust Investment Committee. She holds a B.S. degree from the University
of Utah and was past president of the Utah Bond Club. Ms. Thomas is a Chartered
Financial Analyst.
Mr. Paul Single assumed responsibility for the day-to-day management of the
portfolio of the Ginnie Mae Fund on May 1, 1995. Mr. Single has managed taxable
bond portfolios for over a decade, and has specific expertise in mortgage-backed
securities. Prior to joining Wells Fargo Bank, in early 1988, he was a senior
portfolio manager for Benham Capital Management Group. Mr. Single received his
B.S. from Springfield College.
Mr. Mark Kraschel has been responsible for the day-to-day management of the
portfolio of the Short-Intermediate U.S. Government Income Fund since October
1993. He has also been responsible for the day-to-day management of the
portfolio of the Ginnie Mae Fund since May 1, 1995. He has specialized in
short-term bond investment applications for over a decade. He joined Wells Fargo
Bank in 1988 after five years in fixed-income management at First Boston
Corporation. Mr. Kraschel holds a B.S. in business administration from the
University of Oregon and an M.B.A. in finance from the University of San
Francisco.
Mr. Scott Smith assumed responsibility as a co-portfolio manager for the
day-to-day management of the Intermediate Bond Fund as of the commencement of
operations of the Fund. Mr. Smith has also been responsible for the day-to-day
management of the portfolio of the Short-Intermediate U.S. Government Income
Fund since 1993 and has been responsible for the management of the portfolio of
the Ginnie Mae Fund since May 1, 1995. He joined Wells Fargo Bank in 1988 as a
taxable money market portfolio specialist. Currently, Mr. Smith holds the
position of liquidity management specialist/portfolio manager with Wells Fargo
Bank. His experience includes a position with a private money management firm
with mutual fund investment operations. Mr. Smith holds a B.A. degree from the
University of San Diego and is a Chartered Financial Analyst.
Morrison & Foerster LLP, counsel to the Company and special counsel to Wells
Fargo Bank has advised the Company and Wells Fargo Bank that Wells Fargo Bank
and its affiliates may perform the services contemplated by the Advisory
Contracts and this Prospectus without violation of the Glass-Steagall Act. Such
counsel has pointed out, however, that there are no controlling judicial or
administrative interpretations or decisions and that future judicial or
administrative interpretations of, or decisions relating to, present federal or
state statutes, including the Glass-Steagall Act, and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as future changes in such statutes, regulations and judicial or
PROSPECTUS 26
<PAGE> 196
administrative decisions or interpretations, could prevent such entities from
continuing to perform, in whole or in part, such services. If any such entity
were prohibited from performing any such services, it is expected that new
agreements would be proposed or entered into with another entity or entities
qualified to perform such services.
Stephens is the Fund's sponsor and administrator and distributes the Fund's
shares. Stephens is a full service broker/dealer and investment advisory firm
located at 111 Center Street, Little Rock, Arkansas 72201. Stephens and its
predecessor have been providing securities and investment services for more than
60 years. Additionally, they have been providing discretionary portfolio
management services since 1983. Stephens currently manages investment portfolios
for pension and profit sharing plans, individual investors, foundations,
insurance companies and university endowments.
INVESTING IN THE FUNDS
OPENING AN ACCOUNT
You can buy shares in either Fund in one of the several ways described below.
You must complete and sign an Account Application to open an account. Additional
documentation may be required from corporations, associations and certain
fiduciaries. Do not mail cash. If you have any questions or need extra forms,
please call 1-800-222-8222.
After an application has been processed and an account has been established,
subsequent purchases of different funds of the Company under the same umbrella
account do not require the completion of additional applications. A separate
application must be processed for each different umbrella account number (even
if the registration is the same). Call the number on your confirmation statement
to obtain information about what is required to change registration.
To invest in the Funds through tax-deferred retirement plans through which the
Fund is available, please contact a shareholder servicing agent or a selling
agent to receive information and the required separate application. See
"Tax-Deferred Retirement Plans" below.
The Company or Stephens may make the Prospectus available in an electronic
format. Upon receipt of a request from you or your representative, the Company
or Stephens will transmit or cause to be transmitted promptly, without charge, a
paper copy of the electronic Prospectus.
27 PROSPECTUS
<PAGE> 197
SHARE VALUE
The value of a share is its "net asset value" or NAV. Wells Fargo Bank
calculates the NAV of the shares of each Fund or class on each Business Day (as
defined below) as of the close of regular trading on the New York Stock Exchange
("NYSE") (referred to hereinafter as "the close of the NYSE"), which is
currently 1:00 p.m. (Pacific time). The NAV per share for each class of a Fund
is computed by dividing the value of the Fund's assets allocable to a particular
class, less the liabilities charged to that class by the total number of the
outstanding shares of that class. All expenses, including fees paid to the
investment adviser and administrator, are accrued daily and taken into account
for the purpose of computing the NAV of a share of each class is expected to
fluctuate daily.
Shares may be purchased on any day the Funds are open for business. The Funds
are open for business each day the NYSE is open for trading (a "Business Day").
Currently, the NYSE is closed on New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day
(each a "Holiday"). When any Holiday falls on a weekend, the NYSE is closed on
the weekday immediately before or after such Holiday.
Except for debt obligations with remaining maturities of 60 days or less,
which are valued at amortized cost, the Fund's other assets are valued at
current market prices, or if such prices are not readily available, at fair
value as determined in good faith by the Company's Board of Directors. Prices
used for such valuations may be provided by independent pricing services.
HOW TO BUY SHARES
Class A and Class B shares of the Funds are offered continuously at the
applicable offering price (the NAV plus any applicable sales charge) next
determined after a purchase order is received in the form specified for the
purchase method being used, as described in the following sections. Payment for
shares purchased through a selling agent is not due from the selling agent until
the settlement date, normally three Business Days after the order is placed. The
selling agent is responsible for forwarding payment for shares being purchased
to a Fund promptly. Payment must accompany orders placed directly through the
transfer agent.
Payments for shares of each Fund will be invested in full and fractional
shares of the Fund at the applicable offering price. If shares are purchased by
a check that does not clear, the Company reserves the right to cancel the
purchase and hold the investor responsible for any losses or fees incurred. In
addition, the Company may hold payment on any redemption until reasonably
satisfied that your investments made by check have been collected (which may
take up to 10 days).
The minimum initial investment is generally $1,000. The minimum investment
amounts, however are $100 through the AutoSaver Plan (described below) and $250
for
PROSPECTUS 28
<PAGE> 198
any tax-deferred retirement account for which Wells Fargo Bank serves as trustee
or custodian under a prototype trust approved by the Internal Revenue Service
("IRS") (a "Plan Account"). Generally all subsequent investments must be made in
amounts of $100 or more. Where Fund shares are acquired in exchange for shares
of another fund in the Stagecoach Family of Funds, the minimum initial
investment amount applicable to the shares being exchanged generally carries
over. If the value of your investment in shares of the fund from which you are
exchanging has been reduced below the minimum initial investment amount by
changes in market conditions or sales charges (and not by redemptions), you may
carry over the lesser amount into one of the Funds. Plan Accounts that invest in
the Fund through Wells Fargo ExpressInvest(TM) (available to certain Wells Fargo
tax-deferred retirement plans) are not subject to the minimum initial or
subsequent investment amount requirements. In addition, the minimum initial or
subsequent purchase amount requirements may be waived or lowered for investments
effected on a group basis by certain entities and their employees, such as
pursuant to a payroll deduction or other accumulation plan. If you have
questions regarding purchases of shares or ExpressInvest, please call
1-800-222-8222 or contact a shareholder servicing agent or selling agent. For
additional information on tax-deferred accounts, please refer to "Investing in
the Fund -- Tax-Deferred Retirement Plans" or contact a shareholder servicing
agent or selling agent.
29 PROSPECTUS
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SALES CHARGES
Set forth below is a Front-end Sales Charge Schedule listing the front-end
sales charges applicable to purchases of the Funds Class A shares. As shown
below, reductions in the rate of front-end sales charges ("Volume Discounts")
are available as you purchase additional Class A shares (contingent-deferred
sales charges applicable to Class B shares are described below). You should
consider the front-end sales charge information set forth below and the other
information contained in this Prospectus when making your investment decisions.
The following is the Front-end Sales Charge Schedule for purchasing Class A
shares of the Ginnie Mae and Intermediate Bond Funds:
FRONT-END SALES CHARGE SCHEDULE --
CLASS A SHARES
<TABLE>
<CAPTION>
FRONT-END FRONT-END DEALER
SALES CHARGE SALES CHARGE ALLOWANCE
AS % OF AS % OF NET AS % OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
- ----------------------------- -------------- --------------- --------------
<S> <C> <C> <C>
Less than $50,000............ 4.50% 4.71% 4.00%
$50,000 up to $99,999........ 4.00 4.17 3.55
$100,000 up to $249,999...... 3.50 3.63 3.125
$250,000 up to $499,999...... 3.00 3.09 2.65
$500,000 up to $999,999...... 2.00 2.04 1.75
$1,000,000 and over.......... 1.00 1.01 0.85
</TABLE>
PROSPECTUS 30
<PAGE> 200
The following is the Front-end Sales Charge Schedule for purchasing Class A
shares of the Short-Intermediate U.S. Government Income Fund:
FRONT-END SALES CHARGE SCHEDULE --
CLASS A SHARES
<TABLE>
<CAPTION>
FRONT-END FRONT-END DEALER
SALES CHARGE SALES CHARGE ALLOWANCE
AS % OF AS % OF NET AS % OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
- ----------------------------- -------------- --------------- --------------
<S> <C> <C> <C>
Less than $100,000........... 3.00% 3.09% 2.65%
$100,000 up to $249,999...... 2.25 2.30 2.00
$250,000 up to $599,999...... 1.50 1.52 1.30
$600,000 and over............ 0.60 0.60 0.50
</TABLE>
Class B shares of the Ginnie Mae and Intermediate Bond Funds are not subject
to a front-end sales charge. Class B shares that are redeemed within one, two,
three or four years from the receipt of a purchase order affecting such shares
are subject to a contingent-deferred sales charge equal to 3.00%, 2.00%, 1.00%
or 1.00%, respectively, of the dollar amount equal to the lesser of the NAV at
the time of purchase of the shares being redeemed or the NAV of such shares at
the time of redemption (the "NAV Amount"). See "Investing in the
Funds -- Contingent Deferred Sales Charges -- Class B Shares."
If Class A shares are purchased through a selling agent, Stephens reallows the
portion of the front-end sales charge shown above as the Dealer Allowance.
Stephens also compensates selling agents for sales of Class B shares and is then
reimbursed out of Rule 12b-1 fees and contingent-deferred sales charges
applicable to such shares. When shares are purchased directly through the
transfer agent and no selling agent is involved with the purchase, the entire
sales charge is paid to Stephens.
A selling agent or shareholder servicing agent and any other person entitled
to receive compensation for selling or servicing shares may receive different
compensation for selling or servicing Class A shares as compared with Class B
shares of the same fund.
REDUCED SALES CHARGE -- CLASS A SHARES
Because Class B shares are not subject to a front-end sales charge, the amount
of Class B shares you hold is not considered in determining any reduced sales
charges on Class A shares described below.
31 PROSPECTUS
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Volume Discounts
The Volume Discounts described in the Front-end Sales Charge Schedule are
available to you based on the combined dollar amount you invest in Class A
shares of one or more of the Company's funds that assess a front-end sales
charge (the "Load Funds").
Right of Accumulation
The Right of Accumulation allows you to combine the amount you invest in a
Funds Class A shares with the total NAV of Class A shares in other Load Funds to
determine reduced front-end sales charges in accordance with the above Front-end
Sales Charge Schedule. In addition, you also may combine the total NAV of Class
A shares that you currently have invested in any other mutual fund that assesses
a front-end sales charge and is advised or sub-advised by Wells Fargo Bank and
sponsored by Stephens. For example, if you own Class A shares of the Load Funds
with an aggregate NAV of $90,000 and you invest an additional $20,000 in Class A
shares of a Load Fund, the front-end sales charge on the additional $20,000
investment would be 3.50% of the applicable offering price for the Ginnie Mae
and Intermediate Bond Funds and 2.25% for the Short-Intermediate U.S. Government
Income Fund. To obtain such a discount, you must provide sufficient information
at the time of your purchase to verify that your purchase qualifies for the
reduced front-end sales charge. Confirmation of the order is subject to such
verification. The Right of Accumulation may be modified or discontinued at any
time without prior notice on all subsequent shares purchased.
Letter of Intent
A Letter of Intent allows you to purchase a Funds' Class A shares of the Funds
over a 13-month period at a reduced front-end sales charge based on the total
amount you intend to purchase plus the total NAV of Class A shares in any of the
Load Funds you already own. Each investment you make during the period may be
made at the reduced front-end sales charge that is applicable to the total
amount you intend to invest. If you do not invest the total amount within the
period, you must pay the difference between the higher front-end sales charge
rate that would have been applicable to the purchases you made and the reduced
front-end sales charge rate you have paid. The minimum initial investment for a
Letter of Intent is 5% of the total amount you intend to purchase, as specified
in the Letter. Class A shares of a Fund equal to 5% of the amount you intend to
invest will be held in escrow and, if you do not pay the difference within 20
days following the mailing of a request, a sufficient amount of escrowed shares
will be redeemed for payment of the additional front-end sales charge. Dividends
and capital gains paid on such shares held in escrow are reinvested in
additional Fund shares.
PROSPECTUS 32
<PAGE> 202
Reinvestment
You may reinvest proceeds from a redemption of a Funds Class A shares in Class
A shares of the Fund or in shares of another of the Company's funds registered
in your state of residence at NAV, without payment of a front-end sales charge,
within 120 days after your redemption. However, if the other investment
portfolio charges a front-end sales charge that is higher than the one you paid
in connection with the shares you have redeemed, you must pay the difference
between the dollar amount of the two front-end sales charges. You may reinvest
at this NAV price up to the total amount of the redemption proceeds. A written
purchase order for the shares must be delivered to the Company, a selling agent,
a shareholder servicing agent, or the transfer agent at the time of
reinvestment.
If you realized a gain on your redemption, such gain is ordinarily taxable,
notwithstanding your reinvestment. If you realized a loss on your redemption,
your reinvestment may cause some or all of the loss to be disallowed as a
federal income tax deduction, depending on the number of shares you purchase by
reinvestment and the period of time that elapses after the redemption and which
funds purchased. Although for federal income tax purposes, the amount disallowed
is added to the cost of the shares you acquire upon the reinvestment.
Reductions for Families or Fiduciaries
Reductions in front-end sales charges apply to purchases by a single "person,"
including an individual, members of a family unit, consisting of a husband, wife
and children under the age of 21 purchasing securities for their own account, or
a trustee or other fiduciary purchasing for a single fiduciary account or single
trust estate.
Waivers for Investments of Proceeds From Other Investments
Purchases may be made at NAV, without payment of a front-end sales charge, to
the extent that: (i) you are investing proceeds from a redemption of shares of
another open-end investment company, (ii) on which you paid a front-end sales
charge, and (iii) such redemption occurred within thirty (30) days prior to the
date of the purchase order. You must notify the Fund and/or the transfer agent
at the time you place such purchase order of your eligibility for the waiver of
front-end sales charges and provide satisfactory evidence thereof (e.g., a
confirmation of the redemption and the sales charges paid). Such purchases may
not be made at net asset value to the extent the proceeds are from a redemption
of shares of another open-end investment company that is affiliated with the
Company on which you paid a contingent-deferred sales charge upon redemption.
33 PROSPECTUS
<PAGE> 203
Reductions for Qualified Groups
Reductions in front-end sales charges also apply to purchases by individual
members of a "qualified group." The reductions are based on the aggregate dollar
amount of Class A shares purchased by all members of the qualified group. For
purposes of this paragraph, a qualified group consists of a "company", as
defined in the 1940 Act, which has been in existence for more than six months
and which has a primary purpose other than acquiring Fund shares at a reduced
sales charge, and the "related parties" of such company. For purposes of this
paragraph, a "related party" of a company is: (i) any individual or other
company who directly or indirectly owns, controls or has the power to vote 5%
percent or more of the outstanding voting securities of such company; (ii) any
other company of which such company directly or indirectly owns, controls or has
the power to vote 5% or more of its outstanding voting securities; (iii) any
other company under common control with such company; (iv) any executive
officer, director or partner of such company or of a related party; and (v) any
partnership of which such company is a partner. Investors seeking to rely on
their membership in a qualified group to purchase shares at a reduced sales load
must provide evidence satisfactory to the transfer agent of the existence of a
bona fide qualified group and their membership therein.
Waivers for Certain Parties
The Funds' Class A shares may be purchased at NAV, without payment of a
front-end sales charge, by directors, officers and employees (and their spouses,
parents, children and siblings) of the Company, Stephens, its affiliates and
selling agents. Shares of a Fund also may be purchased at NAV, without payment
of a front-end sales charge, by present and retired directors, officers and
employees (and their spouses, parents, children and siblings) of Wells Fargo
Bank and its affiliates. The Funds' Class A shares also may be purchased at NAV,
without a front-end sales charge, by employee benefit and thrift plans for such
persons and by any investment advisory, trust or other fiduciary account,
including a Plan Account, that is maintained, managed or advised by Wells Fargo
Bank or its affiliates. In addition, you may purchase shares of a Fund at NAV,
without payment of a front-end sales charge, with proceeds from a required
minimum distribution from any Individual Retirement Account ("IRA"), Simplified
Employee Pension Plan or other self-directed retirement plan for which Wells
Fargo Bank serves as trustee, provided that the proceeds are invested in the
Fund within 30 days of such distribution and such distribution is required as a
result of reaching age 70 1/2.
CONTINGENT DEFERRED SALES CHARGE -- CLASS B SHARES
Class B shares are not subject to front-end sales charges but may be subject
to contingent-deferred sales charges. Class B shares that are redeemed within
one, two, three or four years from the receipt of a purchase order for such
shares are subject to a contingent-deferred sales charge equal to 3.00%, 2.00%,
1.00% and 1.00%, respectively,
PROSPECTUS 34
<PAGE> 204
of the dollar amount equal to the lesser of the NAV at the time of purchase of
the shares being redeemed or the NAV of such shares at the time of redemption.
Contingent deferred sales charges are not imposed on amounts representing
increases in NAV above the NAV at the time of purchase and are not assessed on
Class B shares purchased through reinvestment of dividends or capital gains
distributions. Class B shares automatically convert into Class A shares of the
same Fund six years after the end of the month in which such Class B shares were
acquired, and such conversions are ordinarily not taxable.
The amount of any contingent-deferred sales charge paid upon redemption of
Class B shares is determined in a manner designed to result in the lowest sales
charge rate being assessed. When a redemption request is made, Class B shares
acquired pursuant to the reinvestment of dividends and capital-gain
distributions are considered to be redeemed first. After this, Class B shares
are considered redeemed on a first-in, first-out basis so that Class B shares
held for a longer period of time are considered redeemed prior to more recently
acquired Class B shares. For a discussion of the interaction between the
optional Exchange Privilege and contingent-deferred sales charges on Class B
shares, see "Additional Shareholder Services -- Exchange Privilege."
Contingent deferred sales charges are waived on redemptions of Class B shares
(i) following the death or disability (as defined in the Internal Revenue Code
of 1986, as amended (the "Code")) of a shareholder, (ii) to the extent that the
redemption represents a scheduled distribution from an IRA or other retirement
plan to a shareholder who has reached age 59 1/2, (iii) effected pursuant to the
Company's right to liquidate a shareholder's account if the aggregate NAV of the
shareholder's account is less than the minimum account size, or (iv) in
connection with the combination of the Company with any other registered
investment company by a merger, acquisition of assets, or any other transaction.
In deciding whether to purchase Class A or Class B shares, you should compare
the fees assessed on Class A shares (including front-end sales charges) against
those assessed on Class B shares (including potential contingent-deferred sales
charges and higher Rule 12b-1 fees than Class A shares) in light of the amount
to be invested and the anticipated time that the shares will be owned. If your
purchase amount would qualify you for a reduced sales charge on Class A shares,
you should consider carefully whether you would pay lower fees ultimately on
Class A or Class B shares. See "Investing In The Fund -- Sales Charges" for
information on reduced sales charges for Class A shares.
You may buy shares on any Business Day by any of the methods described below.
The Company reserves the right to reject any purchase order or suspend sales at
any time. Payment for orders that are not received is returned after prompt
inquiry. The issuance of shares is recorded on the Company's books, and share
certificates are not issued.
35 PROSPECTUS
<PAGE> 205
INITIAL PURCHASE BY WIRE
1. Complete an Account Application.
2. Instruct the wiring bank to transmit the specified amount in federal funds
($1,000 or more) to:
Wells Fargo Bank, N.A.
San Francisco, California
Bank Routing Number: 121000248
Wire Purchase Account Number: 4068-000587
Attention: Stagecoach Funds (Name of Fund) (designate Class A or B)
Account Name(s): Name(s) in which to be registered
Account Number: (if investing into an existing account)
3. A completed Account Application should be mailed, or sent by telefacsimile
with the original subsequently mailed, to the following address immediately
after funds are wired and must be received and accepted by the transfer
agent before an account can be opened:
Wells Fargo Bank, N.A.
Stagecoach Shareholder Services
P.O. Box 7066
San Francisco, California 94120-7066
Telefacsimile: 1-415-543-9538
4. Share purchases are effected at the public offering price or, in the case of
Class B shares, at the NAV next determined after the Account Application is
received and accepted.
INITIAL PURCHASES BY MAIL
1. Complete an Account Application. Indicate the services to be used.
2. Mail the Account Application and a check for $1,000 or more payable to
"Stagecoach Funds (Name of Fund) (designate the applicable class)" to the
address set forth in "Initial Purchases by Wire."
3. Share purchases are effected at the public offering price or, in the case of
Class B shares, at the NAV next determined after the Account Application is
received and accepted.
AUTOSAVER PLAN PURCHASES
The Company's AutoSaver Plan provides you with a convenient way to establish
and automatically add to your Fund account on a monthly basis. To participate in
the AutoSaver Plan, you must specify an amount ($100 or more) to be withdrawn
PROSPECTUS 36
<PAGE> 206
automatically by the transfer agent on a monthly basis from an account with a
bank that is designated in your Account Application and is approved by the
transfer agent ("Approved Bank Account"). You may open an Approved Bank Account
with Wells Fargo Bank. The transfer agent withdraws and uses this amount to
purchase specified shares of the designated Fund and class on your behalf each
month on or about the day that you have selected, or, if you have not selected a
day, on or about the 20th day of each month. If you hold shares through a
brokerage account, the AutoSaver Plan will comply with the terms of your
brokerage agreement. The transfer agent requires a minimum of ten (10) Business
Days to implement your AutoSaver Plan purchases or to process your request to
change the day on which the AutoSaver purchase is processed. If you hold shares
through a brokerage account, your AutoSaver Plan will comply with the terms of
your brokerage agreement. There are no separate fees charged to you by the
Company for participating in the AutoSaver Plan.
You may change your investment amount, the date on which your AutoSaver
purchase is effected, suspend purchases or terminate your election at any time
by notifying the transfer agent at least five (5) Business Days prior to any
scheduled transaction.
TAX-DEFERRED RETIREMENT PLANS
You may be entitled to invest in the Funds through a Plan Account or other
tax-deferred retirement plan. Contact a shareholder servicing agent or a selling
agent (such as Wells Fargo Bank) for materials describing Plan Accounts
available through it, and the benefits, provisions, and fees of such Plan
Accounts. The minimum initial investment amount for Fund shares acquired through
a Plan Account is $250 (the minimum initial investment is not applicable if you
participate in ExpressInvest(TM) through a Plan Account).
Pursuant to the Code, an individual who is not an active participant (and who
do not have a spouse who is an active participant) in certain types of
retirement plans ("qualified retirement plans") may deduct contributions to an
IRA, up to specified limits. Investment earnings in the IRA will be tax-deferred
until withdrawn, at which time the individual may be in a lower tax bracket.
The maximum annual deductible contribution to an IRA for individuals under age
70 1/2 is 100% of includible compensation up to a maximum of (i) $2,000 for
single individuals; (ii) $4,000 for a married couple when both spouses earn
income; and (iii) $2,250 (increased to $4,000 for tax years beginning after
December 31, 1996) when one spouse earns, or elects for IRA purposes to be
treated as earning, no income (together the "IRA contribution limits").
The IRA deduction is also available for single individual taxpayers and
married couples who are active participants in qualified retirement plans but
who have adjusted gross incomes that do not exceed certain specified limits. If
their adjusted gross income
37 PROSPECTUS
<PAGE> 207
exceeds these limits, the amount of the deductible contribution is phased down
and eventually eliminated.
Any individual who works may make nondeductible contributions to an IRA in
addition to any deductible contributions. Total aggregate deductible and
nondeductible contributions are limited to the IRA contribution limits discussed
above. Aggregate contributions in excess of the applicable IRA contribution
limit are "excess contributions." In addition, contributions made to an IRA for
the year in which an individual attains the age of 70 1/2, or any year
thereafter, are also excess contributions. Excess contributions are subject to a
6% excise tax penalty that is charged each year that the excess contribution
remains in the IRA.
An employer may also contribute to an individual's IRA as part of a Simplified
Employee Pension Plan, known as a "SEP-IRA," established prior to January 1,
1996, or a Savings Incentive Match Plan for Employees, or "SIMPLE plan,"
established after December 31, 1996, both through a shareholder servicing agent
or a selling agent. Participating employers may make an annual contribution to
each employee through a SEP-IRA in an amount up to the lesser of 15% of such
employee's earned income or $30,000, subject to certain provisions of the Code.
Under a SIMPLE plan, an employee may contribute up to $6,000 annually to his or
her own IRA, and the employer must generally match such contributions up to 3%
of the employee's annual salary. Alternatively, the employer may elect under the
SIMPLE formula to contribute to the employee's IRA 2% of the lesser of his or
her earned income or $150,000. In any case, all contributions and investment
earnings will be tax-deferred until withdrawn.
The foregoing discussion regarding IRAs is based on the Code and federal
regulations in effect as of the date of this Prospectus and summarizes only some
of the important federal tax considerations generally affecting IRA
contributions made by individuals or their employers. It is not intended as a
substitute for careful tax planning. Investors should consult their tax advisors
with respect to their specific tax situations as well as with respect to state
and local taxes. Further federal tax information is contained under the heading
"Taxes" in this Prospectus and in the SAI.
A shareholder servicing agent or selling agent also may offer other types of
tax-deferred or tax-advantaged plans, including a Keogh retirement plan for
self-employed professional persons, sole proprietors and partnerships.
Application materials for opening a tax-deferred retirement plan can be
obtained from a shareholder servicing agent or a selling agent. Return your
completed tax-deferred retirement plan application to your shareholder servicing
agent or a selling agent for approval and processing. If your tax-deferred
retirement plan application is incomplete or improperly filled out, there may be
a delay before a Fund account is opened. You should ask your shareholder
servicing agent or selling agent about the investment options available to your
tax-deferred retirement plan, since some of the funds in the
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Stagecoach Family of Funds may be unavailable or inappropriate as options.
Moreover, certain features described herein, such as the AutoSaver Plan and the
Systematic Withdrawal Plan, may not be available to individuals or entities who
invest through a tax-deferred retirement plan.
ADDITIONAL PURCHASES
You may make additional purchases of $100 or more by instructing a Fund's
transfer agent to debit your designated Approved Bank Account, by wire by
instructing the wiring bank to transmit the specified amount as directed above
for initial purchases, or by mail with a check payable to "Stagecoach Funds
(name of Fund) (designate the applicable class)" to the address set forth under
"Initial Purchases by Wire." Write your Fund account number on the check and
include the detachable stub from your Account Statement or a letter providing
your Fund account number.
PURCHASES THROUGH SELLING AGENTS
You may place a purchase order for Fund shares through a broker/dealer or
financial institution that has entered into a selling agreement with Stephens,
as the Funds Distributor ("Selling Agent"). If your order is placed by the close
of the NYSE, the purchase order is executed on the same day if the order is
received by the transfer agent before the close of business. If your purchase
order is received by a Selling Agent after the close of the NYSE or by the
transfer agent after the close of business, then your purchase order is executed
on the next Business Day after the day your order is placed. The Selling Agent
is responsible for the prompt transmission of your purchase order to the
Company. Because payment for shares of the Fund is not due until settlement
date, the Selling Agent might benefit from the temporary use of your payment. A
financial institution that acts as a Selling Agent, shareholder servicing agent
or in certain other capacities may be required to register as a dealer pursuant
to applicable state securities laws, which may differ from federal law and any
interpretations expressed herein.
PURCHASES THROUGH SHAREHOLDER SERVICING AGENTS
Purchase orders for Fund shares may be transmitted to the transfer agent
through any entity that has entered into a shareholder servicing agreement with
the Fund ("Shareholder Servicing Agent"), such as Wells Fargo Bank. See
"Management, Distribution and Servicing Fees -- Shareholder Servicing Agent." A
Shareholder Servicing Agent may transmit your purchase order to the transfer
agent, including a purchase order for which payment is to be transferred from
your Approved Bank Account or wired from a financial institution. If your order
is transmitted by a Shareholder Servicing Agent on your behalf to the transfer
agent before the close of the NYSE, the purchase order is executed on the same
day. If your Shareholder Servicing Agent transmits your purchase order to the
transfer agent after the close of the NYSE, then your
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order is executed on the next Business Day after the day your order is received.
The Shareholder Servicing Agent is responsible for the prompt transmission of
your purchase order to the transfer agent.
STATEMENTS AND REPORTS
The Company, or a Shareholder Servicing Agent on its behalf, will typically
send you a confirmation or statement of your account after every transaction
that affects your share balance or your Fund account registration. A statement
with tax information for each year is mailed to you by January 31 of the
following year and also is filed with the IRS. At least twice a year, you will
receive financial statements.
DIVIDENDS
Dividends from net investment income of the Intermediate Bond, Ginnie Mae and
Short-Intermediate U.S. Government Income Funds are declared daily and paid
monthly. Dividends declared in a month generally are paid on the last Business
Day of the month. The Funds intend to distribute any capital gains at least
annually. You have several options for receiving dividends and capital-gain
distributions. They are discussed under "Additional Shareholder
Services -- Dividend and Distribution Options" below.
Dividends and capital-gain distributions have the effect of reducing the NAV
per share by the amount distributed. Although dividends and distributions paid
to you on newly issued shares shortly after your purchase would represent, in
substance, a return of your capital, the dividends and distributions would
ordinarily be taxable to you. All expenses, such as applicable Rule 12b-1 fees,
state securities registration fees and transfer agency fees, that are
attributable to a particular class also may affect the relative dividends and/or
capital gains distributions of Class A and Class B shares.
Dividends for a Saturday, Sunday or Holiday are declared payable to
shareholders of record as of the preceding Business Day.
If you redeem shares before the dividend payment date, any dividends credited
to you are paid on the following dividend payment date unless you have redeemed
all shares in your account, in which case you will receive your accrued
dividends together with your redemption proceeds.
HOW TO REDEEM SHARES
You may redeem Fund shares on any Business Day. Your shares are redeemed at
the NAV per share next calculated after the Company has received your redemption
request in proper form. Redemption proceeds may be more or less than the amount
invested
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and, therefore, a redemption may result in a recognized gain or loss for federal
and state income tax purposes. The Company ordinarily remits redemption
proceeds, net of any contingent-deferred sales charge applicable to Class B
shares (the "net redemption proceeds"), within seven days after your redemption
order is received in proper form, unless the SEC permits a longer period under
extraordinary circumstances. Such extraordinary circumstances could include a
period during which an emergency exists as a result of which (a) disposal by a
Fund of securities owned by it is not reasonably practicable or (b) it is not
reasonably practicable for a Fund fairly to determine the value of its net
assets, or a period during which the SEC by order permits deferral of
redemptions for the protection of the security holders of such Fund. In
addition, the Funds may hold payment on your redemptions until reasonably
satisfied that your investments made by check have been collected (which can
take up to 10 days from the purchase date). To ensure acceptance of your
redemption request, please follow the procedures described below. In addition,
the Company reserves the right to impose charges for wiring redemption proceeds.
Due to the high cost of maintaining Fund accounts with small balances, the
Company reserves the right to close your account and send you the proceeds if
the balance falls below the applicable minimum balance because of a redemption
(including a redemption of shares of the Fund after you have made only the
applicable minimum initial investment). However, you will be given 30 days'
notice to make an additional investment to increase your account balance to the
required minimum balance. Plan Accounts are not subject to minimum Fund account
balance requirements. For a discussion of applicable minimum balance
requirements, see "Investing in the Fund -- How To Buy Shares."
All redemptions of shares generally are made in cash, except that the
commitment to redeem shares in cash extends only to redemption requests made by
each Fund shareholder during any 90-day period of up to the lesser of $250,000
or 1% of the net asset value of the Fund at the beginning of such period. This
commitment is irrevocable without the prior approval of the SEC and is a
fundamental policy of the Fund that may not be changed without shareholder
approval. In the case of redemption requests by shareholders in excess of such
amounts, the Board of Directors reserves the right to have the Fund make
payment, in whole or in part, in securities or other assets, in case of an
emergency or any time a cash distribution would impair the liquidity of the Fund
to the detriment of the existing shareholders. In this event, the securities
would be valued in the same manner as the securities of the Fund are valued. If
the recipient were to sell such securities, he or she would incur brokerage
costs in converting such securities to cash.
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REDEMPTIONS BY TELEPHONE
Telephone redemption or exchange privileges are made available to you
automatically upon opening an account, unless you specifically decline the
privileges. Telephone redemption privileges authorize the transfer agent to act
on telephone instructions from any person representing himself or herself to be
the investor and reasonably believed by the transfer agent to be genuine. The
Company requires the transfer agent to employ reasonable procedures, such as
requiring a form of personal identification, to confirm that instructions are
genuine and, if it does not follow such procedures, the Company and the transfer
agent may be liable for any losses due to unauthorized or fraudulent
instructions. Neither the Company nor the transfer agent will be liable for
following telephone instructions reasonably believed to be genuine.
REDEMPTIONS BY MAIL
1. Write a letter of instruction. Indicate the class and the dollar amount or
number of Fund shares you want to redeem. Refer to your Fund account number
and give your taxpayer identification number ("TIN"), which is generally your
social security or employer identification number.
2. Sign the letter in exactly the same way the account is registered. If there
is more than one owner of the shares, all must sign.
3. Signature guarantees are not required for redemption requests unless
redemption proceeds of $5,000 or more are to be paid to someone other than
you at your address of record or to your Approved Bank Account, or other
unusual circumstances exist that cause the transfer agent to determine that a
signature guarantee is necessary or prudent to protect against unauthorized
redemption requests. If required, a signature must be guaranteed by an
"eligible guarantor institution", which includes a commercial bank that is an
FDIC member, a trust company, a member firm of a domestic stock exchange, a
savings association, or a credit union that is authorized by its charter to
provide a signature guarantee. Signature guarantees by notaries public are
not acceptable. Further documentation may be requested from corporations,
administrators, executors, personal representatives, trustees or custodians.
4. Mail your letter to the transfer agent at the mailing address set forth
under "Investing in the Fund -- Initial Purchases by Wire."
Unless other instructions are given in proper form, a check for your net
redemption proceeds is sent to your address of record.
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EXPEDITED REDEMPTIONS BY MAIL OR TELEPHONE
You may request an expedited redemption of Fund shares by letter, in which
case your receipt of redemption proceeds, but not a Fund's receipt of your
redemption request, would be expedited. In addition, you also may request an
expedited redemption of shares of a Fund by telephone on any Business Day, in
which case both your receipt of redemption proceeds and a Fund's receipt of your
redemption request would be expedited. You may request expedited redemption by
telephone only if the total value of the shares redeemed is $100 or more.
You may request expedited redemption by telephone by calling the transfer
agent at the telephone number listed on your transaction confirmation or by
calling 1-800-222-8222.
You may request expedited redemption by mail by mailing your expedited
redemption request to the transfer agent at the mailing address set forth under
"Investing in the Fund -- Initial Purchases by Wire."
Upon request, net redemption proceeds of your expedited redemptions of $5,000
or more are wired or credited to your Approved Bank Account or wired to the
Selling Agent designated in your Account Application. The Company reserves the
right to impose a charge for wiring redemption proceeds. When proceeds of your
expedited redemption are to be paid to someone else, to an address other than
that of record, or to an Approved Bank Account or Selling Agent that you have
not predesignated in your Account Application, your expedited redemption request
must be made by letter and the signature(s) on the letter may be required to be
guaranteed, regardless of the amount of the redemption.
If your expedited redemption request is received by the transfer agent by the
close of the NYSE on a Business Day, your redemption proceeds are transmitted to
your designated Approved Bank Account or Selling Agent on the next Business Day
(assuming your investment check has cleared as described above), absent
extraordinary circumstances. Extraordinary circumstances could include those
described above as potentially delaying redemptions and also could include
situations involving an unusually heavy volume of wire transfer orders on a
national or regional basis or communication or transmittal delays that could
cause a brief delay in the wiring or crediting of funds. A check for net
redemption proceeds of less than $5,000 is mailed to your address of record or,
at your election, credited to your designated Approved Bank Account.
During periods of drastic economic or market activity or changes, you may
experience problems implementing an expedited redemption by telephone. In the
event you are unable to reach the transfer agent by telephone, you should
consider using overnight mail to implement an expedited redemption. The Company
reserves the right to modify or terminate the expedited telephone redemption
privilege at any time.
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SYSTEMATIC WITHDRAWAL PLAN
The Company's Systematic Withdrawal Plan provides you with a convenient way to
have Fund shares redeemed from your account and the net redemption proceeds
distributed to you on a monthly basis. You may participate in the Systematic
Withdrawal Plan only if you have a Fund account valued at $10,000 or more as of
the date of your election to participate, your dividends and capital gain
distributions are being reinvested automatically and you are not participating
in the AutoSaver Plan at any time while participating in the Systematic
Withdrawal Plan. You specify an amount ($100 or more) to be distributed by check
to your address of record or deposited in your designated Approved Bank Account.
The transfer agent redeems sufficient shares and mails or deposits your net
redemption proceeds as instructed on or about the fifth Business Day prior to
the end of each month. There are no separate fees charged to you by the Company
for participating in the Systematic Withdrawal Plan. However, you should not
participate in the Systematic Withdrawal Plan if you also are purchasing shares
of a Fund that are subject to a front-end sales charges.
It may take up to ten (10) days after receipt of your request to establish
your participation in the Systematic Withdrawal Plan. You may change your
withdrawal amount, suspend withdrawals or terminate your election at any time by
notifying the transfer agent at least five (5) Business Days prior to any
scheduled transaction. Your participation in the Systematic Withdrawal Plan is
terminated automatically if your Fund account is closed or, in some cases, if
your Approved Bank Account is closed.
REDEMPTIONS THROUGH SELLING AGENTS
If your redemption order is received by a Selling Agent before the close of
the NYSE and received by the transfer agent before the close of business on the
same day, the order is executed at the NAV determined as of the close of the
NYSE on that day. If your redemption order is received by a Selling Agent after
the close of the NYSE, or is not received by the transfer agent prior to the
close of business, your order is executed at the NAV determined as of the close
of the NYSE on the next Business Day. The Selling Agent is responsible for the
prompt transmission of your redemption order to the Company.
Unless you have made other arrangements with the Selling Agent and the
transfer agent has been informed of such arrangements, net redemption proceeds
of a redemption order made by you through a Selling Agent are credited to your
designated Approved Bank account. If no such account is designated, a check for
the net redemption proceeds is mailed to your address of record or, if such
address is no longer valid, the net redemption proceeds are credited to your
account with the Selling Agent. You may request a check from the Selling Agent
or may elect to retain the net redemption proceeds in such account. The Selling
Agent may charge you a service fee. In addition, it
PROSPECTUS 44
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may benefit from the use of your redemption proceeds until the check it issues
to you has cleared or until such proceeds have been disbursed or reinvested on
your behalf.
REDEMPTIONS THROUGH SHAREHOLDER SERVICING AGENTS
You may request a redemption of Fund shares through your Shareholder Servicing
Agent. Any redemption request made by telephone through your Shareholder
Servicing Agent must redeem shares with a total value equal to $100 or more. If
your redemption order is transmitted by the Shareholder Servicing Agent on your
behalf to the transfer agent before the close of the NYSE, the redemption order
is executed at the NAV determined as of the close of the NYSE on that day. If
your Shareholder Servicing Agent transmits your redemption order to the transfer
agent after the close of the NYSE, then your order is executed on the next
Business Day after the date your order is received. The Shareholder Servicing
Agent is responsible for the prompt transmission of your redemption order to the
Company.
Unless you have made other arrangements with your Shareholder Servicing Agent,
and the transfer agent has been informed of such arrangements, net redemption
proceeds of a redemption order made by you through your Shareholder Servicing
Agent are credited to your designated Approved Bank account. If no such account
is designated, a check for the net redemption proceeds is mailed to your address
of record or, if such address is no longer valid, the net redemption proceeds is
credited to your account with your Shareholder Servicing Agent or to another
account designated in your agreement with your Shareholder Servicing Agent. The
Shareholder Servicing Agent may charge you a service fee. In addition, it may
benefit from the use of your redemption proceeds until any check it issues for
you has cleared or until such proceeds have been disbursed or reinvested on your
behalf.
ADDITIONAL SHAREHOLDER SERVICES
The Company offers you a number of optional services. As noted above, you can
take advantage of the AutoSaver Plan, Tax-Deferred Retirement Plans, the
Systematic Withdrawal Plan, and Expedited Redemptions by Letter and Telephone.
In addition, you have several dividend and distribution payment options and an
exchange privilege, which are described below.
DIVIDEND AND DISTRIBUTION OPTIONS
When you fill out your Account Application, you can choose from the following
dividend and distribution options listed below. If you have questions about the
dividend and distribution options available to you, please call 1-800-222-8222.
45 PROSPECTUS
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A. The AUTOMATIC REINVESTMENT OPTION provides for the reinvestment of your
dividends and capital gain distributions in additional shares of the same class
of the Fund that paid such dividends or capital gain distributions. Dividends
and distributions declared in a month generally are reinvested in additional
shares at NAV on the last Business Day of such month. You are assigned this
option automatically if you make no choice on your Account Application.
B. The FUND PURCHASE OPTION lets you use your dividends and/or capital-gain
distributions from the Fund to purchase, at NAV, shares of another fund in the
Stagecoach Family of Funds with which you have an established account that has
met the applicable minimum initial investment requirement. Dividends and
distributions paid on Class A or Class B shares may be invested in Class A or
Class B shares, respectively, of another fund, in Retail shares of a fund
offered by another investment company in the Stagecoach Family of Funds, in
Class A shares of the Government Money Market Mutual, Money Market Mutual, Prime
Money Market Mutual or Treasury Money Market Mutual Funds or in shares of the
California Tax-Free Money Market Mutual or National Tax-Free Money Market Mutual
Funds (the California Tax-Free Money Market Mutual, Government Money Market
Mutual, Money Market Mutual, National Tax-Free Money Market Mutual, Prime Money
Market Mutual and Treasury Money Market Mutual Funds are, collectively the
"Money Market Mutual Funds"). Dividends and distributions paid on Class A shares
may also be invested in shares of a non-money market fund with a single class of
shares (a "single class fund"). Dividends and distributions paid on Class B
shares may not be invested in shares of a single class fund.
C. The AUTOMATIC CLEARING HOUSE OPTION permits you to have dividends and
capital-gain distributions deposited in your designated Approved Bank account.
In the event your Approved Bank Account is closed, and such distribution is
returned to the Funds' dividend disbursing agent, the distribution is reinvested
in your Fund account at the NAV next determined after the distribution has been
returned. In addition, your Automatic Clearing House Option is then converted to
the Automatic Reinvestment Option.
D. The CHECK PAYMENT OPTION lets you receive a check for all dividends and/or
capital gain distributions, which generally is mailed either to your designated
address or your Approved Bank Account shortly following declaration. If the U.S.
Postal Service cannot deliver your checks, or if your checks remain uncashed for
six months, those checks are reinvested in your Fund account at the NAV next
determined after the earlier of the date the checks have been returned to the
dividend disbursing agent or the date six months after the payment of such
dividend or distribution. In addition, your Check Payment Option is then
converted to the Automatic Reinvestment Option.
The Company forwards moneys to the dividend disbursing agent so that it may
issue you dividend checks under the Check Payment Option. The dividend
disbursing agent may benefit from the temporary use of such moneys until these
checks clear. The
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Company takes reasonable efforts to locate investors whose checks are returned
or uncashed after six months.
EXCHANGE PRIVILEGE
Wells Fargo Bank advises a variety of other funds, each with its own
investment objective and policies. The exchange privilege is a convenient way
for you to buy shares in the other funds of the Stagecoach Family of Funds that
are registered in your state of residence and allows you to respond to changes
in your investment and savings goals or in market conditions. Class A and Class
B shares of each Fund may be exchanged for Class A or Class B shares,
respectively, of another fund, for Class A shares of the Government Money Market
Mutual, Money Market Mutual, Prime Money Market Mutual or Treasury Money Market
Mutual Funds or for shares of the California Tax-Free Money Market Mutual or
National Tax-Free Money Market Mutual Funds. Class A shares may also be
exchanged for shares of a single class fund or for Retail Class shares of a fund
offered by another investment company in the Stagecoach Family of Funds.
Before making an exchange from the Fund into another fund of the Stagecoach
Family of Funds, please observe the following:
- Obtain and carefully read the prospectus of the fund into which you want to
exchange.
- If you exchange into another fund with a front-end sales charge, you must
pay the difference between that fund's sales charge and any sales charge you
already have paid in connection with the shares you are exchanging.
- If you exchange Class B shares for Class B shares of another fund, Class A
shares of the Government Money Market Mutual, Money Market Mutual, Prime
Money Market Mutual or Treasury Money Market Mutual Funds or shares of the
California Tax-Free Money Market Mutual or National Tax-Free Money Market
Mutual Funds, a contingent-deferred sales charge is not imposed upon the
exchange.
- Each exchange, in effect, represents the redemption of shares of one fund
and the purchase of shares of another, which may produce a gain or loss for
federal income tax purposes. A confirmation of each exchange transaction is
sent to you.
- The dollar amount of shares you exchange must meet the minimum initial
and/or subsequent investment amounts of the fund from which you are
exchanging. If the value of your investment in the fund from which you are
exchanging has been reduced below the minimum initial investment amount by
changes in market conditions or sales charges (and not by redemption), you
may carry over the lesser amount into the Fund you are acquiring.
- The Company reserves the right to limit the number of times shares may be
exchanged between funds, to reject any telephone exchange order, or
otherwise to modify or discontinue exchange privileges at any time. Under
SEC rules, subject to
47 PROSPECTUS
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limited exceptions, the Company must notify you 60 days before it modifies
or discontinues the exchange privilege.
- If you exchange Class B shares for Class B shares of another fund, Class A
shares of the Government Money Market Mutual, Money Market Mutual, Prime
Money Market Mutual or Treasury Money Market Mutual Funds or shares of the
California Tax-Free Money Market Mutual or National Tax-Free Money Market
Mutual Funds, any remaining period of time that the contingent-deferred
sales charge applicable to such shares is in effect is computed from the
time of initial purchase of the previously held shares. For example, if you
exchange a Fund's Class B shares for shares of the National Tax-Free Money
Market Mutual Fund and then redeem those shares of the National Tax-Free
Money Market Mutual Fund within four years of the initial purchase of the
exchanged Class B shares, you are required to pay a contingent-deferred
sales charge equal to the charge that would have been applicable if you were
redeeming the original Class B shares at that time.
- If you exchange Class B shares for shares of one of the Money Market Mutual
Funds as described above, you subsequently may re-exchange the acquired
shares only for Class B shares of one of the Company's funds or for shares
of another Money Market Mutual Fund.
The procedures applicable to redemptions generally apply to exchanges. In
particular, exchange orders received before 1:00 p.m. (Pacific time) on each
Business Day are processed at the offering price based on the NAV next
determined as of that Business Day's close of market (provided it is a Business
Day for each fund involved in the transaction). In addition, a signature
guarantee may be required for exchanges between shareholder accounts registered
in identical names if the amount being exchanged is more than $25,000. If you
have questions, please call 1-800-222-8222.
To exchange shares, write the transfer agent at the mailing address under
"Investing in the Funds -- Initial Purchases by Wire" or call the transfer agent
at the telephone number listed on your transaction confirmation, or contact your
Shareholder Servicing Agent or Selling Agent. The procedures applicable to
telephone redemptions, including the discussion regarding the responsibility for
the authenticity of telephone instructions, are also applicable to telephone
exchange requests. See "How to Redeem Shares -- Expedited Redemptions by Letter
and Telephone."
CONVERSION
Class B shares that have been outstanding for six years after the end of the
month in which the shares were initially purchased automatically convert to
Class A shares of the same Fund and, consequently, will no longer be subject to
the higher Rule 12b-1 fees applicable to Class B shares of the Fund. Such
conversion is effected on the basis of the relative NAV of the two classes,
without the imposition of any sales charge or other charge except that the lower
Rule 12b-1 fees applicable to Class A shares shall thereafter
PROSPECTUS 48
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be applied to such converted shares. Because the NAV of the Class A shares may
be higher than that of the Class B shares at the time of conversion, a
shareholder may receive fewer Class A shares than the number of Class B shares
converted, although the dollar value will be the same. Reinvestments of
dividends and distributions in Class B shares are considered new purchases for
purposes of the conversion feature. A conversion should not result in a
recognized gain or loss for federal income tax purposes.
If a shareholder effects one or more exchanges among Class B shares of any
Fund, Class A shares of the Government Money Market Mutual, Money Market Mutual
or Treasury Money Market Mutual Funds or shares of the California Tax-Free Money
Market Mutual or National Tax-Free Money Market Mutual Funds during the six-year
period and exchanges back into Class B shares, the holding period for the shares
so exchanged is counted toward the six-year period, and any Class B shares held
at the end of six years are converted into Class A shares.
MANAGEMENT, DISTRIBUTION AND SERVICING FEES
INVESTMENT ADVISER
Subject to the overall supervision of the Company's Board of Directors, Wells
Fargo Bank, as the Funds' adviser, provides investment guidance and policy
direction in connection with the management of the Funds' assets. The adviser
also furnishes the Board of Directors with periodic reports on the Funds'
investment strategy and performance. For its services as investment adviser to
the Intermediate Bond and Short-Intermediate U.S. Government Income Funds, Wells
Fargo Bank is entitled to monthly investment advisory fees at the annual rate of
0.50% of the Funds average daily net assets. For its services as investment
adviser to the Ginnie Mae Fund, Wells Fargo Bank is entitled to a monthly
investment advisory fee at an annual rate equal to 0.50% of the first $250
million of the Fund's average daily net assets, 0.40% of the next $250 million,
and 0.30% in excess of $500 million. From time to time, a Fund, consistent with
its investment objective, policies and restrictions, may invest in securities of
companies with which Wells Fargo Bank has a lending relationship.
For the fiscal period ended September 30, 1995, the predecessor portfolio to
the Intermediate Bond Fund paid advisory fees at the annual rate of 0.50% of the
portfolio's average daily net assets to First Interstate Capital Management,
Inc. ("FICM"), 7501 E. McCormick Parkway, Scottsdale, Arizona, which served as
investment adviser to the predecessor portfolio. FICM was an indirect, wholly
owned subsidiary of First Interstate Bancorp. For the year ended December 31,
1995, the Ginnie Mae and the Short-
49 PROSPECTUS
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Intermediate U.S. Government Income Funds paid advisory fees at the annual rates
of 0.50% and 0.27% of each portfolio's respective average daily net assets to
Wells Fargo Bank.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
Wells Fargo Bank serves as the Funds' custodian and transfer and dividend
disbursing agent. Under the Custody Agreement, each Fund may, at times, borrow
money from Wells Fargo Bank as needed to satisfy temporary liquidity needs.
Wells Fargo Bank charges interest on such overdrafts at a rate determined
pursuant to each Fund's Custody Agreement. Wells Fargo Bank performs its
custodial and transfer and dividend disbursing agency services at 525 Market
Street, San Francisco, California 94105.
SHAREHOLDER SERVICING AGENT
The Funds have entered into shareholder servicing agreements with Wells Fargo
Bank, on behalf of each class of Fund shares, and may enter into similar
agreements with other entities. Under such agreements, a Shareholder Servicing
Agents (including Wells Fargo Bank) agree as agent for their customers, to
provide administrative services, with respect to Fund shares, which include
aggregating and transmitting shareholder orders for purchases, exchanges and
redemptions; maintaining shareholder accounts and records; and providing such
other related services as the Company or a shareholder may reasonably request.
For these services, a Shareholder Servicing Agent for the Intermediate Bond Fund
is entitled to receive a fee, at the annual rate of up to 0.25% of the average
daily net assets attributable to the Class A or Class B shares, as the case may
be, for which payment is being made, owned during the period by investors with
whom the Shareholder Servicing Agent maintains a servicing relationship. In no
case shall payments exceed any maximum amount that may be deemed applicable
under applicable laws, regulations or rules, including the Rules of Fair
Practice of the NASD ("NASD Rules").
For its services, a Shareholder Servicing Agent for the Short-Intermediate
U.S. Government Income Fund receives a fee, as calculated on an annualized basis
for the Fund's then-current fiscal year, up to (1) 0.30% of the average daily
net assets of the Fund represented by shares owned during the period for which
payment is being made by investors with whom the Shareholder Servicing Agent
maintains a servicing relationship, or (2) an amount which equals the maximum
amount payable to the Shareholder Servicing Agent under applicable laws,
regulations or rules, including the Rules of Fair Practice of the NASD ("NASD
Rules"). In no event will shareholder servicing fees for the Ginnie Mae Fund, as
calculated on an annualized basis for the Fund's then-current fiscal year,
exceed the lesser of (1) 0.30% of the average daily net assets of the Fund
represented by Class A or Class B Shares, as the case may be, owned during the
period for which payment is being made by investors with whom the
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Shareholder Servicing Agent maintains a servicing relationship, or (2) an amount
which equals the maximum amount payable to the Shareholder Servicing Agent under
applicable laws, regulations or rules, including the NASD Rules. In no event
will the portion of such fees that constitutes a "service fee," as that term is
used by the NASD, exceed 0.25% of each such Fund's average NAV.
A Shareholder Servicing Agent also may impose certain conditions and/or fees
on its customers, subject to the terms of this Prospectus, in addition to or
different from those imposed by the Funds, such as requiring a higher minimum
initial investment or payment of a separate fee for additional services. Each
Shareholder Servicing Agent has agreed to disclose any fees it may directly
charge its customers who are shareholders of the Fund and to notify them in
writing at least 30 days before it imposes any transaction fees.
SPONSOR, ADMINISTRATOR AND DISTRIBUTOR
Subject to the overall supervision of the Company's Board of Directors,
Stephens provides each Fund with administrative services, including general
supervision of each Fund's operation, coordination of other services provided to
a Fund, compilation of information for reports to the SEC and the state
securities commissions, preparation of proxy statements and shareholder reports,
and general supervision of data compilation in connection with preparing
periodic reports to the Company's Directors and officers. Stephens also
furnishes office space and certain facilities to conduct each Fund's business
and compensates the Directors and officers who are affiliated with Stephens. For
these services, Stephens is entitled to receive from the Intermediate Bond Fund
a monthly fee at the annual rate of 0.05% of the Fund's average daily net assets
and from the Ginnie Mae and Short-Intermediate U.S. Government Income Funds,
monthly fees at the annual rate of up to 0.03% of each Fund's average daily net
assets.
Stephens, as the Funds' principal underwriter within the meaning of the 1940
Act, has entered into a Distribution Agreement with the Company pursuant to
which Stephens is responsible for distributing the shares of the Funds. The
Company also has adopted a Distribution Plan on behalf of each of the Funds
under the SEC's Rule 12b-1 ("Plans"). Under the Plan for the Class A shares of
the Intermediate Bond Fund, the Fund may defray all or part of the cost of
preparing and printing prospectuses and other promotional materials and of
delivering prospectuses and those materials to prospective Class A shareholders
and may pay compensation to the Distributor and Selling Agents for sales support
service. The Class A Plan provides for payments at an annual rate of up to 0.05%
of the average daily net assets attributable to the Class A shares. The Class B
Plan is similar but provides for payments, at an annual rate, of up to 0.75% of
the average daily net assets attributable to the Class B shares of the Fund.
Other distribution-related services may include, among other services, costs and
expenses for advertisements, sales literature, direct mail or any other form of
advertising; expenses of sales employees
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or agents of the Distributor, including salary, commissions, travel and related
expenses; payments to broker/dealers and financial institutions for services in
connection with the distribution of shares, including promotional incentives and
fees calculated with reference to the average daily net asset value of shares
held by shareholders who have a brokerage or other service relationship with the
broker/dealer or other institution receiving such fees; and other similar
services as the Directors determine to be reasonably calculated to result in the
sale of the Fund's shares.
Under the Plan for the Class A Shares of the Ginnie Mae Fund, the Fund may
defray all or part of the cost of preparing and printing prospectuses and other
promotional materials and of delivering prospectuses and those materials to
prospective Class A shareholders by paying on an annual basis up to 0.05% of the
average daily net assets attributable to Class A Shares of such Fund. Under the
Plan for the Class A shares of the Short-Intermediate U.S. Government Income
Fund, the Fund may defray all or a part of the cost of preparing and printing
prospectuses and other promotional material to prospective shareholders by
paying on an annual basis up to 0.05% of the average daily net assets
attributable to the Fund. The Plan for the Class A shares of the Short-
Intermediate U.S. Government Income Fund provides only for the reimbursement of
actual expenses. Under the Class B Plan for the Ginnie Mae Fund, the Fund may
defray all or part of such costs and pay compensation to the Distributor and
Selling Agents for sales support services. The Class B Plan for the Ginnie Mae
Fund provides for payments, on an annual basis, of up to 0.70% of the average
daily net assets attributable to the Class B Shares of the Fund.
Under the Distribution Agreement, Stephens may enter into selling agreements
with Selling Agents that wish to make available Fund shares to their respective
customers. On behalf of the shares of the Funds, each Fund may participate in
joint distribution activities with any of the other funds of the Company, in
which event, expenses reimbursed out of the assets of the Fund may be
attributable, in part, to the distribution-related activities of another fund of
the Company. Generally, the expenses attributable to joint distribution
activities are allocated to the Fund and the other funds of the Company in
proportion to their relative net asset sizes, although the Company's Board of
Directors may allocate such expenses in any other manner that it deems fair and
equitable.
In addition, the Plans contemplate that, to the extent any fees payable
pursuant to a shareholder servicing agreement (discussed above) are deemed to be
for distribution-related services, such payments are approved and payable
pursuant to the Plans, subject to any limits under applicable law, regulations
or rules, including the NASD Rules. Financial institutions acting as Selling
Agents, Shareholder Servicing Agents, or in certain other capacities may be
required to register as dealers pursuant to applicable state securities laws
that may differ from federal law and any interpretations expressed herein.
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Stephens has established a cash and non-cash compensation program, pursuant to
which broker/dealers or financial institutions that sell shares of the Company's
funds may earn additional compensation in the form of trips to sales seminars or
vacation destinations, tickets to sporting events, theater or other
entertainment, opportunities to participate in golf or other outings and gift
certificates for meals or merchandise or the cash value of a non-cash
compensation item.
FUND EXPENSES
From time to time, Wells Fargo Bank and Stephens may waive their respective
fees in whole or in part and reimburse expenses payable to others. Any such
waivers or reimbursements will reduce a fund's expenses and, accordingly, have a
favorable impact on the fund's performance. Except for the expenses borne by
Wells Fargo Bank and Stephens, the Funds bear all costs of their operations.
Expenses attributable to each fund or class are charged against the assets of
the fund or class. General expenses of the Company are allocated among all of
the funds of the Company in a manner proportionate to the net assets of each
Fund, on a transactional basis, or on such other basis as the Company's Board of
Directors deems equitable.
TAXES
The Company intends to qualify each Fund each year as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), as long as such qualification is in the best interest of each Fund's
shareholders. Each Fund is treated as a separate entity for federal income tax
purposes and, thus, the provisions of the Code applicable to regulated
investment companies will be applied to each Fund separately, rather than to the
Company as a whole. In addition, net capital gains, net investment income, and
operating expenses are determined separately for each Fund. By complying with
the applicable provisions of the Code, a Fund will not be subject to federal
income taxes with respect to net investment income and any net realized capital
gains distributed to its shareholders. Each Fund intends to pay out
substantially all of its net investment income and any net realized capital
gains each year.
Dividends from net investment income and net realized short-term capital gains
(the excess of net short-term capital gains over net long-term capital losses)
declared and paid by each Fund are taxable as ordinary income to Fund
shareholders. Dividends and distributions declared payable in October, November
and December and made payable to shareholders of record in such a month are
treated as paid and are thereby taxable as of December 31, provided that such
dividends or distributions are actually paid no later than January 31 of the
following year. Any capital gain distributions, attributable to the Fund's net
realized long-term capital gains (the excess of net long-term capital gains
53 PROSPECTUS
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over net short-term capital losses), generally taxable to shareholders as
long-term capital gain, regardless of the length of time that the Fund's shares
have been held. Such dividends and distributions are taxable to shareholders
irrespective of whether the shareholder takes them in cash or has them
automatically reinvested in additional Fund shares. You may be eligible to defer
the taxation of dividends and capital gain distributions on Fund shares that are
held under a qualified tax-deferred retirement plan. See "Investing in the
Funds -- Tax-Deferred Retirement Plans" above. For the Intermediate Bond Fund, a
portion of the Fund's dividends may qualify for the dividends-received deduction
allowed to corporate shareholders, if such shareholders satisfy certain
requirements pursuant to the Code. For the Ginnie Mae and Short-Intermediate
U.S. Government Income Funds, the Funds' dividends do not qualify for the
dividends-received deduction allowed to corporate shareholders.
The Funds or your Shareholder Servicing Agent on their behalf regularly will
inform you of the amount and nature of each Fund's dividends and capital-gain
distributions. You should keep all statements you receive to assist in your
personal recordkeeping. In addition, an investor must provide a valid social
security or tax identification number ("TIN") upon opening or reopening an
account. Failure to furnish a valid TIN to the Company could subject the
investor to penalties imposed by the IRS. In addition, the Company may be
required to withhold, subject to certain exemptions, at a rate of 31% ("backup
withholding") on dividends, capital-gain distributions, and redemption proceeds
(including proceeds from exchanges) paid or credited to an individual Fund
investor, unless the investor certifies that the TIN provided is correct and
that the investor is not subject to backup withholding, or the IRS notifies the
Company that the investor's TIN is incorrect or that the investor is subject to
backup withholding. Such tax withheld does not constitute any additional tax
imposed on the investor, and may be claimed as a tax payment on the investor's
federal income tax return.
Foreign investors may be subject to different tax treatment, including a
withholding tax. See "Federal Income Taxes -- Foreign Shareholders" in the SAI.
The foregoing discussion is based on tax laws in effect as of the date of this
Prospectus and summarizes only some of the important federal income tax
considerations generally affecting the Funds and their shareholders. It is not
intended as a substitute for careful tax planning; you should consult your tax
advisor with respect to your specific tax situation and state and local taxes.
Further federal income tax considerations are discussed in the SAI.
PROSPECTUS 54
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PROSPECTUS APPENDIX --
ADDITIONAL INVESTMENT POLICIES
FUND INVESTMENTS
Temporary Investments
From time to time, for temporary defensive purposes, the Funds may hold assets
in cash or make short-term investments, to the extent appropriate, to maintain
adequate liquidity for redemption requests or other cash management needs or for
temporary defensive purposes. The short-term investments that the Funds may
purchase for liquidity purposes include: (i) U.S. Treasury bills, shares of
other mutual funds and repurchase agreements (as discussed below); (ii)
negotiable certificates of deposit, bankers' acceptances and fixed time deposits
and other obligations of domestic banks (including foreign branches) that have
more than $1 billion in total assets at the time of investment and are members
of the Federal Reserve System or are examined by the Comptroller of the Currency
or whose deposits are insured by the FDIC; (iii) commercial paper rated at the
date of purchase "Prime-1" by Moody's or "A-1+" or "A-1" by S&P, or, if unrated,
of comparable quality as determined by Wells Fargo Bank, as investment adviser;
and (iv) short-term, U.S. dollar-denominated obligations of foreign banks
(including U.S. branches) that, at the time of investment: (a) have more than
$10 billion, or the equivalent in other currencies, in total assets; (b) are
among the 75 largest foreign banks in the world as determined on the basis of
assets; (c) have branches or agencies in the United States; and (d) in the
opinion of Wells Fargo Bank, as investment adviser, are of comparable quality to
obligations of U.S. banks that may be purchased by a Fund.
U.S. Government Obligations
The Funds may invest in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities (including government-sponsored
enterprises) ("U.S. Government obligations"). U.S. Government obligations
include securities issued or guaranteed as to principal and interest by the U.S.
Government and supported by the full faith and credit of the U.S. Treasury. U.S.
Treasury obligations differ mainly in the length of their maturity. Treasury
bills, the most frequently issued marketable government securities, have a
maturity of up to one year and are issued on a discount basis. U.S. Government
obligations also include securities issued or guaranteed by federal agencies or
instrumentalities, including government-sponsored enterprises. Some obligations
of agencies or instrumentalities of the U.S. Government are supported by the
full faith and credit of the United States or U.S. Treasury guarantees; others,
by the right of the issuer or guarantor to borrow from the U.S. Treasury; still
others, by the discretionary authority
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of the U.S. Government to purchase certain obligations of the agency or
instrumentality; and others, only by the credit of the agency or instrumentality
issuing the obligation. In the case of obligations not backed by the full faith
and credit of the United States, the investor must look principally to the
agency or instrumentality issuing or guaranteeing the obligation for ultimate
repayment, which agency or instrumentality may be privately owned. There can be
no assurance that the U.S. Government will provide financial support to its
agencies or instrumentalities where it is not obligated to do so. In addition,
U.S. Government obligations are subject to fluctuations in market value due to
fluctuations in market interest rates. As a general matter, the value of debt
instruments, including U.S. Government obligations, declines when market rates
increase and rises when market interest rates decrease. Certain types of U.S.
Government obligations are subject to fluctuations in yield or value due to
their structure or contract terms.
Foreign Securities
The Intermediate Bond Fund may invest up to 20% of its assets in U.S. dollar-
denominated debt obligations of foreign issuers. Investments in securities of
foreign issuers, including ADRs and EDRs, involve certain considerations that
are not typically associated with investing in domestic securities. There may be
less publicly available information about a foreign issuer than about a domestic
issuer. Foreign issuers also are not generally subject to the same accounting,
auditing and financial reporting standards or governmental supervision as
domestic issuers. In addition, with respect to certain foreign countries, taxes
may be withheld at the source under foreign income tax laws, and there is a
possibility of expropriation or confiscatory taxation, political or social
instability or diplomatic developments that could adversely affect investments
in, the liquidity of, and the ability to enforce contractual obligations with
respect to, securities of issuers located in those countries.
Mortgage-Related Securities
The Intermediate Bond Fund may invest in mortgage-related securities. Mortgage
pass-through securities are securities representing interests in "pools" of
mortgages in which payments of both interest and principal on the securities are
made monthly, in effect "passing through" monthly payments made by the
individual borrowers on the residential mortgage loans which underlie the
securities (net of fees paid to the issuer or guarantor of the securities).
Early repayment of principal on mortgage pass-through securities (arising from
prepayments of principal due to sale of the underlying property, refinancing, or
foreclosure, net of fees and costs which may be incurred) may expose the Fund to
a lower rate of return upon reinvestment of principal. Also, if a security
subject to prepayment has been purchased at a premium, in the event of
prepayment the value of the premium would be lost. Like other fixed-income
securities, when interest rates rise, the value of a mortgage-related security
generally will decline; however,
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when interest rates decline, the value of mortgage-related securities with
prepayment features may not increase as much as other fixed-income securities.
Payment of principal and interest on some mortgage pass-through securities (but
not the market value of the securities themselves) may be guaranteed by the full
faith and credit of the U.S. Government or its agencies or instrumentalities.
Mortgage pass-through securities created by non-government issuers (such as
commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers) may be supported
by various forms of insurance or guarantees, including individual loan, title,
pool and hazard insurance, and letters of credit, which may be issued by
governmental entities, private insurers or the mortgage poolers.
The Fund may also invest in investment grade Collateralized Mortgage
Obligations ("CMOs"). CMOs may be collateralized by whole mortgage loans but are
more typically collateralized by portfolios of mortgage pass-through securities
guaranteed by GNMA, FHLMC or FNMA. CMOs are structured into multiple classes,
with each class bearing a different stated maturity. Payments of principal,
including prepayments, are first returned to investors holding the shortest
maturity class; investors holding the longer maturity classes receive principal
only after the first class has been retired. As new types of mortgage-related
securities are developed and offered to investors, the Adviser will, consistent
with the Fund's investment objective, policies and quality standards, consider
making investments in such new types of mortgage-related securities.
Other Asset-Backed Securities
Other asset-backed securities (unrelated to mortgage loans) have been offered
to Intermediate Bond Fund investors. These asset-backed securities may consist
of undivided fractional interests in pools of consumer loans or receivables held
in trust. Examples include certificates for automobile receivables (CARS) and
credit card receivables (CARDS). Payments of principal and interest on these
asset-backed securities are "passed through" on a monthly or other periodic
basis to certificate holders and are typically supported by some form of credit
enhancement, such as a letter of credit, surety bond, limited guaranty, or
subordination. The extent of credit enhancement varies, but usually amounts to
only a fraction of the asset-backed security's par value until exhausted.
Ultimately, asset-backed securities are dependent upon payment of the consumer
loans or receivables by individuals, and the certificate holder frequently has
no recourse to the entity that originated the loans or receivables. The actual
maturity and realized yield will vary based upon the prepayment experience of
the underlying asset pool and prevailing interest rates at the time of
prepayment. Asset-backed securities are relatively new instruments and may be
subject to greater risk of default during periods of economic downturn than
other instruments. Also, the secondary market for certain asset-backed
securities may not be as liquid as the market for other types of securities,
which could result in a Fund experiencing difficulty in valuing or liquidating
such securities.
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Derivative Securities
The Intermediate Bond Fund may invest in structured notes, bonds or other
instruments with interest rates that are determined by reference to changes in
the value of other interest rates, indices or financial reference to changes in
the value of other interest rates, indices or financial indicators
("References") or the relative change in two or more References. The Fund may
also hold derivative instruments that have interest rates that re-set inversely
to changing current market rates and/or have embedded interest rate floors and
caps that require the issuer to pay an adjusted interest rate if market rates
fall below or rise above a specified rate. These instruments represent
relatively recent innovations in the bond markets, and the trading market for
these instruments is less developed than the markets for traditional types of
debt instruments. It is uncertain how these instruments will perform under
different economic and interest-rate scenarios. Because certain of these
instruments are leveraged, their market values may be more volatile than other
types of bonds and may present greater potential for capital gain or loss. On
the other hand, the embedded option features of other derivative instruments
could limit the amount of appreciation the Fund can realize on its investment,
could cause the Fund to hold a security it might otherwise sell or could force
the sale of a security at inopportune times or for prices that do not reflect
current market value. The possibility of default by the issuer or the issuer's
credit provider may be greater for these structured and derivative instruments
than for other types of instruments. In some cases, it may be difficult to
determine the fair value of a structured or derivative instrument because of a
lack of reliable objective information and an established secondary market for
some instruments may not exist. As new types of derivative securities are
developed and offered to investors, the adviser will, consistent with the Fund's
investment objective, policies and quality standards, consider making
investments in such new types of derivative securities.
Stripped Obligations
To the extent consistent with their respective investment objectives, the
Intermediate Bond Fund may purchase Treasury receipts and other "stripped"
securities that evidence ownership in either the future interest payments or the
future principal payments on U.S. Government and other obligations. These
participations, which may be issued by the U.S. Government (or a U.S. Government
agency or instrumentality) or by private issuers such as banks and other
institutions, are issued at a discount to their "face value," and may include
stripped mortgage-backed securities ("SMBS"). Stripped securities, particularly,
SMBS, may exhibit greater price volatility than ordinary debt securities because
of the manner in which their principal and interest are returned to investors.
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Custodial Receipts for Treasury Securities
To the extent consistent with its respective investment objective, the
Intermediate Bond Fund may purchase participations in trusts that hold U.S.
Treasury securities (such as TIGRs and CATS) or other obligations where the
trust participations evidence ownership in either the future interest payments
or the future principal payments on the obligations. These participations are
normally issued at a discount to their "face value," and can exhibit greater
price volatility than ordinary debt securities because of the way in which their
principal and interest are returned to investors. Investments by the Fund in
such participations will not exceed 5% of the value of the Fund's total assets.
Options
The Intermediate Bond Fund may purchase put and call options listed on a
national securities exchange and issued by the Options Clearing Corporation in
an amount not exceeding 5% of its net assets. Purchasing options is a
specialized investment technique that entails a substantial risk of a complete
loss of the amounts paid as premiums to the writer of the option.
The Fund may also write covered call and secured put options from time to time
as the adviser deems appropriate. By writing a covered call option, the Fund
forgoes the opportunity to profit from an increase in the market of the
underlying security above the exercise price except insofar as the premium
represents such a profit, and it is not able to sell the underlying security
until the option expires or is exercised or the Fund effects a closing purchase
transaction by purchasing an option of the same series. If the Fund writes a
secured put option, it assumes the risk of loss should the market value of the
underlying security decline below the exercise price of the option. The
aggregate value of the securities subject to options written by the Fund will
not exceed 25% of the value of its net assets. The use of covered call options
and securities put options will not be a primary investment technique of the
Fund, and they are expected to be used infrequently. If the adviser is incorrect
in its forecast of market value or other factors when writing the foregoing
options, the Fund would be in a worse position than it would have been had the
foregoing investment techniques not been used.
For additional information relating to option trading practices, including the
particular risks thereof, see the SAI.
Forward Commitments, When-Issued Purchases and Delay-Delivery Transactions
The Funds may purchase or sell securities on a when-issued or delayed-delivery
basis and make contracts to purchase or sell securities for a fixed price at a
future date beyond customary settlement time. Securities purchased or sold on a
when-issued, delayed-delivery or forward commitment basis involve a risk of loss
if the value of the security to be purchased declines, or the value of the
security to be sold increases, before the
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settlement date. Although a Fund will generally purchase securities with the
intention of acquiring them, a Fund may dispose of securities purchased on a
when-issued, delayed-delivery or a forward commitment basis before settlement
when deemed appropriate by the adviser. During the period between commitment and
settlement, no payment is made by the Fund and no interest accrues to the Fund.
In some instances, a Fund may sell a security and at the same time make a
commitment to purchase the same security at a future date at a specified price.
Conversely, the Fund may purchase a security and at the same time make a
commitment to sell the same security at a future date at a specified price.
These types of transactions are executed simultaneously in what are known as
"roll" transactions. For example, a securities dealer may seek to purchase a
particular security which the Fund owns. The Fund will sell that security to the
dealer and simultaneously enter into a "firm commitment" agreement to buy back
the same security at a future date, as described above. The net effect of these
transactions is to generate income for the Fund since the dealer is willing to
execute these transactions at prices favorable to the Fund in order to acquire
the specific security which it buys in the initial purchase transaction. Wells
Fargo Bank will limit these transactions to a maximum of 35% of the Fund's total
assets. There is a risk that a party with whom a Fund enters into when-issued or
firm commitment agreements may not perform its obligation to deliver or purchase
the securities, which could result in a gain or loss to the Fund. To minimize
the risk of default, the Fund enters into such transactions only with those
major banks and non-bank U.S. Government securities dealers who are recognized
by the Board of Governors of the Federal Reserve System as primary dealers. As
described further in its SAI, the Fund may purchase certain securities on a
when-issued basis, although it currently does not expect to invest more than 5%
of its assets in such securities.
Commercial Paper
The Funds may invest in commercial paper (including variable amount master
demand notes) which refers to short-term, unsecured promissory notes issued by
corporations to finance short-term credit needs. Commercial paper is usually
sold on a discount basis and has a maturity at the time of issuance not
exceeding nine months. Variable amount master demand notes are demand
obligations which permit the investment of fluctuating amounts at varying market
rates of interest pursuant to arrangements between the issuer and a commercial
bank acting as agent for the payee of such notes whereby both parties have the
right to vary the amount of the outstanding indebtedness on the notes.
Investments by the Intermediate Bond Fund in commercial paper (including
variable rate demand notes and variable rate master demand notes issued by
domestic and foreign bank holding companies, corporations and financial
institutions, as well as similar instruments issued by government agencies and
instrumentalities) will consist of issues that are rated in one of the two
highest rating categories by a NRSRO. In addition, the Intermediate Bond Fund
may acquire unrated commercial paper and
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corporate bonds that are determined by the adviser at the time of purchase to be
of comparable quality to rated instruments that may be acquired by such Fund.
Commercial paper may include variable and floating rate instruments.
Floating- and Variable-Rate Instruments
Certain of the debt instruments that the Funds may purchase bear interest at
rates that are not fixed, but vary, for example, with changes in specified
market rates or indices or specified intervals. Certain of these instruments may
carry a demand feature that would permit the holder to tender them back to the
issuer at par value prior to maturity. The Funds may, in accordance with SEC
rules, account for these instruments as maturing at the next interest rate
readjustment date or the date which the Fund may tender the instrument back to
the issuer, whichever is later. The floating and variable-rate instruments that
the Fund may purchase include certificates of participation in such obligations.
Wells Fargo Bank, as investment adviser, will monitor on an ongoing basis the
ability of an issuer of a demand instrument to pay principal and interest on
demand. Events affecting the ability of the issuer of a demand instrument to
make payment when due may occur between the time the Fund elects to demand
payment and the time payment is due, thereby affecting the Fund's ability to
obtain payment at par, except when such demand instruments permit same-day
settlement. Demand instruments whose demand feature is not exercisable within
seven days may be treated as liquid, provided that an active secondary market
exists.
Repurchase Agreements
The Funds may enter into repurchase agreements wherein the seller of a
security to the Fund agrees to repurchase that security from such Fund at a
mutually agreed-upon time and price. The period of maturity is usually quite
short, often overnight or a few days, although it may extend over a number of
months. The Funds may enter into repurchase agreements only with respect to U.S.
Government obligations and other obligations that could otherwise be purchased
by the Funds. All repurchase agreements must be fully collateralized based on
values that are marked to market daily. The maturities of the underlying
securities in a repurchase agreement transaction entered into by a Fund may be
greater than one year. If the seller defaults and the value of the underlying
securities has declined, a Fund may incur a loss. In addition, if bankruptcy
proceedings are commenced with respect to the seller of the security, a Fund's
disposition of the security may be delayed or limited. The Funds will enter into
repurchase agreements only with registered broker/dealers and commercial banks
that meet guidelines established by the Company's Board of Directors and that
are not affiliated with Wells Fargo Bank. The Funds may participate in pooled
repurchase agreement transactions with other funds advised by Wells Fargo Bank.
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Loans of Portfolio Securities
The Intermediate Bond and Short-Intermediate U.S. Government Income Funds may
lend securities from their portfolios to brokers, dealers and financial
institutions if cash, U.S. Government obligations or other high-quality debt
instruments equal to at least 100% of the current market value of the securities
loan (including accrued interest thereon) plus the interest payable to a Fund
with respect to the loan is maintained with such Fund. In determining whether to
lend a security to a particular broker, dealer or financial institution, a Funds
investment adviser will consider all relevant facts and circumstances, including
the creditworthiness of the broker, dealer or financial institution. Any loans
of portfolio securities must be fully collateralized based on values that are
marked-to-market daily. The Funds will not enter into any portfolio security
lending arrangement having a duration of longer than one year. Any securities
that the Funds may receive as collateral will not become part of the Funds
portfolio at the time of the loan and, in the event of a default by the
borrower, the Funds, if permitted by law, will dispose of such collateral except
for such part thereof that is a security in which the Funds are permitted to
invest. During the time securities are on loan, the borrower will pay the Funds
any accrued income on those securities, and the Funds may invest the cash
collateral and earn additional income or receive an agreed-upon fee from a
borrower that has delivered cash-equivalent collateral. The Funds will not lend
securities having a value that exceeds one-third of the current value of the
Funds' total assets. Loans of securities by the Funds will be subject to
termination at the Funds' or the borrower's option. The Funds may pay reasonable
administrative and custodial fees in connection with a securities loan and may
pay a negotiated portion of the interest or fee earned with respect to the
collateral to the borrower or the placing broker. Borrowers and placing brokers
may not be affiliated, directly or indirectly, with the Company, the adviser, or
the Distributor.
Other Investment Companies
The Funds may invest in shares of other open-end, management investment
companies, subject to the limitations of the 1940 Act, provided that any such
purchases will be limited to temporary investments in shares of unaffiliated
investment companies and the investment adviser will waive its advisory fees for
that portion of the Funds' assets so invested, except when such purchase is part
of a plan of merger, consolidation, reorganization or acquisition.
Notwithstanding any other investment policy or limitation (whether or not
fundamental), as a matter of fundamental policy, the Short-Intermediate U.S.
Government Income Fund may invest all of its assets in the securities of a
single open-end, management investment company with substantially the same
fundamental investment objective, policies and limitations as the Fund.
Additional Investments -- Ginnie Mae Fund
FHLMC issues two types of mortgage pass-through securities: mortgage
participation certificates ("PCs") and guaranteed mortgage certificates
("GMCs"). PCs resemble
PROSPECTUS A-8
<PAGE> 232
GNMA certificates in that each PC represents a pro rata share of all interest
and principal payments made and owed on the underlying pool of mortgages. GMCs
also represent a pro rata interest in a pool of mortgages. These instruments,
however, pay interest semiannually and return principal once a year in
guaranteed minimum payments.
These mortgage-backed securities differ from bonds in that principal is paid
back by the borrower over the length of the loan rather than returned in a lump
sum at maturity. They are called "pass-through" securities because both interest
and principal payments, including prepayments, are passed through to the holder
of the security. The GNMA securities in which the Ginnie Mae Fund will invest
are of the "modified" type, which entitles the holder of such certificates to
receive its share of all interest and principal payments owed on the underlying
pool of mortgage loans, regardless of whether or not the mortgagors actually
make the payments.
The payment of principal on the underlying mortgages may exceed the minimum
required by the schedule of payments for the mortgages. Such prepayments are
made at the option of the mortgagors for a wide variety of reasons reflecting
their individual circumstances. For example, mortgagors may speed up the rate at
which they prepay their mortgages when interest rates decline sufficiently to
encourage refinancing. The Ginnie Mae Fund, when such prepayments are passed
through to it, may be able to reinvest them only at a lower rate of interest. As
a result, if the Fund purchases such securities at a premium, a prepayment rate
that is faster than expected will reduce yield to maturity, while a prepayment
rate that is slower than expected will have the opposite effect of increasing
yield to maturity. Conversely, if the Fund purchased such securities at a
discount, faster than expected prepayments will increase, while slower than
expected prepayments will reduce, yield to maturity. Accelerated prepayments on
securities purchased by the Fund at a premium also impose a risk of loss of
principal because the premium may not have been fully amortized at the time the
principal is repaid in full. In choosing specific issues, Wells Fargo Bank, as
investment adviser, will have made assumptions about the likely speed of
prepayment. Actual experience may vary from this assumption resulting in a
higher or lower investment return than anticipated.
Additional Investments -- Short-Intermediate U.S. Government Income Fund
The mortgages underlying ARMS guaranteed by GNMA are fully insured or
guaranteed by the Federal Housing Administration, the Veterans Administration or
the Farmers Home Administration, while those underlying ARMS issued by FNMA or
FHLMC are typically conventional residential mortgages which are not so insured
or guaranteed, but which conform to specific underwriting, size and maturity
standards.
In a CMO, a series of bonds or certificates is issued in multiple classes.
Each class of CMOs, often referred to as a "tranche," is issued at a specified
coupon rate and has a stated maturity or final distribution date. The principal
and interest payment on the
A-9 PROSPECTUS
<PAGE> 233
underlying mortgages may be allocated among the classes of CMOs in several ways.
Typically, payments of principal, including any prepayments, on the underlying
mortgages are applied to the classes in the order of their respective stated
maturities or final distribution dates, so that no payment of principal is made
on CMOs of a class until all CMOs of other classes having earlier stated
maturities or final distribution dates have been paid in full. One or more
classes of CMOs may have coupon rates that reset periodically based on an index,
such as the London Interbank Offered Rate ("LIBOR").
The interest rates on the mortgages underlying the ARMS and the CMOs in which
the Short-Intermediate U.S. Government Income Fund may invest generally are
readjusted at intervals of one year or less in response to changes in a
predetermined interest rate index. There are two main categories of indices:
those based on U.S. Treasury securities and those derived from a calculated
measure, such as cost-of-funds index or a moving average of mortgage rates.
Commonly utilized indices include the one-year and five-year constant maturity
U.S. Treasury note rates, the three-month U.S. Treasury bill rate, the 180-day
U.S. Treasury bill rate, rates on longer-term U.S. Treasury securities, the
National Median Cost of Funds, the one-month, three-month, six-month or one-year
LIBOR, a published prime rate, or commercial paper rates. Certain of these
indices follow overall market interest rates more closely than others.
Adjustable-rate mortgages, an increasingly common form of residential
financing, generally are originated by banks and thrift institutions and have a
specified maturity date. Most provide for amortization of principal in a manner
similar to fixed-rate mortgages but have interest payment amounts that change in
response to changes in a specified interest rate index. The rate of interest due
on such a mortgage is calculated by adding an agreed-upon "margin" to the
specified index, although there generally are limitations or "caps" on interest
rate movements in any given period or over the life of the mortgage. To the
extent that the interest rates on adjustable rate mortgages underlying the ARMS
or the CMOs in which the Short-Intermediate U.S. Government Income Fund may
invest cannot be adjusted in response to interest rate changes because of such
caps, the ARMS or CMOs are likely to respond to changes in market rates more
like fixed-rate securities. In other words, interest rate increases in excess of
such caps can be expected to cause the ARMS or CMOs backed by mortgages that
have such caps to decline in value to a greater extent than would be the case in
the absence of such caps. Conversely, interest rate decreases below such floors
can be expected to cause the ARMS or CMOs backed by mortgages that have such
floors to increase in value to a greater extent than would be the case in the
absence of such floors.
Since the interest rates on many mortgages underlying ARMS and CMOs are reset
on an annual basis and generally are subject to caps, it can be expected that
the prices of such ARMS and CMOs will fluctuate to the extent prevailing market
interest rates are not reflected in the interest rates payable on the underlying
adjustable rate mortgages or the CMO. In this regard, the NAV of the
Short-Intermediate U.S. Government Income Fund's shares could fluctuate to the
extent interest rates on underlying mortgages differ
PROSPECTUS A-10
<PAGE> 234
from prevailing market interest rates during interim periods between interest
rate reset dates. Accordingly, investors could experience some principal loss or
less gain than might otherwise be achieved if they redeem their Fund shares
before the interest rates on the mortgages underlying the Fund's portfolio
securities are adjusted to reflect prevailing market interest rate.
The holder of ARMS and certain CMOs receives not only monthly scheduled
payments of principal and interest but also may receive unscheduled principal
payments representing prepayments on the underlying mortgages. An investor,
therefore, may have to reinvest the periodic payments and any unscheduled
prepayments of principal it receives at a rate of interest which is lower than
the rate on the ARMS and CMOs held by it.
The Short-Intermediate U.S. Government Income Fund also may invest cash
balances temporarily in U.S. Treasury bills, which are short-term U.S.
Government obligations with maturities which do not exceed one year.
Foreign Obligations
The Short-Intermediate U.S. Government Income Fund may invest up to 25% of its
assets in high-quality, short- term debt obligations of foreign branches of U.S.
banks or U.S. branches of foreign banks that are denominated in and pay interest
in U.S. dollars. Investments in foreign obligations involve certain
considerations that are not typically associated with investing in domestic
obligations. There may be less publicly available information about a foreign
issuer than about a domestic issuer. Foreign issuers also are not subject to the
same uniform accounting, auditing and financial reporting standards or
governmental supervision as domestic issuers. In addition, with respect to
certain foreign countries, taxes may be withheld at the source under foreign
income tax laws, and there is a possibility of expropriation or confiscatory
taxation, political or social instability or diplomatic developments that could
adversely affect investments in, the liquidity of, and the ability to enforce
contractual obligations with respect to, securities of issuers located in those
countries.
INVESTMENT POLICIES AND RESTRICTIONS
Each Fund's investment objective, as set forth in "How the Funds
Work -- Investment Objectives and Policies," is not fundamental; that is, it may
be changed without approval by the vote of the holders of a majority of such
Fund's outstanding voting securities, as described under "Capital Stock" in the
SAI for each Fund. If the Board of Directors determines that a Fund's investment
objective can best be achieved by a substantive change in a nonfundamental
investment policy or strategy, the Company may make such change without
shareholder approval and will disclose any such material changes in the
then-current Prospectus.
A-11 PROSPECTUS
<PAGE> 235
As a matter of fundamental policy for the Intermediate Bond Fund, the Fund may
not purchase or sell commodity contracts or invest in oil, gas or mineral
exploration or development programs, except that the Fund may enter into futures
contracts and related options. The Fund may not purchase or sell real estate,
except that the Fund may purchase securities of issuers that deal in real estate
and may purchase securities that are secured by interests in real estate. The
Fund may not purchase securities of companies for the purpose of exercising
control. The Fund may not acquire any other investment company except in
connection with a merger, consolidation, reorganization or acquisition of assets
or where otherwise permitted by the 1940 Act. The Fund may not act as an
underwriter of securities within the meaning of the Securities Act of 1933. The
Fund may not write or sell put options, call options, straddles, spreads, or any
combination thereof, except that the Fund may enter into transactions in options
on securities, futures contracts and options on futures contracts. The Fund may
not borrow money or issue senior securities, except that the Fund may borrow
from banks and enter into reverse repurchase agreements for temporary purposes
in amounts up to 10% of the value of the total assets at the time of such
borrowing. The Fund may not purchase securities (except U.S. Government
securities and repurchase agreements collateralized by such securities) if more
than 5% of its total assets at the time of purchase will be invested in
securities of any one issuer, except that up to 25% of a Fund's total assets may
be invested without regard to this 5% limitation. Subject to the foregoing 25%
exception, the Fund may not purchase more than 10% of the outstanding voting
securities of any issuer. The Fund may not invest 25% or more of its total
assets at the time of purchase in securities of issuers whose principal business
activities are in the same industry. The Fund may not borrow money except in
amounts up to 10% of the value of its total assets at the time of borrowing.
For the Funds, if a percentage restriction on the investment or use of assets
set forth in this Prospectus is adhered to at the time a transaction is
effected, later changes in percentages resulting from changing values will not
be considered a violation, however, each Fund will not at any time have more
than 15% (10% for the Ginnie Mae Fund) of its net assets invested in illiquid
securities.
As matters of fundamental policy for the Ginnie Mae and Short-Intermediate
U.S. Government Income Funds, a Fund may: (i) not purchase securities of any
issuer (except U.S. Government obligations) if as a result more than 5% of the
value of a Fund's total assets would be invested in the securities of such
issuer or a Fund would own more than 10% of the outstanding voting securities of
such issuer; (ii) make loans of portfolio securities in accordance with its
investment policies; and (iii) not invest 25% or more of its assets (i.e.,
concentrate) in any particular industry, except that the Fund may invest 25% or
more of its assets in U.S. Government obligations. In addition, as a matter of
fundamental policy, the Short-Intermediate U.S. Government Income Fund may
borrow from banks up to 10% of the current value of its net assets for temporary
purposes only in order to meet redemptions, and these borrowings may be secured
by
PROSPECTUS A-12
<PAGE> 236
the pledge of up to 10% of the current value of its net assets. As a matter of
fundamental policy, the Ginnie Mae Fund may borrow from banks up to 20% of the
current value of its net assets for temporary purposes only in order to meet
redemptions, and these borrowings may be secured by the pledge of up to 20% of
the current value of its net assets. Each Fund may not purchase investments
while any such outstanding borrowing exceeds 5% of such Fund's net assets.
With respect to fundamental investment policy (i) above, the
Short-Intermediate U.S. Government Income Fund is subject to this restriction
only with respect to 75% of the Fund's assets, and, with regard to both Funds,
it may be possible that the Company would own more than 10% of the outstanding
voting securities of the issuer. With respect to fundamental investment policy
concerning bank borrowing above, the Ginnie Mae Fund presently does not intend
to put at risk more than 5% of its assets during the coming year. With respect
to fundamental investment policy (ii) above, the Short-Intermediate U.S.
Government Income Fund does not intend to make loans of its portfolio securities
during the coming year, and the Ginnie Mae Fund does not intend to put at risk
more than 5% of its assets during the coming year.
As a matter of nonfundamental policy, the Ginnie Mae Fund may invest up to 10%
of the current value of its net assets in repurchase agreements having
maturities of more than seven days, illiquid securities and fixed time deposits
that are subject to withdrawal penalties and that have maturities of more than
seven days.
As a matter of nonfundamental policy, the Short-Intermediate U.S. Government
Income Fund may invest up to 15% of the current value of its net assets in
illiquid securities. For this purpose, illiquid securities include, among
others, (a) securities that are illiquid by virtue of the absence of a readily
available market or legal or contractual restrictions on resale, (b) fixed time
deposits that are subject to withdrawal penalties and that have maturities of
more than seven days, and (c) repurchase agreements not terminable within seven
days.
Illiquid securities shall not include securities eligible for resale pursuant
to Rule 144A under the Securities Act of 1933 (the "1933 Act") that have been
determined to be liquid by the adviser, pursuant to guidelines established by
the Company's Board of Directors, and commercial paper that is sold under
Section 4(2) of the 1933 Act that (i) is not traded flat or in default as to
interest or principal and (ii) is rated in one of the two highest categories by
at least two nationally recognized statistical rating organizations and the
adviser, pursuant to guidelines established by the Company's Board of Directors,
has determined the commercial paper to be liquid; or (iii) is rated in one of
the two highest categories by one nationally recognized statistical rating
organization and the adviser, pursuant to guidelines established by the
Company's Board of Directors has determined that the commercial paper is of
equivalent quality and is liquid, if by any reason thereof the value of its
aggregate investment in such classes of securities will exceed 10% of its total
assets.
A-13 PROSPECTUS
<PAGE> 237
Advised by WELLS FARGO BANK, N.A.
Sponsored/Distributed by
Stephens Inc., Member NYSE/SIPC
LOGO
NOT FDIC INSURED
<PAGE> 238
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE> 239
SPONSOR, DISTRIBUTOR AND ADMINISTRATOR
Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
INVESTMENT ADVISER, TRANSFER AND
DIVIDEND DISBURSING AGENT AND
CUSTODIAN
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
LEGAL COUNSEL
Morrison & Foerster LLP
2000 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
FOR MORE INFORMATION ABOUT THE FUND,
SIMPLY CALL 1-800-222-8222, OR WRITE:
Stagecoach Funds, Inc.
c/o Stagecoach Shareholder Services
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
STAGECOACH FUNDS:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- are NOT FDIC insured
- are NOT guaranteed by Wells Fargo Bank
- are NOT deposits or obligations of the Bank
- involve investment risk, including possible loss of LOGO
principal
</TABLE>
LOGO
Printed on Recycled Paper SC0223 (9/96)
<PAGE> 240
LOGO
P.O. Box 7066
San Francisco, CA 94120-7066
STAGECOACH FUNDS:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- are NOT FDIC insured
- are NOT guaranteed by Wells Fargo Bank
- are NOT deposits or obligations of the Bank
- involve investment risk, including possible loss of LOGO
principal
</TABLE>
LOGO
Printed on Recycled Paper SC0223 (9/96)
<PAGE> 241
LOGO
------------------------------
PROSPECTUS
------------------------------
MONEY MARKET MUTUAL FUND
CALIFORNIA TAX-FREE MONEY MARKET MUTUAL FUND
GOVERNMENT MONEY MARKET MUTUAL FUND
NATIONAL TAX-FREE MONEY MARKET MUTUAL FUND
TREASURY MONEY MARKET MUTUAL FUND
CLASS A
SEPTEMBER 6, 1996
<PAGE> 242
STAGECOACH FUNDS(R)
MONEY MARKET MUTUAL, CALIFORNIA TAX-FREE MONEY MARKET MUTUAL, GOVERNMENT MONEY
MARKET MUTUAL, NATIONAL TAX-FREE MONEY MARKET MUTUAL AND TREASURY MONEY MARKET
MUTUAL FUNDS
CLASS A SHARES
Stagecoach Funds, Inc. (the "Company") is an open-end management investment
company. This Prospectus contains information about five funds of the Stagecoach
Family of Funds -- Class A shares of the GOVERNMENT MONEY MARKET MUTUAL, MONEY
MARKET MUTUAL and TREASURY MONEY MARKET MUTUAL FUNDS and shares (collectively,
with the Class A shares, referred to at times as "Class A shares") of the
CALIFORNIA TAX-FREE MONEY MARKET MUTUAL and NATIONAL TAX-FREE MONEY MARKET
MUTUAL FUNDS (each, a "Fund" and, collectively, the "Funds"). THE NATIONAL
TAX-FREE MONEY MARKET MUTUAL FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY
INVESTING SUBSTANTIALLY ALL OF ITS ASSETS IN THE TAX-FREE MONEY MARKET MASTER
PORTFOLIO (THE "MASTER PORTFOLIO") OF MASTER INVESTMENT TRUST (THE "MASTER
TRUST"), AN OPEN-END MANAGEMENT INVESTMENT COMPANY, RATHER THAN IN A PORTFOLIO
OF SECURITIES. THE NATIONAL TAX-FREE MONEY MARKET MUTUAL FUND HAS THE SAME
INVESTMENT OBJECTIVE AS THE MASTER PORTFOLIO AND THE INVESTMENT EXPERIENCE OF
THE FUND CORRESPONDS DIRECTLY TO THE INVESTMENT EXPERIENCE OF THE MASTER
PORTFOLIO.
Please read this Prospectus before investing and retain it for future
reference. It is designed to provide you with important information and to help
you decide if a Fund's goals match your own. A Statement of Additional
Information ("SAI"), dated September 6, 1996, containing additional information
about the Funds, has been filed with the Securities and Exchange Commission
("SEC") and is incorporated by reference into this Prospectus. The SAI is
available without charge by writing to Stagecoach Funds, Inc., c/o Stagecoach
Shareholder Services, Wells Fargo Bank, N.A., P.O. Box 7066, San Francisco, CA
94120-7066 or by calling 1-800-222-8222. If you hold shares in an IRA, please
call 1-800-BEST-IRA for information or assistance.
AN INVESTMENT IN A FUND OR THE MASTER PORTFOLIO IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT. THERE IS NO ASSURANCE THAT A FUND OR THE
MASTER PORTFOLIO WILL BE ABLE TO MAINTAIN A CONSTANT $1.00 NET ASSET VALUE PER
SHARE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THESE AUTHORITIES PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
FUND SHARES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR ISSUED, ENDORSED OR
GUARANTEED BY, WELLS FARGO BANK, N.A. ("WELLS FARGO BANK") OR ANY OF ITS
AFFILIATES. SUCH SHARES ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT,
THE FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"), THE FEDERAL RESERVE BOARD OR
ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN A FUND INVOLVES CERTAIN RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
PROSPECTUS DATED SEPTEMBER 6, 1996
PROSPECTUS
<PAGE> 243
The MONEY MARKET MUTUAL FUND seeks to provide investors with a high level of
income, while preserving capital and liquidity, by investing in high-quality,
short-term instruments.
The CALIFORNIA TAX-FREE MONEY MARKET MUTUAL FUND seeks to obtain a high level
of income exempt from federal income tax and California personal income tax,
while preserving capital and liquidity, by investing in high-quality, short-term
U.S. dollar-denominated money market instruments, primarily municipal
obligations.
The GOVERNMENT MONEY MARKET MUTUAL FUND seeks to provide investors with as
high a level of current income as is consistent with preservation of capital and
liquidity.
The NATIONAL TAX-FREE MONEY MARKET MUTUAL FUND seeks to provide investors with
a high level of income exempt from federal income tax, while preserving capital
and liquidity. The National Tax-Free Money Market Mutual Fund and the California
Tax-Free Money Market Mutual Fund are sometimes referred to herein as the
"Tax-Free Funds."
The TREASURY MONEY MARKET MUTUAL FUND seeks to provide investors with current
income and stability of principal.
WELLS FARGO BANK IS THE INVESTMENT ADVISER AND IS COMPENSATED FOR PROVIDING
THE FUNDS WITH CERTAIN OTHER SERVICES. STEPHENS INC. ("STEPHENS"),
WHICH IS NOT AFFILIATED WITH WELLS FARGO BANK, IS THE
FUNDS' SPONSOR, ADMINISTRATOR AND DISTRIBUTOR.
PROSPECTUS
<PAGE> 244
TABLE OF CONTENTS
-------
PROSPECTUS SUMMARY 1
SUMMARY OF FUND EXPENSES 5
FINANCIAL HIGHLIGHTS 9
HOW THE FUNDS WORK 15
THE FUNDS, MASTER PORTFOLIO AND MANAGEMENT 23
INVESTING IN THE FUNDS 26
DIVIDENDS 34
HOW TO REDEEM SHARES 34
ADDITIONAL SHAREHOLDER SERVICES 39
MANAGEMENT, DISTRIBUTION AND SERVICING FEES 41
TAXES 45
PROSPECTUS APPENDIX - ADDITIONAL INVESTMENT POLICIES A-1
PROSPECTUS
<PAGE> 245
PROSPECTUS SUMMARY
The Funds provide you with a convenient way to invest in portfolios of
securities selected and supervised by professional management. The following
provides you with summary information about each Fund. For more information,
please refer to the identified Prospectus sections and generally to the
Prospectus and SAI.
Q. WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?
A. The MONEY MARKET MUTUAL FUND seeks to provide investors with a high level of
income, while preserving capital and liquidity, by investing in
high-quality, short-term instruments. These securities include obligations
of the U.S. Government, its agencies and instrumentalities, high-quality
debt obligations such as corporate debt, certain obligations of U.S. banks
and certain repurchase agreements.
The CALIFORNIA TAX-FREE MONEY MARKET MUTUAL FUND seeks to obtain a high
level of income exempt from federal income tax and California personal
income tax, while preserving capital and liquidity, by investing in
high-quality, U.S. dollar-denominated money market instruments, primarily
municipal obligations. Under normal market conditions, substantially all of
the Fund's assets will be invested in municipal obligations that are exempt
from federal income tax and California personal income tax.
The NATIONAL TAX-FREE MONEY MARKET MUTUAL FUND seeks to provide investors
with a high level of income exempt from federal income tax, while preserving
capital and liquidity. The Fund seeks to achieve its investment objective by
investing all of its assets in the Tax-Free Money Market Master Portfolio of
the Master Trust, which has the same investment objective as the Fund. The
Master Portfolio seeks to achieve this investment objective by investing in
high-quality, U.S. dollar-denominated money market instruments, primarily
municipal obligations.
The GOVERNMENT MONEY MARKET MUTUAL FUND seeks to provide investors with as
high a level of current income as is consistent with preservation of capital
and liquidity. The Fund pursues its objective by investing its assets
exclusively in obligations issued or guaranteed by the U.S. Government, its
agencies and instrumentalities, and in certain repurchase agreements. The
Fund maintains a dollar-weighted average portfolio maturity of 90 days or
less. See "How the Fund Works -- Investment Objective and Policies" and
"Prospectus Appendix -- Additional Investment Policies" for further
information on investments.
The TREASURY MONEY MARKET MUTUAL FUND seeks to provide investors with
current income and stability of principal. The Fund's fundamental policy is
to seek its objective by investing its assets only in obligations issued or
guaranteed by the U.S.
1 PROSPECTUS
<PAGE> 246
Treasury and in notes and other instruments, including repurchase
agreements, collateralized or secured by such obligations.
In pursuing their respective investment objectives, each Fund invests in
securities with remaining maturities not exceeding 397 days (13 months), as
determined in accordance with Rule 2a-7 under the Investment Company Act of
1940, as amended from time to time (the "1940 Act"). See "How the Funds
Work -- Investment Objectives and Policies" and "Prospectus
Appendix -- Additional Investment Policies" for further information on
investments.
Q. WHAT ARE SOME OF THE POTENTIAL RISKS ASSOCIATED WITH THIS TYPE OF
INVESTMENT?
A. Investments in the Funds are not bank deposits or obligations of Wells Fargo
Bank and are not insured by the FDIC, nor are they insured or guaranteed
against loss of principal. Therefore, you should be willing to accept some
risk with money invested in the Funds. Although each Fund seeks to maintain
a stable net asset value of $1.00 per share, there is no assurance that it
will be able to do so. Since the California Tax-Free Money Market Mutual
Fund invests primarily in securities issued by California, its agencies and
municipalities, events in California are more likely to affect this Fund's
investments. Also, the California Tax-Free Money Market Mutual Fund is
nondiversified, which means that its assets may be invested among fewer
issuers and therefore the value of its assets may be subject to greater
impact by events affecting one of its investments. The Funds may not achieve
as high a level of current income as other mutual funds that do not limit
their investment to the high credit quality instruments in which the Funds
invest. As with all mutual funds, there can be no assurance that each Fund
will achieve its investment objective. See "How the Funds Work -- Risk
Factors" and "Additional Permitted Investment Activities" in the SAI for
further information about the Funds' investments and related risks. As with
all mutual funds, there can be no assurance that a Fund will achieve its
investment objective.
Q. WHO MANAGES MY INVESTMENTS?
A. Wells Fargo Bank, as the Funds' and the Master Portfolio's investment
adviser, manages your investments. A separate investment adviser has not
been retained for the National Tax-Free Money Market Mutual Fund because
this Fund invests all of its assets in the Master Portfolio. Wells Fargo
Bank also provides the Funds with transfer agency, dividend disbursing
agency, and custodial services. In addition, Wells Fargo Bank is a
shareholder servicing agent and a selling agent for the Funds. See "The
Funds, Master Portfolio and Management" and "Management, Distribution and
Servicing Fees."
PROSPECTUS 2
<PAGE> 247
Q. HOW DO I INVEST?
A. You may invest by purchasing Fund shares at the net asset value ("NAV"). You
may open an account by investing at least $2,500, and you may add to your
account by making additional investments of at least $100, with certain
exceptions. Shares of the California Tax-Free Money Market Mutual Fund and
the National Tax-Free Money Market Mutual Fund may not be suitable
investments for tax-exempt institutions or tax-exempt retirement plans,
since such investors would not generally benefit from the tax-exempt status
of such Funds' dividends. In addition, California Tax-Free Money Market
Mutual Fund shares are not available in all states. Shares may be purchased
on any day the Funds are open by wire, by mail, or by an automatic
investment feature called the AutoSaver Plan. See "Investing in the Funds"
for more details, or contact Stephens (the Funds distributor), a shareholder
servicing agent or a selling agent (such as Wells Fargo Bank).
Q. MAY I INVEST IN FUND SHARES THROUGH A WELLS FARGO BANK ACCOUNT?
A. Yes, customers of Wells Fargo Bank may invest in shares of the Money Market
Mutual Fund, California and National Tax-Free Money Market Mutual Funds
through a Wells Fargo Bank Money Market Access or Money Market Checking
Account. In addition, customers of Wells Fargo Bank who hold shares of the
California Tax-Free Money Market Mutual Fund through a Wells Fargo Bank
Managed Sweep Account may open additional Managed Sweep Accounts or acquire
additional shares of the California Tax-Free Money Market Mutual Fund
through such Accounts. Certain of the features described in this Prospectus
are not available to investors purchasing shares through an Account.
Investments through an Account are governed by the terms and conditions of
such Account as set forth in a separate Disclosure Statement provided by
Wells Fargo Bank to each Accountholder. See "Investing in the
Funds -- Opening A Wells Fargo Bank Sweep Account."
Q. HOW WILL I RECEIVE DIVIDENDS AND ANY CAPITAL GAINS?
A. Dividends from net investment income are declared daily, paid monthly and
automatically reinvested in additional shares of the same class of the Fund
at net asset value unless you elect to receive dividends credited to your
Wells Fargo Bank account, paid in cash, or in shares of certain other funds
in the Stagecoach Family of Funds in which you have an established account
that has met the applicable minimum initial investment. Any capital gains
are distributed at least annually in the same manner as dividends.
Investment income available for distribution to holders of a class of shares
is reduced by the class expenses payable on behalf of those shares. See
"Dividends" and "Additional Shareholder Services."
3 PROSPECTUS
<PAGE> 248
Q. ARE EXCHANGES TO OTHER FUNDS PERMITTED?
A. Yes. The exchange privilege enables you to exchange Fund shares for shares
of another fund offered by the Company, or shares of certain other funds
offered by other investment companies in the Stagecoach Family of Funds, to
the extent such shares are offered for sale in your state of residence. See
"Additional Shareholder Services -- Exchange Privilege."
Q. HOW MAY I REDEEM SHARES?
A. You may redeem your shares at net asset value, without charge, on any day
the Fund is open by letter, or on a regular monthly basis, by an automatic
feature called the Systematic Withdrawal Plan, or by telephone (unless you
have declined this feature on your account application). See "How To Redeem
Shares" for more details, or contact Stephens (the Funds' distributor), a
shareholder servicing agent or a selling agent (such as Wells Fargo Bank).
PROSPECTUS 4
<PAGE> 249
SUMMARY OF FUND EXPENSES
MONEY MARKET MUTUAL FUNDS
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
MONEY
MARKET CALIFORNIA NATIONAL
(A SHARES) TAX-FREE TAX-FREE
---------- ---------- --------
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price).... None None None
Sales Charge Imposed on Reinvested
Dividends.............................. None None None
Sales Charge Imposed on Redemptions...... None None None
Exchange Fees............................ None None None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
MONEY
MARKET CALIFORNIA NATIONAL*
(A SHARES) TAX-FREE TAX-FREE
---------- ---------- --------
<S> <C> <C> <C>
Management Fee (after waivers or
reimbursements)........................ 0.40% 0.50% 0.20%(1)
Rule 12b-1 Fees (after waivers or
reimbursements)........................ 0.02%(2) 0.03%(2) 0.05%
Other Expenses (after waivers or
reimbursements)(3)..................... 0.33% 0.12% 0.25%
---- ---- ----
TOTAL FUND OPERATING EXPENSES (after
waivers or reimbursements)(4).......... 0.75% 0.65% 0.50%
==== ==== ====
</TABLE>
- ---------------------------------
(1) Management Fee (before waivers or reimbursements) would be payable at the
maximum annual rate of 0.30% for the National Tax-Free Money Market Mutual
Fund.
(2) Rule 12b-1 fees (before waivers or reimbursements) would be payable at
maximum annual rates of 0.05% for the Class A shares of the Money Market
Mutual Fund and 0.05% for the California Tax-Free Money Market Mutual Fund.
(3) Other Expenses (before waivers or reimbursements) would be: 0.38% for the
Class A shares of the Money Market Mutual Fund, 0.46% for the California
Tax-Free Money Market Mutual Fund and 0.60% for the National Tax-Free Money
Market Mutual Fund.
(4) Total Fund Operating Expenses (before waivers or reimbursements) would be
0.83% for the Class A shares of the Money Market Mutual Fund, 1.01% for the
California Tax-Free Money Market Mutual Fund and 0.95% for the National
Tax-Free Money Market Mutual Fund.
* Other mutual funds may invest in the Tax-Free Money Market Master Portfolio
and such other funds' expenses and, correspondingly, investment returns may
differ from those of the National Tax-Free Money Market Mutual Fund.
5 PROSPECTUS
<PAGE> 250
SUMMARY OF FUND EXPENSES
MONEY MARKET MUTUAL FUNDS
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
GOVERNMENT TREASURY
(A SHARES) (A SHARES)
-------------- ------------
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price).... None None
Sales Charge Imposed on Reinvested
Dividends.............................. None None
Sales Charge Imposed on Redemptions...... None None
Exchange Fees............................ None None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
GOVERNMENT TREASURY
(A SHARES) (A SHARES)
-------------- ------------
<S> <C> <C>
Management Fee (after waivers or
reimbursements)........................ 0.30% 0.12%(1)
Rule 12b-1 Fees.......................... 0.05% 0.05%
Other Expenses (after waivers or
reimbursements)........................ 0.40%(2) 0.38%
---- ----
TOTAL FUND OPERATING EXPENSES (after
waivers or reimbursements)(3).......... 0.75% 0.55%
==== ====
</TABLE>
- ---------------------------------
(1) Management Fee (before waivers or reimbursements) would be payable at
maximum annual rates of 0.25% for the Treasury Money Market Mutual Fund.
(2) Other Expenses (before waivers or reimbursements) would be 0.43% for the
Class A shares of the Government Money Market Mutual Fund.
(3) Total Fund Operating Expenses (before waivers or reimbursements) would be
0.78% and 0.68%, respectively, for the Class A shares of the Government and
Treasury Money Market Mutual Funds.
PROSPECTUS 6
<PAGE> 251
EXAMPLE OF EXPENSES
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following
expenses on a $1,000 investment in
a Fund, assuming a 5% annual return
and redemption at the end of each
time period indicated:
Money Market Mutual Fund (Class
A shares)...................... $8 $24 $42 $ 93
California Tax-Free Money
Market Mutual Fund............. $7 $21 $36 $ 81
Government Money Market Mutual
Fund (Class A shares).......... $8 $24 $42 $ 93
National Tax-Free Money Market
Mutual Fund.................... $5 $16 N/A N/A
Treasury Money Market Mutual
Fund (Class A shares).......... $6 $18 $31 $ 69
</TABLE>
EXPLANATION OF TABLES
The purpose of the above tables is to help you understand the various costs
and expenses that a shareholder in a Fund will pay directly or indirectly. You
may purchase Fund shares directly from the Company or through Wells Fargo Bank
or other institutions that have developed various account products through which
Fund shares may be purchased, and for which customers may be charged a fee. The
tables do not reflect any charges that may be imposed by a Wells Fargo Bank or
another institution directly on such customer accounts in connection with an
investment in a Fund.
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or sell Fund
shares. There are no Shareholder Transaction Expenses for either Fund. However,
the Company reserves the right to impose a charge for wiring redemption
proceeds.
ANNUAL FUND OPERATING EXPENSES shown above for the Money Market Mutual, and
California Tax-Free Money Market Mutual Funds 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 to reduce expenses
during the current fiscal year. The amount shown above for the National Tax-Free
Money Market Mutual Fund under "Rule 12b-1 Fee" reflects contract amounts; the
amounts shown above under "Other Expenses" and "Total Other Expenses" reflect
certain voluntary fee waivers and expense reimbursements for the current fiscal
year. Annual Fund Operating Expenses for the National Tax-Free Money Market
Mutual Fund summarize expenses charged at the Master Portfolio level as well as
expenses charged at the Fund level. Annual Fund Operating Expenses for the
Government and Treasury Money Market Mutual Funds are based on applicable
contract amounts and derived from amounts incurred by the predecessor
portfolios, the Government Money Market and Treasury Money Market Funds,
respectively, of Pacifica Funds Trust, during its most recent fiscal
7 PROSPECTUS
<PAGE> 252
year, restated to reflect voluntary fee waivers and expense reimbursements that
are expected to continue during the Company's current fiscal year. Wells Fargo
Bank and Stephens have agreed to waive or reimburse all or a portion of their
respective fees charged to, or expenses paid by, each such Fund to ensure that
the respective Total Fund Operating Expenses do not exceed, on an annual basis,
0.75% and 0.55%, respectively, of the Class A shares of the Government and
Treasury Money Market Mutual Funds' average daily net assets through August 31,
1997. Any waivers or reimbursements will reduce the total expenses of a Fund or
Master Portfolio. There can be no assurance that such waivers or reimbursements
will continue after that date. For more complete descriptions of the various
costs and expenses you can expect to incur as an investor in the Funds, please
see "Investing in the Funds -- How to Buy Shares" and "Management, Distribution
and Servicing Fees."
EXAMPLE OF EXPENSES is a hypothetical illustration of the expenses associated
with a $1,000 investment over stated periods, based on the expenses in the above
tables and an assumed annual rate of return of 5%. The rate of return should not
be considered an indication of actual or expected performance of a Fund nor a
representation of past or future expenses; actual expenses and returns may be
greater or lesser than those shown.
PROSPECTUS 8
<PAGE> 253
FINANCIAL HIGHLIGHTS
Money Market Mutual and Tax-Free Funds: The following information relating to
the Class A Shares of the Money Market Mutual Fund and shares of the California
Tax-Free Money Market Mutual Fund has been derived from the Funds' Financial
Highlights in the financial statements for the fiscal year ended December 31,
1995. Such financial statements were audited by KPMG Peat Marwick LLP,
independent auditors, whose report on the financial statements for the year
ended December 31, 1995 is incorporated by reference along with the December 31,
1995 financial statements into the SAI. This information should be read in
conjunction with the related financial statements and the notes thereto.
Financial Highlights for the National Tax-Free Money Market Mutual Fund are
not provided here because the Fund's shares were not offered during the periods
presented.
MONEY MARKET MUTUAL FUND
FOR A CLASS A SHARE OUTSTANDING
<TABLE>
<CAPTION>
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993 1992(1)
---------- ---------- -------- --------
<S> <C> <C> <C> <C>
Net Asset Value Beginning of Period.... $1.00 $1.00 $1.00 $1.00
Income from Investment Operations:
Net Investment Income................ 0.05 0.04 0.03 0.02
Net Realized & Unrealized Gain (Loss)
on Investments..................... 0.00 0.00 0.00 0.00
---------- ---------- -------- --------
Total from Investment Operations....... 0.05 0.04 0.03 0.02
Less Distributions:
Dividends from Net Investment
Income............................. (0.05) (0.04) (0.03) (0.02)
Distributions from Net Realized
Gain............................... 0.00 0.00 0.00 0.00
---------- ---------- -------- --------
Total From Distributions............... (0.05) (0.04) (0.03) (0.02)
---------- ---------- -------- --------
Net Asset Value End of Period.......... $1.00 $1.00 $1.00 $1.00
========== ========== ======== ========
Total Return (not annualized).......... 5.34% 3.74% 2.70% 1.50%
Ratios/Supplemental Data:
Net Assets, End of Period (000's).... $2,892,621 $2,343,942 $317,474 $236,269
Number of shares outstanding, End of
Period (000's)..................... 2,893,689 2,344,028 317,474 236,270
Ratios to Average Net Assets
(annualized):
Ratio of Expenses to Average Net
Assets(2).......................... 0.75% 0.69% 0.58% 0.20%
Ratio of Net Investment Income to
Average Net Assets(3).............. 5.13% 4.12% 2.67% 2.98%
- -------------------
(1) The Fund commenced operations on
July 1, 1992
(2) Ratio of Expenses to Average Net
Assets Prior To Waived Fees and
Reimbursed Expenses................ 0.83% 0.89% 1.00% 0.94%
(3) Ratio of Net Investment Income to
Average Net Assets Prior To Waived
Fees and Reimbursed Expenses....... 5.05% 3.92% 2.25% 2.24%
</TABLE>
9 PROSPECTUS
<PAGE> 254
CALIFORNIA TAX-FREE MONEY MARKET MUTUAL FUND
FOR A SHARE OUTSTANDING
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993 1992
---------- --------- --------- ----------
<S> <C> <C> <C> <C>
Net Asset Value Beginning of Period...... $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from Investment Operations:
Net Investment Income.................. 0.03 0.02 0.02 0.03
Net Realized and Unrealized Gain (Loss)
on Investments....................... 0.00 0.00 0.00 0.00
Total From Investment Operations..... 0.03 0.02 0.02 0.03
Less Distributions:
Dividends from Net Investment Income... (0.03) (0.02) (0.02) (0.03)
Distributions From Net Realized Gain... 0.00 0.00 0.00 0.00
Total From Distributions............. (0.03) (0.02) (0.02) (0.03)
Net Asset Value, End of Period......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========= ========= ==========
Total Return (not annualized)........ 3.23% 2.28% 1.89% 2.81%
Ratios/Supplemental Data:
Net Assets, End of Period (000's)...... $1,031,004 $ 869,745 $ 793,420 $ 572,906
Number of shares outstanding, End of
Period (000's)....................... 1,031,104 869,824 793,426 572,907
Ratios to Average Net Assets
(annualized):
Ratio of Expenses to Average Net
Assets(1)............................ 0.65% 0.62% 0.55% 0.28%
Ratio of Net Investment Income to
Average Net
Assets(2)............................ 3.18% 2.26% 1.88% 2.41%
- -------------------
(1) Ratio of Expenses to Average Net
Assets Prior to Waived Fees and
Reimbursed Expenses.................. 1.01% 1.08% 1.06% 1.03%
(2) Ratio of Net Investment Income to
Average Net Assets Prior to Waived
Fees and Reimbursed Expenses......... 2.82% 1.80% 1.37% 1.66%
</TABLE>
PROSPECTUS 10
<PAGE> 255
FINANCIAL HIGHLIGHTS (continued)
Government and Treasury Money Market Mutual Funds: The following information
has been derived from the Financial Highlights in the annual financial
statements for the fiscal year ended September 30, 1995, and in the semi-annual
financial statements for the six-months ended March 31, 1996, for Pacifica Funds
Trust's Government and Treasury Money Market Funds, the predecessor portfolios
to the Company's Government and Treasury Money Market Mutual Funds. This
information is provided to assist you in evaluating the performance of the Funds
for the periods presented. The financial information for the predecessor funds
for the year ended September 30, 1995 and, with regard to the Treasury Money
Market Fund, the six months ended September 30, 1994, was audited by the
predecessor funds' independent auditors, whose report on the financial
statements for the year ended September 30, 1995 appears in the 1995 Annual
Report to Shareholders for the predecessor portfolios. This report and the
related financial statements are incorporated by reference into the SAI. The
financial information for each of the four years in the period ended March 31,
1994 for the Treasury Money Market Fund was audited by the predecessor fund's
former independent accountants. Prior to August 11, 1995, the Treasury Money
Market Fund offered only one class of shares to institutional investors, which
was known as Service shares. The unaudited financial information and the related
notes for each of the predecessor funds for the six months ended March 31, 1996
also are incorporated by reference into the SAI. See "The Funds, Master
Portfolio and Management" below and "Capital Stock" in the SAI. This information
should be read in conjunction with the related financial statements and the
notes thereto.
11 PROSPECTUS
<PAGE> 256
GOVERNMENT MONEY MARKET MUTUAL FUND
FOR A CLASS A SHARE OUTSTANDING AS SHOWN
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED SEPTEMBER 30,
MARCH 30, ---------------------------------------------------------
1996 1995 1994 1993 1992
------------ ----------- ---------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net asset
value -- beginning
of period......... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Income from
Investment
Operations:
Net investment
income(2)....... 0.024 0.047 0.031 0.027 0.039
Net realized gain
on
investments..... -- 0.004 -- -- --
-------- -------- -------- -------- --------
Total from
investment
operations.... 0.024 0.051 0.031 0.027 0.039
-------- -------- -------- -------- --------
Less Distributions:
Dividends from net
investment
income.......... (0.024) (0.047) (0.031) (0.027) (0.039)
Dividends from net
realized gain on
investments..... -- (0.004) -- -- --
-------- -------- -------- -------- --------
Total
distributions... (0.024) (0.051) (0.031) (0.027) (0.039)
-------- -------- -------- -------- --------
Net asset
value -- end of
period.......... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ========= ======== ======== ========
Total Return.... 2.41% 5.22% 3.16% 2.77% 3.99%
Ratios/Supplemental
Data:
Net assets, end of
period (000).... $ 89,026 $109,368 $194,276 $188,934 $184,705
Ratio of expenses
to average net
assets.......... 0.81%(3) 0.79% 0.7 0.83% 0.82%
Effect of waivers
on above
ratio........... 0.05%(3) 0.02% 0.0 0.01% 0.00%
Ratio of net
investment
income to
average net
assets.......... 4.83%(3) 5.08% 3.0 2.73% 3.85%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, PERIOD ENDED
------------------------------------------- SEPT.30,
1991 1990 1989 1988(1)
-------- ----------- --------- ------------
<S> <C> <C> <C> <C>
Net asset
value -- beginning
of period......... $ 1.000 $ 1.000 $ 1.000 $ 1.000
Income from
Investment
Operations:
Net investment
income(2)....... 0.061 0.076 0.084 0.030
Net realized gain
on
investments..... -- -- -- --
-------- -------- -------- --------
Total from
investment
operations.... 0.061 0.076 0.084 0.030
-------- -------- -------- --------
Less Distributions:
Dividends from net
investment
income.......... (0.061) (0.076) (0.084) (0.030)
Dividends from net
realized gain on
investments..... -- -- -- --
-------- -------- -------- --------
Total
distributions... (0.061) (0.076) (0.084) (0.030)
-------- -------- -------- --------
Net asset
value -- end of
period.......... $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ========
Total Return.... 6.30% 7.85% 8.71% 3.04%
Ratios/Supplemental
Data:
Net assets, end of
period (000).... $171,375 $160,436 $162,726 $125,856
Ratio of expenses
to average net
assets.......... 0.85% 0.73% 0.68% 0.66%(3)
Effect of waivers
on above
ratio........... 0.03% 0.10% 0.16% 0.26%(3)
Ratio of net
investment
income to
average net
assets.......... 6.13% 7.60% 8.42% 6.94%(3)
</TABLE>
- -------------------
(1) Commencement of operations was on April 26, 1988.
(2) Per share data are based upon average monthly shares outstanding.
(3) Annualized.
PROSPECTUS 12
<PAGE> 257
TREASURY MONEY MARKET MUTUAL FUND(1)
(SERVICE SHARES)(2)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
------------------------------------------------------------------------------------------------------
1986(4) 1987 1988 1989 1990 1991 1992
-------- -------- -------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:
Net asset value,
beginning of
period............... $ 1.0000 $ 1.0000 $ 1.0000 $1.0000 $1.0000 $ 1.0000 $ 1.0001
-------- -------- -------- ------- ------- -------- --------
Investment Operations:
Investment
income-net........... .0353 .0550 .0604 .0743 .0827 .0716 .0489
Net realized gain
(loss) on
investments.......... -- -- -- -- -- .0003 .0002
-------- -------- -------- ------- ------- -------- --------
Total from Investment
Operations......... .0353 .0550 .0604 .0743 .0827 .0719 .0491
-------- -------- -------- ------- ------- -------- --------
Distributions:
Dividends from
investment
income-net........... (.0353) (.0550) (.0604) (.0743) (.0827) (.0716) (.0489)
Dividends from net
realized gain on
investment........... -- -- -- -- -- (.0002) (.0004)
-------- -------- -------- ------- ------- -------- --------
Total
Distributions...... (.0353) (.0550) (.0604) (.0743) (.0827) (.0718) (.0493)
-------- -------- -------- ------- ------- -------- --------
Net asset value, end of
year................. $ 1.0000 $ 1.0000 $ 1.0000 $1.0000 $1.0000 $ 1.0001 $ .9999
======== ======== ======== ======= ======= ======== ========
Total Investment
Return............. 7.18%(6) 5.64% 6.20% 7.63% 8.58% 7.42% 5.03%
Ratios/Supplemental
Data:
Ratio of expenses to
average net assets... .80%(6,7) .69%(8) .69%(9) .63%(10) .56%(11) .48%(12) .45%(13)
Ratio of net investment
income to average net
assets............... 6.91%(6,7) 5.50%(8) 6.12%(9) 7.36%(10) 7.73%(11) 7.10%(12) 4.73%(13)
Net Assets, end of year
(000's Omitted)...... $123,243 $134,375 $101,066 $90,672 $98,398 $118,623 $281,343
</TABLE>
<TABLE>
<CAPTION>
(INVESTOR
SHARES)(3)
----------
SIX MONTHS FISCAL YEAR SIX MONTHS
FISCAL YEAR ENDED MARCH 31, ENDED ENDED ENDED
----------------------------- SEPT. 30, SEPT. 30, MARCH 31,
1993 1994 1994(5) 1995 1996
-------- -------- ---------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Per Share Data:
Net asset value,
beginning of
period.............. $ .9999 $ 1.0001 $ 1.0000 $ 1.0000 $1.0000
-------- -------- -------- ---------- -------
Investment Operations:
Investment
income-net.......... .0309 .0277 .0186 .0529 .0251
Net realized gain
(loss) on
investments......... .0002 -- -- -- (.0004)
-------- -------- -------- ---------- -------
Total from Investment
Operations........ .0311 .0277 .0186 .0529 .0247
-------- -------- -------- ---------- -------
Distributions:
Dividends from
investment
income-net.......... (.0309) (.0277) (.0186) (.0529) (.0251)
Dividends from net
realized gain on
investment.......... -- (.0001) -- -- --
-------- -------- -------- ---------- -------
Total
Distributions..... (.0309) (.0278) (.0186) (.0529) (.0251)
-------- -------- -------- ---------- -------
Net asset value, end of
year................ $ 1.0001 $ 1.0000 $ 1.0000 $ 1.0000 $ .9996
======== ======== ======== ========== =======
Total Investment
Return............ 3.13% 2.81% 3.75%(6) 5.42% 5.07%
Ratios/Supplemental
Data:
Ratio of expenses to
average net assets.. .43%(14) .43%(15) .43%(6,16) .42 .55%(6,18)
Ratio of net investmen
income to average net
assets.............. 3.04%(14) 2.77%(15) 3.72%(6,16) 5.32 5.12%(6,18)
Net Assets, end of year
(000's Omitted)..... $614,237 $654,950 $690,630 $1,001,707 $46,920
</TABLE>
13 PROSPECTUS
<PAGE> 258
- -------------------
(1) Prior to August 1, 1990, the Treasury Money Market Mutual Fund was known as
the Short-Term Government Fund and invested in obligations issued or
guaranteed by agencies and instrumentalities of the U.S. Government in
accordance with fundamental policies that were then effective for the Fund.
The Fund operated as a portfolio of Pacific American Fund through October
1, 1994, when it was reorganized as the "Pacific American U.S. Treasury
Portfolio," a portfolio of Pacifica Funds Trust. In July 1995, the Fund was
renamed the "Pacifica Treasury Money Market Fund," and on or about
September 6, 1996, the Fund was reorganized as a fund of Stagecoach Funds,
Inc.
(2) Financial Data for all periods up to and including the fiscal year ended
September 30, 1995, are for Service Shares only.
(3) Financial Data for the six-month period ended March 31, 1996 is for
Investor shares only, the predecessor of the Fund's Class A Shares, which
commenced operations October 1, 1995.
(4) From October 1, 1985 (commencement of operations) to March 31, 1986.
(5) On October 1, 1994, the Fund's fiscal year end was changed from March 31 to
September 30, and on or about September 6, 1996 the Fund's fiscal year end
was changed from September 30 to December 31.
(6) Annualized basis.
(7) During the period from October 1, 1985 (Commencement of Operations) to
March 31, 1986, the Fund's adviser waived a portion of its fees (.25%
(annualized) of average net assets).
(8) During the year ended March 31, 1987, the Fund's adviser waived a portion
of its fees aggregating $264,629 (.25% of average net assets). In addition,
during the period from January 1, 1987 to March 31, 1987, the Fund's
adviser and the Fund's prior distributor waived a portion of their
respective fees (.09% of average net assets).
(9) During the year ended March 31, 1988, the Fund's adviser and the Fund's
prior distributor waived a portion of their respective fees (.36% of
average net assets).
(10) During the year ended March 31, 1989, the Fund's adviser waived a portion
of its fees (.35% of average net assets).
(11) During the year ended March 31, 1990, the Fund's adviser and the Fund's
prior distributor waived a portion of their respective fees (.41% of
average net assets).
(12) During the year ended March 31, 1991, the Fund's adviser and the Fund's
Service Organizations waived a portion of their respective fees (.46% of
average net assets).
(13) During the year ended March 31, 1992, the Fund's adviser and the Fund's
Service Organizations waived a portion of their respective fees (.48% of
average net assets).
(14) During the year ended March 31, 1993, the Fund's adviser and the Fund's
Service Organizations waived a portion of their respective fees (.48% of
average net assets).
(15) During the year ended March 31, 1994, the Fund's adviser and the Fund's
Service Organizations waived a portion of their respective fees (.47% of
average net assets).
(16) During the six month period ended September 30, 1994, the Fund's adviser
and the Fund's Service Organizations waived a portion of their respective
fees (.47% (annualized) of average net assets).
(17) During the year ended September 30, 1995, the Fund's adviser and the Fund's
Service Organizations waived a portion of their respective fees (.24% of
average net assets).
(18) During the six-month period ended March 31, 1996, the Fund's adviser and
the Fund's Service Organizations waived a portion of their respective fees
with regard to Investor Shares (.14% of average net assets).
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HOW THE FUNDS WORK
INVESTMENT OBJECTIVES AND POLICIES
Set forth below is a description of the investment objectives and related
policies of the Funds. Each Fund is a money market fund, subject to Rule 2a-7 of
the 1940 Act. Each Fund seeks to maintain a net asset value of $1.00 per share.
Their assets consist only of obligations with remaining maturities (as defined
by the SEC) of 397 days (13 months) or less at the date of acquisition as
determined in accordance with Rule 2a-7 of the 1940 Act and the dollar-weighted
average maturity of each Fund's investments is 90 days or less. There can be no
assurance that each Fund's investment objective will be achieved or that a Fund
will be able to maintain a net asset value of $1.00 per share.
The MONEY MARKET MUTUAL FUND seeks to provide investors with a high level of
income, while preserving capital and liquidity, by investing in high-quality,
short-term instruments. The Fund invests its assets only in U.S.
dollar-denominated, high-quality money market instruments, and may engage in
certain other investment activities as described in this Prospectus. Permitted
investments include short-term U.S. Government obligations, obligations of
domestic and foreign banks, commercial paper, and repurchase agreements. In
pursuing its objective, the Fund invests in instruments with remaining
maturities not exceeding thirteen months, as determined in accordance with Rule
2a-7 under the 1940 Act. As with all mutual funds, there can be no assurance
that the Fund, which is a diversified portfolio, will achieve its investment
objective. A more complete description of these investments and investment
activities is contained in the "Prospectus Appendix -- Additional Investment
Policies" and in the SAI.
The CALIFORNIA TAX-FREE MONEY MARKET MUTUAL FUND seeks to obtain a high level
of income exempt from federal income tax and California personal income tax,
while preserving capital and liquidity, by investing in high-quality, short-term
U.S. dollar-denominated money market instruments, primarily municipal
obligations. This investment objective is fundamental and cannot be changed
without shareholder approval. There can be no assurance that the Fund, which is
a nondiversified portfolio, will achieve its investment objective. Wells Fargo
Bank, as investment adviser to the Fund, pursues the Fund's objective by
investing (under normal market conditions) substantially all of the Fund's
assets in the following types of municipal obligations that pay interest which
is exempt from both federal income tax and California personal income tax:
bonds, notes, and commercial paper issued by or on behalf of the State of
California, its cities, municipalities, political subdivisions and other public
authorities. These municipal obligations and the taxable investments described
below may bear interest at rates that are not fixed ("floating- and
variable-rate instruments"). The Fund may also invest in obligations issued by
the U.S. Virgin Islands, Puerto Rico and Guam,
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the interest on which also is exempt from federal income tax and California
personal income tax.
The California Tax-Free Money Market Mutual Fund may temporarily invest some
of its assets in certain high-quality, taxable money market instruments or may
engage in certain other investment activities as described in this Prospectus.
The Fund may elect to invest temporarily up to 20% of its net assets in certain
permitted taxable investments, which include cash reserves, U.S. Government
obligations, obligations of domestic and foreign banks, foreign securities,
rated commercial paper, taxable municipal obligations, repurchase agreements,
and loans of portfolio securities. Such temporary investments would most likely
be made when there is an unexpected or abnormal level of investor purchases or
redemptions of Fund shares or because of unusual market conditions. The income
from these temporary investments and investment activities may be subject to
federal income tax and California personal income tax. However, as stated above,
Wells Fargo Bank seeks to invest substantially all of the Fund's assets in
securities exempt from such taxes. An additional description of tax-free
municipal obligations, taxable money market instruments, and other investment
activities is contained in the "Prospectus Appendix -- Additional Investment
Policies" and in the SAI.
As a matter of fundamental policy, at least 80% of the California Tax-Free
Money Market Mutual Fund's net assets are invested (under normal market
conditions) in municipal obligations that pay interest which is exempt from
federal income tax and not subject to the federal alternative minimum tax (or in
other open-end tax-free money market funds with a similar fundamental policy).
At least 65% of the Fund's total assets are invested (under normal market
conditions) in municipal obligations that pay interest which is exempt from
California personal income tax. However, as a matter of general operating
policy, the Fund seeks to have substantially all of its assets invested in such
municipal obligations. The Fund's investment adviser may rely either on the
opinion of counsel to the issuer of the municipal obligations or bond counsel
regarding the tax treatment of these obligations. In addition, the Fund may
invest 25% or more of its assets in California municipal obligations that are
related in such a way that an economic, business or political development or
change affecting one such obligation would also affect the other obligations;
for example, the California Tax-Free Money Market Mutual Fund may own different
municipal obligations which pay interest based on the revenues of similar types
of projects.
The NATIONAL TAX-FREE MONEY MARKET MUTUAL FUND seeks to provide investors with
a high level of income exempt from federal income tax, while preserving capital
and liquidity. The Fund, which is a diversified portfolio, seeks to achieve its
investment objective by investing all of its assets in the Master Portfolio,
which has the same investment objective as the Fund. The Master Portfolio seeks
to achieve its investment objective by investing in high-quality, short-term
U.S. dollar-denominated money market
PROSPECTUS 16
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instruments, primarily municipal obligations, with remaining maturities not
exceeding thirteen months.
Since the investment characteristics of the Fund correspond directly to those
of the Master Portfolio, the following is a discussion of the various
investments of, and techniques employed by, the Master Portfolio.
Wells Fargo Bank, as investment adviser to the Master Portfolio, pursues the
investment objective of the Master Portfolio by investing (under normal market
conditions) substantially all of the Master Portfolio's assets in the following
types of municipal obligations that pay interest which is exempt from federal
income tax: bonds, notes and commercial paper issued by or on behalf of states,
territories, and possessions of the United States (including the District of
Columbia) and their political subdivisions, agencies, instrumentalities
(including government-sponsored enterprises) and authorities, the interest on
which, in the opinion of counsel to the issuer or bond counsel, is exempt from
federal income tax. These municipal obligations and the taxable investments
described below may bear interest at rates that are not fixed ("floating- and
variable-rate instruments").
The Master Portfolio may temporarily invest some of its assets in cash
reserves or certain high-quality, taxable money market instruments, or may
engage in other investment activities as described in this Prospectus. The
Master Portfolio may elect to invest temporarily up to 20% of its net assets in
certain permitted taxable investments, including cash reserves, U.S. Government
obligations, obligations of domestic banks, commercial paper, taxable municipal
obligations and repurchase agreements. The Master Portfolio may also invest in
U.S. dollar-denominated obligations of foreign banks and foreign securities.
Such temporary investments would most likely be made when there is an unexpected
or abnormal level of investor purchases or redemptions of interests in the
Master Portfolio or because of unusual market conditions. The income from these
temporary investments and investment activities may be subject to federal income
tax. However, as stated above, Wells Fargo Bank seeks to invest substantially
all of the Master Portfolio's assets in securities exempt from such tax. A more
complete description of tax-free municipal obligations, taxable money market
instruments, and other investment activities is contained in the "Prospectus
Appendix -- Additional Investment Policies."
As a matter of fundamental policy, at least 80% of the net assets of the
Master Portfolio are invested (under normal market conditions) in municipal
obligations that pay interest which is exempt from federal income tax and is not
subject to the federal alternative minimum tax. However, as a matter of general
operating policy, the Master Portfolio seeks to invest substantially all of its
assets in such municipal obligations. The Master Portfolio's investment adviser
may rely either on the opinion of counsel to the issuer of the municipal
obligations or bond counsel regarding the tax treatment of these obligations. In
addition, the Master Portfolio may invest 25% or more of its assets in
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municipal obligations that are related in such a way that an economic, business
or political development or change affecting one such obligation would also
affect the other obligations; for example, the Master Portfolio may own
different municipal obligations which pay interest based on the revenues of
similar types of projects.
For additional descriptions of the types of securities and investment
practices used by the Funds and Master Portfolios, see "Risk Factors,"
"Prospectus Appendix -- Additional Investment Policies" in this Prospectus and
"Investment Restrictions" and "Additional Permitted Investment Activities" in
the SAI.
MASTER/FEEDER STRUCTURE
The National Tax-Free Money Market Mutual Fund is a feeder fund in a
master/feeder structure, which means that it invests all of its assets in the
Master Portfolio. The Master Portfolio has the same investment objective as the
Fund. The Master Trust is organized as a business trust under Delaware law. See
"How the Funds Work -- Investment Objectives and Policies." In addition to
selling its shares to the Fund, the Master Portfolio may sell its shares to
other mutual funds or qualified investors. Other mutual funds and other
qualified investors may have different expenses and, accordingly, may experience
different investment returns and yields compared with the Fund. Information
regarding additional options, if any, for investments in shares of the Master
Portfolio is available from Stephens and may be obtained by calling
1-800-643-9691 or by calling Wells Fargo Bank at 1-800-222-8222.
The Company's Board of Directors believes that if other investors invest their
assets in the Master Portfolio, certain economic efficiencies may be realized
with respect to the Master Portfolio. There can be no assurance that these
economic efficiencies can be achieved. For example, fixed expenses that
otherwise would have been borne solely by the Fund would be spread across a
potentially larger asset base provided by more than one fund investing in the
Master Portfolio. The Fund and any other entities investing in the Master
Portfolio are each liable for all obligations of the Master Portfolio. However,
the risk of the Fund incurring financial loss on account of such liability is
limited to circumstances in which both inadequate insurance exists and the
Master Trust itself is unable to meet its obligations. Accordingly, the
Company's Board of Directors believes that neither the Fund nor its shareholders
will be adversely affected by reason of investing the Fund's assets in the
Master Portfolio. However, if a mutual fund or other investor withdraws its
investment from the Master Portfolio, the economic efficiencies (e.g., spreading
fixed expenses across a larger asset base) that the Company's Board of Directors
believes should be available through investment in the Master Portfolio may not
be fully achieved. In addition, given the relatively novel nature of the
master/feeder structure, accounting and operational difficulties, although
unlikely, could occur. See "Management, Distribution and Servicing Fees" for
additional description of the Fund's and Master Portfolio's expenses and
management.
PROSPECTUS 18
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The Fund may withdraw its investments in the Master Portfolio only if the
Company's Board of Directors determines that such action is in the best
interests of the Fund and its shareholders. Upon such withdrawal, the Board
would consider alternative investments, including investing all of the Fund's
assets in another investment company with the same investment objective as the
Fund or hiring an investment adviser to manage the Fund's assets in accordance
with the investment policies described in this section with respect to the
Master Portfolio. For a description of the management of the Master Portfolio,
see "The Funds, Master Portfolio and Management."
The investment objective and other fundamental policies of the National
Tax-Free Money Market Mutual Fund and the Master Portfolio cannot be changed
without approval by the holders of a majority, as defined in the 1940 Act, of
the Fund's or Master Portfolio's, as applicable, outstanding voting securities.
Whenever the Fund, as a Master Portfolio interestholder, is requested to vote on
matters pertaining to any fundamental policy of the Master Portfolio, the Fund
will hold a meeting of its shareholders to consider such matters, and the Fund
will cast its votes in proportion to the votes received from Fund shareholders.
The Fund will vote Fund shares for which it receives no voting instructions in
the same proportion as the votes received from Fund shareholders. In addition,
certain policies of the Master Portfolio which are non-fundamental could be
changed by vote of a majority of the Master Trust's Trustees without
interestholder vote. If the Master Portfolio's investment objective or
fundamental or non-fundamental policies are changed, the Fund could subsequently
change its own investment objective or policies to correspond to those of the
Master Portfolio, or the Fund could redeem its Master Portfolio interests and
either seek a new investment company with a matching objective in which to
invest or it could retain its own investment adviser to manage the Fund's
portfolio in accordance with its investment objective. In the latter case, the
Fund's inability to find a substitute investment company in which to invest or
equivalent management services could adversely affect shareholders' investments
in the Fund. The Fund will provide shareholders with 30 days' written notice
prior to the implementation of any change in the investment objective of such
Fund or the Master Portfolio, to the extent possible. Information on the Fund's
and Master Portfolio's investment objectives, policies and restrictions is
included under "How the Funds Work" and "Prospectus Appendix -- Additional
Investment Policies" in this Prospectus and under "Investment Restrictions" and
"Additional Permitted Investment Activities" in the SAI. Additional information
regarding the officers and directors/trustees of the Company and the Master
Trust is included in the SAI under "Management."
The GOVERNMENT MONEY MARKET MUTUAL FUND seeks to provide investors with as
high a level of current income as is consistent with preservation of capital and
liquidity. The Fund pursues its objective by investing its assets exclusively in
obligations issued or guaranteed by the U.S. Government, its agencies and
instrumentalities (as described in the "Prospectus Appendix -- Additional
Investment Policies"). The Fund may also invest in repurchase agreements
collateralized by such U.S. Government obligations. The
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Fund's investment objective, and the fundamental policy stated above, may not be
changed without the vote of a majority of the outstanding shares of the Fund.
The TREASURY MONEY MARKET MUTUAL FUND seeks to provide investors with current
income and stability of principal. The Fund's fundamental policy is to invest
only in obligations issued or guaranteed by the U.S. Treasury (as described in
the "Prospectus Appendix -- Additional Investment Policies") and in notes and
other instruments, including repurchase agreements, collateralized or secured by
such obligations. The Fund's investment objective, and the fundamental policy
stated above, may not be changed without the vote of a majority of the
outstanding shares of the Fund.
For additional information on permitted investments for the Funds, see
"Prospectus Appendix -- Additional Investment Policies", "Investment
Restrictions" and "Additional Permitted Investment Activities" in the SAI.
RISK FACTORS
Investments in a Fund are not bank deposits or obligations of Wells Fargo Bank
and are not insured by the FDIC, nor are they insured or guaranteed against loss
of principal. Therefore, investors should be willing to accept some risk with
money invested in a Fund. Although the Funds seek to maintain a stable net asset
value of $1.00 per share, there is no assurance that they will be able to do so.
The Funds may not achieve as high a level of current income as other mutual
funds that do not limit their investment to the high credit quality instruments
in which the Funds invest. Illiquid securities, which may include certain
restricted securities, may be difficult to sell promptly at an acceptable price.
Certain restricted securities may be subject to legal restrictions on resale.
Delay or difficulty in selling securities may result in a loss or be costly to a
Fund. As with all mutual funds, there can be no assurance that the Fund will
achieve its investment objective.
The Funds and the Master Portfolio, under 1940 Act, must comply with certain
investment criteria designed to provide liquidity, reduce risk, and allow the
Funds and Master Portfolio to maintain a stable net asset value of $1.00 per
share. Investments in the Funds and Master Portfolio are not bank accounts and
are not insured or guaranteed against loss of principal. Although both the Funds
and the Master Portfolio seek to maintain a stable NAV of $1.00 per share, there
is no assurance that they will be able to do so. As with all mutual funds, there
can be no assurance that the Funds and the Master Portfolio will achieve their
investment objectives. See "Prospectus Appendix -- Additional Investment
Policies" for further discussion of investment objectives and risks.
The Funds' and Master Portfolio's dollar-weighted average portfolio maturity
must not exceed 90 days. Any security that a Fund or the Master Portfolio
purchases must have a remaining maturity of not more than 397 days (13 months).
In addition, any security that a Fund or the Master Portfolio purchases must
present minimal credit risks and be
PROSPECTUS 20
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of "high quality," or in the case of the Treasury Money Market Mutual Fund, be
of the "highest quality." "High quality" means to be rated in the top two rating
categories and "highest quality" means to be rated only in the top rating
category, by the required number of NRSROs or, if unrated, determined to be of
comparable quality to such rated securities by Wells Fargo Bank, as the Funds'
and Master Portfolio's investment adviser, under guidelines adopted by the Board
of Directors of the Company or the Master Trust's Board of Trustees,
respectively.
Each Fund and the Master Portfolio seeks to reduce risk by investing its
assets in securities of various issuers. As such, the Money Market Mutual Fund,
the National Tax-Free Money Market Mutual Fund and the Master Portfolio are
considered to be diversified for purposes of the 1940 Act. In addition, the
Funds and Master Portfolio emphasize safety of principal and high credit
quality. In particular, the internal investment policies of the investment
adviser prohibit the purchase of many types of floating-rate derivative
securities that are considered potentially volatile. Illiquid securities, which
may include certain restricted securities, may be difficult to sell promptly at
an acceptable price. Certain restricted securities may be subject to legal
restrictions on resale. Delay or difficulty in selling securities may result in
a loss or be costly to a Fund. The following types of derivative securities ARE
NOT permitted investments for the Funds or the Master Portfolio:
- capped floaters (on which interest is not paid when market rates move above
a certain level);
- leveraged floaters (whose interest rate reset provisions are based on a
formula that magnifies changes in interest rates);
- range floaters (which do not pay any interest if market interest rates move
outside of a specified range);
- dual index floaters (whose interest rate reset provisions are tied to more
than one index so that a change in the relationship between these indices
may result in the value of the instrument falling below face value); and
- inverse floaters (which reset in the opposite direction of their index).
Additionally, neither the Funds nor the Master Portfolio may invest in
securities whose interest rate reset provisions are tied to an index that
materially lags short-term interest rates, such as "COFI floaters." The Funds
and Master Portfolio may invest only in variable or floating-rate securities
that bear interest at a rate that resets quarterly or more frequently and that
resets based on changes in standard money market rate indices such as U.S.
Treasury bills, London Interbank Offered Rate or LIBOR, the prime rate,
published commercial paper rates, federal funds rates, Public Securities
Associates ("PSA") floaters or JJ Kenney index floaters.
Since the California Tax-Free Money Market Mutual Fund invests primarily in
securities issued by California and its agencies and municipalities, events in
California are more
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likely to affect the Fund's investments. While the California Tax-Free Money
Market Mutual Fund seeks to reduce risk by investing its assets in securities of
various issuers, the Fund is considered to be nondiversified for purposes of the
1940 Act. However, the California Tax-Free Money Market Mutual Fund will comply
with the Internal Revenue Code of 1986, as amended from time to time (the
"Code"), diversification requirements, as described in the "Prospectus
Appendix -- Additional Investment Policies" section below.
California is experiencing recurring budget deficits caused by lower than
anticipated tax revenues and increased expenditures for certain programs. These
budget deficits have depleted the state's available cash resources, and the
state has recently had to use a series of external borrowings to meet its cash
needs. In addition, since 1992 some of the credit rating agencies have assigned
their third highest rating to certain of the state's debt obligations. On July
15, 1994, three of the ratings agencies rating California's long-term debt
lowered their rating of the state's general obligation bonds. Moody's Investors
Service lowered its rating from "Aa" to "A1," Standard & Poor's Ratings Group
lowered its rating from "A+" to "A" and termed its outlook as "stable," and
Fitch Investors Service lowered its rating from "AA" to "A." Since the
California Tax-Free Money Market Mutual Fund may invest only in securities rated
in the top two rating categories, any further rating downgrade of the state's
debt obligations may impact the availability of securities that meet the Fund's
investment policies and restrictions. The Fund's investment adviser continues to
monitor and evaluate the Fund's investments in light of the events in California
and the California Tax-Free Money Market Mutual Fund's investment objective and
investment policies. The rating agencies also continue to monitor events in the
state and the state and local governments' responses to budget shortfalls. See
"Special Considerations Affecting California Municipal Obligations" in the SAI
for the California Tax-Free Money Market Mutual Fund.
The Treasury Money Market Mutual Fund restricts its investment to U.S.
Treasury obligations that meet all of the standards described above. Obligations
issued or guaranteed by the U.S. Treasury have historically involved little risk
of loss of principal if held to maturity. However, due to fluctuations in
interest rates, the market value of such obligations may vary during the period
a shareholder owns shares of the Fund. It should be noted that neither the
United States, nor any agency or instrumentality thereof, has guaranteed,
sponsored or approved the Fund or its shares.
Generally, securities in which the Funds invest will not earn as high a yield
as securities of longer maturity and/or of lesser quality that are more subject
to market volatility. Each Fund attempts to maintain the value of its shares at
a constant $1.00 per share, although there can be no assurance that a Fund will
always be able to do so.
PROSPECTUS 22
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PERFORMANCE
The performance of each Fund may be advertised from time to time in terms of
current yield, effective yield, and average annual total return. In addition,
the performance of the Tax-Free Funds may be advertised in terms of
tax-equivalent yield or effective tax-equivalent yield. Performance figures are
based on historical results and are not intended to indicate future performance.
Yield refers to the income generated by an investment in a Fund or class over
a specified period (usually 7 days), expressed as an annual percentage rate.
Effective yield is calculated similarly but assumes reinvestment of the income
earned from a Fund or class. Because of the effects of compounding, effective
yields are slightly higher than yields. For the Tax-Free Funds, the
tax-equivalent and effective tax-equivalent yields assume that a stated income
tax rate has been applied to determine the tax-equivalent figures. Application
of a stated income-tax rate results in higher yield and effective yield figures.
Average annual return is based on the overall dollar or percentage change of
an investment in a Fund or class and assumes the investment is at NAV and all
dividends and distributions are also reinvested at NAV in shares of the Fund or
class.
In addition to presenting these standardized performance calculations, at
times, the Funds may also present non-standard performance figures, such as
yields and effective yields for a 30-day period or, in sales literature,
distribution rates. Because of the differences in the fees and/or expenses borne
by shares of each class of the Money Market Mutual or Treasury Money Market
Mutual Funds, the performance figures on such shares can be expected, at any
given time, to vary from the performance figures for other classes of these
Funds.
Additional performance information is contained in the SAI under "Performance
Calculations" and in the Annual Report, which are available upon request without
charge by calling the Company at 1-800-222-8222 or by writing the Company at the
address shown on the front cover of the Prospectus.
THE FUNDS, MASTER PORTFOLIO
AND MANAGEMENT
The Funds are five funds in the Stagecoach Family of Funds. The Company was
organized as a Maryland corporation on September 9, 1991 and currently offers
shares of the following series: Aggressive Growth, Arizona Tax-Free, Asset
Allocation, Balanced, California Tax-Free Bond, California Tax-Free Income,
California Tax-Free Money Market Mutual, Corporate Stock, Diversified Income,
Equity Value, Ginnie Mae,
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Government Money Market Mutual, Growth and Income, Intermediate Bond, Money
Market Mutual, Money Market Trust, National Tax-Free, National Tax-Free Money
Market Mutual, Oregon Tax-Free, Prime Money Market Mutual, Short-Intermediate
U.S. Government Income, Small Cap, Treasury Money Market Mutual and U.S.
Government Allocation Funds. The Arizona Tax-Free, Balanced, California Tax-Free
Bond, Equity Value, Ginnie Mae, Growth and Income, Intermediate Bond, Money
Market Mutual, National Tax-Free, Oregon Tax-Free, Prime Money Market Mutual,
Small Cap and Treasury Money Market Mutual Funds each offer three classes of
shares. The Aggressive Growth, Asset Allocation, California Tax-Free Income,
Diversified Income, Short-Intermediate U.S. Government Income and U.S.
Government Allocation Funds each offer two classes of shares. The California
Tax-Free Money Market Mutual, Corporate Stock, Government Money Market Mutual,
Money Market Trust, and National Tax-Free Money Market Mutual Funds each offer
one class of shares. Most of the Company's funds are authorized to issue
multiple classes of shares, one class generally subject to a front-end sales
charge and, in some cases, a class subject to a contingent-deferred sales
charge, that are offered to retail investors. Certain of the Company's funds
also are authorized to issue other classes of shares, which are sold primarily
to institutional investors at NAV.
Each class of shares represents an equal proportionate interest in a Fund with
other shares of the same class. Shareholders of each class bear their pro rata
portion of a Fund's operating expenses except for certain class-specific
expenses (e.g., any state securities registration fees, shareholder servicing
fees or distribution fees that may be paid under Rule 12b-1) that are allocated
to a particular class and, accordingly, may affect performance. For information
on another fund or a class of shares, please call Stagecoach Shareholder
Services at 1-800-222-8222 or write the Company at the address shown on the
front cover of the Prospectus.
The Board of Directors of the Company supervises the funds' activities and
monitors their contractual arrangements with various service providers. Although
the Company is not required to hold annual shareholder meetings, special
meetings may be required for purposes such as electing or removing Directors,
approving advisory contracts and distribution plans, and changing a fund's
investment objective or fundamental investment policies. All shares of the
Company have equal voting rights and will be voted in the aggregate, rather than
by fund or class, unless otherwise required by law (such as when the voting
matter affects only one fund or class). As a Fund shareholder, you are entitled
to one vote for each share you own and fractional votes for fractional shares
you own. See "Management" in the SAI for more information on the Company's
Directors and Officers. A more detailed description of the voting rights and
attributes of the shares is contained under "Capital Stock" in the SAI.
The Master Trust was established on August 15, 1991, as a Delaware business
trust. The Declaration of Trust permits the Board of Trustees to issue
beneficial interests in a
PROSPECTUS 24
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Master Portfolio to investors based on their proportionate investments in the
Master Portfolio. The Master Trust has retained the services of Wells Fargo Bank
as investment adviser and Stephens as administrator and placement agent. The
Master Trust's Board of Trustees is responsible for the general management of
the Master Trust and its Master Portfolios and supervising the actions of Wells
Fargo Bank and Stephens in these capacities.
MANAGEMENT
Wells Fargo Bank serves as each Fund's investment adviser (or in the case of
the National Tax-Free Money Market Mutual Fund, as adviser to the Master
Portfolio), transfer and dividend disbursing agent and custodian. In addition,
Wells Fargo Bank serves as a shareholder servicing agent and as a selling agent.
Wells Fargo Bank, one of the largest banks in the United States, was founded in
1852 and is the oldest bank in the western United States. As of June 30, 1996,
Wells Fargo Bank and its affiliates provided investment advisory services for
approximately $56 billion of assets of individuals, trusts, estates and
institutions. Wells Fargo Bank also serves as investment adviser to other
separately managed funds (or the master portfolio in which a fund may invest) of
the Company, and as investment adviser or sub-adviser to separately managed
funds of five other registered, open-end, management investment companies. Wells
Fargo Bank, a wholly owned subsidiary of Wells Fargo & Company, is located at
420 Montgomery Street, San Francisco, California 94104. Wells Fargo Investment
Management, Inc. ("WFIM"), a wholly-owned subsidiary of Wells Fargo & Company,
is located at 444 Market Street, San Francisco, California 94105.
Subsequent to its acquisition by Wells Fargo & Company on April 1, 1996, WFIM
(formerly, First Interstate Capital Management, Inc.) served as investment
adviser to the predecessor portfolios of the Government and Treasury Money
Market Mutual Funds. Prior to March 18, 1994, the predecessor portfolios'
investment adviser was San Diego Financial Capital Management, Inc., which was
acquired by First Interstate Bancorp through its merger with San Diego Financial
Corporation.
Morrison & Foerster LLP, counsel to the Company and the Master Trust and
special counsel to Wells Fargo Bank, has advised the Company, Master Trust and
Wells Fargo Bank that Wells Fargo Bank and its affiliates may perform the
services contemplated by the Investment Advisory Agreement and this Prospectus
without violation of the Glass-Steagall Act. Such counsel has pointed out,
however, that there are no controlling judicial or administrative
interpretations or decisions and that future judicial or administrative
interpretations of, or decisions relating to, present federal or state statutes,
including the Glass-Steagall Act, and regulations relating to the permissible
activities of banks and their subsidiaries or affiliates, as well as future
changes in such statutes, regulations and judicial or administrative decisions
or interpretations, could prevent such entities from continuing to perform, in
whole or in part, such services. If any such
25 PROSPECTUS
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entity were prohibited from performing any such services, it is expected that
new agreements would be proposed or entered into with another entity or entities
qualified to perform such services.
Stephens is the Funds' sponsor and administrator and distributes the Funds'
shares. Stephens is a full service broker/dealer and investment advisory firm
located at 111 Center Street, Little Rock, Arkansas 72201. Stephens and its
predecessor have been providing securities and investment services for more than
60 years. Additionally, they have been providing discretionary portfolio
management services since 1983. Stephens currently manages investment portfolios
for pension and profit-sharing plans, individual investors, foundations,
insurance companies and university endowments.
INVESTING IN THE FUNDS
You may purchase Fund shares directly by opening a Fund account or, in the
case of the Money Market Mutual and Tax-Free Funds, indirectly by opening a
sweep account with Wells Fargo Bank.
OPENING A FUND ACCOUNT
You can buy Fund shares in one of the several ways described below. You must
complete and sign an Account Application to open an account. Additional
documentation may be required from corporations, associations, and certain
fiduciaries. Do not mail cash. If you have any questions or need extra forms,
please call 1-800-222-8222.
After an application has been processed and an account has been established,
subsequent purchases of different funds of the Company under the same umbrella
account do not require the completion of additional Account Applications. A
separate Account Application must be processed for each different umbrella
account number (even if the registration is the same). Call the number on your
confirmation statement to obtain information about what is required to change
registration.
To invest in the Government and Treasury Money Market Mutual Funds through
tax-deferred retirement plans through which these Funds are available, please
contact a Shareholder Servicing Agent or a Selling Agent to receive information
and the required separate application. See "Tax-Deferred Retirement Plans"
below.
The Company or Stephens may make the Prospectus available in an electronic
format. Upon receipt of a request from you or your representative, the Company
or Stephens will transmit or cause to be transmitted promptly, without charge, a
paper copy of the electronic Prospectus.
PROSPECTUS 26
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Customers of Wells Fargo Bank may invest in the Class A shares of the Money
Market Mutual Fund or shares of the Tax-Free Funds through a Money Market Access
Account or a Money Market Checking Account established with the Bank. Customers
of Wells Fargo Bank who currently hold shares of the California Tax-Free Money
Market Mutual Fund through a Managed Sweep Account may also open additional
Managed Sweep Accounts that sweep into the California Tax-Free Money Market
Mutual Fund. Investments through an account are governed by the terms and
conditions of the Account, which are set forth in a separate Disclosure
Statement provided by Wells Fargo Bank to each Accountholder. In light of the
automated sweep and custodial account structure of investments through an
Account, certain of the features described in this Prospectus are not available
to investors purchasing shares through an Account. Specifically, shares of a
Fund purchased through an Account may be redeemed only through the Account, and
the dividend and distribution options and exchange privileges described in this
Prospectus are not available with respect to shares purchased through an
Account. Potential Accountholders should refer to the Disclosure Statement for
more information regarding the Account, including information about fees and
expenses.
SHARE VALUE
Wells Fargo Bank calculates the NAV per share of each class or Fund as of
12:00 Noon (Pacific time) and 1:00 p.m. (Pacific time) on each Business Day (as
defined below). NAV is computed by dividing the value of the assets allocable to
a particular class or Fund, less the liabilities charged to that class or Fund
by the total number of the outstanding shares of that class or Fund. All
expenses, including fees paid to the investment adviser and administrator, are
accrued daily and taken into account for the purposes of computing NAV, which is
expected to fluctuate daily. As noted above, each Fund seeks to maintain a
constant $1.00 NAV share price, although there can be no assurance that it will
be able to do so. The National Tax-Free Money Market Mutual Fund's investments
in the Master Portfolio are valued at the NAV of the Master Portfolio's
interests. The Master Portfolio calculates the NAV of its interests on the same
day and at the same time as the National Tax-Free Money Market Mutual Fund.
Shares may be purchased on any day a Fund is open, provided Wells Fargo Bank
also is open for business (a "Business Day"). Currently, Wells Fargo Bank is
closed on New Year's Day, Presidents' Day, Martin Luther King, Jr. Day, Memorial
Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day
and Christmas Day (each, a "Holiday"). When any Holiday falls on a weekend, the
Funds typically are closed on the weekday immediately before or after such
Holiday. Currently, the National Tax-Free, Government and Treasury Money Market
Mutual Funds observe the same Holidays as Wells Fargo Bank. The Money Market
Mutual Fund and California Tax-Free Money Market Mutual Fund also observe the
same Holidays as Wells Fargo Bank, except Martin Luther King Day, Columbus Day
and Veterans Day. With respect to such Funds,
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these three holidays are, effectively, "Holidays" for purposes of Fund share
purchases, since Wells Fargo Bank is closed. Purchase orders received before
12:00 Noon (Pacific time) are processed at 12:00 Noon on that Business Day.
Purchase orders received after 12:00 Noon are processed at 12:00 Noon the next
Business Day, except that transaction orders that are received prior to 1:00
p.m. through Shareholder Servicing Agents in connection with automated
investment programs are processed at 1:00 p.m. All transaction orders are
processed at the NAV next determined after the order is received.
The Funds' and the Master Portfolio's NAV are each calculated on the basis of
the amortized cost method. This valuation method is based on the receipt of a
steady rate of payment on portfolio instruments from the date of purchase until
maturity rather than actual changes in market value. The Company's Board of
Directors and Master Trust's Board of Trustees believe that this valuation
method accurately reflects fair value.
HOW TO BUY SHARES
You may buy Fund shares on any Business Day by any of the methods described
below. After a properly completed Account Application is received and your wire
order or check is received, or an account with a bank that is designated in the
Account Application and that is approved by the transfer agent (an "Approved
Bank Account") is debited, your purchase order is effected, and full and
fractional shares are purchased at the next determined NAV, which is expected to
remain a constant $1.00 per share. If shares are purchased by a check that does
not clear, the Company reserves the right to cancel the purchase and hold the
investor responsible for any losses or fees incurred. In addition, the Company
may hold payment on any redemption until reasonably satisfied that your
investments made by check have been collected (which may take up to 10 days).
Generally the minimum initial investment is $2,500. The minimum initial
investment amounts, however, are $100 for investments made through the AutoSaver
Plan (described below) and $250 for investments made through any tax-deferred
retirement account for which Wells Fargo Bank serves as trustee or custodian
under a prototype trust approved by the Internal Revenue Service ("IRS") (a
"Plan Account"). Generally, subsequent investments must be made in amounts of
$100 or more. Where Fund shares are acquired in exchange for shares of another
fund in the Stagecoach Family of Funds, the minimum initial investment amount
applicable to the shares being exchanged generally carries over. This means, for
example, that you can make an initial investment of only $1,000 in a Fund even
though ordinarily a $2,500 minimum balance is required, if you are exchanging
from a fund that has a $1,000 minimum investment requirement. If the value of
your investment in shares of the fund from which you are exchanging has been
reduced below the minimum initial investment amount by changes in market
conditions or sales charges (and not by redemptions), you may carry over the
lesser amount into one of the Funds. Plan Accounts that invest in the Funds
through Wells
PROSPECTUS 28
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Fargo ExpressInvest(TM) (available to certain Wells Fargo tax-deferred
retirement plans) are not subject to the minimum initial or subsequent
investment amount requirements. In addition, the minimum initial or subsequent
purchase amount requirements may be waived or lowered for investments effected
on a group basis by certain entities and their employees, such as pursuant to a
payroll deduction or other accumulation plan. If you have questions regarding
purchases of shares or ExpressInvest, please call 1-800-222-8222 or contact a
shareholder servicing agent or selling agent (as defined below). For additional
information on tax-deferred accounts, please refer to "Investing in the
Fund -- Tax-Deferred Retirement Plans" or contact a shareholder servicing agent
or selling agent.
Shares of the Tax-Free Funds may not be suitable investments for tax-exempt
institutions or tax-deferred retirement plans, since such investors would not
benefit from the exempt status of the Funds' dividends. See "Federal Income
Taxes -- Special Tax Considerations" in the SAI. In addition, California
Tax-Free Money Market Mutual Fund shares are not available in all states.
The Company reserves the right to reject any purchase order or suspend sales
at any time. Payment for orders that are not received is returned after prompt
inquiry. The issuance of shares is recorded on the books of the Company, and
share certificates are not issued.
INITIAL PURCHASES BY WIRE
1. Complete an Account Application. Indicate the services to be used.
2. Instruct the wiring bank to transmit the specified amount in federal funds
($2,500 or more) to:
Wells Fargo Bank, N.A.
San Francisco, California
Bank Routing Number: 121000248
Wire Purchase Account Number: 4068-000587
Attention: Stagecoach Funds (Name of Fund) (designate Class A where
applicable)
Account Name(s): Name(s) in which to be registered
Account Number: (if investing into an existing account)
3. A completed Account Application should be mailed, or sent by telefacsimile
with the original subsequently mailed, to the following address immediately
after the funds are wired and must be received and accepted by the transfer
agent before an account can be opened:
Wells Fargo Bank, N.A.
Stagecoach Shareholder Services
P.O. Box 7066
29 PROSPECTUS
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San Francisco, California 94120-7066
Telefacsimile: 1-415-543-9538
4. Share purchases are effected at the NAV next determined after the Account
Application is received and accepted.
INITIAL PURCHASES BY MAIL
1. Complete an Account Application. Indicate the services to be used.
2. Mail the Account Application and a check for $2,500 or more, payable to
"Stagecoach Funds (Name of Fund) (designate Class A where applicable)," to
the address set forth under "Initial Purchases by Wire" above.
3. Share purchases are effected at the NAV next determined after the Account
Application is received and accepted.
AUTOSAVER PLAN PURCHASES
The Company's AutoSaver Plan provides you with a convenient way to establish
and automatically add to your Fund account on a monthly basis. To participate in
the AutoSaver Plan, you must specify an amount ($100 or more) to be withdrawn
automatically by the transfer agent on a monthly basis from your Approved Bank
Account. You may open an Approved Bank Account with Wells Fargo Bank. The
transfer agent withdraws and uses this amount to purchase Fund shares on your
behalf each month on or about the day that you have selected, or, if you have
not selected a day, on or about the 20th day of each month. If you hold shares
through a brokerage account, the AutoSaver Plan will comply with the terms of
your brokerage agreement. Certain restrictions may apply to indirect
investments, such as those made through a brokerage account or Wells Fargo Bank
Sweep Account, including the inability to select the particular day of the month
when the Transfer Agent purchases Fund shares on your behalf. See "Investing in
the Funds -- Opening a Wells Fargo Bank Sweep Account." The transfer agent
requires a minimum of ten (10) Business Days to implement your AutoSaver Plan
purchases. There are no separate fees charged to you by the Company for
participating in the AutoSaver Plan.
You may change your investment amount, the date on which your AutoSaver
purchase is effected, suspend purchases or terminate your election at any time
by notifying the transfer agent at least five (5) Business Days prior to any
scheduled transaction.
TAX-DEFERRED RETIREMENT PLANS
You may be entitled to invest in the Funds through a Plan Account or other
tax-deferred retirement plan. Contact a Shareholder Servicing Agent (such as
Wells Fargo Bank) or a Selling Agent for materials describing Plan Accounts
available through it, and
PROSPECTUS 30
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the benefits, provisions, and fees of such Plan Accounts. The minimum initial
investment amount for Fund shares acquired through a Plan Account is $250 (the
minimum initial investment amount is not applicable if you participate in
ExpressInvest through a Plan Account). Such arrangements might not be
appropriate for investments in the Tax-Free Funds. See "How to Buy Shares,"
above.
Pursuant to the Code, an individual who is not an active participant (and who
does not have a spouse who is an active participant) in certain types of
retirement plans ("qualified retirement plans") may deduct contributions to an
Individual Retirement Account ("IRA"), up to specified limits. Investment
earnings in the IRA will be tax-deferred until withdrawn, at which time the
individual may be in a lower tax bracket.
The maximum annual deductible contribution to an IRA for individuals under age
70 1/2 is 100% of includible compensation up to a maximum of (i) $2,000 for
single individuals; (ii) $4,000 for a married couple when both spouses earn
income; and (iii) $2,250 (increased to $4,000 for tax years beginning after
December 31, 1996) when one spouse earns, or elects for IRA purposes to be
treated as earning, no income (together the "IRA contribution limits").
The IRA deduction is also available for single individual taxpayers and
married couples who are active participants in qualified retirement plans but
who have adjusted gross incomes that do not exceed certain specified limits. If
their adjusted gross income exceeds these limits, the amount of the deductible
contribution is phased down and eventually eliminated.
Any individual who works may make nondeductible contributions to an IRA in
addition to any deductible contributions. Total aggregate deductible and
nondeductible contributions are limited to the IRA contribution limits discussed
above. Aggregate contributions in excess of the applicable IRA contribution
limit are "excess contributions." In addition, contributions made to an IRA for
the year in which an individual attains the age of 70 1/2, or any year
thereafter, are also excess contributions. Excess contributions are subject to a
6% excise tax penalty which is charged each year that the excess contribution
remains in the IRA.
An employer also may contribute to an individual's IRA as part of a Simplified
Employee Pension Plan, known as a "SEP-IRA," established prior to January 1,
1996, or a Savings Incentive Match Plan for Employees, or "SIMPLE plan,"
established after December 31, 1996, both through a Shareholder Servicing Agent
or a Selling Agent. Participating employers may make an annual contribution to
each employee through a SEP-IRA in an amount up to the lesser of 15% of such
employee's earned income or $30,000, subject to certain provisions of the Code.
Under a SIMPLE plan, an employee may contribute up to $6,000 annually to his or
her own IRA, and the employer must generally match such contributions up to 3%
of the employee's annual salary. Alternatively, the employer may elect under the
SIMPLE formula to contribute to the
31 PROSPECTUS
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employee's IRA 2% of the lesser of his or her earned income or $150,000. In any
case, all contributions and investment earnings will be tax-deferred until
withdrawn.
The foregoing discussion regarding IRAs is based on the Code and federal
regulations in effect as of the date of this Prospectus and summarizes only some
of the important federal tax considerations generally affecting IRA
contributions made by individuals or their employers. It is not intended as a
substitute for careful tax planning. You should consult your tax advisor with
respect to your specific tax situation as well as with respect to state and
local taxes. Further federal tax information is contained under "Taxes" in this
Prospectus and in the SAI for each Fund.
A Shareholder Servicing Agent or Selling Agent also may offer other types of
tax-deferred or tax-advantaged plans, including a Keogh retirement plan for
self-employed professional persons, sole proprietors and partnerships.
Application materials for opening a tax-deferred retirement plan can be
obtained from a shareholder servicing agent or a selling agent. Return your
completed tax-deferred retirement plan application to your shareholder servicing
agent or selling agent for approval and processing. If your tax-deferred
retirement plan application is incomplete or improperly filled out, there may be
a delay before a Fund account is opened. You should ask your Shareholder
Servicing Agent or Selling Agent about the investment options available to your
tax-deferred retirement plan, since some of the funds in the Stagecoach Family
of Funds may be unavailable as options. Moreover, certain features described
herein, such as the AutoSaver Plan and the Systematic Withdrawal Plan, may not
be available to individuals or entities who invest through a tax-deferred
retirement plan.
ADDITIONAL PURCHASES
You may make additional purchases of $100 or more by instructing the Funds'
transfer agent to debit your Approved Bank Account by wire with an instruction
to the wiring bank to transmit the specified amount as directed above for
initial purchases or by mail with a check payable to "Stagecoach Funds (Name of
Fund) (designate Class A, if applicable)" to the address set forth above under
"Initial Purchases by Wire." Write your Fund account number on the check and
include the detachable stub from your Account Statement or a letter providing
your Fund account number.
PURCHASES THROUGH SELLING AGENTS
You may place a purchase order for shares of the Funds through a broker/dealer
or financial institution that has entered into a selling agreement with
Stephens, the Funds' distributor (a "Selling Agent") by 12:00 Noon (Pacific
time) on any Business Day, including orders for which payment is to be made from
your free cash credit balance maintained with a Selling Agent. These purchase
orders are executed on the same day
PROSPECTUS 32
<PAGE> 277
the order is placed if notice is provided to the transfer agent by 12:00 Noon
(Pacific time) and if federal funds are received by the transfer agent before
the close of business that day. If your purchase order is received by a Selling
Agent after 12:00 Noon (Pacific time) on any Business Day or if federal funds
are not received by the transfer agent before the close of business that day,
then your purchase order generally is executed on the next Business Day. The
Selling Agent is responsible for the prompt transmission of your purchase order
to the Company. A financial institution that acts as a Selling Agent,
shareholder servicing agent or in certain other capacities may be required to
register as a dealer pursuant to applicable state securities laws, which may
differ from federal law and any interpretations expressed herein.
PURCHASES THROUGH SHAREHOLDER SERVICING AGENTS
Purchase orders for Fund shares may be transmitted to the transfer agent
through any entity that has entered into a shareholder servicing agreement with
the Funds (a "Shareholder Servicing Agent"), such as Wells Fargo Bank. See
"Management, Distribution and Servicing Fees -- Shareholder Servicing Agent" for
more information. A Shareholder Servicing Agent may transmit your purchase order
to the transfer agent, including an order for which payment is to be transferred
from your Approved Bank Account or wired from a financial institution. If the
Shareholder Servicing Agent transmits your order to the transfer agent before
12:00 Noon (Pacific time) and if federal funds are received by the transfer
agent before the close of business that day, the purchase order is executed on
the same day. If your Shareholder Servicing Agent transmits your purchase order
to the transfer agent after 12:00 Noon or if federal funds are not received by
the transfer agent before the close of business that day, then your order
generally is executed on the next Business Day, except that automated investment
program purchase orders transmitted through Shareholder Servicing Agents are
executed as of 1:00 p.m. on each Business Day. The Shareholder Servicing Agent
is responsible for the prompt transmission of your purchase order to the
Company.
STATEMENTS AND REPORTS
The Company, or a Shareholder Servicing Agent on its behalf, typically sends
you a monthly statement of your Fund account after every month in which there
has been a transaction that affects your share balance or your Fund account
registration. A statement with tax information for each year is mailed to you by
January 31 of the following year and also is filed with the IRS. At least twice
a year, the Company's financial statements are mailed to shareholders of record.
33 PROSPECTUS
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DIVIDENDS
Each Fund intends to declare dividends of its net investment income on a daily
basis payable to shareholders of record as of 12:00 Noon (Pacific time). If your
purchase order is received before 12:00 Noon on any Business Day, or 1:00 p.m.
on any Business Day through a transfer agent, you begin earning dividends on
that Business Day and continue to earn dividends through the day before you
redeem such shares. If your purchase order is received at or after 12:00 Noon on
any Business Day, or 1:00 p.m. on any Business Day through a transfer agent, you
begin earning dividends on the next Business Day and continue to earn dividends
through the day on which you redeem your shares.
Dividends for a Saturday, Sunday or Holiday are declared payable to
shareholders of record as of the preceding Business Day. If you redeem shares
before a dividend payment date, any dividends credited to you are paid on the
following dividend payment date unless you have redeemed all of the shares in
your account, in which case you will receive any accrued dividends together with
your redemption proceeds. The Funds declare and distribute any capital gains at
least annually. Dividends for the Funds generally are paid on the last Business
Day of the month in which they are declared. You have three options for
receiving dividends and any capital-gain distributions. They are discussed under
"Additional Shareholder Services -- Dividend and Distribution Options" below.
HOW TO REDEEM SHARES
You may redeem Fund shares on any Business Day without a charge by the
Company. Your shares are redeemed at the NAV next calculated after the Company
has received your redemption order. Redemption orders received by the Transfer
Agent before 12:00 Noon (Pacific time) on any Business Day are executed on that
day. Such redemption orders that are received after 12:00 Noon on any Business
Day are executed on the next Business Day. Redemption proceeds may be more or
less than the amount invested and, therefore, a redemption of Fund shares may
result in a recognized gain or loss for federal and state income tax purposes.
The Company ordinarily remits your redemption proceeds within seven days after
your redemption order is received in proper form, unless the SEC permits a
longer period under extraordinary circumstances. Such extraordinary
circumstances could include a period during which an emergency exists as a
result of which (a) disposal by a Fund of securities owned by it is not
reasonably practicable or (b) it is not reasonably practicable for a Fund fairly
to determine the value of its net assets, or (c) a period during which the SEC
by order permits deferral of redemptions for the protection of the Fund's
security holders. In addition, the Company may hold payment on your redemption
until reasonably satisfied that your investments
PROSPECTUS 34
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made by check have been collected (which can take up to 10 days from the
purchase date). To ensure acceptance of your redemption order, please follow the
procedures described below. Payment of redemption proceeds may be made in
securities, subject to regulation by some state securities commissions. In
addition, the Company reserves the right to impose charges for wiring redemption
proceeds.
All redemptions of shares generally are made in cash, except that the
commitment to redeem shares in cash extends only to redemption requests made by
each Fund shareholder during any 90-day period of up to the lesser of $250,000
or 1% of the net asset value of the Fund at the beginning of such period. This
commitment is irrevocable without the prior approval of the SEC and is a
fundamental policy of the Fund that may not be changed without shareholder
approval. In the case of redemption requests by shareholders in excess of such
amounts, the Board of Directors reserves the right to have the Fund make
payment, in whole or in part, in securities or other assets, in case of an
emergency or any time a cash distribution would impair the liquidity of the Fund
to the detriment of the existing shareholders. Such redemption would also
ordinarily be taxable to redeeming shareholders. The securities would be valued
in the same manner as the securities of the Fund are valued. If the recipient
were to sell such securities, he or she would incur brokerage costs in
converting such securities to cash.
Due to the high cost of maintaining Fund accounts with small balances, the
Company reserves the right to close your account and send you the proceeds if
the balance falls below the applicable minimum balance because of a redemption
(including a redemption of Fund shares after you have made only the applicable
minimum initial investment). You will be given 30 days' notice to make an
additional investment to increase your account balance to at least the
applicable minimum balance. For a discussion of applicable minimum balance
requirements, see "Investing in the Funds -- How to Buy Shares."
REDEMPTIONS BY TELEPHONE
Telephone redemption or exchange privileges are made available to you
automatically upon opening an account, unless you specifically decline the
privileges. Telephone redemption privileges authorize the transfer agent to act
on telephone instructions from any person representing himself or herself to be
the investor and reasonably believed by the transfer agent to be genuine. The
Company requires the transfer agent to employ reasonable procedures, such as
requiring a form of personal identification, to confirm that instructions are
genuine and, if it does not follow such procedures, the Company and the transfer
agent may be liable for any losses due to unauthorized or fraudulent
instructions. Neither the Company nor the transfer agent will be liable for
following telephone instructions reasonably believed to be genuine.
35 PROSPECTUS
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REDEMPTIONS BY LETTER
1. Write a letter of instruction. Indicate the dollar amount or number of Fund
shares you want to redeem. Refer to your Fund account number and give your
taxpayer identification number ("TIN"), which is generally your social
security or employer identification number.
2. Sign the letter in exactly the same way the account is registered. If there
is more than one owner of the shares, all must sign.
3. Signature guarantees are not required for redemption requests unless
redemption proceeds of $5,000 or more are to be paid to someone other than
you at your address of record or your Approved Bank Account, or other unusual
circumstances exist that cause the transfer agent to determine that a
signature guarantee is necessary or prudent to protect against unauthorized
redemption requests. If required, a signature must be guaranteed by an
"eligible guarantor institution," which includes a commercial bank that is an
FDIC member, a trust company, a member firm of a domestic stock exchange, a
savings association, or a credit union that is authorized by its charter to
provide a signature guarantee. Signature guarantees by notaries public are
not acceptable. Further documentation may be requested from corporations,
administrators, executors, personal representatives, trustees or custodians.
4. Mail your letter to the transfer agent at the address set forth under
"Investing in the Funds -- Initial Purchases by Wire."
Unless other instructions are given in proper form, a check for your net
redemption proceeds is sent to your address of record.
EXPEDITED REDEMPTIONS BY LETTER OR TELEPHONE
You may request an expedited redemption of Fund shares by letter, in which
case your receipt of redemption proceeds (but not a Fund's receipt of your
redemption request) would be expedited. Telephone redemption or exchange
privileges are made available to you automatically upon the opening of an
account unless you specifically decline the privilege. You also may request an
expedited redemption of Fund shares by telephone on any Business Day, in which
case both your receipt of redemption proceeds and a Fund's receipt of your
redemption request would be expedited. You may request expedited redemption by
telephone only if the total value of the shares redeemed is $100 or more.
You may request expedited redemption by telephone by calling the transfer
agent at the telephone number listed on your transaction confirmation or by
calling 1-800-222-8222.
You may mail your expedited redemption request to the transfer agent at the
address set forth under "Investing in the Fund -- Initial Purchases by Wire."
PROSPECTUS 36
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Upon request, proceeds of expedited redemptions of $5,000 or more are wired or
credited to your Approved Bank Account or wired to the Selling Agent designated
in your Account Application. The Company reserves the right to impose a charge
for wiring redemption proceeds. When proceeds of your expedited redemption are
to be paid to someone else, to an address other than that of record, or to an
account at an Approved Bank or a Selling Agent that you have not predesignated
in your Account Application, your expedited redemption request must be made by
letter and the signature(s) on the letter may be required to be guaranteed,
regardless of the amount of the redemption. If your expedited redemption request
for Fund shares is received by the transfer agent before 12:00 Noon (Pacific
time) on a Business Day, your redemption proceeds are transmitted to your
Approved Bank Account or Selling Agent on the same Business Day (assuming your
investment check has cleared as described above), absent extraordinary
circumstances. Extraordinary circumstances could include those described above
as potentially delaying redemptions and also could include situations involving
an unusually heavy volume of wire transfer orders on a national or regional
basis or communication or transmittal delays that could cause a brief delay in
the wiring or crediting of funds. A check for net redemption proceeds of less
than $5,000 is mailed to your address of record or, at your election, credited
to your Approved Bank Account.
During periods of drastic economic or market activity or changes, you may
experience problems implementing an expedited redemption by telephone. In the
event you are unable to reach the transfer agent by telephone, you should
consider using overnight mail to implement an expedited redemption. The Company
reserves the right to modify or terminate the expedited telephone redemption
privilege at any time.
SYSTEMATIC WITHDRAWAL PLAN
The Systematic Withdrawal Plan provides you with a convenient way to have Fund
shares redeemed from your account and the proceeds distributed to you on a
monthly basis. You may participate in this Plan only if you have a Fund account
valued at $10,000 or more as of the date of your election to participate, your
dividends and capital gain distributions are being reinvested automatically, and
you are not participating in the AutoSaver Plan at any time while participating
in the Systematic Withdrawal Plan. You specify an amount ($100 or more) to be
distributed by check to your address of record or deposited in your Approved
Bank Account. The transfer agent redeems sufficient shares and mails or deposits
your proceeds as instructed on or about the fifth Business Day prior to the end
of each month. There are no separate fees charged to you by the Company for
participating in the Systematic Withdrawal Plan.
It may take up to ten (10) Business Days after receipt of your request to
establish your participation in the Systematic Withdrawal Plan. You may change
your withdrawal amount, suspend withdrawals or terminate your participation in
the Plan at any time by notifying the transfer agent at least five (5) Business
Days prior to any scheduled
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transaction. Your participation in the Systematic Withdrawal Plan is terminated
automatically if your Fund account is closed, or, in some cases, if your
Approved Bank Account is closed.
REDEMPTIONS THROUGH SELLING AGENTS
You may request a redemption of Fund shares through your Selling Agent.
Redemption orders transmitted by a Selling Agent to the transfer agent before
12:00 Noon (Pacific time) on any Business Day, are executed on that day.
Redemption orders transmitted by a Selling Agent to the transfer agent after
12:00 Noon on any Business Day, generally are executed on the next Business Day.
The Selling Agent is responsible for the prompt transmission of your redemption
order to the Company.
Unless you have made other arrangements with a Selling Agent and the transfer
agent has been informed of such arrangements, proceeds of a redemption order
made by you through a Selling Agent are credited to your Approved Bank Account.
If no such account is designated, a check for the redemption proceeds is mailed
to your address of record or, if such address is no longer valid, the proceeds
are credited to your account with the Selling Agent. You may request a check
from the Selling Agent or may elect to retain the proceeds in such account. The
Selling Agent may charge you a service fee. In addition, the Selling Agent may
benefit from the use of your proceeds until the check it issues to you has
cleared or until such proceeds have been disbursed or reinvested on your behalf.
REDEMPTIONS THROUGH SHAREHOLDER SERVICING AGENTS
You may request a redemption of Fund shares through your Shareholder Servicing
Agent. Redemption requests made by telephone through your Shareholder Servicing
Agent must redeem shares with a total value equal to $100 or more. Redemption
orders transmitted by the Shareholder Servicing Agent to the transfer agent
before 12:00 Noon (Pacific time) on any Business Day, are executed on that day.
Redemption orders transmitted by a Shareholder Servicing Agent after 12:00 Noon
on any Business Day, generally are executed on the next Business Day. The
Shareholder Servicing Agent is responsible for the prompt transmission of your
redemption order to the Funds.
Unless you have made other arrangements with your Shareholder Servicing Agent
and the Transfer Agent has been informed of such arrangements, proceeds of a
redemption order made through your Shareholder Servicing Agent are credited to
your Approved Bank Account. If no such account is designated, a check for the
proceeds is mailed to your address of record or, if such address is no longer
valid, the proceeds are credited to your account with your Shareholder Servicing
Agent or to another account designated in your agreement with your Shareholder
Servicing Agent. The Shareholder Servicing Agent may charge you a service fee.
In addition, it may benefit from the use of your redemption proceeds until any
check it issues to you has cleared or until such proceeds have been disbursed or
reinvested on your behalf.
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ADDITIONAL SHAREHOLDER SERVICES
The Company offers you a number of optional services. As noted above, you can
take advantage of the AutoSaver Plan, the Systematic Withdrawal Plan, and
Expedited Redemptions by Letter and Telephone. In addition, you have three
dividend and distribution payment options and an exchange privilege, which are
described below.
DIVIDEND AND DISTRIBUTION OPTIONS
When you fill out your Account Application, you can choose from three dividend
and distribution options listed below. If you have questions about the dividend
and distribution options available to you, please call 1-800-222-8222.
A. The AUTOMATIC REINVESTMENT OPTION provides for the reinvestment of your
dividends and/or capital-gain distributions in additional shares of the
same class of the Fund that paid the dividends or distributions. Dividends
and distributions declared in a month are reinvested at NAV on the last
Business day of the month. You are assigned this option automatically if
you make no choice on your Account Application.
B. The AUTOMATIC CLEARING HOUSE OPTION permits you to have dividends and
capital-gain distributions deposited in your Approved Bank Account. In the
event your Approved Bank Account is closed and your distribution is
returned to the dividend disbursing agent, your distribution is reinvested
in your Fund account at the NAV next determined after the distribution has
been received. In addition, your Automatic Clearing House Option is then
converted to the Automatic Reinvestment Option.
C. The CHECK PAYMENT OPTION lets you receive a check for all dividends and
capital gain distributions, which generally is mailed either to your
designated address or your Approved Bank Account early in the month
following declaration. If the U.S. Postal Service cannot deliver your
checks, or if your checks remain uncashed for six months, those checks are
reinvested in your Fund account at the NAV next determined after the
distribution has been received. Your Check Payment Option is then converted
to the Automatic Reinvestment Option.
The Company makes reasonable efforts to locate investors whose checks are
returned or uncashed after six months. The Company forwards moneys to the
dividend disbursing agent so that it may issue you dividend checks under the
Check Payment Option. The dividend disbursing agent may benefit from the
temporary use of such moneys until these checks clear.
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EXCHANGE PRIVILEGE
Wells Fargo Bank advises or sub-advises a variety of other funds, each with
its own investment objective and policies. The exchange privilege is a
convenient way for you to buy shares in other funds of the Stagecoach Family of
Funds that are registered in your state of residence in order to respond to
changes in your investment and savings goals or in market conditions. Before you
make an exchange from the Fund into another fund of the Stagecoach Family of
Funds, please observe the following:
- Obtain and carefully read the prospectus of the fund into which you want to
exchange. Prospectuses may be obtained by calling 1-800-222-8222.
- You may exchange Class A shares of the Funds for shares of one of the
Company's single-class funds, Class A or B shares of one of the Company's
multi-class funds or for Retail Class shares of another fund.
- If you exchange into another fund with a front-end sales charge, you must
pay the difference between that fund's sales charge and any sales charge you
already have paid in connection with the shares you are exchanging.
- Each exchange, in effect, represents the redemption of shares of one fund
and the purchase of shares of another, which may produce a gain or loss for
federal income tax purposes. A confirmation of each exchange transaction is
sent to you.
- The dollar amount of shares you exchange generally must meet the minimum
initial and/or subsequent investment amounts of the fund from which you are
exchanging. Where Fund shares are acquired in exchange for shares of another
fund in the Stagecoach Family of Funds, however, the minimum initial
investment amount applicable to the shares being exchanged carries over,
except that if the value of your investment in the shares of the fund from
which you are exchanging has been reduced below the minimum initial
investment amount by changes in market conditions or sales charges (and not
by redemptions), you may carry over the lesser amount into either Fund.
- The Company reserves the right to limit the number of times shares may be
exchanged between funds, to reject any telephone exchange order, to charge a
nominal exchange fee (although it currently does not do so) or otherwise to
modify or discontinue exchange privileges at any time. Under SEC rules,
subject to limited exceptions, the Company must notify you 60 days before it
modifies or discontinues the exchange privilege.
The procedures applicable to redemptions also apply to exchanges. In
particular, transaction orders that are received before 1:00 p.m. (Pacific time)
on each Business Day through Shareholder Servicing Agents in connection with
automated investment programs are processed on that day (provided that it is a
Business Day for each Fund
PROSPECTUS 40
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involved in the transaction). Also where an exchange order is from a Stagecoach
money market mutual fund to a Stagecoach non-money market mutual fund (a
"long-term fund") and the instructions are received before 1:00 p.m. through a
Shareholder Servicing Agent by telephone or in person (excluding automated
telephone instructions or Wells Fargo Express ATM instructions), the purchase
order for the long-term fund is processed as of 1:00 p.m. at the share price
determined as of that Business Day's close of market. A sufficient number of
money market mutual fund shares are sold the following Business Day as of 12:00
Noon (Pacific time) in order to settle the long-term fund purchase. In all other
instances, exchange orders received after 12:00 Noon (Pacific time) are
processed on the next Business Day that is a Business Day for each fund involved
in the exchange. In addition, a signature guarantee may be required for
exchanges between shareholder accounts registered in identical names if the
amount being exchanged is more than $25,000.
To exchange shares, write the transfer agent at the mailing address under
"Investing in the Funds -- Initial Purchases by Wire" or call the transfer agent
at the telephone number listed on your transaction confirmation, or contact your
Shareholder Servicing Agent or Selling Agent. The procedures applicable to
telephone redemptions, including the discussion regarding the responsibility for
the authenticity of telephone instructions, are also applicable to telephone
exchange requests. See "How to Redeem Shares -- Expedited Redemptions by Letter
and Telephone."
MANAGEMENT, DISTRIBUTION AND SERVICING FEES
INVESTMENT ADVISER
Subject to the overall supervision of the Company's Board of Directors and the
Master Trust's Board of Trustees, Wells Fargo Bank, as the investment adviser,
provides investment guidance and policy direction in connection with the
management of the Funds' assets. Wells Fargo Bank also furnishes the Board of
Directors with periodic reports on the Funds' investment strategies and
performance. For these services, Wells Fargo Bank is entitled to a monthly
investment advisory fee at an annual percentage rate of the average daily net
assets of each fund as follows: 0.40% for the Money Market Mutual Fund, 0.50%
for the California Tax-Free Money Market Mutual Fund, 0.30% for the Master
Portfolio, of which the National Tax-Free Money Market Mutual Fund bears a pro
rata portion, 0.30% for the Government Money Market Mutual Fund and 0.25% for
the Treasury Money Market Mutual Fund. From time to time, Wells Fargo Bank may
waive such fees in whole or in part. Any such waiver will reduce expenses of the
Funds and the Master Portfolio and, accordingly, have a favorable impact on the
Funds' yields. From
41 PROSPECTUS
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time to time, each Fund, consistent with its investment objective, policies and
restrictions, may invest in securities of companies with which Wells Fargo Bank
has a lending relationship. For the year ended December 31, 1995, Wells Fargo
Bank was paid at an annual rate equal to 0.40% of the average daily net assets
of the Money Market Mutual Fund and 0.50% of the average daily net assets of the
California Tax-Free Money Market Mutual Fund, respectively, for its services as
investment adviser. As of December 31, 1995, the National Tax-Free Money Market
Mutual Fund had not commenced operations.
For the fiscal period ended September 30, 1995, the respective predecessor
portfolios of Pacifica Funds Trust paid investment advisory fees to WFIM's
predecessor, FICM, at the annual rates of 0.30%, and 0.25% of Government Money
Market Fund's and Treasury Money Market Fund's respective average daily net
assets under the advisory agreement in effect at that time.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
Wells Fargo Bank also serves as the Funds' and the Master Portfolio's
custodian and transfer and dividend disbursing agent. Under its respective
Custody Agreement with Wells Fargo Bank, each Fund and the Master Portfolio may,
at times, borrow money from Wells Fargo Bank as needed to satisfy temporary
liquidity needs. Wells Fargo Bank charges interest on such overdrafts at a rate
determined pursuant to each Fund's and/or Master Portfolio's Custody Agreement.
The custodial, transfer and dividend disbursing agency activities are performed
at 525 Market Street, San Francisco, California 94105.
SHAREHOLDER SERVICING AGENT
On behalf of the Class A shares, the Funds have entered into Shareholder
Servicing Agreements with Wells Fargo Bank and may enter into similar agreements
with other entities. Under the agreements, Shareholder Servicing Agents
(including Wells Fargo Bank) agree to perform, as agents for their customers,
administrative services, with respect to Fund shares, which include aggregating
and transmitting shareholder orders for purchases, exchanges and redemptions;
maintaining shareholder accounts and records; and providing such other related
services as the Company or a shareholder may reasonably request. For these
services, a Shareholder Servicing Agent is entitled to receive fees, as
calculated on an annualized basis for each Fund's then-current fiscal year, up
to (1) 0.30% of the average daily net assets of the California Tax-Free Money
Market Mutual Fund, 0.30% of the average daily net assets attributable to the
Class A shares of the Money Market Mutual Fund, 0.25% of the average daily net
assets of the National Tax-Free Money Market Mutual Fund, 0.25% of the
respective average daily net assets of the Government and Treasury Money Market
Mutual Funds, as 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 (2) an amount which
PROSPECTUS 42
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equals the maximum amount payable to the Shareholder Servicing Agent under
applicable laws, regulations or rules, including the Rules of Fair Practice of
the NASD ("NASD Rules"). In no event will the portion of such fees that
constitutes a "service fee," as that term is used by the NASD, exceed 0.25% of
the average net asset value of a Fund or Class of a Fund, as the case may be.
Shareholder Servicing Agents may impose certain conditions on their customers,
subject to the terms of this Prospectus, in addition to or different from those
imposed by each Fund, such as requiring a minimum initial investment or payment
of a separate fee for additional services. Each Shareholder Servicing Agent has
agreed to disclose any fees it may directly charge its customers who are
shareholders of a Fund and to notify them in writing at least 30 days before it
imposes any transaction fees.
SPONSOR, ADMINISTRATOR AND DISTRIBUTOR
Subject to the overall supervision of the governing Board of
Directors/Trustees, Stephens provides each Fund and the Master Portfolio with
administrative services, including general supervision of each Fund's operation,
coordination of the other services provided to each Fund and the Master
Portfolio, compilation of information for reports to the SEC and the state
securities commissions, preparation of proxy statements and shareholder reports
and general supervision of data compilation in connection with preparing
periodic reports. Stephens also furnishes office space and certain facilities to
conduct each Fund's and the Master Portfolio's business, and compensates the
Directors/Trustees, officers and employees who are affiliated with Stephens. For
these services, Stephens is entitled to a monthly fee at the annual rate of
0.03% of the respective average daily net assets of the Money Market Mutual and
California Tax-Free Money Market Mutual Funds and 0.05% of the respective
average daily net assets of the National Tax-Free, Government and Treasury Money
Market Mutual Funds.
Stephens, as the principal underwriter of the Fund within the meaning of the
1940 Act, has entered into a Distribution Agreement with the Company pursuant to
which Stephens is responsible for distributing Fund shares. The Company also has
adopted Distribution Plans under Rule 12b-1 (the "Plans"). Under the Plans, and
on behalf of the Class A shares of the Money Market Mutual Fund and shares of
the California Tax-Free Money Market Mutual Fund (collectively, such shares
referred to in this subsection as the "Class A shares"), the Company may defray
all or part of the actual cost of preparing and printing prospectuses and other
promotional materials and of delivering prospectuses and those materials to
prospective Class A shareholders by paying on an annual basis up to 0.05% of the
average daily net assets attributable to their respective shares. Pursuant to
the Plans for the Class A shares of National Tax-Free, Government and Treasury
Money Market Mutual Funds, Stephens is entitled to receive as compensation for
distribution-related services, a monthly fee at an annual rate of up to 0.05% of
the average daily net assets attributable to their respective Class A shares.
Distribution-
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related services may include, among other services, costs and expenses for
advertisements, sales literature, direct mail or any other form of advertising;
expenses of sales employees or agents of the Distributor, including salary,
commissions, travel and related expenses; payments to broker-dealers and
financial institutions for services in connection with the distribution of
shares, including promotional incentives and fees calculated with reference to
the average daily net asset value of shares held by shareholders who have a
brokerage or other service relationship with the broker-dealer or other
institution receiving such fees; costs of printing prospectuses and other
materials to be given or sent to prospective investors; and other similar
services as the Directors determine to be reasonably calculated to result in the
sale of shares of each Fund. In addition, the Plans contemplate that, to the
extent any fees payable pursuant to a Shareholder Servicing Agreement (discussed
above) are deemed to be for distribution-related services, such payments are
approved and payable pursuant to the Plans.
Under the Distribution Agreement, Stephens may enter into Selling Agreements
with Selling Agents that wish to make available shares of each Fund to their
respective customers. On behalf of the Class A shares, the Funds may participate
in joint distribution activities with any of the other funds of the Company, in
which event, expenses reimbursed out of the assets of the Funds may be
attributable, in part, to the distribution-related activities of another fund of
the Company. Generally, the expenses attributable to joint distribution
activities are allocated among the Funds and the other funds of the Company in
proportion to their relative net asset sizes, although the Company's Board of
Directors may allocate such expenses in any other manner that it deems fair and
equitable.
Stephens has established a cash and non-cash compensation program, pursuant to
which broker/dealers or financial institutions that sell shares of the Company's
fund may earn additional compensation in the form of trips to sales seminars or
vacation destinations, tickets to sporting events, theater or other
entertainment, opportunities to participate in golf or other outings and gift
certificates for meals or merchandise, or the cash value of a non-cash
compensation item.
FUND EXPENSES
From time to time, Wells Fargo Bank and Stephens may waive their respective
fees in whole or in part and reimburse expenses payable to others. Any such
waivers or reimbursements will reduce a Fund's expenses and, accordingly, have a
favorable impact on such Fund's performance. Except for the expenses borne by
Wells Fargo Bank and Stephens, each fund of the Company bear all costs of its
operations, including its pro rata portion of the Company expenses such as fees
and expenses of its independent auditors and legal counsel, and compensation of
the Company's directors who are not affiliated with the adviser, administrator
or any of their affiliates; advisory, shareholder servicing,
PROSPECTUS 44
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transfer agency, custody and administration fees, payments pursuant to any
Plans, interest, and any extraordinary expenses. Expenses attributable to each
Fund or class are charged against the assets of the Fund or class. General
expenses of the Company are allocated among all of the funds of the Company,
including the Funds, in a manner proportionate to the net assets of each fund,
on a transactional basis, or on such other basis as the Company's Board of
Directors deems equitable. The National Tax-Free Money Market Fund bears a pro
rata portion of the Tax-Free Money Market Master Portfolio's expenses.
TAXES
The Company intends to qualify each Fund each year as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended,
(the "Code"), as long as such qualification is in the best interest of the
Fund's shareholders. Each Fund will be treated as a separate entity for federal
income tax purposes and thus the provisions of the Code applicable to regulated
investment companies will be applied to the Funds separately, rather than to the
Company as a whole. In addition, net capital gains, net investment income, and
operating expenses will be determined separately for each Fund. By complying
with the applicable provisions of the Code, the Funds will not be subject to
federal income taxes with respect to net investment income and any net realized
capital gains distributed to their shareholders. Each Fund intends to pay out
substantially all of its net investment income and net realized capital gains
(if any) for each year.
Dividends from net investment income and net realized short-term capital gains
(the excess of net short-term capital gains over net long-term capital losses)
declared and paid by the Money Market Mutual, Government Money Market Mutual and
Treasury Money Market Mutual Funds will be taxable as ordinary income to their
respective shareholders. Whether you take dividend payments in cash or have them
automatically reinvested in additional shares in such Funds, they will be
taxable as ordinary income. Any capital gain distributions, attributable to a
Fund's net realized long-term capital gains (the excess of net long-term capital
gains over net short-term capital losses), will generally be taxable to
shareholders as long-term capital gain, regardless of the length of time that
the Fund's shares have been held. Such dividends and distributions will be
taxable to shareholders irrespective of whether the shareholder takes them in
cash or has them automatically reinvested in additional Fund shares. You may be
eligible to defer the taxation of dividend and capital gain distributions on
Fund shares which are held under a qualified tax-deferred retirement plan. See
"Investing in the Funds -- Tax-Deferred Retirement Plans" above. The Money
Market Mutual Fund, Government and Treasury Money Market Mutual Funds do not
expect their dividends to qualify for the dividends-received deduction allowed
to corporate shareholders.
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The California Tax-Free Money Market Mutual Fund's shareholders will not be
subject to federal income taxes on any Fund dividends attributable to interest
from tax-exempt securities. However, dividends attributable to interest from
taxable securities and capital gains (if any) will be taxable to shareholders,
regardless of whether such dividends are paid in cash or reinvested in Fund
shares. In addition, by complying with the applicable provisions of the
California Revenue and Taxation Code, Fund dividends also will be exempt from
California personal income tax to the extent such dividends are attributable to
instruments that pay interest which would be exempt from California personal
income taxes were such instruments held directly by an individual.
The National Tax-Free Money Market Mutual Fund's shareholders will not be
subject to federal income tax on any dividends of the Fund attributable to
interest from tax-exempt securities. However, dividends attributable to interest
from taxable securities and capital gains (if any) will be taxable to
shareholders, regardless of whether such dividends are paid in cash or
reinvested in Fund shares. The Fund seeks to qualify as a regulated investment
company by investing all of its assets in the Master Portfolio. The Master
Portfolio will be treated as a non-publicly traded partnership rather than as a
regulated investment company or a corporation under the Code, and as such, shall
not be subject to federal income tax. As a non-publicly traded partnership, any
interest, dividends, gains and losses of the Master Portfolio shall be deemed to
have been "passed through" to the Fund (and other investors) in proportion to
the Fund's ownership interest in the Master Portfolio.
If the Master Portfolio were to accrue but not distribute any interest,
dividends or gains, the Fund would be deemed to have realized and recognized its
proportionate share of such income, regardless of whether or not such income has
been distributed by the Master Portfolio. However, the Master Portfolio will
seek to minimize recognition by the Fund and other investors of interest,
dividends and gains without a corresponding distribution.
The federal alternative minimum tax ("AMT") rules attempt to ensure that at
least a minimum amount of tax is paid by corporate and high-income noncorporate
taxpayers who obtain significant benefit from certain tax deductions and
exemptions. Some of these deductions and exemptions have been designated "tax
preference items" which must be added back to taxable income for the purposes of
calculating the AMT. Among the tax preference items which must be considered
when calculating the AMT is tax-exempt interest from "private activity bonds"
issued after August 7, 1986. To the extent that the California Tax-Free Money
Market Mutual Fund or the National Tax-Free Money Market Mutual Fund invests in
private activity bonds, shareholders of these Funds who pay AMT will be required
to report that portion of Fund dividends attributable to income from the bonds
as a tax preference item in determining their AMT. Shareholders will be notified
of the tax status of distributions made by the Funds. Persons who may be
"substantial users" (or "related persons" of substantial users) of facilities
financed by private
PROSPECTUS 46
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activity bonds should consult their tax advisors before purchasing shares in the
California Tax-Free Money Market Mutual Fund or the National Tax-Free Money
Market Mutual Fund. With respect to corporate shareholders of such Funds,
exempt-interest dividends paid by a Fund is included in the corporate
shareholder's "adjusted current earnings" as part of its AMT calculation, and
may also affect its federal "environmental tax" liability. As of the printing of
this Prospectus, individuals are subject to an AMT at a maximum rate of 28% and
corporations at a maximum rate of 20%. Shareholders with questions or concerns
about AMT should consult their tax advisors.
An investor must provide a valid TIN upon opening or reopening an account.
Failure to furnish a valid TIN to the Company could subject the investor to
penalties imposed by the IRS. In addition, the Company may be required to
withhold, subject to certain exemptions, at a rate of 31% ("backup withholding")
on dividends, capital gain distributions, and redemption proceeds (including
proceeds from exchanges) paid or credited to an individual Fund shareholder,
unless a shareholder certifies that the TIN provided is correct and that the
shareholder is not subject to backup withholding, or the IRS notifies the
Company that the shareholder's TIN is incorrect or that the shareholder is
subject to backup withholding. Such tax withheld does not constitute any
additional tax imposed on the shareholder, and may be claimed as a tax payment
on the shareholder's federal income tax return. The Funds, or your Shareholder
Servicing Agent on their behalf, will inform you of the amount and nature of
such Fund's dividends and capital gains. You should keep all statements you
receive to assist in your personal record keeping.
Foreign shareholders may be subject to different tax treatment, including a
withholding tax. See "Federal Income Taxes -- Foreign Shareholders" in the SAI.
The foregoing discussion is based on federal tax laws in effect as of the date
of this Prospectus and summarizes only some of the important federal income tax
considerations generally affecting the Funds and their shareholders. It is not
intended as a substitute for careful tax planning; you should consult your tax
advisor with respect to your particular tax situation and the state and local
tax status of investments in Fund shares. In addition, each Fund does not make
any representation regarding the taxation of its corporate shareholders and
recommends that such shareholders consult their tax advisors.
Further federal tax considerations are discussed in the SAI.
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PROSPECTUS APPENDIX --
ADDITIONAL INVESTMENT POLICIES
FUND AND MASTER PORTFOLIO INVESTMENTS
Money Market Mutual Fund
The Money Market Mutual Fund may invest in the following:
(i) U.S. Government obligations (defined and discussed below);
(ii) negotiable certificates of deposit, fixed time deposits, bankers'
acceptances or other short-term obligations of U.S. banks (including
foreign branches) that have more than $1 billion in total assets at
the time of investment and are members of the Federal Reserve System
or are examined by the Comptroller of the Currency or whose deposits
are insured by the FDIC ("bank instruments");
(iii) commercial paper rated at the date of purchase P-1 by Moody's
Investors Service, Inc. ("Moody's") or "A-1+" or "A-1" by Standard &
Poor's Rating Group ("S&P") ("rated commercial paper");
(iv) commercial paper unrated at the date of purchase but secured by a
letter of credit from a U.S. bank that meets the above criteria for
investment;
(v) certain floating- and variable-rate instruments (discussed below);
(vi) certain repurchase agreements (discussed below); and
(vii) short-term, U.S. dollar-denominated obligations of U.S. branches of
foreign banks that at the time of investment have more than $10
billion, or the equivalent in other currencies, in total assets
("foreign bank obligations") (discussed below);
(viii) certain municipal obligations (discussed below); and
(ix) certain securities issued by other investment companies (discussed
below).
California Tax-Free Money Market Mutual Fund
The California Tax-Free Money Market Mutual Fund may invest in the following
municipal obligations with remaining maturities not exceeding thirteen months:
(i) long-term municipal bonds rated at the date of purchase "MIG 1" or
"MIG 2" or, if no medium- or short-term rating is available, "Aa" or
better by Moody's or "AA" or better by S&P;
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(ii) medium-term municipal notes rated at the date of purchase "MIG 1" or
"MIG 2" (or "VMIG 1" or "VMIG 2" in the case of an issue having a
variable rate with a demand feature) by Moody's or "SP-1+" or "SP-1" by
S&P; and
(iii) short-term municipal commercial paper rated at the date of purchase
"P-1" by Moody's or "A-1+" or "A1+" by S&P.
Pending the investment of proceeds from the sale of Fund shares or proceeds from
sales of portfolio securities or in anticipation of redemptions or to maintain a
"defensive" posture when, in the opinion of Wells Fargo Bank, as investment
adviser, it is advisable to do so because of market conditions, the California
Tax-Free Money Market Mutual Fund may elect to invest temporarily up to 20% of
the current value of its total assets in cash reserves or the following taxable
high-quality money market instruments:
(i) U.S. Government obligations;
(ii) bank instruments;
(iii) rated commercial paper;
(iv) repurchase agreements;
(v) foreign bank obligations;
(vi) high-quality municipal obligations, the income from which may or may not
be exempt from federal income taxes; and
(vii) certain securities issued by other investment companies.
Moreover, the California Tax-Free Money Market Mutual Fund may invest
temporarily more than 20% of its total assets in such securities and in
high-quality, short-term municipal obligations the interest on which is not
exempt from federal income taxes to maintain a temporary defensive posture or in
an effort to improve after-tax yield to the California Tax-Free Money Market
Mutual Fund's shareholders when, in the opinion of Wells Fargo Bank, as
investment adviser, it is advisable to do so because of unusual market
conditions.
National Tax-Free Money Market Mutual Fund and Tax-Free Money Market Master
Portfolio
The National Tax-Free Money Market Mutual Fund invests all its assets in
interests of the Master Portfolio. As a result, the performance of the Fund
corresponds to the investment experience of the Master Portfolio. The Master
Portfolio may invest in the following:
(i) certain municipal obligations;
(ii) certain U.S. Government obligations;
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(iii) negotiable certificates of deposit, fixed time deposits, bankers'
acceptances or other obligations of U.S. banks (including foreign
branches) that have more than $1 billion in total assets at the time of
investment and are members of the Federal Reserve System or are examined
by the Comptroller of the Currency or whose deposits are insured by the
FDIC:
(iv) commercial paper rated at the date of purchase P-1 by Moody's or "A-1+"
or "A-1" by S&P;
(v) certain floating- and variable-rate instruments;
(vi) certain repurchase agreements;
(vii) foreign bank obligations; and
(viii)certain securities issued by other investment companies.
Government Money Market Mutual Fund
The Government Money Market Mutual Fund may invest in the following:
(i) certain U.S. Government obligations;
(ii) certain repurchase agreements;
(iii) certain floating- and variable-rate instruments; and
(iv) certain securities issued by other investment companies.
Treasury Money Market Mutual Fund
The Treasury Money Market Mutual Fund may invest in the following:
(i) U.S. Treasury obligations (defined and discussed below);
(ii) certain repurchase agreements;
(iii) certain floating- and variable-rate instruments;
(iv) securities purchased on a "when-issued" basis and securities purchased
or sold on a "forward commitment" basis or "delayed settlement" basis"
(discussed below);
(v) certain reverse repurchase agreements ("reverse repurchase agreements")
(discussed below); and
(vi) certain securities issued by other investment companies.
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The following describes certain instruments in which the Funds and the Master
Portfolio may invest.
U.S. Government and U.S. Treasury Obligations
The Funds and the Master Portfolio, except as described below with respect to
the Treasury Money Market Mutual Fund, may invest in obligations of agencies and
instrumentalities of the U.S. Government ("U.S. Government obligations"). U.S.
Government obligations include securities issued or guaranteed as to principal
and interest by the U.S. Government and supported by the full faith and credit
of the U.S. Treasury, as well as securities issued or guaranteed by federal
agencies or instrumentalities, including government-sponsored enterprises.
Treasury bills, the most frequently issued marketable government securities,
have a maturity of up to one year and are issued on a discount basis. Some
obligations of agencies or instrumentalities of the U.S. Government are
supported by the full faith and credit of the United States or U.S. Treasury
guarantees; others, by the right of the issuer or guarantor to borrow from the
U.S. Treasury; still others, by the discretionary authority of the U.S.
Government to purchase certain obligations of the agency or instrumentality; and
others, only by the credit of the agency or instrumentality issuing the
obligation. In the case of obligations not backed by the full faith and credit
of the United States, the investor must look principally to the agency or
instrumentality issuing or guaranteeing the obligation for ultimate repayment,
which agency or instrumentality may be privately owned. There can be no
assurance that the U.S. Government will provide financial support to its
agencies or instrumentalities where it is not obligated to do so. As a general
matter, the value of debt instruments, including U.S. Government obligations,
declines when market rates increase and rises when market interest rates
decrease. Certain types of U.S. Government obligations are subject to
fluctuations in yield or value due to their structure or contract terms.
The Treasury Money Market Mutual Fund may invest only in obligations issued or
guaranteed by the U.S. Treasury such as bills, notes, bonds and certificates of
indebtedness, and in notes and repurchase agreements collateralized or secured
by such obligations ("U.S. Treasury obligations"). U.S. Treasury notes, bills
and bonds differ mainly in the length of their maturity. The U.S. Treasury
obligations in which the Fund invests may also include "U.S. Treasury STRIPS,"
interests in U.S. Treasury obligations reflected in the Federal Reserve-Book
Entry System that represent ownership in either the future interest payments or
the future principal payments on the U.S. Treasury obligations. U.S. Treasury
STRIPS are "stripped securities." Stripped securities are issued at a discount
to their "face value" and may exhibit greater price volatility than ordinary
debt securities because of the manner in which their principal and interest are
paid to investors. The Treasury and Government Money Market Mutual Funds may
invest in U.S. Treasury STRIPS.
PROSPECTUS A-4
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The Funds may attempt to increase yields by trading to take advantage of
short-term market variations. This policy could result in high portfolio
turnover, which should not adversely affect the Funds since they do not
ordinarily pay brokerage commissions on the purchase of short-term debt
obligations.
Repurchase Agreements
The Funds and the Master Portfolio may enter into repurchase agreements
wherein the seller of a security to a Fund or the Master Portfolio agrees to
repurchase that security from such Fund or the Master Portfolio at a mutually
agreed-upon time and price. The period of maturity is usually quite short, often
overnight or a few days, although it may extend over a number of months. The
Funds and the Master Portfolio may enter into repurchase agreements only with
respect to obligations that could otherwise be purchased by the participating
Fund or Master Portfolio. All repurchase agreements will be collateralized at
102%, based on values that are marked-to-market daily. While the maturities of
the underlying securities in a repurchase agreement transaction may be greater
than 397 days, the term of any repurchase agreement on behalf of a Fund or the
Master Portfolio will always be less than one year. If the seller defaults and
the value of the underlying securities has declined, the participating Fund or
the Master Portfolio, as the case may be, may incur a loss. In addition, if
bankruptcy proceedings are commenced with respect to the seller of the security,
disposition of the security by the participating Fund or the Master Portfolio
may be delayed or limited. The Funds and the Master Portfolio enter into
repurchase agreements only with primary reporting dealers and commercial banks
that meet guidelines established by the applicable Board and that are not
affiliated with Wells Fargo Bank. The Funds and the Master Portfolio may
participate in pooled repurchase agreement transactions with other funds advised
by Wells Fargo Bank.
Floating- and Variable-Rate Instruments
Certain of the debt instruments that the Funds and the Master Portfolio may
purchase bear interest at rates that are not fixed, but vary for example, with
changes in specified market rates or indices or at specified intervals. Certain
of these instruments may carry a demand feature that would permit the holder to
tender them back to the issuer at par value prior to maturity. The Funds may, in
accordance with SEC rules, account for these instruments as maturing at the next
interest rate readjustment date or the date at which the Funds may tender the
instrument back to the issuer, whichever is later. The floating- and
variable-rate instruments that the Funds and the Master Portfolio may purchase
include certificates of participation in such obligations. With regard to the
California Tax-Free Money Market Mutual Fund and the Master Portfolio, Wells
Fargo Bank, as investment adviser to the Master Portfolio, may rely upon either
an opinion of counsel to the issuer or bond counsel regarding the tax-exempt
status of these certificates. The Funds and the Master Portfolio may invest in
floating- and variable-rate
A-5 PROSPECTUS
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obligations even if they carry stated maturities in excess of 397 days, upon
compliance with certain conditions of the SEC, in which case such obligations
will be treated in accordance with these conditions as having maturities not
exceeding 397 days.
Wells Fargo Bank, as investment adviser to the Funds and the Master Portfolio,
monitors on an ongoing basis the ability of an issuer of a demand instrument to
pay principal and interest on demand. Events affecting the ability of the issuer
of a demand instrument to make payment when due may occur between the time a
Fund or the Master Portfolio elects to demand payment and the time payment is
due, thereby affecting such Fund's ability to obtain payment at par. The
investment adviser, in accordance with the guidelines approved by the Boards of
Directors or Trustees of the Company or Master Trust, may treat those
instruments that have a demand feature that is not exercisable within seven days
as liquid, provided that an active secondary market exists.
When-Issued, Forward Commitment and Delayed Settlement Securities
The Treasury Money Market Mutual Fund may purchase securities on a
"when-issued" basis and may purchase or sell securities on a "forward
commitment" basis. The Fund may also purchase or sell securities on a "delayed
settlement" basis. When-issued and forward commitment transactions, which
involve a commitment by the Fund to purchase or sell particular securities with
payment and delivery taking place at a future date (perhaps one or two months
later), permit the Fund to lock in a price or yield on a security it owns or
intends to purchase, regardless of future changes in interest rates. Delayed
settlement describes settlement of a securities transaction in the secondary
market which will occur sometime in the future. When-issued, forward commitment
and delayed settlement transactions involve the risk, however, that the yield or
price obtained in a transaction may be less favorable than the yield or price
available in the market when the securities delivery takes place. The Fund's
forward commitments, when-issued purchases and delayed settlements are not
expected to exceed 25% of the value of the Fund's total assets absent unusual
market conditions. The Fund does not intend to engage in these transactions for
speculative purposes but only in furtherance of its investment objectives.
Other Investment Companies
For temporary investments, the Money Market Mutual Fund, the Tax-Free Funds
and the Master Portfolio may invest in shares of other open-end investment
companies that invest exclusively in high-quality short-term securities subject
to the limits set forth under Section 12 of the 1940 Act, provided however, that
with respect to the California Tax-Free Money Market Fund, the National Tax-Free
Money Market Mutual Fund and the Master Portfolio, any such company has policy
of investing, under normal market conditions, at least 80% of its net assets in
obligations that are exempt from federal
PROSPECTUS A-6
<PAGE> 299
income tax and are not subject to the federal alternative minimum tax. Such
investment companies can be expected to charge management fees and other
operating expenses that would be in addition to those charged to a Fund or the
Master Portfolio; however, Wells Fargo Bank has undertaken to waive its advisory
fees with respect to that portion of the Funds' or the Master Portfolio's assets
so invested, except when such purchase is part of a plan of merger,
consolidation, reorganization or acquisition. Under Section 12(d)(l), a Fund or
the Master Portfolio, together with any company or companies controlled by the
Fund or the Master Portfolio, is generally prohibited from owning more than 3%
of the total outstanding voting stock of any such investment company, nor may a
Fund or the Master Portfolio, together with any such company or companies,
invest more than 5% of its assets in any one such investment company or invest
more than 10% of its assets in securities of all such investment companies
combined. Under Section 12, however, a Fund may invest substantially all of its
assets in the Master Portfolio.
The Treasury Money Market Fund may invest up to 10% of its assets in shares of
other open-end investment companies that invest exclusively in the high-quality,
short-term money market instruments in which the Fund may invest. The Treasury
Money Market Mutual Fund may only invest in shares of other investment companies
that are structured to seek an investment objective that is similar to the
Fund's investment objective. The investment companies can be expected to charge
management fees and other operating expenses that would be in addition to those
charged to a Fund; however, the Funds' adviser has undertaken to waive its
advisory fees with respect to that portion of the Fund's assets so invested. The
Funds may invest in shares of other open-end investment companies up to the
limits prescribed by the 1940 Act.
Municipal Obligations
Subject to the maturity and other restrictions of Rule 2a-7, the Money Market
Mutual Fund, the Tax-Free Funds and the Master Portfolio may invest in Municipal
Obligations. Municipal bonds generally have a maturity at the time of issuance
of up to 40 years. Medium-term municipal notes are generally issued in
anticipation of the receipt of tax funds, of the proceeds of bond placements, or
of other revenues. The ability of an issuer to make payments on notes is
therefore especially dependent on such tax receipts, proceeds from bond sales or
other revenues, as the case may be. Municipal commercial paper is a debt
obligation with a stated maturity of 270 days or less that is issued to finance
seasonal working capital needs or as short-term financing in anticipation of
longer-term debt. From time to time, the California Tax-Free Money Market Mutual
Fund and the Master Portfolio may each invest 25% or more of the current value
of its total assets in certain "private activity bonds," such as pollution
control bonds; provided, however, that such investments will be made only to the
extent they are consistent with the Master Portfolio's fundamental policy of
investing, under normal
A-7 PROSPECTUS
<PAGE> 300
circumstances, at least 80% of its net assets in municipal obligations that are
exempt from federal income tax and not subject to the federal alternative
minimum tax.
The Master Portfolio will invest in the following municipal obligations with
remaining maturities not exceeding 13 months:
(i) long-term municipal bonds rated at the date of purchase "Aa" or better
by Moody's or "AA" or better by S&P;
(ii) municipal notes rated at the date of purchase "MIG 1" or "MIG 2" (or
"VMIG 1" or "VMIG 2" in the case of an issue having a variable rate with
a demand feature) by Moody's or "SP-1+" "SP-1" or "SP-2" by S&P; and
(iii) short-term municipal commercial paper rated at the date of purchase
"P-1" by Moody's or "A-1+", or "A-1" or "A-2" by S&P.
For a further discussion of factors affecting purchases of municipal
obligations by the California Tax-Free Money Market Mutual Fund, see "Special
Considerations Affecting California Municipal Obligations" in the SAI.
Letters of Credit
Certain of the debt obligations, certificates of participation, commercial
paper and other short-term obligations which the Money Market Mutual Fund and
California Tax-Free Money Market Mutual Fund are permitted to purchase may be
backed by an unconditional and irrevocable letter of credit of a bank, savings
and loan association or insurance company which assumes the obligation for
payment of principal and interest in the event of default by the issuer. Letter
of credit-backed investments must, in the opinion of Wells Fargo Bank, be of
investment quality comparable to other permitted investments of such Funds.
Foreign Obligations
Each of the Money Market Mutual Fund, the Tax-Free Funds and the Master
Portfolio may invest up to 25% of its assets in high-quality, short-term
(thirteen months or less) debt obligations of foreign branches of U.S. banks or
U.S. branches of foreign banks that are denominated in and pay interest in U.S.
dollars. Investments in foreign obligations involve certain considerations that
are not typically associated with investing in domestic obligations. There may
be less publicly available information about a foreign issuer than about a
domestic issuer. Foreign issuers also are not subject to the same uniform
accounting, auditing and financial reporting standards or governmental
supervision as domestic issuers. In addition, with respect to certain foreign
countries, taxes may be withheld at the source under foreign income tax laws and
there is a possibility of expropriation or confiscatory taxation, political or
social instability, or diplomatic developments that could affect adversely
investments in, the liquidity of, and
PROSPECTUS A-8
<PAGE> 301
the ability to enforce contractual obligations with respect to, securities of
issuers located in those countries.
Taxable Investments
Pending the investment of proceeds from the sale of interests of the Master
Portfolio or proceeds from sales of portfolio securities or in anticipation of
redemptions or to maintain a "defensive" posture when, in the opinion of Wells
Fargo Bank, as investment adviser, it is advisable to do so because of market
conditions, the Master Portfolio may elect to invest temporarily up to 20% of
the current value of its net assets in cash reserves including the following
taxable high-quality money market instruments: (i) U.S. Government obligations;
(ii) negotiable certificates of deposit, bankers' acceptances and fixed time
deposits and other obligations of domestic banks (including foreign branches)
that have more than $1 billion in total assets at the time of investment and are
members of the Federal Reserve System or are examined by the Comptroller of the
Currency or whose deposits are insured by the FDIC; (iii) commercial paper rated
at the date of purchase "P-1" by Moody's or "A-1+" or "A-1" by S&P; (iv) certain
repurchase agreements; and (v) high-quality municipal obligations, the income
from which may or may not be exempt from federal income taxes.
Moreover, the Master Portfolio may invest temporarily more than 20% of its
total assets in such securities and in high-quality, short-term municipal
obligations the interest on which is not exempt from federal income taxes to
maintain a temporary defensive posture or in an effort to improve after-tax
yield to the Master Portfolio's interestholders when, in the opinion of Wells
Fargo Bank, as investment adviser, it is advisable to do so because of unusual
market conditions.
Illiquid Securities
Certain securities may be sold only pursuant to certain legal restrictions,
and may be difficult to sell. The Money Market Mutual Fund, National Tax-Free
Money Market Mutual Fund, and California Tax-Free Money Market Mutual Fund will
not knowingly invest more than 10% of the value of their respective net assets
in securities that are illiquid or such lower percentage as may be required by
the states in which the Fund sells their shares. Repurchase agreements and time
deposits that do not provide for payment to a Fund within seven days after
notice, guaranteed investment contracts and some commercial paper issued in
reliance upon the exemption in Section 4(2) of the Securities Act of 1933, as
amended (the "1933 Act") (other than variable amount master demand notes with
maturities of nine months or less), are subject to the limitation on illiquid
securities. In addition, interests in privately arranged loans may be subject to
this limitation.
If otherwise consistent with its investment objective and policies, certain
Funds may purchase securities which are not registered under the 1933 Act but
which can be sold
A-9 PROSPECTUS
<PAGE> 302
to "qualified institutional buyers" in accordance with Rule 144A under the 1933
Act. Any such security will not be considered illiquid so long as it is
determined by the Company's Board of Directors, acting under guidelines approved
and monitored by the Company's Board, that an adequate trading market exists for
that security.
With respect to the Government and Treasury Money Market Mutual Funds,
illiquid securities shall not include securities eligible for resale pursuant to
Rule 144A under the 1933 Act that have been determined to be liquid by the
adviser, pursuant to guidelines established by the Company's Board of Directors,
and commercial paper that is sold under Section 4(2) of the 1933 Act that (i) is
not traded flat or in default as to interest or principal and (ii) is rated in
one of the two highest categories by at least two nationally recognized
statistical rating organizations and the adviser, pursuant to guidelines
established by the Company's Board of Directors has determined the commercial
paper to be liquid; or (iii) is rated in one of the two highest categories by
one nationally recognized statistical rating agency and the adviser, pursuant to
guidelines established by the Company's Board of Directors has determined that
the commercial paper is of equivalent quality and is liquid), if by any reason
thereof the value of its aggregate investment in such classes of securities will
exceed 10% of its total assets.
INVESTMENT POLICIES AND RESTRICTIONS
Each Fund's investment objective, as set forth in the "How the Funds Work --
Investment Objectives and Policies" section, is fundamental. Accordingly, such
investment objectives and policies may not be changed without approval by the
vote of the holders of a majority of such Fund's outstanding voting securities,
as described under "Capital Stock" in the SAI. In addition, any fundamental
investment policy may not be changed without such shareholder approval. If the
Company's Board of Directors determines, however, that a Fund's investment
objective can best be achieved by a substantive change in a nonfundamental
investment policy or strategy, the Company's Board may make such a change
without shareholder approval and will disclose any such material changes in the
then-current prospectus.
Money Market Mutual and Tax-Free Funds
As matters of fundamental policy, the Money Market Mutual Fund or California
Tax-Free Money Market Mutual Fund may: (i) borrow from banks up to 10% of the
current value of such Fund's net assets only for temporary purposes in order to
meet redemptions, and these borrowings may be secured by the pledge of up to 10%
of the current value of its net assets (but investments may not be purchased by
a Fund while any such outstanding borrowing in excess of 5% of the net assets
exists); (ii) not make loans of portfolio securities or other assets, except
that loans for purposes of this restriction will not include the purchase of
fixed time deposits, repurchase agreements, commercial paper and other
short-term obligations, and other types of debt instruments
PROSPECTUS A-10
<PAGE> 303
commonly sold in a public or private offering; and (iii) not invest more than
25% of its assets (i.e., concentrate) in any particular industry, excluding, (a)
investments in municipal securities by the California Tax-Free Money Market
Mutual Fund (for the purpose of this restriction, private activity bonds shall
not be deemed municipal securities if the payments of principal and interest on
such bonds is the ultimate responsibility of nongovernmental users), (b) U.S.
Government obligations, and (c) obligations of domestic banks (for purposes of
this restriction, domestic bank obligations do not include obligations of
foreign branches of U.S. banks and obligations of U.S. branches of foreign
banks).
As matters of nonfundamental policy: (i) the Money Market Mutual Fund may not
purchase securities of any issuer (except for U.S. Government obligations, for
certain temporary purposes and for certain guarantees and unconditional puts) if
as a result more than 5% of the value of its total assets would be invested in
the securities of such issuer or the Fund would own more than 10% of the
outstanding voting securities of such issuer; (ii) the Money Market Mutual Fund
may not invest more than 10% of the current value of its net assets in
securities that are illiquid by virtue of the absence of a readily available
market or legal or contractual restrictions on resale and fixed time deposits
that are subject to withdrawal penalties and that have maturities of more than
seven days; and (iii) the California Tax-Free Money Market Mutual Fund may not
invest more than 10% of the current value of its net assets in repurchase
agreements having maturities of more than seven days, illiquid securities and
fixed time deposits that are subject to withdrawal penalties and that have
maturities of more than seven days. With respect to item (i), it may be possible
that the Company would own more than 10% of the outstanding voting securities of
an issuer.
For purposes of complying with the Code, the California Tax-Free Money Market
Mutual Fund will diversify its holdings so that, at the end of each quarter of
the taxable year, (i) at least 50% of the market value of the California
Tax-Free Money Market Mutual Fund's assets is represented by cash, U.S.
Government obligations and other securities limited in respect of any one issuer
to an amount not greater than 5% of the California Tax-Free Money Market Mutual
Fund's assets and 10% of the outstanding voting securities of such issuer, and
(ii) not more than 25% of the value of its assets is invested in the securities
of any one issuer (other than U.S. Government obligations and the securities of
other regulated investment companies), or of two or more issuers which the
taxpayer controls and which are determined to be engaged in the same or similar
trades or businesses or related trades or businesses.
In addition, at least 65% of the California Tax-Free Money Market Mutual
Fund's total assets are invested (under normal market conditions) in municipal
obligations that pay interest that is exempt from California personal income
tax. However, as a matter of general operating policy, the California Tax-Free
Money Market Mutual Fund seeks to have substantially all of its assets invested
in such municipal obligations.
A-11 PROSPECTUS
<PAGE> 304
The investment objective of the Master Portfolio may not be changed without
approval of the investors in the Master Portfolio. The classification of the
National Tax-Free Money Market Mutual Fund and the Master Portfolio as
"diversified" may not be changed without the approval of the Fund's shareholders
or Master Portfolio's interestholders.
As matters of fundamental policy, the National Tax-Free Money Market Mutual
Fund or Master Portfolio may: (i) borrow from banks up to 10% of the current
value of its net assets only for temporary purposes in order to meet
redemptions, and these borrowings may be secured by the pledge of up to 10% of
the current value of its net assets (but investments by the Master Portfolio may
not be purchased while any such outstanding borrowing in excess of 5% of its net
assets exists); (ii) not make loans, except that the Fund or Master Portfolio
may purchase or hold debt instruments, lend its portfolio securities and enter
into repurchase agreement transactions in accordance with its investment
policies; loans for purposes of this restriction will not include the Fund's
purchase of interests in the Master Portfolio; (iii) not purchase the securities
of issuers conducting their principal business activity in the same industry if,
immediately after the purchase and as a result thereof, the value of the Fund's
or Master Portfolio's investments in that industry would be 25% or more of the
current value of the Fund's or Master Portfolio's total assets, provided that
there is no limitation with respect to investments in (a) municipal securities
(for the purposes of this restriction, private activity bonds and notes shall
not be deemed municipal securities if the payments of principal and interest on
such bonds and notes is the ultimate responsibility of non-governmental
entities), (b) U.S. Government obligations, and (c) certain obligations of
domestic banks; and (iv) not purchase securities of any issuer (except
securities issued or guaranteed by the U.S. Government, its agencies and
instrumentalities, including government-sponsored enterprises) if, as a result,
with respect to 75% of its total assets, more than 5% of the value of the Master
Portfolio's total assets would be invested in the securities of any one issuer
or, with respect to 100% of its total assets the Master Portfolio's ownership
would be more than 10% of the outstanding voting securities of such issuer.
As matters of non-fundamental policy the National Tax-Free Money Market Mutual
Fund and the Master Portfolio may each: (i) invest up to 10% of the current
value of its net assets in securities that are illiquid by virtue of the absence
of a readily available market or the existence of legal or contractual
restrictions on resale and fixed time deposits that are subject to withdrawal
penalties and that have maturities of more than seven days; and (ii) invest up
to 10% of the current value of its net assets in repurchase agreements having
maturities of more than seven days, and restricted securities (which include
securities that must be registered under the 1933 Act before they may be offered
to the public).
PROSPECTUS A-12
<PAGE> 305
Government and Treasury Money Market Mutual Funds
As matters of fundamental policy, each Fund may: (i) borrow from banks up to
10% with respect to the Government Money Market Mutual Fund and up to 20% with
respect to the Treasury Money Market Mutual Fund, of the current value of its
net assets only for temporary purposes in order to meet redemptions, and these
borrowings may be secured by the pledge of up to 10% of the current value of its
net assets (but investments may not be purchased by the Fund while any such
outstanding borrowing in excess of 5% of its net assets exists); and (ii) not
invest more than 25% of its assets (i.e., concentrate) in any particular
industry, excluding, U.S. Government obligations; and (iii) with respect to the
Government Money Market Mutual Fund, not make loans of portfolio securities or
other assets, except that loans for purposes of this restriction will not
include the purchase of repurchase agreements and other short-term obligations,
and other types of debt instruments commonly sold in a public or private
offering.
These investment restrictions are applied at the time investment securities
are purchased. As a matter of nonfundamental policy, the Treasury Money Market
Mutual Fund may make loans of portfolio securities or other assets, although it
does not intend to do so during the current fiscal year.
As a matter of nonfundamental policy, neither Fund may: (i) purchase
securities of any issuer (except for U.S. Government obligations, for certain
temporary purposes and for certain guarantees and unconditional puts) if as a
result more than 5% of the value of its total assets would be invested in the
securities of such issuer, except that a Fund may invest up to 25% of its assets
in the highest-rated obligations of any one issuer for a period of up to three
business days, or if a Fund would own more than 10% of the outstanding voting
securities of such issuer; and (ii) invest more than 10% of the current value of
its net assets in securities that are illiquid by virtue of the absence of a
readily available market or legal or contractual restrictions on resale or that
have maturities of more than seven days. With respect to item (i), it may be
possible that the Company would own more than 10% of the outstanding voting
securities of an issuer. For purposes of item (ii), repurchase agreements that
do not provide for payment to the Funds within seven days after notice are
subject to this 10% limit, unless the Board or investment adviser, pursuant to
guidelines adopted by the Board, determines that a liquid trading market exists.
The following securities are excluded from the Funds 10% limitation: (a)
securities eligible for resale pursuant to Rule 144A under the 1933 Act that
have been determined to be liquid by the Fund's Board of Directors, and (b)
Section 4(2) commercial paper that (i) is not traded flat or in default as to
interest or principal and (ii) is rated in one of the two highest categories by
at least two NRSROs and the Board of Directors has determined the commercial
paper to be liquid; or (iii) is rated in one of the two highest categories by
one NRSRO and the Fund's Board of Directors has determined that the commercial
paper is of equivalent quality and is liquid.
A-13 PROSPECTUS
<PAGE> 306
SPONSOR, DISTRIBUTOR AND ADMINISTRATOR
Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
INVESTMENT ADVISER, TRANSFER AND
DIVIDEND DISBURSING AGENT AND
CUSTODIAN
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
LEGAL COUNSEL
Morrison & Foerster LLP
2000 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
FOR MORE INFORMATION ABOUT THE FUNDS,
SIMPLY CALL 1-800-222-8222, OR WRITE:
Stagecoach Funds, Inc.
c/o Stagecoach Shareholder Services
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
STAGECOACH MONEY MARKET MUTUAL FUNDS:
- --------------------------------------------------------------------------------
- are NOT FDIC insured
- are NOT deposits or obligations of Wells Fargo Bank
- are NOT guaranteed by Wells Fargo Bank
- involve investment risk, including possible loss of
principal
- seek to maintain a stable net asset value of $1.00 per [LOGO]
share, however, there can be no assurance that either
fund will meet this goal. Yields and returns will vary
with market conditions.
[LOGO]
Printed on Recycled Paper SC0224 (9/96)
<PAGE> 307
[LOGO]
P.O. Box 7066
San Francisco, CA 94120-7066
STAGECOACH MONEY MARKET MUTUAL FUNDS:
- --------------------------------------------------------------------------------
- are NOT FDIC insured
- are NOT deposits or obligations of Wells Fargo Bank
- are NOT guaranteed by Wells Fargo Bank
- involve investment risk, including possible loss of
principal
- seek to maintain a stable net asset value of $1.00 per [LOGO]
share, however, there can be no assurance that either
fund will meet this goal. Yields and returns will vary
with market conditions.
[LOGO]
Printed on Recycled Paper SC0224 (9/96)
<PAGE> 308
[LOGO]
------------------------------
PROSPECTUS
------------------------------
PRIME MONEY MARKET MUTUAL FUND
CLASS A
SEPTEMBER 6, 1996
<PAGE> 309
STAGECOACH FUNDS(R)
PRIME MONEY MARKET MUTUAL FUND
CLASS A SHARES
Stagecoach Funds, Inc. (the "Company") is an open-end management investment
company. This Prospectus contains information about one class offered by one
fund of the Stagecoach Family of Funds -- the PRIME MONEY MARKET MUTUAL
FUND -- CLASS A (the "Fund").
The PRIME MONEY MARKET MUTUAL FUND seeks to provide investors with maximized
current income to the extent consistent with preservation of capital and
maintenance of liquidity. The Fund pursues its objective by investing its assets
in a broad range of short-term, high quality U.S. dollar-denominated money
market instruments, which have remaining maturities not exceeding 397 days (13
months), and in certain repurchase agreements.
Please read this Prospectus before investing and retain it for future
reference. It is designed to provide you with important information and to help
you decide if the Fund's goals match your own. A Statement of Additional
Information ("SAI"), dated September 6, 1996, containing additional information
about the Fund, has been filed with the Securities and Exchange Commission
("SEC") and is incorporated by reference into this Prospectus. The SAI is
available without charge by writing to Stagecoach Funds, Inc., c/o Stagecoach
Shareholder Services, Wells Fargo Bank, N.A., P.O. Box 7066, San Francisco, CA
94120-7066 or by calling 1-800-222-8222. If you hold shares in an IRA, please
call 1-800-BEST-IRA for information or assistance.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE IS NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A
CONSTANT $1.00 NET ASSET VALUE PER SHARE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THESE AUTHORITIES PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
FUND SHARES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR ISSUED, ENDORSED OR
GUARANTEED BY, WELLS FARGO BANK, N.A. ("WELLS FARGO BANK") OR ANY OF ITS
AFFILIATES. SUCH SHARES ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT,
THE FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"), THE FEDERAL RESERVE BOARD OR
ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN THE FUND INVOLVES CERTAIN RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
WELLS FARGO BANK IS THE INVESTMENT ADVISER AND IS COMPENSATED FOR PROVIDING THE
FUND WITH CERTAIN OTHER SERVICES. STEPHENS INC. ("STEPHENS"), WHICH IS NOT
AFFILIATED WITH WELLS FARGO BANK, IS THE FUND'S SPONSOR, ADMINISTRATOR AND
DISTRIBUTOR.
PROSPECTUS DATED SEPTEMBER 6, 1996
PROSPECTUS
<PAGE> 310
TABLE OF CONTENTS
-----------------
PROSPECTUS SUMMARY 1
SUMMARY OF FUND EXPENSES 3
FINANCIAL HIGHLIGHTS 5
HOW THE FUND WORKS 7
THE FUND AND MANAGEMENT 12
INVESTING IN THE FUND 14
DIVIDENDS 20
HOW TO REDEEM SHARES 21
ADDITIONAL SHAREHOLDER SERVICES 26
MANAGEMENT, DISTRIBUTION AND SERVICING FEES 28
TAXES 31
PROSPECTUS APPENDIX-ADDITIONAL INVESTMENT POLICIES A-1
PROSPECTUS
<PAGE> 311
PROSPECTUS SUMMARY
The Fund provides you with a convenient way to invest in a portfolio of
securities selected and supervised by professional management. The following
provides you with summary information about the Fund. For more information,
please refer to the identified Prospectus sections and generally to the
Prospectus and SAI.
Q. WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
A. The PRIME MONEY MARKET MUTUAL FUND seeks to provide investors with maximized
current income to the extent consistent with preservation of capital and
maintenance of liquidity. The Fund pursues its objective by investing its
assets in a broad range of short-term, high quality U.S. dollar-denominated
money market instruments, which have remaining maturities not exceeding 397
days (13 months), and in certain repurchase agreements.
See "How the Fund Works -- Investment Objective and Policies" and
"Prospectus Appendix -- Additional Investment Policies" for further
information on investments.
Q. WHAT ARE SOME OF THE POTENTIAL RISKS ASSOCIATED WITH THIS TYPE OF
INVESTMENT?
A. Investments in the Fund are not bank deposits or obligations of Wells Fargo
Bank and are not insured by the FDIC, nor are they insured or guaranteed
against loss of principal. Therefore, you should be willing to accept some
risk with money invested in the Fund. Although the Fund seeks to maintain a
stable net asset value of $1.00 per share, there is no assurance that it
will be able to do so. The Fund may not achieve as high a level of current
income as other mutual funds that do not limit their investment to the high
credit quality instruments in which the Fund invest. As with all mutual
funds, there can be no assurance that the Fund will achieve its investment
objective.
See "How the Fund Works -- Investment Objective and Policies -- Risk
Factors" below and "Additional Permitted Investment Activities" in the SAI
for further information about the Fund's investments and related risks. As
with all mutual funds, there can be no assurance that the Fund will achieve
its investment objective.
Q. WHO MANAGES MY INVESTMENTS?
A. Wells Fargo Bank, as the Fund's investment adviser, manages your
investments. Wells Fargo Bank also provides the Fund with transfer agency,
dividend disbursing agency, and custodial services. In addition, Wells
Fargo Bank is a shareholder servicing agent and a selling agent for the
Fund. See "The Fund and Management" and "Management, Distribution and
Servicing Fees."
1 PROSPECTUS
<PAGE> 312
Q. HOW DO I INVEST?
A. You may invest by purchasing Fund shares at the net asset value or NAV. You
may open an account by investing at least $2,500, and you may add to your
account by making additional investments of at least $100, with certain
exceptions. Shares may be purchased on any day the Fund is open by wire, by
mail, or by an automatic investment feature called the AutoSaver Plan. See
"Investing in the Fund" for more details, or contact Stephens (the Fund's
distributor), a shareholder servicing agent or a selling agent (such as
Wells Fargo Bank).
Q. HOW WILL I RECEIVE DIVIDENDS AND ANY CAPITAL GAINS?
A. Dividends from net investment income are declared daily, paid monthly and
automatically reinvested in additional shares of the same class of the Fund
at net asset value unless you elect to receive dividends credited to your
Wells Fargo Bank account or paid in cash. Any capital gains are distributed
at least annually in the same manner as dividends. Investment income
available for distribution to holders of a class of shares is reduced by the
class expenses payable on behalf of those shares. See "Dividends" and
"Additional Shareholder Services".
Q. ARE EXCHANGES TO OTHER FUNDS PERMITTED?
A. Yes. The exchange privilege enables you to exchange Fund shares for shares
of another fund offered by the Company, or shares of certain other funds
offered by other investment companies in the Stagecoach Family of Funds, to
the extent such shares are offered for sale in your state of residence. See
"Additional Shareholder Services -- Exchange Privilege."
Q. HOW MAY I REDEEM SHARES?
A. You may redeem your shares, without charge, on any day the Fund is open by
letter, or on a regular monthly basis, by an automatic feature called the
Systematic Withdrawal Plan, or by telephone (unless you have declined this
feature on your account application). See "How To Redeem Shares" for more
details, or contact Stephens, a shareholder servicing agent or a selling
agent (such as Wells Fargo Bank).
PROSPECTUS 2
<PAGE> 313
SUMMARY OF FUND EXPENSES
CLASS A
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
PRIME MONEY
MARKET MUTUAL FUND
------------------
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a
percentage of offering price)................... None
Sales Charge Imposed on Reinvested Dividends...... None
Sales Charge Imposed on Redemptions............... None
Exchange Fees..................................... None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
PRIME MONEY
MARKET MUTUAL FUND
------------------
<S> <C>
Management Fee (after waivers or
reimbursements)(1).............................. 0.12%
Rule 12b-1 Fee.................................... 0.05%
Other Expenses.................................... 0.38%
----
TOTAL FUND OPERATING EXPENSES (after waivers and
reimbursements)(2).............................. 0.55%
====
</TABLE>
- ---------------------------------
(1) Management Fee (before waivers or reimbursements) would be payable at a
maximum annual rate of 0.25%.
(2) Total Fund Operating Expenses (before waivers or reimbursements) would be
0.68%.
3 PROSPECTUS
<PAGE> 314
EXAMPLE OF EXPENSES
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following
expenses on a $1,000 investment in
the Fund, assuming a 5% annual
return and redemption at the end of
each time period indicated:
Prime Money Market Mutual
Fund........................... $6 $18 $31 $ 69
</TABLE>
EXPLANATION OF TABLES
The purpose of the above tables is to help you understand the various costs
and expenses that a shareholder in the Fund will pay directly or indirectly. You
may purchase Fund shares directly from the Company or through Wells Fargo Bank
or other institutions that have developed various account products through which
Fund shares may be purchased, and for which customers may be charged a fee. The
tables do not reflect any charges that may be imposed by Wells Fargo Bank or
another institution directly on certain customer accounts in connection with an
investment in the Fund.
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or sell Fund
shares. There are no Shareholder Transaction Expenses for the Fund. However, the
Company reserves the right to impose a charge for wiring redemption proceeds.
ANNUAL FUND OPERATING EXPENSES for the Fund's Class A shares are based on
applicable contract amounts and derived from amounts incurred by the predecessor
portfolio, the Prime Money Market Fund of Pacifica Funds Trust, during its most
recent fiscal year, restated to reflect voluntary fee waivers and expense
reimbursements that are expected to continue during the Company's current fiscal
year. Wells Fargo Bank and Stephens have each agreed to waive or reimburse all
or a portion of their respective fees charged to, or expenses paid by, the Fund
to ensure that the Total Fund Operating Expenses do not exceed, on an annual
basis, 0.55% of the Fund's average daily net assets through August 31, 1997. Any
waivers or reimbursements will reduce the Fund's total expenses. There can be no
assurance that waivers or reimbursements will continue after that date. The Fund
understands that a shareholder servicing agent also may impose certain
conditions on its customers, subject to the terms of this Prospectus, in
addition to or different from those imposed by the Fund, such as requiring a
higher minimum initial investment or payment of a separate fee for additional
expenses. For more complete descriptions of the various costs and expenses you
can expect to incur as an investor in the Fund, please see "Investing in the
Fund -- How to Buy Shares" and "Management, Distribution and Servicing Fees."
EXAMPLE OF EXPENSES is a hypothetical illustration of the expenses associated
with a $1,000 investment over stated periods, based on the expenses in the above
tables and an
PROSPECTUS 4
<PAGE> 315
assumed annual rate of return of 5%. The rate of return should not be considered
an indication of actual or expected performance of the Fund nor a representation
of past or future expenses; actual expenses and returns may be greater or lesser
than those shown.
FINANCIAL HIGHLIGHTS
The following information has been derived from the Financial Highlights in
the annual and semi-annual financial statements for the fiscal periods ended
September 30, 1995 and March 31, 1996 for Pacifica Funds Trust's Prime Money
Market Fund, the predecessor portfolio to the Fund. This information is provided
to assist you in evaluating the performance of the Fund for each of the ten
years represented. The financial information for the year ended September 30,
1995 and six months ended September 30, 1994 has been audited by the predecessor
portfolio's independent auditors, whose report on the financial statements for
the year ended September 30, 1995 appears in the 1995 Annual Report to
Shareholders for the predecessor portfolio. This report and the related
financial statements are incorporated by reference into the SAI. The financial
information for each of the four years in the period ended March 31, 1994 has
been audited by the predecessor portfolio's former independent auditors. Prior
to August 11, 1995, the predecessor portfolio offered only one class of shares,
to institutional investors, which was known as Service shares. The financial
information shown below through September 30, 1995 pertains only to the Service
shares of the predecessor portfolio. The predecessor portfolio commenced
offering a second class of shares -- the Investor shares -- on October 1, 1995.
The unaudited financial information and the related notes for the six months
ended March 31, 1996, pertain only to the Investor shares, and are incorporated
by reference into the SAI. See "The Fund and Management" below and "Capital
Stock" in the SAI. This information should be read in conjunction with the
related financial statements and the notes thereto.
5 PROSPECTUS
<PAGE> 316
PRIME MONEY MARKET MUTUAL FUND(1)
<TABLE>
<CAPTION>
SERVICE SHARES
--------------------------------------------------------------------------------------------
FISCAL YEAR ENDED MARCH 31,
--------------------------------------------------------------------------------------------
1986 1987 1988 1989 1990 1991 1992 1993
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:
Net asset value, beginning
of year......................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ .9997
-------- -------- -------- -------- -------- -------- -------- --------
Investment Operations:
Investment income-net............. 0.754 .0581... 0.634 .0764 .0849 .0745 .0510 .0327
Net realized gain (loss) on
investments..................... -- -- -- -- -- -- (.0003) .0001
-------- -------- -------- -------- -------- -------- -------- --------
Total from Investment
Operations.................... 0.754 .0581... 0.634 .0764 .0849 .0745 .0507 .0328
-------- -------- -------- -------- -------- -------- -------- --------
Distributions:
Dividends from investment
income-net...................... (0.754) (.0581) (.0634) (.0764) (.0849) (.0745) (.0510) (.0327)
Net asset value, end of year....... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ .9997 $ .9998
======== ======== ======== ======== ======== ======== ======== ========
Total Investment Return............ 7.80% 5.97% 6.50% 7.88% 8.82% 7.72% 5.22% 3.32%
Ratios/Supplemental Data:
Ratio of expenses to average net
assets.......................... .66%(4) .68%(5) .58%(6) .56%(6) .54%(7) .47%(8) .43%(9) .41%(10)
Ratio of net investment income
to average net assets........... 7.47%(4) 5.81%(5) 6.38%(6) 7.58%(6) 7.95%(7) 7.38%(8) 5.09%(9) 3.27%(10)
Net Assets, end of year (000's
Omitted).......................... $350,344 $407,815 $628,987 $496,675 $493,641 $543,834 $528,397 $468,479
<CAPTION>
INVESTOR
SIX FISCAL SHARES*
MONTHS YEAR ---------
ENDED ENDED SIX-MONTHS
SEPT. 30, SEPT. 30, MARCH 31,
1994 1994(2) 1995 1996
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Per Share Data:
Net asset value, beginning
of year......................... $ .9998 $ .9998 $ .9998 $ 1.0000
-------- -------- -------- ---------
Investment Operations:
Investment income-net............. .0296 .0185 .0546 .0258
Net realized gain (loss) on
investments..................... -- -- -- (.0002)
-------- -------- -------- ---------
Total from Investment
Operations.................... .0296 .0185 .0546 .0256
-------- -------- -------- ---------
Distributions:
Dividends from investment
income-net...................... (.0296) (.0185) (.0546) (.0258)
Net asset value, end of year....... $ .9998 $ .9998 $ .9998 $ .9998
======== ======== ======== =========
Total Investment Return............ 3.00% 3.71%(3) 5.60% 5.21%(3)
Ratios/Supplemental Data:
Ratio of expenses to average net
assets.......................... .41%(11) .41(3)(12) .41%(13) .55%(3,14)
Ratio of net investment income
to average net assets........... 2.96%(11) 3.67(3)(12) 5.47%(13) 5.19%(3,14)
Net Assets, end of year (000's
Omitted).......................... $527,599 $565,305 $614,101 $ 295,292
</TABLE>
- -------------------
* Financial Data for the six-month period ended March 31, 1996 is for
Investor shares only, the predecessor of the Fund's Class A shares, which
commenced operations October 1, 1995.
(1) The Prime Fund operated as Pacific American Liquid Assets, Inc. from
commencement of operations on April 30, 1981 until it was reorganized as a
portfolio of Pacific American Fund on October 1, 1985. On October 1, 1994,
the Fund was reorganized as the "Pacific American Money Market Portfolio,"
a portfolio of Pacifica Funds Trust. In July 1995, the Fund was renamed the
"Pacifica Prime Money Market Fund," and on or about September 6, 1996, the
Fund was reorganized as the Prime Money Market Mutual Fund of Stagecoach
Funds, Inc.
(2) On October 1, 1994, the Fund's fiscal year end changed from March 31 to
September 30.
(3) Annualized basis.
(4) During the year ended March 31, 1986, the Fund's adviser waived a portion
of its fees (.13% of average net assets).
(5) During the year ended March 31, 1987, the Fund's adviser waived a portion
of its fees (.25% of average net assets). In addition, during the period
from January 1, 1987 to March 31, 1987, the Fund's adviser waived an
additional portion of its fees (.02% of average net assets).
(6) During the years ended March 31, 1988 and 1989, the Fund's adviser waived a
portion of its fees (.35% and .34% of average net assets, respectively).
(7) During the year ended March 31, 1990, the Fund's adviser and the Fund's
prior distributor waived a portion of their respective fees (.36% of
average net assets).
(8) During the year ended March 31, 1991, the Fund's adviser and the Fund's
Service Organizations waived a portion of their respective fees (.47% of
average net assets).
(9) During the year ended March 31, 1992, the Fund's adviser and the Fund's
Service Organizations waived a portion of their respective fees (.48% of
average net assets).
(10) During the year ended March 31, 1993, the Fund's adviser and the Fund's
Service Organizations waived a portion of their respective fees (.48% of
average net assets).
(11) During the year ended March 31, 1994, the Fund's adviser and the Fund's
Service Organizations waived a portion of their respective fees (.48% of
average net assets).
(12) During the six month period ended September 30, 1994, the Fund's adviser
and the Fund's Service Organizations waived a portion of their respective
fees (.48% (annualized) of average net assets).
(13) During the year ended September 30, 1995, the Fund's adviser and the Fund's
Service Organizations waived a portion of their respective fees (.27% of
average net assets).
(14) During the six month period ended March 31, 1996, the Fund's adviser and
the Fund's Service Organizations waived a portion of their respective fees
with regard to Investor Shares (.16% of average net assets).
PROSPECTUS 6
<PAGE> 317
HOW THE FUND WORKS
INVESTMENT OBJECTIVE AND POLICIES
Set forth below is a description of the investment objective and related
policies of the Fund. The Fund seeks to maintain a net asset value of $1.00 per
share. The Funds assets consist only of obligations with remaining maturities
(as defined by the SEC) of 397 days (13 months) or less at the date of
acquisition, and the dollar-weighted average maturity of the Fund's investments
is 90 days or less. There can be no assurance that the Fund's investment
objective will be achieved or that the Fund will be able to maintain a net asset
value of $1.00 per share.
The PRIME MONEY MARKET MUTUAL FUND seeks to provide investors with maximized
current income to the extent consistent with the preservation of capital and
maintenance of liquidity. The Fund pursues its investment objective by investing
in a broad range of short-term, high quality U.S. dollar-denominated
instruments, consisting of commercial paper, certificates of deposit, bankers'
acceptances, time deposits, bank notes, variable rate master demand note
agreements, medium-term notes, corporate notes, U.S. Agency and U.S. Treasury
obligations, and in repurchase agreements collateralized or secured by U.S.
Agency and U.S. Treasury obligations.
All securities acquired by the Fund will be U.S. Government obligations (see
below) or "First Tier Eligible Securities" as defined under Rule 2a-7 of the
Investment Company Act of 1940 (the "1940 Act"). First Tier Eligible Securities
generally consist of instruments that are either rated at the time of purchase
in the highest rating category by one or more unaffiliated nationally recognized
statistical rating organizations ("NRSROs") or issued by issuers with such
ratings. The Appendix to the SAI includes a description of the applicable
ratings. Unrated instruments purchased by the Fund will be of comparable quality
as determined by the adviser pursuant to guidelines approved by the Board of
Directors.
U.S. Treasury and U.S. Government Obligations. The Prime Money Market Mutual
Fund may invest in U.S. Treasury obligations, such as bills, notes, bonds and
certificates of indebtedness, and in notes and repurchase agreements
collateralized or secured by such obligations, as well as in obligations of
agencies and instrumentalities of the U.S. Government ("U.S. Government
obligations"). U.S. Government obligations in which the Fund may invest include
securities issued or guaranteed as to principal and interest by the U.S.
Government and supported by the full faith and credit of the U.S. Treasury. U.S.
Treasury obligations differ mainly in the length of their maturity. Treasury
bills, the most frequently issued marketable government securities, have a
maturity of up to one year and are issued on a discount basis. U.S. Government
obligations also include securities issued or guaranteed by federal agencies or
instrumentalities, including government-sponsored enterprises. Some obligations
of agencies or instrumentalities of
7 PROSPECTUS
<PAGE> 318
the U.S. Government are supported by the full faith and credit of the United
States or U.S. Treasury guarantees; others, by the right of the issuer or
guarantor to borrow from the U.S. Treasury; still others, by the discretionary
authority of the U.S. Government to purchase certain obligations of the agency
or instrumentality; and others, only by the credit of the agency or
instrumentality issuing the obligation. In the case of obligations not backed by
the full faith and credit of the United States, the investor must look
principally to the agency or instrumentality issuing or guaranteeing the
obligation for ultimate repayment, which agency or instrumentality may be
privately owned. There can be no assurance that the U.S. Government will provide
financial support to its agencies or instrumentalities where it is not obligated
to do so. As a general matter, the value of debt instruments, including U.S.
Government obligations, declines when market interest rates increase and rises
when market interest rates decrease. Certain types of U.S. Government
obligations are subject to fluctuations in yield or value due to their structure
or contract terms.
The Fund may also purchase "stripped securities" such as TIGRs or CATs, which
are interests in U.S. Treasury obligations offered by broker-dealers and other
financial institutions that represent ownership in either the future interest
payments or the future principal payments on the U.S. Treasury obligations.
Stripped securities are issued at a discount to their "face value" and may
exhibit greater price volatility than ordinary debt securities because of the
manner in which their principal and interest are paid to investors.
In addition to the types of instruments described above, the Fund may purchase
U.S. dollar-denominated bank obligations such as time deposits, certificates of
deposit, bankers' acceptances, bank notes and deposit notes issued by domestic
and foreign banks. Time deposits are non-negotiable deposits maintained at a
banking institution for a specified period of time normally at a stated interest
rate. Certificates of deposit are certificates evidencing the obligation of a
bank to repay funds deposited with it for a specified period of time. Bankers
acceptances are negotiable deposits or bills of exchange, normally drawn by an
importer or exporter to pay for specific merchandise, which are "accepted" by a
bank (meaning, in effect, that the bank unconditionally agrees to pay the face
value of the instrument at maturity). Bank notes usually represent senior debt
of the bank.
The Fund may also purchase commercial paper, short-term notes, medium-term
notes and bonds issued by domestic and foreign corporations that meet the Fund's
maturity limitations.
The Fund may also invest in U.S. dollar denominated obligations issued or
guaranteed by foreign governments or any of their political subdivisions,
agencies or instrumentalities. Such obligations include debt obligations of
supranational entities. Supranational entities include international
organizations designated or supported by governmental entities to promote
economic reconstruction or development and
PROSPECTUS 8
<PAGE> 319
international banking institutions and related government agencies. Examples of
these include the International Bank for Reconstruction and Development (the
"World Bank"), the Asian Development Bank and the InterAmerican Development
Bank.
The Fund may purchase asset-backed securities, which are securities backed by
mortgages, installment sales contracts, credit-card receivables or other assets.
The average life of asset-backed securities varies with the maturities of the
underlying instruments, and the average life of a mortgage-backed instrument, in
particular, is likely to be substantially less than the original maturity of the
mortgage pools underlying the securities as the result of mortgage prepayments.
For this and other reasons, an asset-backed security's stated maturity may be
shortened, and the securities' total return may be difficult to predict
precisely. Such difficulties are not, however, expected to have a significant
effect on the Fund since the remaining maturity of any asset-backed security
acquired will be thirteen months or less.
The Fund may attempt to increase yields by trading to take advantage of
short-term market variations. This policy could result in high portfolio
turnover, which should not adversely affect the Fund since it does not
ordinarily pay brokerage commissions on the purchase of short-term debt
obligations.
For additional descriptions of the types of securities and investment
practices used by the Fund, see "Risk Factors," "Prospectus
Appendix -- Additional Investment Policies" in this Prospectus and "Investment
Restrictions" and "Additional Permitted Investment Activities" in the SAI.
RISK FACTORS
Investments in the Fund are not bank deposits or obligations of Wells Fargo
Bank and are not insured by the FDIC, nor are they insured or guaranteed against
loss of principal. Therefore, investors should be willing to accept some risk
with money invested in the Fund. Although the Fund seeks to maintain a stable
net asset value of $1.00 per share, there is no assurance that it will be able
to do so. The Fund may not achieve as high a level of current income as other
mutual funds that do not limit their investment to the high credit quality
instruments in which the Fund invest. Illiquid securities, which may include
certain restricted securities, may be difficult to sell promptly at an
acceptable price. Certain restricted securities may be subject to legal
restrictions on resale. Delay or difficulty in selling securities may result in
a loss or be costly to a Fund. As with all mutual funds, there can be no
assurance that the Fund will achieve its investment objective.
The Fund, under 1940 Act, must comply with certain investment criteria
designed to provide liquidity, reduce risk, and allow the Fund to maintain a
stable net asset value of $1.00 per share. The Fund's dollar-weighted average
portfolio maturity must not exceed 90 days. Any security that the Fund purchases
must have a remaining maturity of
9 PROSPECTUS
<PAGE> 320
not more than 397 days. In addition, Fund purchases must present minimal credit
risks and be of the highest quality (i.e., be rated in the top rating category
by the requisite NRSROs or, if unrated, determined to be of comparable quality
to such rated securities by the Fund's adviser under guidelines adopted by the
Company's Board of Directors).
The Fund seeks to reduce risk by investing its assets in securities of various
issuers. In addition, the Fund emphasizes safety of principal and high credit
quality. In particular, the internal investment policies of the Fund's
investment adviser prohibits the purchase for the Fund of many types of
floating-rate derivative securities that are considered potentially volatile.
The following types of derivative securities ARE NOT permitted investments for
the Fund:
- capped floaters (on which interest is not paid when market rates move above
a certain level);
- leveraged floaters (whose interest rate reset provisions are based on a
formula that magnifies changes in interest rates);
- range floaters (which do not pay any interest if market interest rates move
outside of a specified range);
- dual index floaters (whose interest rate reset provisions are tied to more
than one index so that a change in the relationship between these indices
may result in the value of the instrument falling below face value); and
- inverse floaters (which reset in the opposite direction of their index).
Additionally, the Fund may not invest in securities whose interest rate reset
provisions are tied to an index that materially lags short-term interest rates,
such as "COFI floaters." The Fund may invest only in variable or floating-rate
securities that bear interest at a rate that resets quarterly or more frequently
and that resets based on changes in standard money market rate indices such as
U.S. Treasury bills, London Interbank Offered Rate or LIBOR, the prime rate,
published commercial paper rates, federal funds rates, Public Securities
Associates ("PSA") floaters or JJ Kenney index floaters.
Since the Prime Money Market Mutual Fund may purchase securities issued by
foreign issuers, it may be subject to investment risks which are different in
some respects from those incurred by a fund that invests exclusively in debt
obligations of domestic issuers. Such potential risks include future political
and economic developments, the possible imposition of withholding and other
taxes imposed by foreign countries on income received from sources within such
foreign countries, the possible seizure or nationalization of foreign deposits,
the possible establishment of exchange controls or the adoption of other foreign
governmental restrictions that might adversely affect the payment of principal
and interest on these securities. In addition, foreign banks and other issuers
are not necessarily subject to the same regulatory requirements that apply to
PROSPECTUS 10
<PAGE> 321
domestic issuers (such as reserve requirements, loan limitations, examinations,
accounting, auditing and recordkeeping requirements, and public availability of
information), and the Fund may experience difficulties in obtaining or enforcing
a judgment against a foreign issuer. Absent any unusual market conditions, the
Fund will not invest more than 25% of its total assets in securities issued by
foreign issuers.
Generally, securities in which the Fund invests will not earn as high a yield
as securities of longer maturity and/or of lesser quality that are more subject
to market volatility. The Fund attempts to maintain the value of its shares at a
constant $1.00 per share, although there can be no assurance that it will always
be able to do so. See "Prospectus Appendix -- Additional Investment Policies"
and the SAI for further information about investment policies and risks.
PERFORMANCE
The performance of each class of shares of the Fund may be advertised from
time to time in terms of current yield, effective yield or average annual total
return. Performance figures are based on historical results and are not intended
to indicate future performance.
Yield refers to the income generated by an investment in the Fund's class over
a specified period (usually 7 days), expressed as an annual percentage rate.
Effective yield is calculated similarly but assumes reinvestment of the income
earned from the Fund. Because of the effects of compounding, effective yields
are slightly higher than yields.
Average annual return of a class of shares is based on the overall dollar or
percentage change of an investment in the Fund's class and assumes the
investment is at NAV and all dividends and distributions attributable to a class
are also reinvested at NAV in shares of the class.
In addition to presenting these standardized performance calculations, at
times, the Fund also may present nonstandard performance figures, such as yields
and effective yields for a 30-day period or, in sales literature, distribution
rates. Because of the differences in the fees and/or expenses borne by shares of
each class of the Fund, the performance figures on such shares can be expected,
at any given time, to vary from the performance figures for other classes of the
Fund.
Additional performance information is contained in the SAI under "Performance
Calculations" and in the Annual Report, which are available upon request without
charge by calling the Company at 1-800-222-8222 or by writing the Company at the
address shown on the front cover of the Prospectus.
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THE FUNDS AND MANAGEMENT
The Fund is one of the funds in the Stagecoach Family of Funds. The Company
was organized as a Maryland corporation on September 9, 1991 and currently
offers shares of the following series: Aggressive Growth, Arizona Tax-Free,
Asset Allocation, Balanced, California Tax-Free Bond, California Tax-Free
Income, California Tax-Free Money Market Mutual, Corporate Stock, Diversified
Income, Equity Value, Ginnie Mae, Government Money Market Mutual, Growth and
Income, Intermediate Bond, Money Market Mutual, Money Market Trust, National
Tax-Free, National Tax-Free Money Market Mutual, Oregon Tax-Free, Prime Money
Market Mutual, Short-Intermediate U.S. Government Income, Small Cap, Treasury
Money Market Mutual and U.S. Government Allocation Funds. The Arizona Tax-Free,
Balanced, California Tax-Free Bond, Equity Value, Ginnie Mae, Growth and Income,
Intermediate Bond, Money Market Mutual, National Tax-Free, Oregon Tax-Free,
Prime Money Market Mutual, Small Cap and Treasury Money Market Mutual Funds each
offer three classes of shares. The Aggressive Growth, Asset Allocation,
California Tax-Free Income, Diversified Income, Short-Intermediate U.S.
Government Income and U.S. Government Allocation Funds each offer two classes of
shares. The California Tax-Free Money Market Mutual, Corporate Stock, Government
Money Market Mutual, Money Market Trust, and National Tax-Free Money Market
Mutual Funds each offer one class of shares. Most of the Company's funds are
authorized to issue multiple classes of shares, one class generally subject to a
front end-end sales charge and, in some cases, a class subject to a contingent-
deferred sales charge, that are offered to retail investors. Certain of the
Company's funds also are authorized to issue other classes of shares, which are
sold primarily to institutional investors at NAV. Each class of shares
represents an equal, proportionate interest in the Fund with other shares of the
same class. Shareholders of each class bear their pro rata portion of the Fund's
operating expenses except for certain class-specific expenses (e.g., any state
securities registration fees, shareholder servicing fees or distribution fees
that may be paid under Rule 12b-1) that are allocated to a particular class and,
accordingly, may affect performance. For information on another fund or a class
of shares, please call Stagecoach Shareholder Services at 1-800-222-8222 or
write the Company at the address shown on the front cover of the Prospectus.
The Board of Directors of the Company supervises the funds' activities and
monitors their contractual arrangements with various service providers. Although
the Company is not required to hold annual shareholder meetings, special
meetings may be required for purposes such as electing or removing Directors,
approving advisory contracts and distribution plans, and changing a fund's
investment objective or fundamental investment policies. All shares of the
Company have equal voting rights and will be voted in the aggregate, rather than
by fund or class, unless otherwise required by law (such as when the voting
matter affects only one fund or class). As a Fund shareholder, you are entitled
to one vote for each share you own and fractional votes for fractional
PROSPECTUS 12
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shares you own. See "Management" in the SAI for more information on the
Company's Directors and Officers. A more detailed description of the voting
rights and attributes of the shares is contained under "Capital Stock" in the
SAI.
MANAGEMENT
Wells Fargo Bank serves as the Fund's investment adviser, transfer and
dividend disbursing agent and custodian. In addition, Wells Fargo Bank serves as
a Shareholder Servicing Agent and as a Selling Agent of the Fund. Wells Fargo
Bank, one of the largest banks in the United States, was founded in 1852 and is
the oldest bank in the western United States. As of June 30, 1996, Wells Fargo
Bank and its affiliates provided investment advisory services for approximately
$56 billion of assets of individuals, trusts, estates and institutions. Wells
Fargo Bank also serves as investment adviser to other separately managed funds
(or the master portfolio in which a fund may invest) of the Company, and as
investment adviser or sub-adviser to separately managed funds of five other
registered, open-end, management investment companies. Wells Fargo Bank, a
wholly owned subsidiary of Wells Fargo & Company, is located at 420 Montgomery
Street, San Francisco, California 94104. Wells Fargo Investment Management, Inc.
("WFIM"), a wholly-owned subsidiary of Wells Fargo & Company, is located at 444
Market Street, San Francisco, California 94105.
Subsequent to its acquisition by Wells Fargo & Company on April 1, 1996, WFIM
(formerly, First Interstate Capital Management, Inc.) served as investment
adviser to the predecessor portfolio. Prior to March 18, 1994, the predecessor
portfolio's investment adviser was San Diego Financial Capital Management, Inc.,
which was acquired by First Interstate Bancorp through its merger with San Diego
Financial Corporation.
Morrison & Foerster LLP counsel to the Company and special counsel to Wells
Fargo Bank, has advised the Company and Wells Fargo Bank that Wells Fargo Bank
and its affiliates may perform the services contemplated by the Advisory
Contracts and this Prospectus without violation of the Glass-Steagall Act. Such
counsel has pointed out, however, that there are no controlling judicial or
administrative interpretations or decisions and that future judicial or
administrative interpretations of, or decisions relating to, present federal or
state statutes, including the Glass-Steagall Act, and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as future changes in such statutes, regulations and judicial or
administrative decisions or interpretations, could prevent such entities from
continuing to perform, in whole or in part, such services. If any such entity
were prohibited from performing any such services, it is expected that new
agreements would be proposed or entered into with another entity or entities
qualified to perform such services.
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Stephens is the Fund's sponsor and administrator and distributes the Fund's
shares. Stephens is a full service broker/dealer and investment advisory firm
located at 111 Center Street, Little Rock, Arkansas 72201. Stephens and its
predecessor have been providing securities and investment services for more than
60 years. Additionally, they have been providing discretionary portfolio
management services since 1983. Stephens currently manages investment portfolios
for pension and profit-sharing plans, individual investors, foundations,
insurance companies and university endowments.
INVESTING IN THE FUND
OPENING AN ACCOUNT
You can buy Class A shares of the Fund in one of the several ways described
below. You must complete and sign an Account Application to open an account.
Additional documentation may be required from corporations, associations, and
certain fiduciaries. Do not mail cash. If you have any questions or need extra
forms, please call 1-800-222-8222.
After an application has been processed and an account has been established,
subsequent purchases of different funds of the Company under the same umbrella
account do not require the completion of additional applications. A separate
application must be processed for each different umbrella account number (even
if the registration is the same). Call the number on your confirmation statement
to obtain information about what is required to change registration.
To invest in the Fund through tax-deferred retirement plans through which the
Fund is available, please contact a Shareholder Servicing Agent or a Selling
Agent to receive information and the required separate application. See
"Tax-Deferred Retirement Plans" below.
The Company or Stephens may make the Prospectus available in an electronic
format. Upon receipt of a request from you or your representative, the Company
or Stephens will transmit or cause to be transmitted promptly, without charge, a
paper copy of the electronic Prospectus.
SHARE VALUE
The value of a Fund share is its net asset value or NAV. Wells Fargo Bank
calculates the NAV of each class of the Fund's shares as of 12:00 p.m. (Pacific
time) and 1:00 p.m. (Pacific time) on each Business Day (as defined below). The
NAV per share of each class of a Fund is computed by dividing the value of the
Fund's assets allocable to a particular class, less the liabilities charged to
that class by the total number of the outstanding shares of that class. All
expenses, including fees paid to the investment
PROSPECTUS 14
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adviser and administrator, are accrued daily and taken into account for the
purposes of determining the NAV of a share of each class is expected to
fluctuate daily. As noted above, the Fund seeks to maintain a constant $1.00 NAV
share price, although there can be no assurance that it will be able to do so.
The only transaction orders that are processed at 1:00 p.m. (Pacific time) are
those that are received prior to that time through shareholder servicing agents
or selling agents in connection with automated investment programs. All
transaction orders are processed at the NAV next computed after the order is
received.
Fund shares may be purchased on any day the Fund is open for business,
provided Wells Fargo Bank also is open for business (a "Business Day").
Currently, Wells Fargo Bank is closed on New Year's Day, Presidents' Day, Martin
Luther King, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans
Day, Thanksgiving Day and Christmas Day (each, a "Holiday"). When any Holiday
falls on a weekend, the Fund is typically closed on the weekday immediately
before or after such Holiday.
Each Fund's NAV is calculated on the basis of the amortized-cost method. This
valuation method is based on the receipt of a steady rate of payment from the
date of purchase until maturity rather than actual changes in market value. The
Company's Board of Directors believes that this valuation method accurately
reflects fair value.
HOW TO BUY SHARES
You may buy Fund shares on any Business Day by any of the methods described
below. After a properly completed Account Application is received and your wire
order or check is received, or an account with a bank that is designated in the
Account Application and that is approved by the transfer agent (an "Approved
Bank Account") is debited, your purchase order is effected, and full and
fractional shares are purchased at the next determined NAV, which is expected to
remain a constant $1.00 per share. If shares are purchased by a check that does
not clear, the Company reserves the right to cancel the purchase and hold the
investor responsible for any losses or fees incurred. In addition, the Fund may
hold payment on any redemption until reasonably satisfied that your investments
made by check have been collected (which may take up to 10 days).
Generally the minimum initial investment is $2,500. The minimum initial
investment amounts, however, are $100 for investments made through the AutoSaver
Plan (described below) and $250 for investments made through any tax-deferred
retirement account for which Wells Fargo Bank serves as trustee or custodian
under a prototype trust approved by the Internal Revenue Service ("IRS") (a
"Plan Account"). Generally, subsequent investments must be made in amounts of
$100 or more. Where Fund shares are acquired in exchange for shares of another
fund in the Stagecoach Family of Funds, the minimum initial investment amount
applicable to the shares being exchanged generally carries over. This means, for
example, that you can make an initial investment of only $1,000 in the Fund even
though ordinarily a $2,500 minimum balance is
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required, in an exchange from a fund that has a $1,000 minimum investment
requirement, except that if the value of your investment in shares of the fund
from which you are exchanging has been reduced below the minimum initial
investment amount by changes in market conditions or sales charges (and not by
redemptions), you may carry over the lesser amount into the Fund. Plan Accounts
that invest in the Fund through Wells Fargo ExpressInvest(TM) (available to
certain Wells Fargo tax-deferred retirement plans) are not subject to the
minimum initial or subsequent investment amount requirements. In addition, the
minimum initial or subsequent purchase amount requirements may be waived or
lowered for investments effected on a group basis by certain entities and their
employees, such as pursuant to a payroll deduction or other accumulation plan.
If you have questions regarding purchases of shares or ExpressInvest, please
call 1-800-222-8222 or contact a shareholder servicing agent or selling agent
(as defined below). For additional information on tax-deferred accounts, please
refer to "Investing in the Fund -- Tax-Deferred Retirement Plans" or contact a
shareholder servicing agent or selling agent.
The Company reserves the right to reject any purchase order or suspend sales
at any time. Payment for orders that are not received is returned after prompt
inquiry. The issuance of shares is recorded on the books of the Company, and
share certificates are not issued.
INITIAL PURCHASES BY WIRE
1. Complete an Account Application. Indicate the services to be used.
2. Instruct the wiring bank to transmit the specified amount in federal funds
($2,500 or more) to:
Wells Fargo Bank, N.A.
San Francisco, California
Bank Routing Number: 121000248
Wire Purchase Account Number: 4068-000587
Attention: Stagecoach Funds (Name of Fund) (designate Class A)
Account Name(s): Name(s) in which to be registered
Account Number: (if investing into an existing account)
3. A completed Account Application should be mailed, or sent by telefacsimile
with the original subsequently mailed, to the following address immediately
after the funds are wired and must be received and accepted by the transfer
agent before an account can be opened:
Wells Fargo Bank, N.A.
Stagecoach Shareholder Services
P.O. Box 7066
San Francisco, California 94120-7066
Telefacsimile: 1-415-543-9538
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4. Share purchases are effected at the NAV next determined after the Account
Application is received and accepted.
INITIAL PURCHASES BY MAIL
1. Complete an Account Application. Indicate the services to be used.
2. Mail the Account Application and a check for $2,500 or more, payable to
"Stagecoach Funds (Name of Fund) (designate Class A)," to the address set forth
under "Initial Purchases by Wire" above.
3. Share purchases are effected at the NAV next determined after the Account
Application is received and accepted.
AUTOSAVER PLAN PURCHASES
The Company's AutoSaver Plan provides you with a convenient way to establish
and automatically add to your Fund account on a monthly basis. To participate in
the AutoSaver Plan, you must specify an amount ($100 or more) to be withdrawn
automatically by the transfer agent on a monthly basis from your Approved Bank
Account. You may open an Approved Bank Account with Wells Fargo Bank. The
transfer agent withdraws and uses this amount to purchase Fund shares on your
behalf each month on or about the day that you have selected, or, if you have
not selected a day, on or about the 20th day of each month. If you hold shares
through a brokerage account, the AutoSaver Plan will comply with the terms of
your brokerage agreement. The transfer agent requires a minimum of ten (10)
Business Days to implement your AutoSaver Plan purchases. If you hold shares
through a brokerage account, your AutoSaver Plan will comply with the terms of
your brokerage agreement. There are no separate fees charged to you by the
Company for participating in the AutoSaver Plan.
You may change your investment amount, the date on which your AutoSaver
purchase is effected, suspend purchases or terminate your election at any time
by notifying the transfer agent at least five (5) Business Days prior to any
scheduled transaction.
TAX-DEFERRED RETIREMENT PLANS
You may be entitled to invest in the Fund through a Plan Account or other
tax-deferred retirement plan. Contact a Shareholder Servicing Agent (such as
Wells Fargo Bank) or a Selling Agent for materials describing Plan Accounts
available through it, and the benefits, provisions, and fees of such Plan
Accounts. The minimum initial investment amount for Fund shares acquired through
a Plan Account is $250 (the minimum initial investment amount is not applicable
if you participate in ExpressInvest through a Plan Account).
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Pursuant to the Internal Revenue Code of 1986, as amended (the "Code"), an
individual who is not an active participant (and who does not have a spouse who
is an active participant) in certain types of retirement plans ("qualified
retirement plans") may deduct contributions to an Individual Retirement Account
("IRA"), up to specified limits. Investment earnings in the IRA will be
tax-deferred until withdrawn, at which time the individual may be in a lower tax
bracket.
The maximum annual deductible contribution to an IRA for individuals under age
70 1/2 is 100% of includible compensation up to a maximum of (i) $2,000 for
single individuals; (ii) $4,000 for a married couple when both spouses earn
income; and (iii) $2,250 (increased to $4,000 for tax years beginning after
December 31, 1996) when one spouse earns, or elects for IRA purposes to be
treated as earning, no income (together the "IRA contribution limits").
The IRA deduction is also available for single individual taxpayers and
married couples who are active participants in qualified retirement plans but
who have adjusted gross incomes that do not exceed certain specified limits. If
their adjusted gross income exceeds these limits, the amount of the deductible
contribution is phased down and eventually eliminated.
Any individual who works may make nondeductible contributions to an IRA in
addition to any deductible contributions. Total aggregate deductible and
nondeductible contributions are limited to the IRA contribution limits discussed
above. Aggregate contributions in excess of the applicable IRA contribution
limit are "excess contributions." In addition, contributions made to an IRA for
the year in which an individual attains the age of 70 1/2, or any year
thereafter, are also excess contributions. Excess contributions are subject to a
6% excise tax penalty which is charged each year that the excess contribution
remains in the IRA.
An employer may also contribute to an individual's IRA as part of a Simplified
Employee Pension Plan, known as a "SEP-IRA", established prior to January 1,
1996, or a Savings Incentive Match Plan for Employees, or "SIMPLE plan",
established after December 31, 1996, both through a Shareholder Servicing Agent
or a Selling Agent. Participating employers may make an annual contribution to
each employee through a SEP-IRA in an amount up to the lesser of 15% of such
employee's earned income or $30,000, subject to certain provisions of the Code.
Under a SIMPLE plan, an employee may contribute up to $6,000 annually to his or
her own IRA and the employer must generally match such contributions up to 3% of
the employee's annual salary. Alternatively, the employer may elect under the
SIMPLE formula to contribute to the employee's IRA 2% of the lesser of his or
her income or $150,000. In any case, all contributions and investment earnings
will be tax-deferred until withdrawn.
The foregoing discussion regarding IRAs is based on the Code and federal
regulations in effect as of the date of this Prospectus and summarizes only some
of the important
PROSPECTUS 18
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federal tax considerations generally affecting IRA contributions made by
individuals or their employers. It is not intended as a substitute for careful
tax planning. You should consult your tax advisor with respect to your specific
tax situation as well as with respect to state and local taxes. Further federal
tax information is contained under "Taxes" in this Prospectus and in the SAI.
A Shareholder Servicing Agent or Selling Agent also may offer other types of
tax-deferred or tax-advantaged plans, including a Keogh retirement plan for
self-employed professional persons, sole proprietors and partnerships.
Application materials for opening a tax-deferred retirement plan can be
obtained from a shareholder servicing agent or a selling agent. Return your
completed tax-deferred retirement plan application to your shareholder servicing
agent or selling agent for approval and processing. If your tax-deferred
retirement plan application is incomplete or improperly filled out, there may be
a delay before a Fund account is opened. You should ask your shareholder
servicing agent or selling agent about the investment options available to your
tax-deferred retirement plan, since some of the funds in the Stagecoach Family
of Funds may be unavailable as options. Moreover, certain features described
herein, such as the AutoSaver Plan and the Systematic Withdrawal Plan, may not
be available to individuals or entities who invest through a tax-deferred
retirement plan.
ADDITIONAL PURCHASES
You may make additional purchases of $100 or more by instructing the Fund's
transfer agent to debit your Approved Bank Account by wire with an instruction
to the wiring bank to transmit the specified amount as directed above for
initial purchases or by mail with a check payable to "Stagecoach Funds (Name of
Fund) (designate Class A)" to the address set forth above under "Initial
Purchases by Wire." Write your Fund account number on the check and include the
detachable stub from your Account Statement or a letter providing your Fund
account number.
PURCHASES THROUGH SELLING AGENTS
You may place a purchase order for shares of the Fund through a broker/dealer
or financial institution that has entered into a selling agreement with
Stephens, the Fund's Distributor (a "Selling Agent") by 12:00 p.m. (Pacific
time) on any Business Day, including orders for which payment is to be made from
your free cash credit balance maintained with a Selling Agent. These purchase
orders are executed on the same day the order is placed if notice is provided to
the transfer agent by 12:00 p.m. (Pacific time) and if federal funds are
received by the transfer agent before the close of business that day. If your
purchase order is received by a Selling Agent after 12:00 p.m. (Pacific time) on
any Business Day or if federal funds are not received by the transfer agent
before the close of business that day, then your purchase order generally is
executed on
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the next Business Day. The Selling Agent is responsible for the prompt
transmission of your purchase order to the Fund. A financial institution that
acts as a selling agent, shareholder servicing agent or in certain other
capacities may be required to register as a dealer pursuant to applicable state
securities laws, which may differ from federal law and any interpretations
expressed herein.
PURCHASES THROUGH SHAREHOLDER SERVICING AGENTS
Purchase orders for Fund shares may be transmitted to the transfer agent
through any entity that has entered into a shareholder servicing agreement with
the Fund (a "Shareholder Servicing Agent"), such as Wells Fargo Bank. See
"Management, Distribution and Servicing Fees-Shareholder Servicing Agent" for
more information. A Shareholder Servicing Agent may transmit your purchase order
to the transfer agent, including an order for which payment is to be transferred
from your Approved Bank Account or wired from a financial institution. If the
Shareholder Servicing Agent transmits your order to the transfer agent before
12:00 p.m. (Pacific time) and if federal funds are received by the transfer
agent before the close of business that day, the purchase order is executed on
the same day. If your Shareholder Servicing Agent transmits your purchase order
to the transfer agent after 12:00 p.m. or if federal funds are not received by
the transfer agent before the close of business that day, then your order
generally is executed on the next Business Day, except that automated investment
program purchase orders transmitted through Shareholder Servicing Agents are
executed as of 1:00 p.m. on each Business Day. The Shareholder Servicing Agent
is responsible for the prompt transmission of your purchase order to the
transfer agent.
STATEMENTS AND REPORTS
The Company, or a Shareholder Servicing Agent on its behalf, typically sends
you a monthly statement of your Fund account after every month in which there
has been a transaction that affects your share balance or your Fund account
registration. A statement with tax information for each year is mailed to you by
January 31 of the following year and also is filed with the IRS. At least twice
a year, the Company's financial statements are mailed to shareholders of record.
DIVIDENDS
The Fund intends to declare dividends of its net investment income on a daily
basis payable to shareholders of record as of 12:00 noon (Pacific time). If your
purchase order is received before 12:00 noon on any Business Day, you begin
earning dividends on that Business Day and continue to earn dividends through
the day before you redeem such shares. If your purchase order is received at or
after 12:00 noon on any Business Day, you begin earning dividends on the next
Business Day and continue to
PROSPECTUS 20
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earn dividends through the day on which you redeem your shares. Dividends for a
Saturday, Sunday or Holiday are declared payable to shareholders of record as of
the preceding Business Day. If you redeem shares before a dividend payment date,
any dividends credited to you are paid on the following dividend payment date
unless you have redeemed all of the shares in your account, in which case you
will receive any accrued dividends together with your redemption proceeds. The
Fund will distribute any capital gains at least annually.
Dividends declared in a month generally are paid on the last Business Day of
the month. You have three options for receiving dividends and any capital-gain
distributions. They are discussed under "Additional Shareholder
Services -- Dividend and Distribution Options" below.
HOW TO REDEEM SHARES
You may redeem Fund shares on any Business Day without a charge by the
Company. Your shares are redeemed at the NAV next calculated after the Company
has received your redemption order. Redemption orders that are received by the
transfer agent before 12:00 noon (Pacific time) on any Business Day are executed
on that day. Redemption orders that are received after 12:00 noon on any
Business Day are executed on the next Business Day. Redemption proceeds may be
more or less than the amount invested and, therefore, a redemption of Fund
shares may result in a recognized gain or loss for federal and state income tax
purposes. The Company ordinarily remits your redemption proceeds within seven
days after your redemption order is received in proper form, unless the SEC
permits a longer period under extraordinary circumstances. Such extraordinary
circumstances could include a period during which an emergency exists as a
result of which (a) disposal by the Fund of securities owned by it is not
reasonably practicable or (b) it is not reasonably practicable for the Fund
fairly to determine the value of its net assets, or (c) a period during which
the SEC by order permits deferral of redemptions for the protection of the
Fund's security holders. In addition, the Fund may hold payment on your
redemption until reasonably satisfied that your investments made by check have
been collected (which can take up to 10 days from the purchase date). To ensure
acceptance of your redemption order, please follow the procedures described
below. In addition, the Company reserves the right to impose charges for wiring
redemption proceeds.
All redemptions of shares generally are made in cash, except that the
commitment to redeem shares in cash extends only to redemption requests made by
Fund shareholders during any 90-day period of up to the lesser of $250,000 or 1%
of the net asset value of the Fund at the beginning of such period. This
commitment is irrevocable without the prior approval of the SEC and is a
fundamental policy of the Fund that may not be changed without shareholder
approval. In the case of redemption requests by
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shareholders in excess of such amounts, the Board of Directors reserves the
right to have the Fund make payment, in whole or in part, in securities or other
assets, in case of an emergency or any time a cash distribution would impair the
liquidity of the Fund to the detriment of the existing shareholders. Such
redemption would also ordinarily be taxable to redeeming shareholders. The
securities would be valued in the same manner as the securities of the Fund are
valued. If the recipient were to sell such securities, he or she would incur
brokerage costs in converting such securities to cash.
Due to the high cost of maintaining Fund accounts with small balances, the
Company reserves the right to close your account and send you the proceeds if
the balance falls below the applicable minimum balance because of a redemption
(including a redemption of Fund shares after you have made only the applicable
minimum initial investment). You will be given 30 days' notice to make an
additional investment to increase your account balance to at least the
applicable minimum balance. For a discussion of applicable minimum balance
requirements, see "Investing in the Funds -- How to Buy Shares."
REDEMPTIONS BY TELEPHONE
Telephone redemption or exchange privileges are made available to you
automatically upon opening an account, unless you specifically decline the
privileges. Telephone redemption privileges authorize the transfer agent to act
on telephone instructions from any person representing himself or herself to be
the investor and reasonably believed by the transfer agent to be genuine. The
Company requires the transfer agent to employ reasonable procedures, such as
requiring a form of personal identification, to confirm that instructions are
genuine and, if it does not follow such procedures, the Company and the transfer
agent may be liable for any losses due to unauthorized or fraudulent
instructions. Neither the Company nor the transfer agent will be liable for
following telephone instructions reasonably believed to be genuine.
REDEMPTIONS BY LETTER
1. Write a letter of instruction. Indicate the dollar amount or number of Fund
shares you want to redeem. Refer to your Fund account number and give your
taxpayer identification number ("TIN"), which is generally your social
security or employer identification number.
2. Sign the letter in exactly the same way the account is registered. If there
is more than one owner of the shares, all must sign.
3. Signature guarantees are not required for redemption requests unless
redemption proceeds of $5,000 or more are to be paid to someone other than
you at your address of record or your Approved Bank Account, or other unusual
circumstances exist that cause the transfer agent to determine that a
signature guarantee is necessary or
PROSPECTUS 22
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prudent to protect against unauthorized redemption requests. If required, a
signature must be guaranteed by an "eligible guarantor institution," which
includes a commercial bank that is an FDIC member, a trust company, a member
firm of a domestic stock exchange, a savings association, or a credit union
that is authorized by its charter to provide a signature guarantee. Signature
guarantees by notaries public are not acceptable. Further documentation may
be requested from corporations, administrators, executors, personal
representatives, trustees or custodians.
4. Mail your letter to the transfer agent at the address set forth under
"Investing in the Fund -- Initial Purchases by Wire."
Unless other instructions are given in proper form, a check for your net
redemption proceeds is sent to your address of record.
EXPEDITED REDEMPTIONS BY LETTER OR TELEPHONE
You may request an expedited redemption of Fund shares by letter, in which
case your receipt of redemption proceeds (but not the Fund's receipt of your
redemption request) would be expedited. Telephone redemption or exchange
privileges are made available to you automatically upon the opening of an
account unless you specifically decline the privilege. You also may request an
expedited redemption of Fund shares by telephone on any Business Day, in which
case both your receipt of redemption proceeds and the Fund's receipt of your
redemption request would be expedited. You may request expedited redemption by
telephone only if the total value of the shares redeemed is $100 or more.
You may request expedited redemption by telephone by calling the transfer
agent at the telephone number listed on your transaction confirmation or by
calling 1-800-222-8222.
You may mail your expedited redemption request to the transfer agent at the
address set forth under "Investing in the Fund -- Initial Purchases by Wire."
Upon request, proceeds of expedited redemptions of $5,000 or more are wired or
credited to your Approved Bank Account or wired to the Selling Agent designated
in your Account Application. The Company reserves the right to impose a charge
for wiring redemption proceeds. When proceeds of your expedited redemption are
to be paid to someone else, to an address other than that of record, or to an
account at an Approved Bank or a Selling Agent that you have not predesignated
in your Account Application, your expedited redemption request must be made by
letter and the signature(s) on the letter may be required to be guaranteed,
regardless of the amount of the redemption. If your expedited redemption request
for Fund shares is received by the transfer agent before 12:00 p.m. (Pacific
time) on a Business Day, your redemption proceeds are transmitted to your
Approved Bank Account or Selling Agent on the same Business Day (assuming your
investment check has cleared as described above), absent extraordinary
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circumstances. Extraordinary circumstances could include those described above
as potentially delaying redemptions and also could include situations involving
an unusually heavy volume of wire transfer orders on a national or regional
basis or communication or transmittal delays that could cause a brief delay in
the wiring or crediting of funds. A check for net redemption proceeds of less
than $5,000 is mailed to your address of record or, at your election, credited
to your Approved Bank Account.
During periods of drastic economic or market activity or changes, you may
experience problems implementing an expedited redemption by telephone. In the
event you are unable to reach the transfer agent by telephone, you should
consider using overnight mail to implement an expedited redemption. The Company
reserves the right to modify or terminate the expedited telephone redemption
privilege at any time.
SYSTEMATIC WITHDRAWAL PLAN
The Systematic Withdrawal Plan provides you with a convenient way to have Fund
shares redeemed from your account and the proceeds distributed to you on a
monthly basis. You may participate in this Plan only if you have a Fund account
valued at $10,000 or more as of the date of your election to participate, your
dividends and capital gain distributions are being reinvested automatically, and
you are not participating in the AutoSaver Plan at any time while participating
in the Systematic Withdrawal Plan. You specify an amount ($100 or more) to be
distributed by check to your address of record or deposited in your Approved
Bank Account. The transfer agent redeems sufficient shares and mails or deposits
your proceeds as instructed on or about the fifth Business Day prior to the end
of each month. There are no separate fees charged to you by the Company for
participating in the Systematic Withdrawal Plan.
It may take up to ten (10) Business Days after receipt of your request to
establish your participation in the Systematic Withdrawal Plan. You may change
your withdrawal amount, suspend withdrawals or terminate your participation in
the Plan at any time by notifying the transfer agent at least five (5) Business
Days prior to any scheduled transaction. Your participation in the Systematic
Withdrawal Plan is terminated automatically if your Fund account is closed, or,
in some cases, if your Approved Bank Account is closed.
REDEMPTIONS THROUGH SELLING AGENTS
You may request a redemption of Fund shares through your Selling Agent.
Redemption orders transmitted by a Selling Agent to the transfer agent before
12:00 p.m. (Pacific time) on any Business Day are executed on that day.
Redemption orders transmitted by a Selling Agent to the transfer agent after
12:00 p.m. on any Business Day generally are executed on the next Business Day.
The Selling Agent is responsible for the prompt transmission of your redemption
order to the Company.
PROSPECTUS 24
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Unless you have made other arrangements with a Selling Agent and the transfer
agent has been informed of such arrangements, proceeds of a redemption order
made by you through a Selling Agent are credited to your Approved Bank Account.
If no such account is designated, a check for the redemption proceeds is mailed
to your address of record or, if such address is no longer valid, the proceeds
are credited to your account with the Selling Agent. You may request a check
from the Selling Agent or may elect to retain the proceeds in such account. The
Selling Agent may charge you a service fee. In addition, the Selling Agent may
benefit from the use of your proceeds until the check it issues to you has
cleared or until such proceeds have been disbursed or reinvested on your behalf.
REDEMPTIONS THROUGH SHAREHOLDER SERVICING AGENTS
You may request a redemption of Fund shares through your Shareholder Servicing
Agent. Redemption requests made by telephone through your Shareholder Servicing
Agent must redeem shares with a total value equal to $100 or more. Redemption
orders transmitted by the Shareholder Servicing Agent to the transfer agent
before 12:00 p.m. (Pacific time) on any Business Day are executed on that day.
Redemption orders transmitted by a Shareholder Servicing Agent after 12:00 p.m.
on any Business Day generally are executed on the next Business Day. The
Shareholder Servicing Agent is responsible for the prompt transmission of your
redemption order to the Company.
Unless you have made other arrangements with your Shareholder Servicing Agent
and the transfer agent has been informed of such arrangements, proceeds of a
redemption order made through your Shareholder Servicing Agent are credited to
your Approved Bank Account. If no such account is designated, a check for the
proceeds is mailed to your address of record or, if such address is no longer
valid, the proceeds are credited to your account with your Shareholder Servicing
Agent or to another account designated in your agreement with your Shareholder
Servicing Agent. The Shareholder Servicing Agent may charge you a service fee.
In addition, it may benefit from the use of your redemption proceeds until any
check it issues to you has cleared or until such proceeds have been disbursed or
reinvested on your behalf.
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ADDITIONAL SHAREHOLDER SERVICES
The Company offers you a number of optional services. As noted above, you can
take advantage of the AutoSaver Plan, the Systematic Withdrawal Plan, and
Expedited Redemptions by Letter and Telephone. In addition, you have three
dividend and distribution payment options and an exchange privilege, which are
described below.
DIVIDEND AND DISTRIBUTION OPTIONS
When you fill out your Account Application, you can choose from three dividend
and distribution options listed below. If you have questions about the dividend
and distribution options available to you, please call 1-800-222-8222.
A. The AUTOMATIC REINVESTMENT OPTION provides for the reinvestment of your
dividends and/or capital-gain distributions in additional shares of the
same class of the Fund that paid the dividends or distributions. Dividends
and distributions declared in a month are reinvested at NAV on the last
Business day of the month. You are assigned this option automatically if
you make no choice on your Account Application.
B. The AUTOMATIC CLEARING HOUSE OPTION permits you to have dividends and
capital-gain distributions deposited in your Approved Bank Account. In the
event your Approved Bank Account is closed and your distribution is
returned to the dividend disbursing agent, your distribution is reinvested
in your Fund account at the NAV next determined after the distribution has
been received. In addition, your Automatic Clearing House Option is then
converted to the Automatic Reinvestment Option.
C. The CHECK PAYMENT OPTION lets you receive a check for all dividends and
capital-gain distributions, which generally is mailed either to your
designated address or your Approved Bank Account early in the month
following declaration. If the U.S. Postal Service cannot deliver your
checks, or if your checks remain uncashed for six months, those checks are
reinvested in your Fund account at the NAV next determined after the
distribution has been received. Your Check Payment Option is then converted
to the Automatic Reinvestment Option.
The Company makes reasonable efforts to locate investors whose checks are
returned or uncashed after six months. The Company forwards moneys to the
dividend disbursing agent so that it may issue you dividend checks under the
Check Payment Option. The dividend disbursing agent may benefit from the
temporary use of such moneys until these checks clear.
PROSPECTUS 26
<PAGE> 337
EXCHANGE PRIVILEGE
Wells Fargo Bank advises or sub-advises a variety of other funds, each with
its own investment objective and policies. The exchange privilege is a
convenient way for you to buy shares in other funds of the Stagecoach Family of
Funds that are registered in your state of residence in order to respond to
changes in your investment and savings goals or in market conditions. Before you
make an exchange from the Fund into another fund of the Stagecoach Family of
Funds, please observe the following:
- Obtain and carefully read the prospectus of the fund into which you want to
exchange. Prospectuses may be obtained by calling 1-800-222-8222.
- You may exchange Class A shares of the Fund for shares of one of the
Company's single-class funds, Class A or B shares of one of the Company's
multi-class funds or for Retail Class shares of another fund.
- If you exchange into another fund with a front-end sales charge, you must
pay the difference between that fund's sales charge and any sales charge you
already have paid in connection with the shares you are exchanging.
- Each exchange, in effect, represents the redemption of shares of one fund
and the purchase of shares of another, which may produce a gain or loss for
federal income tax purposes. A confirmation of each exchange transaction is
sent to you.
- The dollar amount of shares you exchange generally must meet the minimum
initial and/or subsequent investment amounts of the fund from which you are
exchanging. Where Fund shares are acquired in exchange for shares of another
fund in the Stagecoach Family of Funds, however, the minimum initial
investment amount applicable to the shares being exchanged carries over,
except that if the value of your investment in the shares of the fund from
which you are exchanging has been reduced below the minimum initial
investment amount by changes in market conditions or sales charges (and not
by redemptions), you may carry over the lesser amount into the Fund.
- The Company reserves the right to limit the number of times shares may be
exchanged between funds, to reject any telephone exchange order, to charge a
nominal exchange fee (although it currently does not do so) or otherwise to
modify or discontinue exchange privileges at any time. Under SEC rules,
subject to limited exceptions, the Company must notify you 60 days before it
modifies or discontinues the exchange privilege.
The procedures applicable to redemptions also apply to exchanges. In
particular, transaction orders that are received before 1:00 p.m. (Pacific time)
on each Business Day through Shareholder Servicing Agents in connection with
automated investment programs are processed on that day (provided that it is a
Business Day for the Fund involved in the transaction). Also where an exchange
order is from a Stagecoach money
27 PROSPECTUS
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market mutual fund to a Stagecoach non-money market mutual fund (a "long-term
fund") and the instructions are received before 1:00 p.m. through a Shareholder
Servicing Agent by telephone or in person (excluding automated telephone
instructions or Wells Fargo Express ATM instructions), the purchase order for
the long-term fund is processed as of 1:00 p.m. at the share price determined as
of that Business Day's close of market. A sufficient number of money market
mutual fund shares are sold the following Business Day as of 12:00 p.m. (Pacific
time) in order to settle the long-term fund purchase. In all other instances,
exchange orders received after 12:00 p.m. (Pacific time) are processed on the
next Business Day that is a Business Day for each fund involved in the exchange.
In addition, a signature guarantee may be required for exchanges between
shareholder accounts registered in identical names if the amount being exchanged
is more than $25,000.
To exchange shares, write the transfer agent at the mailing address under
"Investing in the Fund -- Initial Purchases by Wire" or call the transfer agent
at the telephone number listed on your transaction confirmation, or contact your
Shareholder Servicing Agent or Selling Agent. The procedures applicable to
telephone redemptions, including the discussion regarding the responsibility for
the authenticity of telephone instructions, are also applicable to telephone
exchange requests. See "How to Redeem Shares -- Expedited Redemptions by Letter
and Telephone."
MANAGEMENT, DISTRIBUTION AND SERVICING FEES
INVESTMENT ADVISER
Subject to the overall supervision of the Company's Board of Directors, Wells
Fargo Bank, as the Fund's investment adviser, provides investment guidance and
policy direction in connection with the management of the Fund's assets. The
adviser also furnishes the Board of Directors with periodic reports on the
Fund's investment strategies and performance. For these services, the adviser is
entitled to a monthly investment advisory fee at the annual rate of 0.25% of the
average daily net assets of the Fund. From time to time, the Fund, consistent
with its investment objective, policies and restrictions, may invest in
securities of companies with which Wells Fargo Bank has a lending relationship.
For the fiscal period ended September 30, 1995, the predecessor portfolio of
Pacifica Funds Trust paid investment advisory fees to WFIM's predecessor, FICM,
at the annual rate of 0.30% of the Prime Money Market Mutual Fund's average
daily net assets under the advisory agreement in effect at that time.
PROSPECTUS 28
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CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
Wells Fargo Bank serves as the Fund's custodian and transfer and dividend
disbursing agent. Under the Custody Agreement with Wells Fargo Bank, the Fund
may, at times, borrow money from Wells Fargo Bank as needed to satisfy temporary
liquidity needs. Wells Fargo Bank charges interest on such overdrafts at a rate
determined pursuant to the Fund's Custody Agreement. Wells Fargo Bank performs
its custodial and transfer and dividend dispensing agency services at 525 Market
Street, San Francisco, California 94105.
SHAREHOLDER SERVICING AGENT
On behalf of the Class A shares, the Fund has entered into a Shareholder
Servicing Agreement with Wells Fargo Bank and may enter into similar agreements
with other entities. Under the agreement, Shareholder Servicing Agents
(including Wells Fargo Bank) agree to perform, as agents for their customers,
administrative services, with respect to Fund shares, which include exaggerating
and transmitting shareholder orders for purchases, exchanges and redemptions;
maintaining shareholder accounts and records; and providing such other related
services as the Company or a shareholder may reasonably request. For these
services, a Shareholder Servicing Agent is entitled to receive fees at the
annual rate of up to 0.25% of the average daily net assets of the Class A owned
by investors with whom the Shareholder Servicing Agent maintains a servicing
relationship. In no case shall payments exceed any maximum amount that may be
deemed applicable under applicable laws, regulations or rules, including the
Rules of Fair Practice of the NASD.
Shareholder Servicing Agents may impose certain conditions on their customers,
subject to the terms of this Prospectus, in addition to or different from those
imposed by the Fund, such as requiring a minimum initial investment or payment
of a separate fee for additional services. Each Shareholder Servicing Agent has
agreed to disclose any fees it may directly charge its customers who are
shareholders of the Fund and to notify them in writing at least 30 days before
it imposes any transaction fees.
SPONSOR, ADMINISTRATOR AND DISTRIBUTOR
Subject to the overall supervision of the Company's Board of Directors,
Stephens provides the Fund with administrative services, including general
supervision of the Fund's operation, coordination of the other services provided
to the Fund, compilation of information for reports to the SEC and the state
securities commissions, preparation of proxy statements and shareholder reports,
and general supervision of data compilation in connection with preparing
periodic reports to the Company's Directors and officers. Stephens also
furnishes office space and certain facilities to conduct the Fund's business,
and compensates the Company's Directors, officers and employees who are
affiliated
29 PROSPECTUS
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with Stephens. For these services, Stephens is entitled to receive a monthly fee
at the annual rate of 0.05% of the Fund's average daily net assets.
Stephens, as the principal underwriter of the Fund within the meaning of the
1940 Act, has entered into a Distribution Agreement with the Company pursuant to
which Stephens is responsible for distributing Fund shares. The Company also has
adopted a Distribution Plan on behalf of the Fund's Class A shares under the
SEC's Rule 12b-1 (the "Plan"). Under the Plan, Stephens is entitled, as
compensation for distribution-related services, a monthly fee at an annual rate
of up to 0.05% of the average daily net assets of the Fund's Class A shares.
Distribution-related services may include, among other services, costs and
expenses for advertisements, sales literature, direct mail or any other form of
advertising; expenses of sales employees or agents of the Distributor, including
salary, commissions, travel and related expenses; payments to broker-dealers and
financial institutions for services in connection with the distribution of
shares, including promotional incentives and fees calculated with reference to
the average daily net asset value of shares held by shareholders who have a
brokerage or other service relationship with the broker-dealer or other
institution receiving such fees; costs of printing prospectuses and other
materials to be given or sent to prospective investors; and other similar
services as the Directors determine to be reasonably calculated to result in the
sale of shares of the Fund.
Under the Distribution Agreement, Stephens may enter into Selling Agreements
with Selling Agents that wish to make available shares of the Fund to their
respective customers. On behalf of the Class A shares, the Fund may participate
in joint distribution activities with any of the other funds of the Company, in
which event, expenses reimbursed out of the assets of the Fund may be
attributable, in part, to the distribution-related activities of another fund of
the Company. Generally, the expenses attributable to joint distribution
activities are allocated among the Fund and the other funds of the Company in
proportion to their relative net asset sizes, although the Company's Board of
Directors may allocate such expenses in any other manner that it deems fair and
equitable.
Stephens has established a cash and non-cash compensation program, pursuant to
which broker/dealers or financial institutions that sell shares of the Company's
fund may earn additional compensation in the form of trips to sales seminars or
vacation destinations, tickets to sporting events, theater or other
entertainment, opportunities to participate in golf or other outings and gift
certificates for meals or merchandise, or the cash value of a non-cash
compensation item.
FUND EXPENSES
From time to time, Wells Fargo Bank and Stephens may waive their respective
fees in whole or in part and reimburse expenses payable to others. Any such
waivers or reimbursements will reduce the Fund's expenses and, accordingly, have
a favorable
PROSPECTUS 30
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impact on the Fund's performance. Except for the expenses borne by Wells Fargo
Bank and Stephens, each fund of the Company bears all costs of its operations,
including its pro rata portion of the Company expenses such as fees and expenses
of its independent auditors and legal counsel, and compensation of the Company's
directors who are not affiliated with the adviser, administrator or any of their
affiliates; advisory, transfer agency, custody and administration fees, and any
extraordinary expenses. Expenses attributable to each fund or class are charged
against the assets of the fund or class. General expenses of the Company are
allocated among all of the funds of the Company, including the Fund, in a manner
proportionate to the net assets of each fund, on a transactional basis, or on
such other basis as the Company's Board of Directors deems equitable.
TAXES
The Company intends to qualify the Fund as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), as long as such qualification is in the best interest of the Fund's
shareholders. The Fund will be treated as a separate entity for federal income
tax purposes and thus the provisions of the Code applicable to regulated
investment companies will be applied to the Fund separately, rather than to the
Company as a whole. In addition, net capital gains, net investment income, and
operating expenses will be determined separately for the Fund. By complying with
the applicable provisions of the Code, the Fund will not be subject to federal
income taxes with respect to net investment income and any net realized capital
gains distributed to their shareholders. The Fund intends to pay out
substantially all of its net investment income and net realized capital gains
(if any) for each year.
Dividends from net investment income and net realized short-term capital gains
(the excess of net short-term capital gains over net long-term capital losses)
declared and paid by the Fund will be taxable as ordinary income to its
shareholders. Any capital gain distributions, attributable to the Fund's net
realized long-term capital gains (the excess of net long-term capital gains over
net short-term capital losses), will generally be taxable to shareholders as
long-term capital gain, regardless of the length of time that the Fund's shares
have been held. Such dividends and distributions will be taxable to shareholders
irrespective of whether the shareholder takes them in cash or has them
automatically reinvested in additional Fund shares. You may be eligible to defer
the taxation of dividend and capital gain distributions on Fund shares which are
held under a qualified tax-deferred retirement plan. See "Investing in the
Fund -- Tax-Deferred Retirement Plans" above. The Fund does not expect its
dividends to qualify for the dividends-received deduction allowed to corporate
shareholders.
An investor must provide a valid TIN upon opening or reopening an account.
Failure to furnish a valid TIN to the Company could subject the investor to
penalties imposed by
31 PROSPECTUS
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the IRS. In addition, the Company may be required to withhold, subject to
certain exemptions, at a rate of 31% ("backup withholding") on dividends,
capital gain distributions, and redemption proceeds (including proceeds from
exchanges) paid or credited to an individual Fund shareholder, unless a
shareholder certifies that the TIN provided is correct and that the shareholder
is not subject to backup withholding, or the IRS notifies the Company that the
shareholder's TIN is incorrect or that the shareholder is subject to backup
withholding. Such tax withheld does not constitute any additional tax imposed on
the shareholder, and may be claimed as a tax payment on the shareholder's
federal income tax return.
Foreign shareholders may be subject to different tax treatment, including a
withholding tax. See "Federal Income Taxes -- Foreign Shareholders" in the SAI.
The foregoing discussion is based on federal tax laws in effect as of the date
of this Prospectus and summarizes only some of the important federal income tax
considerations generally affecting the Fund and its shareholders. It is not
intended as a substitute for careful tax planning; you should consult your tax
advisor with respect to your particular tax situation and the state and local
tax status of investments in Fund shares. Further federal tax considerations are
discussed in the SAI.
PROSPECTUS 32
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PROSPECTUS APPENDIX --
ADDITIONAL INVESTMENT POLICIES
FUND INVESTMENTS
The Prime Money Market Mutual Fund may invest in the following:
(i) obligations issued or guaranteed by the U.S. Government, its agencies
or instrumentalities, including government-sponsored enterprises,
including U.S. Treasury obligations ("U.S. Government
obligations")(discussed below);
(ii) certain repurchase agreements ("repurchase agreements")(discussed
below);
(iii) certain floating- and variable-rate instruments ("variable-rate
instruments);
(iv) securities purchased on a "when-issued" basis and securities purchased
or sold on a "forward commitment" basis or "delayed settlement" basis"
(discussed below);
(v) certain reverse repurchase agreements ("reverse repurchase
agreements")(discussed below);
(vi) certain securities issued by other investment companies;
(vii) negotiable certificates of deposit, fixed time deposits, bankers'
acceptances or other short-term obligations of U.S. banks (including
foreign branches) that have more than $1 billion in total assets at
the time of investment and are members of the Federal Reserve System
or are examined by the Comptroller of the Currency or whose deposits
are insured by the FDIC ("bank instruments");
(viii)commercial paper rated at the date of purchase Prime-1 by Moody's
Investors Service, Inc. ("Moody's") or "A-1+" or "A-1" by Standard &
Poor's Corporation ("S&P") ("rated commercial paper");
(ix) commercial paper unrated at the date of purchase but secured by a
letter of credit from a U.S. bank that meets the above criteria for
investment;
(x) short-term, U.S. dollar-denominated obligations of U.S. branches of
foreign banks that at the time of investment have more than $10
billion, or the equivalent in other currencies, in total assets
("foreign bank obligations") (discussed below).
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(xi) mortgage-backed securities (discussed below); and
(xii) certain other asset-backed securities (discussed below).
U.S. Government Obligations
U.S. Government obligations include securities issued or guaranteed as to
principal and interest by the U.S. Government and supported by the full faith
and credit of the U.S. Treasury. U.S. Treasury obligations differ mainly in the
length of their maturity. Treasury bills, the most frequently issued marketable
government securities, have a maturity of up to one year and are issued on a
discount basis. U.S. Government obligations also include securities issued or
guaranteed by federal agencies or instrumentalities, including
government-sponsored enterprises. Some obligations of agencies or
instrumentalities of the U.S. Government are supported by the full faith and
credit of the United States or U.S. Treasury guarantees; others, by the right of
the issuer or guarantor to borrow from the U.S. Treasury; still others, by the
discretionary authority of the U.S. Government to purchase certain obligations
of the agency or instrumentality; and others, only by the credit of the agency
or instrumentality issuing the obligation. In the case of obligations not backed
by the full faith and credit of the United States, the investor must look
principally to the agency or instrumentality issuing or guaranteeing the
obligation for ultimate repayment, which agency or instrumentality may be
privately owned. There can be no assurance that the U.S. Government will provide
financial support to its agencies or instrumentalities where it is not obligated
to do so. In addition, U.S. Government obligations are subject to fluctuations
in market value due to fluctuations in market interest rates. As a general
matter, the value of debt instruments, including U.S. Government obligations,
declines when market rates increase and rises when market interest rates
decrease. Certain types of U.S. Government obligations are subject to
fluctuations in yield or value due to their structure or contract terms.
Repurchase Agreements
The Fund may enter into repurchase agreements wherein the seller of a security
to the Fund agrees to repurchase that security from the Fund at a mutually
agreed-upon time and price. The period of maturity is usually quite short, often
overnight or a few days, although it may extend over a number of months. The
Fund may enter into repurchase agreements only with respect to U.S. Treasury
obligations and other obligations that could otherwise be purchased by the Fund.
All repurchase agreements must be collateralized at 102% based on values that
are marked-to-market daily. While the maturities of the underlying securities in
a repurchase agreement transaction may be greater than 397 days, the term of any
repurchase agreement on behalf of the Fund will always be less than one year. If
the seller defaults and the value of the underlying securities has declined, the
Fund may incur a loss. In addition, if bankruptcy proceedings are commenced with
respect to the seller of the security, the Fund's
PROSPECTUS A-2
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disposition of the security may be delayed or limited. The Fund will enter into
repurchase agreements only with primary reporting dealers and commercial banks
that meet guidelines established by the Board of Directors and that are not
affiliated with Wells Fargo Bank. The Fund may participate in pooled repurchase
agreement transactions with other funds advised by Wells Fargo Bank.
Floating- and Variable-Rate Instruments
Certain of the debt instruments that the Fund may purchase bear interest at
rates that are not fixed, but vary for example, with changes in specified market
rates or indices or at specified intervals. Certain of these instruments may
carry a demand feature that would permit the holder to tender them back to the
issuer at par value prior to maturity. The Fund may, in accordance with SEC
rules, account for these instruments as maturing at the next interest rate
readjustment date or the date at which the Fund may tender the instrument back
to the issuer, whichever is later. The floating- and variable-rate instruments
that the Fund may purchase include certificates of participation in such
obligations. The Fund may invest in floating- and variable-rate obligations even
if the obligations carry stated maturities in excess of 397 days, upon
compliance with certain conditions of the SEC, in which case such obligations
will be treated in accordance with these conditions as having maturities not
exceeding 397 days.
The investment adviser to the Fund will monitor on an ongoing basis the
ability of an issuer of a demand instrument to pay principal and interest on
demand. Events affecting the ability of the issuer of a demand instrument to
make payment when due may occur between the time the Fund elects to demand
payment and the time payment is due, thereby affecting the Fund's ability to
obtain payment at par. Demand instruments whose demand feature is not
exercisable within seven days may be treated as liquid, provided that an active
secondary market exists.
Securities Loans
The Fund also may lend its portfolio securities in order to increase income to
broker-dealers and other institutional investors pursuant to agreements
requiring that the loans be continuously secured by collateral equal at all
times in value to at least the market value of the securities loaned plus
accrued interest. Collateral for such loans may include cash, U.S. Treasury
securities or other U.S. government securities or an irrevocable letter of
credit issued by a bank which meets the investment standards of the Fund. Such
loans will not be made if, as a result, the aggregate of all outstanding loans
of the Fund exceeds one-third of the value of its total assets. There may be
risks of delay in receiving additional collateral or in recovering the
securities loaned or even a loss of rights in the collateral should the borrower
of the securities fail financially.
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When-Issued, Forward Commitment and Delayed Settlement Securities
The Fund may purchase securities on a "when-issued" basis and may purchase or
sell securities on a "forward commitment" basis. The Fund may also purchase or
sell securities on a "delayed settlement" basis. When-issued and forward
commitment transactions, which involve a commitment by the Fund to purchase or
sell particular securities with payment and delivery taking place at a future
date (perhaps one or two months later), permit the Fund to lock in a price or
yield on a security it owns or intends to purchase, regardless of future changes
in interest rates. Delayed settlement describes settlement of a securities
transaction in the secondary market which will occur sometime in the future.
When-issued, forward commitment and delayed settlement transactions involve the
risk, however, that the yield or price obtained in a transaction may be less
favorable than the yield or price available in the market when the securities
delivery takes place. The Fund's forward commitments, when-issued purchases and
delayed settlements are not expected to exceed 25% of the value of the Fund's
total assets absent unusual market conditions. The Fund does not intend to
engage in these transactions for speculative purposes but only in furtherance of
their investment objectives.
Other Investment Companies
The Fund may invest up to 10% of its assets in shares of other open-end
investment companies that invest exclusively in the high-quality, short-term
money market instruments in which the Fund may invest. The investment companies
can be expected to charge management fees and other operating expenses that
would be in addition to those charged to the Fund; however, the Fund's adviser
has undertaken to waive its advisory fees with respect to that portion of the
Fund's assets so invested. The Funds may invest in shares of other open-end
investment companies up to the limits prescribed by the 1940 Act.
Foreign Obligations
The Fund may invest up to 25% of its assets in high-quality, short-term
(thirteen months or less) debt obligations of foreign branches of U.S. banks or
U.S. branches of foreign banks that are denominated in and pay interest in U.S.
dollars. The Prime Money Market Mutual Fund may also invest in U.S.
dollar-denominated obligations issued or guaranteed by foreign governments or
any of their political subdivisions, agencies or instrumentalities. Such
obligations include debt obligations of supranational entities. Supranational
entities include international organizations designated or supported by
governmental entities to promote economic reconstruction or development and
international banking institutions and related government agencies.
Investments in foreign obligations involve certain considerations that are not
typically associated with investing in domestic obligations. There may be less
publicly available
PROSPECTUS A-4
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information about a foreign issuer than about a domestic issuer. Foreign issuers
also are not subject to the same uniform accounting, auditing and financial
reporting standards or governmental supervision as domestic issuers. In
addition, with respect to certain foreign countries, interest may be withheld at
the source under foreign income tax laws, and there is a possibility of
expropriation or confiscatory taxation, political or social instability or
diplomatic developments that could adversely affect investments in, the
liquidity of, and the ability to enforce contractual obligations with respect
to, securities of issuers located in those countries.
Mortgage-Backed And Other Asset-Backed Securities
The Fund also may purchase asset-backed securities, which are securities
backed by mortgages, installment sales contracts, credit card receivables or
other assets. The average life of asset-backed securities varies with the
maturities of the underlying instruments, and the average life of a
mortgage-backed instrument, in particular, is likely to be substantially less
than the original maturity of the mortgage pools underlying the securities as
the result of mortgage prepayments. For this and other reasons, an asset-backed
security's stated maturity may be shortened, and the securities' total return
may be difficult to predict precisely. Such difficulties are not, however,
expected to have a significant effect on the Fund since the remaining maturity
of any asset-backed security acquired will be thirteen months or less.
Asset-backed securities purchased by the Fund may include collateralized
mortgage obligations ("CMOs") issued by private companies.
INVESTMENT POLICIES AND RESTRICTIONS
The Fund's investment objective, as set forth under "How the Fund Works --
Investment Objective and Policies", is fundamental; that is, it may not be
changed without approval by the vote of the holders of a majority of the Fund's
outstanding voting securities, as described under "Capital Stock" in the SAI. In
addition, any fundamental investment policy may not be changed without such
shareholder approval. If the Company's Board of Directors determines, however,
that the Fund's investment objective could best be achieved by a substantive
change in a nonfundamental investment policy or strategy, the Company's Board
may make such change without shareholder approval and will disclose any such
material changes in the then-current prospectus.
As matters of fundamental policy, the Fund may: (i) borrow from banks up to
20% of the current value of its net assets only for temporary purposes in order
to meet redemptions, and these borrowings may be secured by the pledge of up to
10% of the current value of its net assets (but investments may not be purchased
by the Fund while any such outstanding borrowing in excess of 5% of its net
assets exists); and (ii) not invest more than 25% of its assets (i.e.,
concentrate) in any particular industry,
A-5 PROSPECTUS
<PAGE> 348
excluding, U.S. Government obligations and obligations of U.S. banks and certain
U.S. branches of foreign banks.
These investment restrictions are applied at the time investment securities
are purchased. As a matter of nonfundamental policy, the Fund may make loans of
portfolio securities or other assets, although the Fund does not intend to do so
during the current fiscal year.
As a matter of nonfundamental policy, the Fund may not: (i) purchase
securities of any issuer (except for U.S. Government obligations, for certain
temporary purposes and for certain guarantees and unconditional puts) if as a
result more than 5% of the value of its total assets would be invested in the
securities of such issuer, except that the Fund may invest up to 25% of its
assets in the highest-rated obligations of any one issuer for a period of up to
three business days, or if the Fund would own more than 10% of the outstanding
voting securities of such issuer; and (ii) invest more than 10% of the current
value of its net assets in securities that are illiquid by virtue of the absence
of a readily available market or legal or contractual restrictions on resale or
that have maturities of more than seven days. With respect to item (i), it may
be possible that the Company would own more than 10% of the outstanding voting
securities of an issuer. Also, as a matter of non-fundamental policy and in
accordance with the current regulations of the SEC, the Fund intends to limit
its investments in the obligations of any one non-U.S. governmental issuer to
not more than 5% of its total assets at the time of purchase, provided that the
Fund may invest up to 25% of its assets in the obligations of one non-U.S.
governmental issuer for a period of up to three business days. For purposes of
item (ii), repurchase agreements that do not provide for payment to the Fund
within seven days after notice are subject to this 10% limit, unless the Board
or investment adviser, pursuant to guidelines adopted by the Board, determines
that a liquid trading market exists.
Illiquid securities shall not include securities eligible for resale pursuant
to Rule 144A under the Securities Act of 1933 (the "1933 Act") that have been
determined to be liquid by the adviser, pursuant to guidelines established by
the Company's Board of Directors, and commercial paper that is sold under
Section 4(2) of the 1933 Act that (i) is not traded flat or in default as to
interest or principal and (ii) is rated in one of the two highest categories by
at least two nationally recognized statistical rating organizations and the
adviser, pursuant to guidelines established by the Company's Board of Directors,
has determined the commercial paper to be liquid; or (iii) is rated in one of
the two highest categories by one nationally recognized statistical rating
organization and the adviser, pursuant to guidelines established by the
Company's Board of Directors has determined that the commercial paper is of
equivalent quality and is liquid, if by any reason thereof the value of its
aggregate investment in such classes of securities will exceed 10% of its total
assets.
PROSPECTUS A-6
<PAGE> 349
SPONSOR, DISTRIBUTOR AND ADMINISTRATOR
Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
INVESTMENT ADVISER, TRANSFER AND
DIVIDEND DISBURSING AGENT AND
CUSTODIAN
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
LEGAL COUNSEL
Morrison & Foerster LLP
2000 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
FOR MORE INFORMATION ABOUT THE FUND, SIMPLY CALL 1-800-222-8222, OR WRITE:
Stagecoach Funds, Inc.
c/o Stagecoach Shareholder Services
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
STAGECOACH MONEY MARKET MUTUAL FUNDS:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- are NOT FDIC insured
- are NOT deposits or obligations of Wells Fargo Bank
- are NOT guaranteed by Wells Fargo Bank
- involve investment risk, including possible loss of
principal
- seek to maintain a stable net asset value of $1.00 per [LOGO]
share,
however, there can be no assurance that either fund will
meet this goal. Yields and returns will vary with market
conditions.
</TABLE>
[LOGO]
Printed on Recycled Paper SC0225 (9/96)
<PAGE> 350
[LOGO]
P.O. Box 7066
San Francisco, CA 94120-7066
STAGECOACH MONEY MARKET MUTUAL FUNDS:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- are NOT FDIC insured
- are NOT deposits or obligations of Wells Fargo Bank
- are NOT guaranteed by Wells Fargo Bank
- involve investment risk, including possible loss of
principal
- seek to maintain a stable net asset value of $1.00 per [LOGO]
share,
however, there can be no assurance that either fund will
meet this goal. Yields and returns will vary with market
conditions.
</TABLE>
[LOGO]
Printed on Recycled Paper SC0225 (9/96)
<PAGE> 351
[STAGECOACH FUNDS LOGO]
------------------------------
PROSPECTUS
------------------------------
ARIZONA TAX-FREE FUND
CALIFORNIA TAX-FREE BOND FUND
CALIFORNIA TAX-FREE INCOME FUND
NATIONAL TAX-FREE FUND
OREGON TAX-FREE FUND
INSTITUTIONAL CLASS
SEPTEMBER 6, 1996
<PAGE> 352
STAGECOACH FUNDS(R)
ARIZONA TAX-FREE, CALIFORNIA TAX-FREE BOND,
CALIFORNIA TAX-FREE INCOME, NATIONAL TAX-FREE,
AND OREGON TAX-FREE FUNDS
INSTITUTIONAL CLASS
Stagecoach Funds, Inc. (the "Company") is an open-end management investment
company. This Prospectus contains information about Institutional Class shares
offered by five funds of the Stagecoach Family of Funds -- the CALIFORNIA
TAX-FREE BOND and CALIFORNIA TAX-FREE INCOME FUNDS (together, at times, the
"California Funds"), ARIZONA TAX-FREE and OREGON TAX-FREE FUNDS (collectively,
with the California Funds, the "State Tax-Free Funds") and NATIONAL TAX-FREE
FUND (each, a "Fund" and, collectively, the "Funds").
Please read this Prospectus before investing and retain it for future
reference. It is designed to provide you with important information and to help
you decide if a Fund's goals match your own. A Statement of Additional
Information ("SAI"), dated September 6, 1996, containing additional information
about the Funds has been filed with the Securities and Exchange Commission
("SEC") and is incorporated by reference into this Prospectus. The SAI is
available without charge by writing to Stagecoach Funds, Inc., c/o Stagecoach
Shareholder Services, Wells Fargo Bank, N.A., P.O. Box 7066, San Francisco, CA
94120-7066 or by calling 1-800-222-8222.
Under normal market conditions, the State Tax-Free Funds' assets consist
substantially of municipal obligations the interest on which is exempt from
federal income tax and the applicable state's personal income tax.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THESE AUTHORITIES PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
FUND SHARES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR ISSUED, ENDORSED OR
GUARANTEED BY, WELLS FARGO BANK, N.A. ("WELLS FARGO BANK") OR ANY OF ITS
AFFILIATES. SUCH SHARES ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT,
THE FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"), THE FEDERAL RESERVE BOARD OR
ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN A FUND INVOLVES CERTAIN RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
WELLS FARGO BANK IS THE INVESTMENT ADVISER AND IS COMPENSATED FOR PROVIDING
THE FUNDS WITH CERTAIN OTHER SERVICES. STEPHENS INC. ("STEPHENS"),
WHICH IS NOT AFFILIATED WITH WELLS FARGO BANK, IS THE
FUNDS' SPONSOR, ADMINISTRATOR AND DISTRIBUTOR.
PROSPECTUS DATED SEPTEMBER 6, 1996
PROSPECTUS
<PAGE> 353
The ARIZONA TAX-FREE FUND seeks to provide investors with income exempt from
federal income tax and Arizona personal income tax. The CALIFORNIA TAX-FREE BOND
FUND seeks to provide investors with a high level of income exempt from federal
income taxes and California personal income taxes, while preserving capital, by
investing in medium- to long-term, investment-grade municipal securities. The
CALIFORNIA TAX-FREE INCOME FUND seeks to provide investors with a high level of
income exempt from federal income taxes and California personal income taxes,
while preserving capital. The NATIONAL TAX-FREE FUND seeks to provide investors
with income exempt from federal income tax. The OREGON TAX-FREE FUND seeks to
provide investors with income exempt from federal income tax and Oregon personal
income tax.
THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL NOR THE SOLICITATION OF
AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF SECURITIES THAT ARE NOT
REGISTERED IN A STATE WHERE SUCH OFFER WOULD BE UNLAWFUL UNDER THE SECURITIES
LAWS OF THE STATE.
PROSPECTUS
<PAGE> 354
TABLE OF CONTENTS
-------
PROSPECTUS SUMMARY 1
SUMMARY OF FUND EXPENSES 5
FINANCIAL HIGHLIGHTS 7
HOW THE FUNDS WORK 11
THE FUNDS AND MANAGEMENT 17
INVESTING IN THE FUNDS 20
EXCHANGES 24
DIVIDENDS 25
MANAGEMENT AND SERVICING FEES 26
TAXES 28
PROSPECTUS APPENDIX - ADDITIONAL INVESTMENT POLICIES A-1
PROSPECTUS
<PAGE> 355
PROSPECTUS SUMMARY
The Funds provide investors with a convenient way to invest in various
portfolios of securities selected and supervised by professional management. The
following provides summary information about the Funds. For more information,
please refer to the identified Prospectus sections and generally to the Funds'
Prospectus and SAI.
Q. WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?
A. The ARIZONA TAX-FREE FUND seeks to provide investors with income exempt from
federal income tax and Arizona personal income tax.
The CALIFORNIA TAX-FREE BOND FUND seeks to provide investors with a high
level of income exempt from federal income taxes and California personal
income taxes, while preserving capital, by investing in medium- to
long-term, investment-grade municipal securities.
The CALIFORNIA TAX-FREE INCOME FUND seeks to provide investors with a high
level of income exempt from federal income taxes and California personal
income taxes, while preserving capital.
The NATIONAL TAX-FREE FUND seeks to provide investors with income exempt
from federal income tax.
The OREGON TAX-FREE FUND seeks to provide investors with income exempt from
federal income tax and Oregon personal income tax.
Under normal market conditions, substantially all of each Fund's assets are
invested in municipal obligations that are exempt from federal income tax
and, for the State Tax-Free Funds, exempt from each respective state's
personal income tax; and except during temporary defensive periods or when
acceptable securities are unavailable for investment by a Fund, at least 65%
of each State Tax-Free Fund's total net assets will be invested in municipal
obligations of issuers exempt from each respective state's personal income
tax. Additionally, each of the Funds will have at least 80% of its
respective net assets invested in securities the interest on which is exempt
from federal income tax, except during period of unusual market conditions.
See "How the Funds Work" and "Prospectus Appendix -- Additional Investment
Policies" for further information on investments.
Q. WHAT ARE SOME OF THE POTENTIAL RISKS ASSOCIATED WITH THIS TYPE OF INVESTMENT?
A. An investment in a Fund is not insured against loss of principal. When the
value of the securities that a Fund owns declines, so does the value of your
Fund's shares. Therefore, you should be prepared to accept some risk with
the money you invest in a Fund. The portfolio debt instruments of a Fund are
subject to interest-rate risk
1 PROSPECTUS
<PAGE> 356
and credit risk. Interest-rate risk is the risk that increases in market
interest rates may adversely affect the value of the municipal securities in
which each Fund invests and, hence, the value of your investment in a Fund;
the value of such securities generally changes inversely to changes in
market interest rates. Credit risk is the risk that the issuers of the debt
instruments in which a Fund may invest may default on the payment of
principal and/or interest. In addition, each Fund may invest a portion of
its assets in municipal securities that are considered to have speculative
characteristics.
Since each State Tax-Free Fund invests primarily in securities issued by
Arizona, California or Oregon, and its respective agencies and
municipalities, events and political and economic conditions in those states
are more likely to affect the respective Fund's investments.
Certain Funds may seek to achieve their investment objectives through
investments in instruments with the lowest investment-grade rating, which
have speculative characteristics.
Each Fund is nondiversified, which means that its assets may be invested
among fewer issuers and, therefore, the value of assets may be subject to
greater impact by events affecting one of its investments. As with all
mutual funds, there can be no assurance that a Fund will achieve its
investment objective. See "How the Funds Work -- Investment Objectives and
Policies -- Risk Factors" below and "Additional Permitted Investment
Activities" in the SAI for further information about the Funds' investments
and related risks. As with all mutual funds, there can be no assurance that
a Fund will achieve its investment objective.
Q. WHO MANAGES MY INVESTMENTS?
A. Wells Fargo Bank, as each Fund's investment adviser, manages your
investments. Wells Fargo Bank also provides the Funds with transfer agency,
dividend disbursing agency and custodial services. In addition, Wells Fargo
Bank is a shareholder servicing agent and a selling agent for the Funds. See
"The Funds and Management" and "Management and Servicing Fees" for further
information.
Q. HOW DO I INVEST?
A. Qualified investors may invest by purchasing Institutional Class shares of
the Funds at the net asset value per share without a sales charge ("NAV").
Qualified investors include certain customers of affiliate, franchise or
correspondent banks of Wells Fargo & Company and other selected institutions
("Institutions"). Customers may include individuals, trusts, partnerships
and corporations. Purchases are effected through the customer's account with
the Institution under the terms of the customer's account agreement with the
Institution. Fund shares may not be suitable investments for tax-exempt
institutions or tax-exempt retirement plans, since such
PROSPECTUS 2
<PAGE> 357
investors would not benefit from the exempt status of the Funds' dividends.
Investors wishing to purchase a Fund's Institutional Class shares should
contact their account representatives. See "Investing in the Funds" for
additional information.
Q. ARE EXCHANGES TO OTHER FUNDS PERMITTED?
A. Yes. The exchange privilege enables investors to exchange Fund shares for
shares of another fund offered by the Company, or shares of certain other
funds offered by other investment companies in the Stagecoach Family of
Funds, to the extent such shares are offered for sale in your state of
residence. Exchanges are effected through the customer's account with the
Institution under the terms of the customer's account agreement with the
Institution. See "Exchanges."
Q. HOW MAY I REDEEM SHARES?
A. Investors may redeem shares at NAV, without charge by the Company.
Institutional Class shares held by an Institution on behalf of its customers
must be redeemed under the terms of the customer's account agreement with
the Institution. Institutions are responsible for transmitting redemption
requests to the Company and crediting their customers' accounts. The Company
reserves the right to impose charges for wiring redemption proceeds. See
"Investing in the Funds -- Redemption of Institutional Class Shares."
Q. HOW WILL I RECEIVE DIVIDENDS AND ANY CAPITAL GAINS?
A. Dividends from net investment income of a Fund are declared daily and paid
monthly. Dividends are automatically reinvested in additional Institutional
Class shares of such Fund at NAV. Shareholders also may elect to receive
dividends in cash. Any capital gains are distributed at least annually in
the same manner as dividends. See "Dividends" for additional information.
Q. WHAT ARE DERIVATIVES AND DO THE FUNDS USE THEM?
A. Derivatives are financial instruments whose value is derived, at least in
part, from the price of another security or a specified asset, index or rate.
Some of the permissible investments described in this Prospectus, such as
variable-rate instruments that have an interest rate that is reset
periodically based on an index, are considered derivatives. Some derivatives
may be more sensitive than direct securities to changes in interest rates or
sudden market moves. Some derivatives also may be susceptible to fluctuations
in yield or value due to their structure or contract terms.
Q. WHAT STEPS DO THE FUNDS TAKE TO CONTROL DERIVATIVES-RELATED RISKS?
A. Wells Fargo Bank, as investment adviser to the Funds, uses a variety of
internal risk management procedures to ensure that derivatives' use is
consistent with a Fund's
3 PROSPECTUS
<PAGE> 358
investment objective, does not expose the Fund to undue risks and is closely
monitored. These procedures include providing periodic reports to the Board
of Directors concerning the use of derivatives. Derivatives use by a Fund
also is subject to broadly applicable investment policies. For example, a
Fund may not invest more than a specified percentage of its assets in
"illiquid securities," including derivatives that do not have active
secondary markets. Nor may a Fund use certain derivatives without
establishing adequate "cover" in compliance with SEC rules limiting the use
of leverage. For more information on a Fund's investment activities, see
"How the Funds Work" and "Prospectus Appendix -- Additional Investment
Policies."
PROSPECTUS 4
<PAGE> 359
SUMMARY OF FUND EXPENSES
INSTITUTIONAL CLASS SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
ARIZONA CALIFORNIA CALIFORNIA NATIONAL OREGON
TAX-FREE TAX-FREE TAX-FREE TAX-FREE TAX-FREE
FUND BOND FUND INCOME FUND FUND FUND
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge
Imposed on Purchases
(as a percentage of
offering price)...... None None None None None
Sales Charge Imposed on
Reinvested
Dividends............ None None None None None
Sales Charge Imposed on
Redemptions.......... None None None None None
Exchange Fees.......... None None None None None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
ARIZONA CALIFORNIA CALIFORNIA NATIONAL OREGON
TAX-FREE TAX-FREE TAX-FREE TAX-FREE TAX-FREE
FUND BOND FUND INCOME FUND FUND FUND
<S> <C> <C> <C> <C> <C>
Management Fee (after
waivers or
reimbursements)(1)... 0.15% 0.50% 0.43% 0.00% 0.15%
Rule 12b-1 Fee......... None None None None None
Other Expenses(2)...... 0.25% 0.13% 0.17% 0.35% 0.25%
----- ----- ----- ----- -----
TOTAL FUND OPERATING
EXPENSES (after
waivers and
reimbursements)(3)... 0.40% 0.63% 0.60% 0.35% 0.40%
===== ===== ===== ===== =====
</TABLE>
- ---------------------------------
(1) Management Fees (before waivers or reimbursements) would be 0.50%, 0.50%,
0.50%, 0.50%, and 0.50%, respectively.
(2) Other Expenses (before waivers or reimbursements) would be 0.61%, 0.52%,
0.69%, 0.60%, and 0.58%, respectively.
(3) Total Fund Operating Expenses (before waivers or reimbursements) would be
1.11%, 1.02%, 1.19%, 1.10% and 1.08%, respectively.
Note: The table does not reflect any charges that may be imposed by a Wells
Fargo Bank or another Institution directly on certain customer accounts in
connection with an investment in a Fund.
5 PROSPECTUS
<PAGE> 360
EXAMPLE OF EXPENSES
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following
expenses on a $1,000 investment in
a Fund's Institutional Class
shares, assuming a 5% annual return
and redemption at the end of each
time period indicated:
Arizona Tax-Free Fund.......... $4 $13 $22 $51
California Tax-Free Bond
Fund........................ $6 $20 $35 $79
California Tax-Free Income
Fund........................ $6 $19 $33 $75
National Tax-Free Fund......... $4 $11 $20 $44
Oregon Tax-Free Fund........... $4 $13 $22 $51
</TABLE>
EXPLANATION OF TABLES
The purpose of the above tables is to help a shareholder understand the
various costs and expenses that an investor in a Fund will bear directly or
indirectly.
SHAREHOLDER TRANSACTION EXPENSES are charges incurred when a shareholder buys
or sells Fund shares. Institutional Class shares are sold with no shareholder
transaction expenses imposed by the Company. The Company reserves the right to
impose a charge for wiring redemption proceeds.
ANNUAL FUND OPERATING EXPENSES for the Institutional Class shares of the Funds
are based on applicable contract amounts and derived from amounts incurred
during the most recent fiscal year, restated to reflect voluntary fee waivers
and expense reimbursements that are expected to continue to reduce expenses
during the Company's current fiscal year. Wells Fargo Bank and Stephens have
agreed to waive or reimburse all or a portion of their respective fees charged
to, or expenses paid by, each Fund to ensure that the Total Fund Operating
Expenses do not exceed, on an annual basis, 0.40%, 0.63%, 0.60%, 0.35% or 0.40%
of the average daily net assets of the Arizona Tax-Free, California Tax-Free
Bond, California Tax-Free Income, National Tax-Free and Oregon Tax-Free Funds,
respectively, through August 31, 1997. Any waivers or reimbursements will reduce
a Fund's total expenses. There can be no assurance that waivers or
reimbursements will continue after that date. For more complete descriptions of
the various costs and expenses you can expect to incur as an investor in the
Funds, please see "Management and Servicing Fees."
EXAMPLE OF EXPENSES is a hypothetical illustration of the expenses associated
with a $1,000 investment over stated periods, based on the expenses in the above
tables and an assumed annual rate of return of 5%. The rate of return should not
be considered an indication of actual or expected performance of a Fund nor a
representation of past or future expenses; actual expenses and returns may be
greater or lesser than those shown.
PROSPECTUS 6
<PAGE> 361
FINANCIAL HIGHLIGHTS
For the Arizona Tax-Free, National Tax-Free and Oregon Tax-Free Funds, the
following information has been derived from the Financial Highlights in the
annual financial statements for the fiscal period ended September 30, 1995 for
Pacifica Funds Trust's Arizona Tax-Exempt, National Tax-Exempt and Oregon
Tax-Exempt Funds, the predecessor portfolios to the Funds. This information is
provided to assist you in evaluating the performance of the predecessor funds.
The financial information for the fiscal year ended September 30, 1995 and for
the periods through September 30, 1994 were each audited by former independent
accountants to the predecessor portfolios. The financial information and the
report on the audit for the fiscal year ended September 30, 1995 are
incorporated by reference in the SAI. The unaudited financial information and
the related notes for the six-month period ended March 31, 1996 also is
incorporated by reference into the SAI. This information should be read in
conjunction with the predecessor portfolios' related financial statements and
notes thereto. The financial data up to and including the period ended September
30, 1995 is for the Investor Class shares of the predecessor portfolios. The
financial information provided for the six-month period ended March 31, 1996
pertains only to the Institutional Class shares of such portfolios, that
commenced operations October 1, 1995 and which are the predecessors of the
Institutional Class shares offered by this prospectus.
Financial Highlights for the Institutional Class shares of the California
Funds is not provided here because such shares were not offered during the
periods presented.
7 PROSPECTUS
<PAGE> 362
ARIZONA TAX-FREE FUND(1)
FOR A SHARE OUTSTANDING AS SHOWN
<TABLE>
<CAPTION>
INVESTOR SHARES
---------------------------------------------
INSTITUTIONAL FOUR-
SHARES MONTH
------------- PERIOD
SIX-MONTH ENDED PERIOD
PERIOD ENDED SEPT. YEAR ENDED MAY 31, ENDED
MARCH 31, 30, -------------------------- MAY 31,
1996(2) 1995(3) 1995 1994 1993 1992(1)
------------- ------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net asset value -- beginning of
period........................ $10.71 $10.68 $10.48 $10.64 $10.09 $10.00
Income from Investment
Operations:
Net investment income......... 0.25 0.17 0.51 0.50 0.49 0.09
Net gain (loss) on investments
(both realized and
unrealized)................. (0.10) 0.06 0.23 (0.15) 0.55 0.08
------ ------ ------ ------ ------ ------
Total income from investment
operations.................. 0.15 0.23 0.74 0.35 1.04 0.17
------ ------ ------ ------ ------ ------
Less Distributions:
Dividends from net investment
income...................... (0.25) (0.20) (0.53) (0.50) (0.49) (0.08)
Distributions from net
realized gain on
investments................. (0.02) (0.00) (0.01) (0.01) (0.00) (0.00)
------ ------ ------ ------ ------ ------
Total distributions......... (0.27) (0.20) (0.54) (0.51) (0.49) (0.08)
------ ------ ------ ------ ------ ------
Net asset value -- end of
period...................... $10.59 $10.71 $10.68 $10.48 $10.64 $10.09
====== ====== ====== ====== ====== ======
Total return (excluding
sales load)............... 1.51% 6.55%(4) 7.35% 3.28% 10.50% 7.02%(4)
Ratios/Supplemental Data:
Net assets, end of period
(000)....................... $16,015 $24,622 $24,581 $25,153 $22,430 $4,690
Ratio of expenses to average
net assets.................. 0.40%(4) 0.45%(4) 0.40% 0.31% 0.20% 0.68%(4)
Ratio of net investment income
to average net assets....... 4.70%(4) 4.73%(4) 4.89% 4.72% 4.98% 4.32%(4)
Ratio of expenses to average
net assets without fee
waivers..................... 0.99%(4) 1.38%(4) 1.13% 1.00% 1.18% 2.08%(4)
Ratio of net investment income
to average net assets
without fee waivers......... 4.11%(4) 3.80%(4) 4.16% 4.03% 4.00% 2.92%(4)
Portfolio turnover rate(5).... 27% 62% 14% 28% 4% 0.00%
</TABLE>
(1) The Fund operated as the Arizona Intermediate Tax-Free Fund of Westcore
Trust from its commencement of operations on March 2, 1992 until its
reorganization as a portfolio of the Trust on October 1, 1995. During the
periods shown, the Fund was advised by First Interstate Bank of Arizona,
N.A. until the reorganization as a portfolio of Pacifica Funds Trust on
October 1, 1995, when First Interstate Capital Management, Inc. ("FICM")
assumed investment advisory responsibilities. In connection with the merger
of First Interstate Bancorp into Wells Fargo & Co. on April 1, 1996, FICM
was renamed Wells Fargo Investment Management, Inc. ("WFIM").
(2) The Financial Data for this period is unaudited. The Institutional Class
shares of the Fund commenced operations on October 1, 1995.
(3) The Fund changed its fiscal year from May 31 to September 30.
(4) Annualized.
(5) A portfolio turnover rate is, in general, the percentage computed by taking
the lesser of purchases or sales of portfolio securities (excluding
securities with a maturity date of one year or less at the time of
acquisition) for a period and dividing it by the monthly average of the
market value of such securities during the period. Purchases and sales of
investment securities (excluding short-term securities) for the period ended
September 30, 1995 were $5,546,887 and $4,984,866, respectively.
PROSPECTUS 8
<PAGE> 363
NATIONAL TAX-FREE FUND(1)
FOR A SHARE OUTSTANDING AS SHOWN
<TABLE>
<CAPTION>
INSTITUTIONAL
SHARES INVESTOR SHARES
------------- -----------------------------------------------
SIX-MONTH FOUR-MONTH YEAR ENDED PERIOD
PERIOD ENDED PERIOD ENDED MAY 31, ENDED
MARCH 31, SEPT. 30, ----------------- MAY 31,
1996(2) 1995(3) 1995 1994 1993(1)
------------- ------------ ------- ------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net asset value -- beginning of
period....................... $15.42 $15.28 $14.98 $15.17 $15.00
Income from Investment
Operations:
Net investment income........ 0.34 0.24 0.68 0.64 0.17
Net gain (loss) investments
(both realized and
unrealized)................ (0.13) 0.08 0.32 (0.17) 0.15
------ ------ ------ ------ ------
Total income from
investment operations.... 0.21 0.32 1.00 0.47 0.32
------ ------ ------ ------ ------
Less Distributions:
Dividends from net investment
income..................... (0.34) (0.26) (0.70) (0.64) (0.15)
Distributions from net
realized gain on
investments................ (0.00) (0.00) (0.00) (0.02) (0.00)
------ ------ ------ ------ ------
Total distributions........ (0.34) (0.26) (0.70) (0.66) (0.15)
------ ------ ------ ------ ------
Net asset value -- end of
period..................... $15.29 $15.34 $15.28 $14.98 $15.17
====== ====== ====== ====== ======
Total return (excluding
sales load).............. 2.01% 6.53% 6.97% 3.07% 5.65%
Ratios/Supplemental Data:
Net assets, end of period
(000)...................... $7,753 $14,305 $14,458 $13,600 $7,457
Ratio of expenses to average
net assets................. 0.40%(4) 0.35%(4) 0.35% 0.27% 0.25%(4)
Ratio of net investment
income to average net
assets..................... 4.65%(4) 4.65%(4) 4.59% 4.29% 3.88%(4)
Ratio of expenses to average
net assets without fee
waivers.................... 1.07%(4) 1.85%(4) 1.51% 1.58% 1.99%(4)
Ratio of net investment
income to average net
assets without fee
waivers.................... 3.98%(4) 3.15%(4) 3.43% 2.98% 2.14%(4)
Portfolio turnover rate(5)... 40% 86% 23% 19% 18%
</TABLE>
- -------------------
(1) The Fund operated as the Quality Tax-Exempt Income Fund of Westcore Trust
from its commencement of operations on January 15, 1993 until its
reorganization as a portfolio of the Trust on October 1, 1995. During the
periods shown, the Fund was advised by First Interstate Bank of Oregon, N.A.
and First Interstate Bank of Washington, N.A. In connection with the Fund's
reorganization, FICM assumed investment advisory responsibilities for the
Fund.
(2) The Financial Data for this period is unaudited. The Institutional Class
shares of the Fund commenced operations on October 1, 1995.
(3) The Fund changed its fiscal year from May 31 to September 30.
(4) Annualized.
(5) A portfolio turnover rate is, in general, the percentage computed by taking
the lesser of purchases or sales of portfolio securities (excluding
securities with a maturity date of one year or less at the time of
acquisition) for a period and dividing it by the monthly average of the
market value of such securities during the period. Purchases and sales of
investment securities (excluding short-term securities) for the period ended
September 30, 1995 were $4,847,223 and $4,001,951, respectively.
9 PROSPECTUS
<PAGE> 364
OREGON TAX-FREE FUND(1)
FOR A SHARE OUTSTANDING AS SHOWN
<TABLE>
<CAPTION>
INSTITUTIONAL
SHARES INVESTOR SHARES
------------ -------------------------------------------------------------------------------
SIX-MONTH FOUR-MONTH
PERIOD ENDED PERIOD ENDED YEAR ENDED MAY 31,
MARCH 31, SEPT. 30, -----------------------------------------------------------------
1996(2) 1995(3) 1995 1994 1993 1992 1991 1990 1989
------------ ------------ ------- ------- ------- ------- ------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value -- Beginning of
Period............................ $ 16.38 $ 16.47 $ 16.17 $ 16.79 $ 16.07 $ 15.74 $ 15.27 $15.35 $15.00
Income from Investment Operations:
Net investment income............. 0.32 0.28 0.82 0.84 0.86 0.91 0.94 0.93 0.93
Net gain (loss) on investments
(both realized and
unrealized)..................... (0.01) (0.08) 0.39 (0.43) 0.76 0.38 0.47 (0.06) 0.31
-------- -------- ------- ------- ------- ------- ------- ------ ------
Total from investment
operations.................... 0.31 0.20 1.21 0.41 1.62 1.29 1.41 0.87 1.24
-------- -------- ------- ------- ------- ------- ------- ------ ------
Less Distributions:
Dividends from net investment
income.......................... (0.32) (0.29) (0.87) (0.82) (0.86) (0.92) (0.94) (0.93) (0.89)
Distributions from net realized
gain on investments............. (0.00) (0.00) (0.04) (0.21) (0.04) (0.04) (0.00) (0.02) (0.00)
-------- -------- ------- ------- ------- ------- ------- ------ ------
Total distributions............. (0.32) (0.29) (0.91) (1.03) (0.90) (0.96) (0.94) (0.95) (0.89)
-------- -------- ------- ------- ------- ------- ------- ------ ------
Net asset value -- end of period.... $ 16.37 $ 16.38 $ 16.47 $ 16.17 $ 16.79 $ 16.07 $ 15.74 $15.27 $15.35
======== ======== ======= ======= ======= ======= ======= ====== ======
Total return (excluding sales
load)......................... 2.38% 3.67% 7.92% 2.33% 10.36% 8.45% 9.58% 5.80% 8.55%
Ratios/Supplemental Data:
Net assets, end of period (000)... $ 38,018 $ 50,077 $52,245 $53,846 $45,435 $25,002 $14,607 $7,550 $3,175
Ratio of expenses to average net
assets.......................... 0.71%(5) 0.70%(5) 0.70% 0.62% 0.60% 0.60% 0.55% 0.50% 0.50%
Ratio of net investment income to
average net assets.............. 4.89%(5) 5.01%(5) 5.19% 4.90% 5.34% 5.81% 6.27% 6.26% 6.64%
Ratio of expenses to average net
assets without fee waivers...... 0.97%(5) 1.01%(5) 0.90% 0.84% 0.91% 0.98% 1.03% 1.35% 3.29%
Ratio of net investment income to
average net assets without fee
waivers......................... 4.63%(5) 4.70%(5) 4.99% 4.68% 5.03% 5.43% 5.79% 5.41% 3.85%
Portfolio turnover rate(4)........ 3% 57% 15% 22% 6% 17% 23% 94% 9%
</TABLE>
- ---------------
(1) The Fund operated as the Oregon Tax-Exempt Fund of Westcore Trust from its
commencement of operations on June 1, 1988 until its reorganization as a
portfolio of the Trust on October 10, 1995. During the periods shown, the
Fund was advised by First Interstate Bank of Oregon, N.A. In connection with
the Fund's reorganization, FICM assumed investment advisory responsibilities
for the Fund.
(2) The Financial Data for this period is unaudited. The Institutional Class
shares of the Fund commenced operations on October 1, 1995.
(3) The Fund changed its fiscal year from May 31 to September 30.
(4) A portfolio turnover rate is, in general, the percentage computed by taking
the lesser of purchases or sales of portfolio securities (excluding
securities with a maturity date of one year or less at the time of
acquisition) for a period and dividing it by the monthly average of the
market value of such securities during the period. Purchases and sales of
investment securities (excluding short-term securities) for the year ended
September 30, 1995 were $9,296,225 and $9,230,944, respectively.
(5) Annualized.
PROSPECTUS 10
<PAGE> 365
HOW THE FUNDS WORK
INVESTMENT OBJECTIVES AND POLICIES
As stated above, the investment objective of the ARIZONA TAX-FREE, NATIONAL
TAX-FREE, AND OREGON TAX-FREE FUNDS is to seek to provide investors with income
exempt from federal income tax and, for the Arizona Tax-Free and Oregon Tax-Free
Funds, exempt from Arizona or Oregon personal income tax, respectively. The
Arizona Tax-Free, National Tax-Free, and Oregon Tax-Free Funds have no
restrictions as to the minimum or maximum maturity of any individual security
held by it. Each Fund's average portfolio maturity will vary from time to time
in light of current market and economic conditions, the comparative yields on
instruments with different maturities and other factors.
The CALIFORNIA TAX-FREE BOND FUND seeks to provide investors with a high level
of income exempt from federal income taxes and California personal income taxes,
while preserving capital, by investing in medium- to long-term, investment-grade
municipal securities. Medium- and long-term securities include those securities
with remaining maturities of 2 to 10 years and 10 or more years, respectively.
The CALIFORNIA TAX-FREE INCOME FUND seeks to provide investors with a high level
of income exempt from federal income taxes and California personal income taxes,
while preserving capital. It pursues this objective by investing primarily in
short- and intermediate-term, investment-grade municipal securities. Short-term
securities are securities with remaining maturities of less than 2 years.
Intermediate-term securities are securities with remaining maturities of 2 to 10
years.
Each Fund's assets are primarily invested in debt instruments issued by or on
behalf of states, territories and possessions of the United States, the District
of Columbia and their respective authorities, agencies, instrumentalities and
political subdivisions ("municipal obligations"). Each of the State Tax-Free
Funds expects that, except during temporary defensive periods or when acceptable
securities are unavailable for investment by the Fund, at least 65% of such
Fund's total assets will be invested in municipal obligations of issuers located
in a particular state ("Arizona Obligations," "California Obligations," or
"Oregon Obligations," respectively), and issuers of the Virgin Islands, Guam and
Puerto Rico, which are exempt from Arizona, California and Oregon personal
income tax. The amount of each Fund's assets invested in such obligations may
vary from time to time.
As a matter of general operating policy, however, each California Fund seeks
to have substantially all of its assets invested in such municipal obligations.
In addition, under normal market conditions, at least 65% of the California
Tax-Free Bond Fund's total assets are invested in municipal bonds, as opposed to
municipal notes or commercial paper, and at least 65% of the California Tax-Free
Income Fund's total assets are invested
11 PROSPECTUS
<PAGE> 366
in short- and intermediate-term municipal obligations. As a matter of general
operating policy, the California Tax-Free Income Fund intends that, under normal
market conditions, the average expected duration of its portfolio securities
will be from one to five years.
In seeking to achieve its investment objective, each Fund may invest in
municipal obligations that are private activity bonds, the interest on which is
subject to the Federal alternative minimum tax (though investments in such
securities, under normal market conditions, will not exceed 20% of each Fund's
total assets when added together with any taxable investments held by the Fund).
Moreover although each Fund does not presently intend to do so on a regular
basis, it may invest 25% or more of its assets in industrial development bonds
issued before August 7, 1986 that are not subject to the Federal alternative
minimum tax and in municipal obligations the interest on which is paid solely
from revenue of similar projects if such investment is deemed necessary or
appropriate by the Fund's adviser.
As a fundamental policy, each Fund will have at least 80% of its respective
net assets invested in securities, the interest on which is exempt from federal
income tax, except during periods of unusual market conditions. For purposes of
this investment limitation, securities are considered taxable if the interest
payable on them is treated as a specific tax preference item under the federal
alternative minimum tax. The Funds' investment adviser may rely on an opinion of
either counsel to the issuer of the municipal obligations or bond counsel
regarding the tax treatment of these obligations.
Municipal obligations acquired by a Fund will be rated in one of the three
highest investment-grade categories at the time of purchase by a nationally
recognized statistical rating organization ("NRSRO"). (See the Appendix to the
SAI for a description of the applicable rating categories). In addition, the
State Tax-Free Funds may purchase investment-grade obligations within the fourth
highest category when acceptable obligations with higher ratings are unavailable
for investment by such Funds. While obligations rated within the fourth highest
category are regarded as having an adequate capacity to pay principal and
interest, such obligations lack outstanding investment characteristics and in
fact have speculative characteristics as well. Changes in economic conditions or
other circumstances are more likely to lead to a weakened capacity to make
principal and interest payments than is the case with higher grade bonds. The
Funds also may invest in unrated municipal securities that are determined by
Wells Fargo Bank, as investment adviser, to be of comparable quality to
municipal securities that are rated investment grade. No more than 10% of the
Arizona Tax-Free Fund's total assets will be invested in municipal obligations
that are rated at the time of purchase below one of the three highest
categories.
If, subsequent to its purchase by a Fund, an issue of debt securities should
cease to be rated by one or more of a Fund's selected NRSROs due to factors
relating to the value of the security, or if its rating should be reduced by one
or more of such NRSROs below
PROSPECTUS 12
<PAGE> 367
the minimum rating required for purchase by such Fund, the investment adviser
will consider such event in determining whether the Fund should continue to hold
the security. Furthermore, unrated obligations purchased by a Fund will be
determined by the investment adviser to be comparable in quality to instruments
that are so rated.
Each Fund also may acquire tax-exempt commercial paper rated within the
highest rating category or, when deemed advisable by the Fund's investment
adviser, rated within the second highest rating category. Each Fund may acquire
municipal notes and variable rate demand obligations rated within one of the two
highest rating categories.
Each Fund may from time to time invest a portion of its assets on a temporary
basis (for example, when appropriate municipal obligations are unavailable) or
for temporary defensive purposes in short-term taxable money market instruments,
in securities issued by other investment companies that invest in taxable or
tax-exempt money market instruments and in U.S. Government obligations. In
addition, each Fund may hold uninvested cash reserves pending investment, during
temporary defensive periods, or if, in the opinion of the investment adviser,
suitable tax-exempt obligations are unavailable. The Funds also may purchase
zero-coupon bonds (i.e., discount debt obligations that do not make periodic
interest payments) that are subject to greater market fluctuations from changing
interest rates than debt obligations of comparable maturities that make current
distributions of interest.
Each Fund may temporarily invest some of its assets in open-end tax-free funds
with a similar fundamental investment objective and which pay interest that is
exempt from federal income tax and not subject to the federal alternative
minimum tax, subject to the limitations of the Investment Company Act of 1940,
as amended (the "1940 Act"). Each Fund also may invest temporarily in cash
reserves or certain high-quality, taxable money market instruments, or may
engage in other investment activities. Each Fund may elect to invest temporarily
up to 20% of its net assets in certain permitted taxable investments, which
include cash reserves, U.S. Government obligations, obligations of domestic
banks, commercial paper, taxable municipal obligations, and, for the California
funds, certain repurchase agreements. The Funds may make loans of portfolio
securities. Such temporary investments would most likely be made when there is
an unexpected or abnormal level of investor purchases or redemptions of shares
of a Fund or because of unusual market conditions. The income from these
temporary investments and investment activities may be subject to federal income
tax and Arizona, California or Oregon personal income tax. However, as stated
above, Wells Fargo Bank seeks to invest substantially all of the Funds' assets
in securities exempt from such taxes. Additional description of tax-free
municipal obligations, taxable money market instruments, and other investment
activities is contained in the "Prospectus Appendix -- Additional Investment
Policies" and in the SAI.
The investment objectives for the Arizona Tax-Free, National Tax-Free and
Oregon Tax-Free Funds are not fundamental and may be changed without shareholder
approval.
13 PROSPECTUS
<PAGE> 368
The investment objectives for the California Funds are fundamental and may be
changed only with shareholder approval. Any such change may result in a Fund
having an investment objective different from the objective that the shareholder
considered appropriate at the time of investment in the Fund. Wells Fargo Bank,
as investment adviser to the Funds, pursues each Fund's objective by investing
(under normal market conditions) substantially all of the Funds' assets in
various types of municipal obligations as described above. These municipal
obligations and the taxable investments described below may bear interest at
rates that are not fixed ("floating- and variable-rate instruments"). For
additional descriptions of tax-free municipal obligations, taxable money market
instruments, and other investment activities, see the "Prospectus
Appendix -- Additional Investment Policies."
For additional descriptions of the types of securities and investment
practices used by the Funds, see "Risk Factors," "Prospectus
Appendix -- Additional Investment Policies" in this Prospectus and "Investment
Restrictions" and "Additional Permitted Investment Activities" in the SAI.
RISK FACTORS
As noted above and discussed further in the SAI, some of the securities
purchased by the State Tax-Free Funds may be rated below the three highest
rating categories, and may be rated in the lowest investment grade category, by
NRSROs.
The price per share of each of the Funds will fluctuate with changes in value
of the investments held by a Fund. Shareholders of a Fund should, therefore,
expect the value of their shares to fluctuate with changes in the value of the
securities owned by that Fund.
The market value of a Fund's investment in fixed-income securities changes in
response to changes in interest rates and the relative financial strength of
each issuer. During periods of falling interest rates, the value of fixed-income
securities generally rises. Conversely, during periods of rising interest rates,
the value of such securities generally declines. Debt securities with longer
maturities, which tend to produce higher yields, are subject to potentially
greater capital appreciation and depreciation than obligations with shorter
maturities. Changes in the financial strength of an issuer or changes in the
ratings of any particular security also may affect the value of these
investments. Fluctuations in the market value of fixed-income securities
subsequent to their acquisition will not affect cash income from such securities
but will be reflected in a Fund's net asset value.
Each Fund may invest 25% or more of its assets in municipal obligations that
are related in such a way that an economic, business or political development or
change affecting one such obligation would also affect the other obligations;
for example, a Fund may own different municipal obligations which pay interest
based on the revenues of
PROSPECTUS 14
<PAGE> 369
similar types of projects. To the extent that a Fund's assets are concentrated
in municipal obligations payable from revenues on similar projects, the Fund
will be subject to the peculiar risks presented by such projects to a greater
extent than it would be if the Fund's assets were not so concentrated.
Furthermore, for the Arizona Tax-Free, National Tax-Free and Oregon Tax Free
Funds payment of municipal obligations of certain projects may be secured by
mortgages or deeds of trust. In the event of a default, enforcement of the
mortgages or deeds of trust will be subject to statutory enforcement procedures
and limitations, including rights of redemption and limitations on obtaining
deficiency judgments. In the event of a foreclosure, collection of the proceeds
of the foreclosure may be delayed and the amount of proceeds from the
foreclosure may not be sufficient to pay the principal of and accrued interest
on the defaulted municipal obligations.
Each Fund is classified as non-diversified under the 1940 Act. Investment
return on a non-diversified portfolio typically is dependent upon the
performance of a smaller number of securities relative to the number held in a
diversified portfolio. Consequently, the change in value of any one security may
affect the overall value of a non-diversified portfolio more than it would a
diversified portfolio, and thereby subject the market-based net asset value per
share of the non-diversified portfolio to greater fluctuations. In addition, a
non-diversified portfolio may be more susceptible to economic, political and
regulatory developments than a diversified investment portfolio with a similar
objective may be.
The concentration of the State Tax-Free Funds in municipal obligations of
particular states raises additional considerations. Payment of the interest on
and the principal of these obligations is dependent upon the continuing ability
of state issuers and/or obligors of state, municipal and public authority debt
obligations to meet their obligations thereunder. Investors should consider the
greater risk inherent in a Fund's concentration in such obligations versus the
safety that comes with a less geographically concentrated investment portfolio
and should compare the yield available on a portfolio of state-specific issues
with the yield of a more diversified portfolio including issues of other states
before making an investment decision.
The State Tax-Free Funds have constitutional and/or statutory restrictions
that affect government revenues. Because of the nature of the various
restrictions, certain possible ambiguities and inconsistencies in their terms
and the scope of various exemptions and exceptions, as well as the impossibility
of predicting the level of future appropriations for state and local
governmental entities, it is not presently possible to determine the impact of
these restrictions and related measures on the ability of governmental issuers
in Oregon and Arizona to pay interest or repay principal on their obligations.
There have, however, been certain adverse developments with respect to municipal
obligations of governmental issuers in these states over the past several years.
In addition to the risk of nonpayment of state and local governmental debt, if
such debt declines in quality and is downgraded by the NRSROs, it may become
ineligible for
15 PROSPECTUS
<PAGE> 370
purchase by a Fund. Since there are a number of buyers of such debt that may be
similarly restricted, the supply of eligible securities could become inadequate
at certain times. Similarly, there is a relatively small active market for
Arizona Obligations, California Obligations and Oregon Obligations and the
market price of such bonds may therefore be volatile. If any of the State
Tax-Free Funds were forced to sell a large volume of Arizona Obligations,
California Obligations or Oregon Obligations for any reason, such as to meet
redemption requests for a large number of shares, there is a risk that the large
sale itself would adversely offset the value of the Fund's portfolio.
A more detailed description of special factors affecting investment in Arizona
Obligations, California Obligations or Oregon Obligations is set forth in
"Special Considerations Affecting Arizona Municipal Securities," "Special
Considerations Affecting California Municipal Securities" and "Special
Considerations Affecting Oregon Municipal Securities" in the SAI.
Illiquid securities, which may include certain restricted securities, may be
difficult to sell promptly at an acceptable price. Certain restricted securities
may be subject to legal restrictions on resale. Delay or difficulty in selling
securities may result in a loss or be costly to a Fund.
There is, of course, no assurance that a Fund will achieve its investment
objective or be successful in preventing or minimizing the risk of loss that is
inherent in investing in particular types of investment products. See
"Prospectus Appendix -- Additional Investment Policies" and the SAI for further
information about investment policies and risks.
PERFORMANCE
Fund performance may be advertised from time to time in terms of yield,
tax-equivalent yield and average annual total return. Performance figures, are
based on historical results and are not intended to indicate future performance.
Performance figures are calculated separately for each class of shares of a
Fund.
Yield refers to the income generated by an investment in a class of a Fund's
shares over a specified period (usually 30 days), expressed as an annual
percentage rate. Effective yield is calculated similarly but assumes
reinvestment of the income earned from a Fund. Because of the effects of
compounding, effective yields are slightly higher than yields. The
tax-equivalent yield of a class of shares is similarly calculated but assumes
that a stated income tax rate has been applied to determine the tax-equivalent
figure.
Average annual total return of the Institutional class shares is based on the
overall dollar or percentage change in value of a hypothetical investment in a
Fund's Institutional Class and assumes the investment is at NAV and all
dividends and capital-gain distributions attributable to a class are also
reinvested at NAV in shares of the class.
PROSPECTUS 16
<PAGE> 371
Cumulative total return is calculated similarly except that the return figure is
aggregated over the relevant period instead of annualized.
In addition to presenting these standardized performance calculations, at
times, the Funds also may present non-standard performance figures, such as
effective tax-equivalent yields or, in sales literature, distribution rates.
Because of the differences in the fees and/or expenses borne by shares of each
class of the Funds, the performance figures on one class of shares can be
expected, at any given time, to vary from the performance figures for other
classes of the Funds.
Additional performance information is contained in the SAI under "Performance
Calculations" and in the Annual Report, which are available upon request without
charge by calling the Company at 1-800-222-8222 or by writing the Company at the
address shown on the front cover of the Prospectus.
THE FUNDS AND MANAGEMENT
The Funds are five funds of the Stagecoach Family of Funds. The Company was
organized as a Maryland corporation on September 9, 1991 and currently offers
shares of the following funds: Aggressive Growth, Arizona Tax-Free, Asset
Allocation, Balanced, California Tax-Free Bond, California Tax-Free Income,
California Tax-Free Money Market Mutual, Corporate Stock, Diversified Income,
Equity Value, Intermediate Bond, Ginnie Mae, Government Money Market Mutual,
Growth and Income, Money Market Mutual, Money Market Trust, National Tax-Free,
National Tax-Free Money Market Mutual, Oregon Tax-Free, Prime Money Market
Mutual, Short-Intermediate U.S. Government Income, Small Cap, Treasury Money
Market Mutual, and U.S. Government Allocation Funds. The Arizona Tax-Free,
Balanced, California Tax-Free Bond, Equity Value, Ginnie Mae, Growth and Income,
Intermediate Bond, Money Market Mutual, National Tax-Free, Oregon Tax-Free,
Prime Money Market Mutual, Small Cap and Treasury Money Market Mutual Funds each
offer three classes of Funds. The Aggressive Growth, Asset Allocation,
California Tax-Free Income, Diversified Income, Short-Intermediate U.S.
Government Income and U.S. Government Allocation Funds each offer two classes of
Funds. The California Tax-Free Money Market Mutual, Corporate Stock, Government
Money Market Mutual, Money Market Trust, and National Tax-Free Money Market
Mutual Funds each offer one class of shares. The Company's funds are authorized
to issue classes of shares, one class generally subject to a front-end sales
charge and, in some cases, a class subject to a contingent-deferred sales
charge, that are offered to retail investors. Certain of the Company's also may
be authorized to issue other classes of shares, which are sold primarily to
institutional investors at NAV. Each class of shares in a fund represents an
equal, proportionate interest in a fund with other shares of the same class.
Shareholders of each class bear their pro rata portion of the fund's operating
expenses, except for certain class-specific expenses (e.g., any state securities
registration
17 PROSPECTUS
<PAGE> 372
fees, shareholder servicing fees or distribution fees that may be paid under
Rule 12b-1) that are allocated to a particular class and, accordingly, may
affect performance. Please contact Stagecoach Shareholder Services at
1-800-222-8222 if you would like additional information about other funds or
classes of shares offered.
The Company's Board of Directors supervises the Funds' activities and monitors
their contractual arrangements with various service providers. Although the
Company is not required to hold annual shareholder meetings, special meetings
may be required for purposes such as electing or removing Directors, approving
advisory contracts and distribution plans, and changing a fund's investment
objective or fundamental investment policies. All shares of the Company have
equal voting rights and are voted in the aggregate, rather than by fund or
class, unless otherwise required by law (such as when the voting matter affects
only one fund or class). A Fund shareholder of record is entitled to one vote
for each share owned and fractional votes for fractional shares owned. A more
detailed description of the voting rights and attributes of the shares is
contained in the "Capital Stock" section of each Fund's SAI.
MANAGEMENT
Wells Fargo Bank is the Funds' investment adviser, transfer and dividend
disbursing agent and custodian. In addition, Wells Fargo Bank serves as a
shareholder servicing agent and as selling agent of the Funds. Wells Fargo Bank,
one of the largest banks in the United States, was founded in 1852 and is the
oldest bank in the western United States. As of June 30, 1996, Wells Fargo Bank
and its affiliates provided investment advisory services for approximately $56
billion of assets of individuals, trusts, estates and institutions. Wells Fargo
Bank also serves as the investment adviser to other separately managed funds (or
the master portfolio in which a fund invests) of the Company, and as investment
adviser or sub-adviser to separately managed funds of five other registered,
open-end, management investment companies. Wells Fargo Bank, a wholly owned
subsidiary of Wells Fargo & Company, is located at 420 Montgomery Street, San
Francisco, California 94104.
Subsequent to its acquisition by Wells Fargo & Company on April 1, 1996, Wells
Fargo Investment Management, Inc. ("WFIM") (formerly, First Interstate Capital
Management, Inc.) served as investment adviser to the predecessor portfolios of
the Arizona Tax-Free, National Tax-Free and Oregon Tax-Free Funds. WFIM, a
wholly-owned subsidiary of Wells Fargo & Company, is located at 444 Market
Street, San Francisco, California 94105. Prior to October 1, 1995, affiliates of
First Interstate Capital Management, Inc. served as investment advisers to the
predecessor portfolios of the Arizona Tax-Free, National Tax-Free and Oregon
Tax-Free Funds as follows: First Interstate Bank of Oregon, N.A, served as
investment adviser to the Oregon Tax-Exempt Fund; First Interstate Bank of
Arizona, N.A. served as investment adviser to the Arizona
PROSPECTUS 18
<PAGE> 373
Tax-Exempt Fund; and First Interstate Bank of Washington, N.A. served as
co-investment advisers to the National Tax-Exempt Fund.
Ms. Laura Milner assumed sole responsibility for the day-to-day management of
the portfolios of the Arizona Tax-Free and National Tax-Free Funds as of the
commencement of operations of the Funds and assumed sole responsibility for the
day-to-day management of the California Tax-Free Income Fund on June 1, 1995.
Ms. Milner had been a co-manager of the California Tax-Free Income Fund since
November 1992. Ms. Milner's current position with Wells Fargo Bank is Senior
Tax-Exempt Specialist/Portfolio Manager. Her background includes over seven
years experience specializing in short- and long-term municipal securities with
Salomon Brothers. She is a member of the National Federation of Municipal
Analysts and its California chapter.
Mr. David Klug assumed sole responsibility for the day-to-day management of
the portfolio of the Oregon Tax-Free Fund as of the commencement of operations
of the Fund and assumed sole responsibility for the day-to-day management of the
California Tax-Free Bond Fund on June 1, 1995. Mr. Klug had been a co-manager of
the California Tax-Free Bond Fund since January 1992. Mr. Klug's current
position with Wells Fargo Bank is Senior Tax-Exempt Specialist/Portfolio
Manager. He has managed municipal bond portfolios for Wells Fargo Bank for over
nine years. Prior to joining Wells Fargo Bank, he managed the municipal bond
portfolio for a major property and casualty insurance company. Mr. Klug holds an
M.B.A. from the University of Chicago, and is a member of the National
Federation of Municipal Analysts and its California chapter.
Morrison & Foerster LLP, counsel to the Company and special counsel to Wells
Fargo Bank has advised the Company and Wells Fargo Bank that Wells Fargo Bank
and its affiliates may perform the services contemplated by the Advisory
Contracts and this Prospectus without violation of the Glass-Steagall Act. Such
counsel has pointed out, however, that there are no controlling judicial or
administrative interpretations or decisions and that future judicial or
administrative interpretations of, or decisions relating to, present federal or
state statutes, including the Glass-Steagall Act, and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as future changes in such statutes, regulations and judicial or
administrative decisions or interpretations, could prevent such entities from
continuing to perform, in whole or in part, such services. If any such entity
were prohibited from performing any such services, it is expected that new
agreements would be proposed or entered into with another entity or entities
qualified to perform such services.
Stephens is the Funds' sponsor and administrator and distributes the Funds'
shares. Stephens is a full service broker/dealer and investment advisory firm
located at 111 Center Street, Little Rock, Arkansas 72201. Stephens and its
predecessor have been providing securities and investment services for more than
60 years. Additionally, they have been providing discretionary portfolio
management services since 1983. Stephens
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currently manages investment portfolios for pension and profit sharing plans,
individual investors, foundations, insurance companies and university
endowments.
INVESTING IN THE FUNDS
Institutional Class shares may be purchased on any day the Funds are open. The
Funds are open for business each day the New York Stock Exchange ("NYSE") is
open for trading (a "Business Day"). Currently, the NYSE is closed on New Year's
Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day (each a "Holiday"). When any Holiday falls on
a weekend, the NYSE typically is closed on the weekday immediately before or
after such Holiday.
The Company or Stephens may make the Prospectus available in an electronic
format. Upon receipt of a request from an investor or the investor's
representative, the Company or Stephens will transmit or cause to be transmitted
promptly, without charge, a paper copy of the electronic Prospectus.
Shares of the Funds may not be suitable investments for tax-exempt
institutions or individual shareholders of tax-deferred retirement plans, since
such investors would not benefit from the exempt status of the Funds' dividends.
See "Federal Income Taxes -- Special Tax Considerations" in the SAI.
SHARE VALUE
The value of a share of each class is its NAV. Wells Fargo Bank calculates the
NAV of each class of a Fund as of the close of regular trading on the NYSE
(referred to hereafter as "the close of the NYSE"), which is currently 1:00 p.m.
(Pacific time). The NAV per share for each class of shares is computed by
dividing the value of a Fund's assets allocable to a particular class, less the
liabilities charged to that class by the total number of the outstanding shares
of that class. All expenses, including fees paid to the investment adviser and
administrator, are accrued daily and taken into account for the purpose of
computing the NAV, which is expected to fluctuate daily.
Except for debt obligations with remaining maturities of 60 days or less,
which are valued at amortized cost, the other assets of the Funds are valued at
current market prices or, if such prices are not readily available, at fair
value as determined in good faith by the Company's Board of Directors. Prices
used for such valuations may be obtained from independent pricing services.
PROSPECTUS 20
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PURCHASE OF INSTITUTIONAL CLASS SHARES
Institutional Class shares of the Funds are sold at NAV (without a sales
charge) on a continuous basis primarily to certain customers ("Customers") of
affiliate, franchise or correspondent banks of Wells Fargo & Company and other
selected institutions (previously defined as Institutions). Customers may
include individuals, trusts, partnerships and corporations. Share purchases are
effected through a Customer's account at an Institution under the terms of the
Customer's account agreement with the Institution, and confirmations of share
purchases and redemptions are sent by the Funds to the Institution involved.
Institutions (or their nominees), acting on behalf of their Customers, normally
are the holders of record of Institutional Class shares. Customers' beneficial
ownership of Institutional Class shares is reflected in the account statements
provided by Institutions to their Customers. The exercise of voting rights and
the delivery to Customers of shareholder communications from the Funds is
governed by the Customers' account agreements with an Institution. Investors
wishing to purchase Institutional Class shares of the Funds should contact their
account representatives.
Institutional Class shares of the Funds are sold at the NAV per share next
determined after a purchase order has become effective. Purchase orders placed
by an Institution for Institutional Class shares in a Fund must be received by
the Company by 1:00 p.m. (Pacific time) on any Business Day. Payment for such
shares may be made by Institutions in federal funds or other funds immediately
available to the custodian no later than 1:00 p.m. (Pacific time) on the next
Business Day following the receipt of the purchase order.
Institutions are responsible for transmitting orders for purchases by their
Customers and delivering required funds on a timely basis. If funds are not
received within the periods described above, the order will be canceled, notice
thereof will be given, and the Institution will be responsible for any loss to a
Fund or its shareholders. Institutions may charge certain account fees depending
on the type of account the investor has established with the Institution. In
addition, an Institution may receive fees from the Funds with respect to the
investments of its Customers as described under "Management and Servicing Fees."
Payment for Institutional Class shares of a Fund may, in the discretion of the
investment adviser, be made in the form of securities that are permissible
investments for the Fund. For further information see "Additional Purchase and
Redemption Information" in the SAI.
The Company reserves the right to reject any purchase order or to suspend
sales at any time. Payment for orders that are not received will be returned
after prompt inquiry. The issuance of Institutional Class shares is recorded on
the Company's books, and share certificates are not issued.
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WIRE INSTRUCTIONS -- DIRECT PURCHASES BY INSTITUTIONS
1. Complete an Account Application.
2. Instruct the wiring bank to transmit the specified amount in federal funds
to:
Wells Fargo Bank, N.A.
San Francisco, California
Bank Routing Number: 121000248
Wire Purchase Account Number: 4068-000587
Attention: Stagecoach Funds (Name of Fund and designate the Institutional
Class)
Account Name(s): Name(s) in which to be registered
Account Number: (if investing into an existing account)
3. A completed Account Application should be sent by telefacsimile, with the
original subsequently mailed, to the following address immediately after
funds are wired and must be received and accepted by the transfer agent
before an account can be opened:
Wells Fargo Bank, N.A.
Stagecoach Shareholder Services
P.O. Box 7066
San Francisco, California 94120-7066
Telefacsimile: 1-415-543-9538
4. Share purchases are effected at the NAV next determined after the Account
Application is received and accepted.
STATEMENTS AND REPORTS
Institutions (or their nominees) typically send investors a confirmation or
statement of the account after every transaction that affects their share
balance or the Fund account registration. A statement with tax information for
each year is mailed by January 31 of the following year and also is filed with
the Internal Revenue Service ("IRS"). At least twice a year, shareholders
receive financial statements.
REDEMPTION OF INSTITUTIONAL CLASS SHARES
Redemption requests are effected at the NAV per share next determined after
receipt of a redemption request in good order by the Company. Institutional
Class shares held by an Institution on behalf of its Customers must be redeemed
in accordance with instructions and limitations pertaining to the Customer's
accounts at the Institution. Institutions are responsible for transmitting
redemption requests to the Company and crediting its Customers' accounts with
the redemption proceeds on a timely basis. The redemption proceeds for
Institutional Class shares of the Funds normally are wired to the redeeming
Institution the following Business Day after receipt of the request by the
PROSPECTUS 22
<PAGE> 377
Company. The Company reserves the right to delay the wiring of redemption
proceeds for up to seven days after it receives a redemption order if, in the
judgment of the investment adviser, an earlier payment could adversely affect
the Funds or unless the SEC permits a longer period under extraordinary
circumstances. Such extraordinary circumstances could include a period during
which an emergency exists as a result of which (a) disposal by the Funds of
securities owned by them is not reasonably practicable or (b) it is not
reasonably practicable for the Funds to fairly determine the value of their net
assets, or a period during which the SEC by order permits deferral of
redemptions for the protection of security holders of a Fund.
With respect to former shareholders of Westcore Trust or Pacifica Funds Trust
who do not have a relationship with an Institution, shares of the Funds may be
redeemed by writing or calling the Funds directly at the address phone number
shown on the first page of the Prospectus. When Institutional Class shares are
redeemed directly from the Funds, the Funds ordinarily send the proceeds by
check to the shareholder at the address of record on the next Business Day
unless payment by wire is requested. The Funds may take up to seven days to make
payment, although this will not be the customary practice. Also, if the NYSE is
closed (or when trading is restricted) for any reason other than the customary
weekend or holiday closing or if an emergency condition as determined by the SEC
merits such action, the Funds may suspend redemptions or postpone payment dates.
To be accepted by a Fund, a letter requesting redemption must include: (i) the
Fund's name and account registration from which the Institutional Class shares
are being redeemed; (ii) the account number; (iii) the amount to be redeemed;
(iv) the signatures of all registered owners; and (v) a signature guarantee by
any eligible guarantor institution. An "eligible guarantor institution" includes
a commercial bank that is an FDIC member, a trust company, a member firm of a
domestic stock exchange, a savings association, or a credit union that is
authorized by its charter to provide a signature guarantee. Signature guarantees
by notaries public are not acceptable. Further documentation may be requested
from corporations, administrators, executors, personal representatives, trustees
or custodians.
All redemptions of Institutional Class shares of the Funds are made in cash,
except that the commitment to redeem Institutional Class shares in cash extends
only to redemption requests made by each Fund shareholder during any 90-day
period of up to the lesser of $250,000 or 1% of the NAV of the Funds at the
beginning of such period. This commitment is irrevocable without the prior
approval of the SEC. In the case of redemption requests by shareholders in
excess of such amounts, the Board of Directors reserves the right to have the
Funds make payment, in whole or in part, in securities or other assets, in case
of an emergency or any time a cash distribution would impair the liquidity of
the Funds to the detriment of the existing shareholders. In this event, the
securities would be valued in the same manner as the securities of the Funds are
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valued. If the recipient were to sell such securities, the investor would incur
brokerage charges.
A redemption may result in a recognized gain or loss for federal income tax
purposes, irrespective of whether the redemption is paid in cash or in kind,
resulting in a recognized gain or loss for federal income tax purposes.
REDEMPTIONS BY TELEPHONE
Telephone exchange or redemption privileges authorize the transfer agent to
act on telephone instructions from any person representing himself or herself to
be the shareholder of record and reasonably believed by the transfer agent to be
genuine. The Company requires the transfer agent to employ reasonable
procedures, such as requiring a form of personal identification, to confirm that
instructions are genuine and, if it does not follow such procedures, the Company
and the transfer agent may be liable for any losses due to unauthorized or
fraudulent instructions. Neither the Company nor the transfer agent will be
liable for following telephone instructions reasonably believed to be genuine.
EXCHANGES
The Funds offer a convenient way to exchange Institutional Class shares in one
Fund for Institutional Class shares in another fund of the Company. Before
engaging in an exchange transaction, an investor should read carefully the
Prospectus describing the fund into which the exchange will occur, which is
available without charge and can be obtained by writing or by calling the
Company at the address or phone number listed on the first page of the
Prospectus. A shareholder may not exchange Institutional Class shares of one
fund for Institutional Class shares of another fund if Institutional Class
shares of both funds are not qualified for sale in the state of the
shareholder's residence. The Company may terminate or amend the terms of the
exchange privilege at any time.
Exchange transactions are effected through a Customer's account at an
Institution under the terms of the Customer's account agreement with the
Institution, and confirmations of share exchanges are sent by a Fund to the
Institution involved. Institutions (or their nominees), acting on behalf of
their Customers, normally are the holders of record of Institutional Class
shares. Institutions are responsible for transmitting orders for exchanges to
the Company on a timely basis. Customers' exchange transactions are generally
reflected in the account statements provided by Institutions to their Customers.
Investors wishing to exchange Institutional Class shares of a Fund for
Institutional Class shares of another fund should contact their account
representatives. Investors with questions may call the Company at
1-800-222-8222.
PROSPECTUS 24
<PAGE> 379
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. All exchanges are
made at the NAV of the respective funds next determined following receipt of the
request by the Company in good order.
Each exchange, in effect, represents the redemption of shares of one fund and
the purchase of shares by another, which may result in a recognized gain or loss
for federal income tax purposes. Investors should receive written confirmation
of the exchange from the Institution within a few days of the completion of the
transaction.
To exchange Institutional Class shares, or if you have questions, simply call
the Company at 1-800-222-8222. A shareholder of record should be prepared to
give the telephone representative the following information: (i) the account
number, social security or taxpayer identification number and account
registration; (ii) the name of the fund from and the fund into which the
transfer is to occur; and (iii) the dollar or share amount of the exchange. The
conversation may be recorded to protect shareholders and the Company. Telephone
exchanges may be available unless the shareholder of record has declined the
privilege on the Purchase Application.
In addition, Institutional Class shares of the Funds may be exchanged for each
of the Funds' Class A shares in connection with the distribution of assets held
in a qualified trust, agency or custodial account maintained with the trust
department of a Wells Fargo Bank or another bank, trust company or thrift
institution, or in other cases where Institutional Class shares are not held in
such qualified accounts. Similarly, Class A shares may be exchanged for the
Funds' Institutional Class shares if the shares are to be held in such a
qualified trust, agency or custodial account. These exchanges are made at the
respective NAVs of the Institutional Class shares next determined after the
exchange request is received by the Company.
DIVIDENDS
Dividends from net investment income of the Funds are declared daily payable
to shareholders of record as of the close of regular trading of the NYSE
(currently 1:00 p.m., Pacific time). Dividends are paid generally on the last
Business Day of each month. Shareholders begin earning dividends on the Business
Day following the date the purchase order is effective and continue to earn
dividends through the day such shares are redeemed. The Funds intend to
distribute any capital gains at least annually. Expenses, such as state
securities registration and transfer agency fees that are attributable to a
particular class may affect the relative dividends and/or capital-gain
distributions of a class of shares.
Dividends declared in a month generally are paid on the last Business Day of
each month. Dividends and any capital-gain distributions are automatically
invested in
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additional whole and fractional shares of the same class unless the shareholder
has elected to receive payment in cash.
Dividends and capital-gain distributions have the effect of reducing the NAV
per share by the amount distributed. Although such dividends and distributions
paid on newly issued shares shortly after a purchase would represent, in
substance, a return of capital, the dividend or distribution would ordinarily be
taxable to you.
Dividends for a Saturday, Sunday or Holiday are declared payable to
shareholders of record as of the preceding Business Day. If a shareholder
redeems shares before the dividend payment date, any dividends credited to the
shareholder are paid on the following dividend payment date unless the
shareholder has redeemed all of the shares in the account, in which case the
shareholder receives accrued dividends together with redemption proceeds.
MANAGEMENT AND SERVICING FEES
INVESTMENT ADVISER
Subject to the overall supervision of the Company's Board of Directors, Wells
Fargo Bank, as the Funds' investment adviser, provides investment guidance and
policy direction in connection with the management of the Funds' assets. Wells
Fargo Bank also furnishes the Board of Directors with periodic reports on the
Funds' investment strategy and performance. For these services, Wells Fargo Bank
is entitled to monthly investment advisory fees at the annual rate of 0.50% of
the average daily net assets of each Fund. From time to time, each Fund,
consistent with its investment objective, policies and restrictions, may invest
in securities of entities with which Wells Fargo Bank has a lending
relationship. For the year ended December 31, 1995, the Company paid amounts
equal to 0.50% and 0.43% of the average daily net assets of the California Tax-
Free Bond Fund and California Tax-Free Income Fund, respectively, to Wells Fargo
Bank for its services as investment adviser. For the fiscal period ended
September 30, 1995, the previous investment adviser to the Oregon Tax-Free Fund
was paid advisory fees (after waivers) at the annual rate of 0.24% of the
average daily net assets of the Fund. For the same period, the previous
investment adviser waived all advisory fees payable on behalf of the Arizona
Tax-Free and National Tax-Free Funds.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
Wells Fargo Bank also serves as the Funds' custodian and transfer and dividend
disbursing agent. Under the Custody Agreement, a Fund may, at times, borrow
money from Wells Fargo Bank as needed to satisfy temporary liquidity needs.
Wells Fargo Bank charges interest on such overdrafts at a rate determined
pursuant to the Custody
PROSPECTUS 26
<PAGE> 381
Agreement. Wells Fargo Bank performs its custodial and transfer and dividend
disbursing agency services at 525 Market Street, San Francisco, California
94105.
INSTITUTIONS AND SHAREHOLDER SERVICING AGENT
The Funds have entered into shareholder servicing agreements with Wells Fargo
Bank and may enter into similar agreements with other Institutions ("Shareholder
Servicing Agents"). Under such agreements, Shareholder Servicing Agents
(including Wells Fargo Bank) agree, as agents for their customers, to provide
shareholder administrative and liaison services with respect to Fund shares,
which include, without limitation, aggregating and transmitting shareholder
orders for purchases, exchanges and redemptions; maintaining shareholder
accounts and records; and providing such other related services as the Company
or a shareholder may reasonably request. For these services, a Shareholder
Servicing Agent is entitled to receive a fee at the annual rate of up to 0.25%
of the average daily net assets attributable to the Institutional Class shares
owned of record or beneficially by investors with whom the Shareholder Servicing
Agent maintains a servicing relationship. In no case shall payments exceed any
maximum amount that may be deemed applicable under applicable laws, regulations
or rules, including the Rules of Fair Practice of the NASD.
A Shareholder Servicing Agent also may impose certain conditions on its
customers, subject to the terms of this Prospectus, in addition to or different
from those imposed by Funds, such as requiring a higher minimum initial
investment or payment of a separate fee for additional services. Each
Shareholder Servicing Agent has agreed to disclose any fees it may directly
charge its customers who are shareholders of a Fund and to notify them in
writing at least 30 days before it imposes any transaction fees.
SPONSOR, ADMINISTRATOR AND DISTRIBUTOR
Subject to the overall supervision of the Company's Board of Directors,
Stephens provides each Fund with administrative services, including general
supervision of each Fund's operation, coordination of other services provided to
a Fund, compilation of information for reports to the SEC and the state
securities commissions, preparation of proxy statements and shareholder reports,
and general supervision of data compilation in connection with preparing
periodic reports to the Company's Directors and officers. Stephens also
furnishes office space and certain facilities to conduct each Fund's business
and compensates the Directors and officers who are affiliated with Stephens. For
these services, Stephens is entitled to a monthly fee at the annual rate of
0.05% of the average daily net assets of Arizona Tax-Free, National Tax-Free and
Oregon Tax-Free Funds and 0.03% of the average daily net assets of each
California Fund.
Stephens, as the principal underwriter of the Funds within the meaning of the
1940 Act, has entered into Distribution Agreements with the Company pursuant to
which Stephens acts as agent for the Funds for the sale of their shares and may
enter into selling
27 PROSPECTUS
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agreements with other agents ("Selling Agents") that wish to make available
shares of the Funds to their respective customers.
Stephens has established a cash and non-cash compensation program, pursuant to
which broker/dealers or financial institutions that sell shares of the Company's
funds may earn additional compensation in the form of trips to sales seminars or
vacation destinations, tickets to sporting events, theater or other
entertainment, opportunities to participate in golf or other outings and gift
certificates for meals or merchandise, or the cash value of a non-cash
compensation item.
Financial institutions acting as Shareholder Servicing Agents, Selling Agents,
or in certain other capacities, may be required to register as dealers pursuant
to applicable state securities laws which may differ from federal law and any
interpretations expressed herein.
FUND EXPENSES
From time to time, Wells Fargo Bank and Stephens may waive their respective
fees in whole or in part and reimburse expenses payable to others. Any such
waivers or reimbursements will reduce a Fund's expenses and, accordingly, have a
favorable impact on the Fund's performance. Except for the expenses borne by
Wells Fargo Bank and Stephens, each fund of the Company bears all costs of its
operations, including its pro rata portion of Company expenses such as fees and
expenses of its independent auditors and legal counsel, compensation of the
Company's directors who are not affiliated with the adviser, administrator or
any of their affiliates; advisory, transfer agency, custody and administration
fees, and any extraordinary expenses. Expenses attributable to each fund or
class, are charged against the assets of the fund or class. General expenses of
the Company are allocated among all of the funds of the Company in a manner
proportionate to the net assets of each fund, on a transactional basis, or on
such other basis as the Company's Board of Directors deems equitable.
TAXES
The Company intends to qualify each Fund each year as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), as long as such qualification is in the best interest of each Fund's
shareholders. Each Fund is treated as a separate entity for federal income tax
purposes and, thus, the provisions of the Code applicable to regulated
investment companies are applied to each Fund separately, rather than to the
Company as a whole. In addition, net capital gains, net investment income, and
operating expenses are determined separately for each Fund. By complying with
the applicable provisions of the Code, a Fund will not be subject to federal
income taxes with respect to net investment income
PROSPECTUS 28
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and any net realized capital gains distributed to its shareholders. Each Fund
intends to pay out substantially all of its net investment income and any net
realized capital gains each year.
In general, each Fund's shareholders are not subject to federal income taxes
on any Fund dividends attributable to interest from tax-exempt securities.
However, dividends attributable to a Fund's other net investment income will be
taxable to shareholders as ordinary income, and capital gain distributions
attributable to a Fund's net realized capital gains will generally be taxable to
shareholders as long-term capital gain, regardless of the length of time that
the Fund's shares have been held. Such dividends and distributions will be
taxable to a shareholder irrespective of whether the shareholder takes them in
cash or has them automatically reinvested in additional Fund shares. None of the
Funds' dividends will qualify for the dividends-received deduction allowed to
corporate shareholders.
Interest on indebtedness incurred or continued to purchase or carry Fund
shares will not be deductible to the extent that Fund dividends are exempt from
federal income tax. In addition, federal alternative minimum tax ("AMT") rules
ensure that at least a minimum amount of tax is paid by taxpayers who obtain
significant benefit from certain tax deductions and exemptions. Some of these
deductions and exemptions have been designated "tax preference items" which must
be added back to taxable income for purposes of calculating AMT. Among the "tax
preference items" is tax-exempt interest from "private activity bonds" issued
after August 7, 1986. To the extent that a Fund invests in private activity
bonds, shareholders who pay AMT will be required to report that portion of Fund
dividends attributable to income from the bonds as a tax preference item in
determining their AMT. Shareholders will be notified of the tax status of
distributions made by the Funds. Persons who may be "substantial users" (or
"related persons" of substantial users) of facilities financed by private
activity bonds should consult their tax advisors before purchasing shares in the
Funds. With respect to corporate shareholders of such Funds, exempt-interest
dividends paid by a Fund are included in the corporate shareholder's "adjusted
current earnings" as part of its AMT calculation, and may also affect its
federal "environmental tax" liability. As of the printing of this Prospectus,
individuals are subject to an AMT at a maximum rate of 28% and corporations at a
maximum rate of 20%. Shareholders with questions or concerns about AMT should
also consult their tax advisors.
The Company or your Institution on its behalf regularly will inform investors
of the amount and nature of each Fund's dividends and capital-gain
distributions. You should keep all statements you receive to assist in your
personal record keeping. In addition, a shareholder must provide a valid social
security or tax identification number ("TIN") upon opening or reopening an
account. Failure to furnish a valid TIN to the Company could subject the
investor to penalties imposed by the IRS. In addition, the Company may be
required to withhold, subject to certain exemptions, at a rate of 31% ("backup
29 PROSPECTUS
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withholding") on certain dividends, capital-gain distributions, and redemption
proceeds (including proceeds from exchanges) paid or credited to an individual
Fund investor, unless the investor certifies that the TIN provided is correct
and that he or she is not subject to backup withholding, or the IRS notifies the
Company that the shareholder's TIN is incorrect or that he or she is subject to
backup withholding. Such withholding does not constitute any additional tax
imposed on the shareholder, and may be claimed as a tax payment on his or her
federal income tax return.
Foreign investors may be subject to different tax treatment, including a
withholding tax. See "Federal Income Taxes -- Foreign Shareholders" in the
Fund's SAI.
STATE TAXES
ARIZONA STATE INCOME TAXES
Individuals, trusts and estates who are subject to Arizona income tax will not
be subject to such tax on dividends paid by the Arizona Tax-Free Fund, to the
extent that such dividends qualify as exempt-interest dividends of a regulated
investment company under Section 852(b)(5) of the Code and are attributable to
either (i) obligations of the State of Arizona or its political subdivisions
thereof or (ii) obligations issued by the governments of Guam, Puerto Rico, or
the Virgin Islands. In addition, dividends paid by the Arizona Tax-Free Fund
that are attributable to interest payments on direct obligations of the U.S.
government will not be subject to Arizona income tax to the extent the Arizona
Tax-Free Fund qualifies as a regulated investment company under Subchapter M of
the Code. Other distributions from the Arizona Tax-Free Fund, however, such as
distributions of short-term or long-term capital gains, will generally not be
exempt from Arizona income tax.
There are no municipal income taxes in Arizona. Moreover, because shares of
the Arizona Tax-Free Fund are intangibles, they are not subject to Arizona
property tax. Shareholders of the Arizona Tax-Free Fund should consult their tax
advisors about other state and local tax consequences of their investment in the
Arizona Tax-Free Fund.
CALIFORNIA STATE INCOME TAXES
Individuals, trusts and estates resident in California will not be subject to
California personal income tax on dividends from the California Tax-Free Bond
Fund and California Tax-Free Income Fund that represent tax-exempt interest paid
on municipal obligations of the State of California, its political subdivisions,
direct obligations of the U.S. government and certain other issuers, including
Puerto Rico, Guam, and the U.S. Virgin Islands. Such individuals, trusts and
estates will be subject to California personal income tax on other distributions
received from the California Tax-Free Bond Fund and California Tax-Free Income
Fund, including distributions of interest on
PROSPECTUS 30
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municipal obligations issued by other issuers and all long-term and short-term
capital gains.
Except as noted above with respect to California personal income taxation of
individuals, trusts and estates resident in California, dividends and
distributions from the California Tax-Free Bond Fund and California Tax-Free
Income Fund may be taxable to investors under state or local law as dividend
income even though all or a portion of such distributions may be derived from
interest on tax-exempt obligations which, if realized directly, would be exempt
from such income taxes.
Shareholders of the California Tax-Free Bond Fund and California Tax-Free
Income Fund, including part-year residents of California, should consult their
tax advisors about other state and local tax consequences of their investments
in the California Tax-Free Bond Fund and California Tax-Free Income Fund, which
may have different consequences from those under federal income tax law. The
Company makes no representations as to California state and local taxes that may
be imposed on a corporate investor in the California Tax-Free Bond Fund,
California Tax-Free Income, or other Funds, and such investors should consult
with their tax advisors.
OREGON STATE INCOME TAXES
Individuals, trusts and estates resident in Oregon will not be subject to
Oregon personal income tax on distributions from the Oregon Tax-Free Fund that
represent tax-exempt interest paid on municipal obligations of the State of
Oregon and its political subdivisions and certain other issuers, including
Puerto Rico and Guam. Such individuals, trusts and estates will be subject to
Oregon personal income tax on other types of distributions received from the
Oregon Tax-Free Fund, including distributions of interest on municipal
obligations issued by other issuers and all long-term and short-term capital
gains. Except as noted above with respect to Oregon personal income taxation of
individuals, trusts and estates resident in Oregon, distributions from the
Oregon Tax-Free Fund may be taxable to investors under state or local law as
dividend income even though all or a portion of such distributions may be
derived from interest on tax-exempt obligations which, if realized directly,
would be exempt from such income taxes.
Corporations subject to the Oregon corporate excise tax will generally be
subject to tax on all distributions from the Oregon Tax-Free Fund, including
distributions of income that is exempt for federal tax purposes. Shares of the
Oregon Tax-Free Fund will not be subject to the Oregon property tax.
Shareholders of the Oregon Tax-Free Fund, including part-year residents of
Oregon, should consult their tax advisors about other state and local tax
consequences of their investments in the Oregon Tax-Free Fund, which may have
different consequences from those under federal income tax law.
31 PROSPECTUS
<PAGE> 386
NATIONAL TAX-EXEMPT FUND -- STATE AND LOCAL TAXES
Investors are advised to consult their tax advisors concerning the application
of state and local taxes, which may have different consequences from those under
federal income tax law.
General Information
The foregoing discussion is based on tax laws in effect as of the date of this
Prospectus and summarizes only some of the important federal income tax and
certain state income tax considerations generally affecting the Funds and their
shareholders. It is not intended as a substitute for careful tax planning; you
should consult your tax advisor with respect to your specific tax situation
particularly with respect to state and local taxes. Further tax considerations
are discussed in the SAI.
PROSPECTUS 32
<PAGE> 387
PROSPECTUS APPENDIX --
ADDITIONAL INVESTMENT POLICIES
FUND INVESTMENTS
Municipal Securities
The Funds may invest in municipal bonds rated at the date of purchase "Baa" or
better by Moody's or "BBB" or better by S&P, or unrated bonds that are
considered by the investment adviser to be of comparable quality. Bonds rated
"Baa" and "BBB" have speculative characteristics and are more likely than
higher-rated bonds to have a weakened capacity to pay principal and interest in
times of adverse economic conditions; all are considered investment grade.
Municipal bonds generally have a maturity at the time of issuance of up to 40
years.
The Funds may invest in municipal notes rated at the date of purchase "MIG 2"
(or "VMIG 2" in the case of an issue having a variable rate with a demand
feature) or better by Moody's or "SP-2" or better by S&P, or unrated notes that
are considered by the investment adviser to be of comparable quality. Municipal
notes generally have maturities at the time of issuance of three years or less.
Municipal notes are generally issued in anticipation of the receipt of tax
funds, of the proceeds of bond placements, or of other revenues. The ability of
an issuer to make payments on notes is therefore especially dependent on such
tax receipts, proceeds from bond sales or other revenues, as the case may be.
The Funds may invest in municipal commercial paper rated at the date of
purchase "Prime-1" or "Prime-2" by Moody's or "A-1+," "A-1" or "A-2" by S&P, or
unrated commercial paper that is considered by the investment adviser to be of
comparable quality. Municipal commercial paper is a debt obligation with a
stated maturity of 270 days or less that is issued to finance seasonal working
capital needs or as short-term financing in anticipation of longer-term debt.
In the event a security purchased by a California Fund is downgraded below
investment grade, the Fund may retain such security, although the Fund may not
have more than 5% of its assets invested in securities rated below investment
grade at any time. A description of the ratings is contained in the Appendix to
the Funds' SAI.
Municipal obligations also may include "moral obligation" securities, which
are normally issued by special purpose public authorities. If the issuer of
moral obligation securities is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a
moral commitment but not a legal obligation of the state or municipality which
created the issuer.
A-1 PROSPECTUS
<PAGE> 388
Certain of the municipal obligations held by the Funds may be insured as to
the timely payment of principal and interest. The insurance policies will
usually be obtained by the issuer of the municipal obligation at the time of its
original issuance. In the event that the issuer defaults on an interest or
principal payment, the insurer will be notified and will be required to make
payment to the bondholders. There is, however, no guarantee that the insurer
will meet its obligations. In addition, such insurance will not protect against
market fluctuations caused by changes in interest rates and other factors.
The Arizona Tax-Free, National Tax-Free and Oregon Tax-Free Funds may purchase
municipal obligations known as "certificates of participation" which represent
undivided proportional interests in lease payments by a governmental or
nonprofit entity. The lease payments and other rights under the lease provide
for and secure the payments on the certificates. Lease obligations may be
limited by applicable municipal charter provisions or the nature of the
appropriation for the lease. In particular, lease obligations may be subject to
periodic appropriation. Lease obligations also may be abated if the leased
property is damaged or becomes unsuitable for the lessee's purpose. If the
entity does not appropriate funds for future lease payments, the entity cannot
be compelled to make such payments. Furthermore, a lease may or may not provide
that the certificate trustee can accelerate lease obligations upon default. If
the trustee could not accelerate lease obligations upon default, the trustee
would only be able to enforce lease payments as they became due. In the event of
a default or failure of appropriation, it is unlikely that the trustee would be
able to obtain an acceptable substitute source of payment. Certificates of
participation are generally subject to redemption by the issuing municipal
entity under specified circumstances. If a specified event occurs, a certificate
is callable at par either at any interest payment date or, in some cases, at any
time. As a result, certificates of participation are not as liquid or marketable
as other types of municipal obligations and are generally valued at par or less
than par in the open market.
The Funds' investment adviser, under the supervision of the Board of
Directors, makes determinations concerning the liquidity of a municipal lease
obligation based on all relevant factors. The Arizona Tax-Free, National
Tax-Free and Oregon Tax-Free Funds also may purchase unrated municipal lease
obligations. The Funds' investment adviser, under the supervision of the Board
of Directors, determines the credit quality of such leases on an ongoing basis,
including an assessment of the likelihood that the underlying lease will not be
canceled.
Opinions relating to the validity of municipal obligations and to the
exemption of interest thereon from regular federal income tax (and to the
exemption of interest from state personal income tax) are rendered by bond
counsel to the respective issuers at the time of issuance. Neither the Funds,
the Funds' investment adviser nor their counsel will review the proceedings
relating to the issuance of municipal obligations or the bases for such
opinions.
PROSPECTUS A-2
<PAGE> 389
For a further discussion of factors affecting purchases of municipal
obligations by the State Tax-Free Funds, see "Special Considerations Affecting
Arizona Municipal Securities," "Special Considerations Affecting California
Municipal Securities" and "Special Considerations Affecting Oregon Municipal
Securities" in the SAI.
Taxable Investments
Pending the investment of proceeds from the sale of shares of the Funds or
proceeds from sales of portfolio securities or in anticipation of redemptions or
to maintain a "defensive" posture when, in the opinion of Wells Fargo Bank, as
investment adviser, it is advisable to do so because of market conditions, each
Fund may elect to invest temporarily up to 20% of the current value of its net
assets in cash reserves, in instruments that pay interest which is exempt from
federal income taxes, but not, for the State Tax-Free Funds, from a respective
state's personal income tax, or the following taxable high-quality money market
instruments: (i) U.S. Government obligations; (ii) negotiable certificates of
deposit, bankers' acceptance and fixed time deposits and other obligations of
domestic banks (including foreign branches) that have more than $1 billion in
total assets at the time of investment and are members of the Federal Reserve
System or are examined by the Comptroller of the Currency or whose deposits are
insured by the FDIC; (iii) commercial paper rated at the date of purchase
"Prime-1" by Moody's or "A-1+" or "A-1" by S&P; (iv) certain repurchase
agreements; and (v) high-quality municipal obligations, the income from which
may or may not be exempt from federal income taxes.
U.S. Government Obligations
U.S. Government obligations include securities issued or guaranteed as to
principal and interest by the U.S. Government and supported by the full faith
and credit of the U.S. Treasury. U.S. Treasury obligations differ mainly in the
length of their maturity. Treasury bills, the most frequently issued marketable
government securities, have a maturity of up to one year and are issued on a
discount basis. U.S. Government obligations also include securities issued or
guaranteed by federal agencies or instrumentalities, including
government-sponsored enterprises. Some obligations of agencies or
instrumentalities of the U.S. Government are supported by the full faith and
credit of the United States or U.S. Treasury guarantees; others, by the right of
the issuer or guarantor to borrow from the U.S. Treasury; still others, by the
discretionary authority of the U.S. Government to purchase certain obligations
of the agency or instrumentality; and others, only by the credit of the agency
or instrumentality issuing the obligation. In the case of obligations not backed
by the full faith and credit of the United States, the investor must look
principally to the agency or instrumentality issuing or guaranteeing the
obligation for ultimate repayment, which agency or instrumentality may be
privately owned. There can be no assurance that the U.S. Government will provide
financial support to its agencies or instrumentalities where it is not obligated
to do so. In
A-3 PROSPECTUS
<PAGE> 390
addition, U.S. Government obligations are subject to fluctuations in market
value due to fluctuations in market interest rates. As a general matter, the
value of debt instruments, including U.S. Government obligations, declines when
market rates increase and rises when market interest rates decrease. Certain
types of U.S. Government obligations are subject to fluctuations in yield or
value due to their structure or contract terms.
Forward Commitments, When-Issued Purchases, Stand-by Commitments and Delayed-
Delivery Transactions
The Funds may purchase or sell securities on a when-issued or delayed-delivery
basis and make contracts to purchase or sell securities for a fixed price at a
future date beyond customary settlement time. Securities purchased or sold on a
when-issued, delayed-delivery or forward-commitment basis involve a risk of loss
if the value of the security to be purchased declines, or the value of the
security to be sold increases, before the settlement date. Although a Fund will
generally purchase securities with the intention of acquiring them, a Fund may
dispose of securities purchased on a when-issued, delayed-delivery or a
forward-commitment basis before settlement when deemed appropriate by the
adviser. When-issued securities are subject to market fluctuation, and no income
accrues to the purchaser during the period prior to issuance. The purchase price
and the interest rate received on debt securities are fixed at the time the
purchaser enters into the commitment. Purchasing a security on a when-issued
basis can involve a risk that the market price at the time of delivery may be
lower than the agreed-upon purchase price, in which case there could be an
unrealized loss at the time of delivery.
The Arizona Tax-Free, Oregon Tax-Free and National Tax-Free Funds also may
acquire "stand-by commitments" with respect to municipal obligations held in
their respective portfolios. Under a stand-by commitment, a dealer agrees to
purchase at a Fund's option specified municipal obligations at a price equal to
their amortized-cost value plus accrued interest. The Funds will acquire
stand-by commitments solely to facilitate portfolio liquidity and do not intend
to exercise their respective rights thereunder for trading purposes.
Each Fund establishes a segregated account in which it maintains cash, U.S.
Government obligations or other high-quality debt instruments in an amount at
least equal in value to its respective commitments to engage in when-issued
purchases and delayed delivery transactions. If the value of these assets
declines, the Fund places additional liquid assets in the account on a daily
basis so that the value of the assets in the account is equal to the amount of
such commitments.
Other Mutual Funds
Subject to the limitations of the 1940 Act, the Funds may invest in shares of
other unaffiliated open-end investment companies that have a fundamental policy
of investing,
PROSPECTUS A-4
<PAGE> 391
under normal circumstances, at least 80% of their net assets in obligations that
are exempt from federal income taxes and are not subject to the federal
alternative minimum tax. Such investment companies can be expected to charge
management fees and other operating expenses that would be in addition to those
charged to the Funds. However, the Funds' investment adviser has undertaken to
waive its advisory fees with respect to assets so invested.
Notwithstanding any other investment policy or limitation (whether or not
fundamental), as a matter of fundamental policy, each Fund (except the
California Tax-Free Bond Fund) may invest all of its assets in the securities of
a single open-end, management investment company with substantially the same
fundamental investment objective, policies and limitations as the Fund.
Floating- and Variable-Rate Instruments
Certain of the debt instruments that the Funds may purchase bear interest at
rates that are not fixed, but vary, for example, with changes in specified
market rates or indices or at specified intervals. Certain of these instruments
may carry a demand feature that would permit the holder to tender them back to
the issuer at par value prior to maturity. The Funds may, in accordance with SEC
rules, account for these instruments as maturing at the next interest rate
readjustment date or the date at which the Funds may tender the instrument back
to the issuer, whichever is later. The floating- and variable-rate instruments
that the Funds may purchase include certificates of participation in such
obligations.
Wells Fargo Bank, as investment adviser to the Funds, monitors on an ongoing
basis the ability of an issuer of a demand instrument to pay principal and
interest on demand. Events affecting the ability of the issuer of a demand
instrument to make payment when due may occur between the time a Fund elects to
demand payment and the time payment is due, thereby affecting such Fund's
ability to obtain payment at par. Demand instruments whose demand feature is not
exercisable within seven days, may be treated as liquid provided that an active
secondary market exists.
Illiquid Securities
The Arizona Tax-Free, California Tax-Free Income Fund, National Tax-Free and
Oregon Tax-Free Funds will not knowingly invest more than 15% (10% for the
California Tax-Free Bond Fund) of the value of its net assets is securities that
are illiquid because of restrictions on transferability or other reasons.
Illiquid securities shall not include securities eligible for resale pursuant to
Rule 144A under the Securities Act of 1933 (the "1933 Act") that have been
determined to be liquid by the adviser, pursuant to guidelines established by
the Company's Board of Directors, and commercial paper that is sold under
Section 4(2) of the 1933 Act (i) is not traded flat or in default as to interest
or principal and (ii) is rated in one of the two highest categories by at least
two
A-5 PROSPECTUS
<PAGE> 392
nationally recognized statistical rating organizations and the adviser, pursuant
to guidelines established by the Company's Board of Directors, has determined
the commercial paper to be liquid; or (iii) is rated in one of the two highest
categories by one nationally recognized statistical rating agency and the
adviser, pursuant to guidelines established by the Company's Board of Directors,
has determined that the commercial paper is of equivalent quality and is
liquid), if by any reason thereof the value of its aggregate investment in such
classes of securities will exceed the applicable limitation described above with
respect to its total assets.
Repurchase Agreements
The California Funds may enter into repurchase agreements wherein the seller
of a security to a Fund agrees to repurchase that security from the Funds at a
mutually agreed-upon time and price. The period of maturity is usually quite
short, often overnight or a few days, although it may extend over a number of
months. The Funds may enter into repurchase agreements only with respect to U.S.
Government obligations and other obligations that could otherwise be purchased
by the participating Fund. All repurchase agreements will be fully
collateralized based on values that are marked to market daily. The maturities
of the underlying securities in a repurchase agreement transaction entered into
by a Fund may be greater than one year, however, the term of the agreement will
always be less than one year. If the seller defaults and the value of the
underlying securities has declined, the participating Fund may incur a loss. In
addition, if bankruptcy proceedings are commenced with respect to the seller of
the security, the participating Fund's disposition of the security may be
delayed or limited. The Funds will enter into repurchase agreements only with
registered broker/dealers and commercial banks that meet guidelines established
by the Company's Board of Directors and that are not affiliated with Wells Fargo
Bank. The Funds may participate in pooled repurchase agreement transactions with
other funds advised by Wells Fargo Bank.
Loans of Portfolio Securities
Each California Fund may lend securities from its portfolios to brokers,
dealers and financial institutions (but not individuals) if cash, U.S.
Government obligations or other high-quality debt instruments equal to at least
100% of the current market value of the securities loan (including accrued
interest thereon) plus the interest payable to a Fund with respect to the loan
is maintained with such Fund. In determining whether to lend a security to a
particular broker, dealer or financial institution, the Funds' investment
adviser will consider all relevant facts and circumstances, including the
creditworthiness of the broker, dealer or financial institution. Any loans of
portfolio securities must be fully collateralized based on values that are
marked-to-market daily. Any securities that a Fund may receive as collateral
will not become part of such Fund's portfolio at the time of the loan and, in
the event of a default by the borrower, such Fund, if permitted by law, will
dispose of such collateral except for such part thereof that is a security in
which
PROSPECTUS A-6
<PAGE> 393
such Fund is permitted to invest. During the time securities are on loan, the
borrower will pay such Fund any accrued income on those securities, and such
Fund may invest the cash collateral and earn additional income or receive an
agreed-upon fee from a borrower that has delivered cash-equivalent collateral.
The Funds will not lend securities having a value that exceeds one-third of the
current value of each of their total assets. Loans of securities by a Fund will
be subject to termination at the Fund's or the borrower's option. Each Fund may
pay reasonable administrative and custodial fees in connection with a securities
loan and may pay a negotiated portion of the interest or fee earned with respect
to the collateral to the borrower or the placing broker. Borrowers and placing
brokers may not be affiliated, directly or indirectly, with the Company, the
investment adviser, or the Distributor.
Derivative Securities
The Funds may invest in structured notes, bonds or other instruments with
interest rates that are determined by reference to changes in the value of other
interest rates, indices or financial indicators ("References") or the relative
in two or more References. The Funds may also hold derivative instruments that
have interest rates that re-set inversely to changing current market rates
and/or have embedded interest rate floors and caps that require the issuers to
pay an adjusted interest rate if market rates fall below or rise above a
specified rate. These instruments represent relatively recent innovations in the
bond markets, and the trading market for these instruments is less developed
than the markets for traditional types of debt instruments. It is uncertain how
these instruments will perform under different economic and interest-rate
scenarios. Because certain of these instruments are leveraged, their market
values may be more volatile than other types of bonds and may present greater
potential for capital gain or loss. On the other hand, the imbedded option
features of other derivative instruments could limit the amount of appreciation
a Fund can realize on its investment, could cause a Fund to hold a security it
might otherwise sell or could force the sale of a security at inopportune times
or for prices that do not reflect current market value. The possibility of
default by the issuer or the issuer's credit provider may be greater for these
structured and derivative instruments than for other types of instruments. In
some cases it may be difficult to determine the fair value of a structured or
derivative instrument because of a lack of reliable objective information and an
established secondary market for some instruments may not exist.
INVESTMENT POLICIES AND RESTRICTIONS
Any fundamental investment policy may not be changed without approval by the
vote of the holders of a majority of such Fund's outstanding voting securities,
as described under "Capital Stock" in the Funds' SAI. If the Company's Board of
Directors determines, however, that a Fund's investment objective can best be
achieved by a substantive change in a nonfundamental investment policy or
strategy, the Company's
A-7 PROSPECTUS
<PAGE> 394
Board may make such change without shareholder approval and will disclose any
such material changes in the then-current prospectus. The following description
summarizes several of the Funds' fundamental restrictions, which are set forth
in full in the SAI.
As matters of fundamental policy:
1. The Arizona Tax-Free, National Tax-Free or Oregon Tax-Free Funds may not
purchase securities (except U.S. Government securities and repurchase agreements
collateralized by such securities) if more than 5% of its total assets at the
time of purchase will be invested in securities of any one issuer, except that
up to 50% of a Fund's total assets may be invested without regard to this 5%
limitation.
2. The Arizona Tax-Free, National Tax-Free and Oregon Tax-Free Funds may not
invest 25% or more of its total assets at the time of purchase in securities of
issuers whose principal business activities are in the same industry and the
California Funds may not purchase the securities of issuers conducting their
principal business activity in the same industry, if immediately after the
purchase and as a result thereof, the value of a Fund's investments in that
industry would be 25% or more of the current value of the Fund's total assets,
provided that there is no limitation with respect to investments in (a)
municipal securities (for the purpose of this restriction, private activity
bonds shall not be deemed municipal securities if the payment of principal and
interest on such bonds is the ultimate responsibility of nongovernmental users)
and (b) U.S. Government obligations.
3. No Fund may borrow money except in amounts up to 10% of the value of its
total assets at the time of borrowing (for the California Funds, only from banks
for temporary purposes in order to meet redemptions, and these borrowings may be
secured by the pledge of up to 10% of the current value of each of their net
assets (but investments may not be purchased by a Fund while any such
outstanding borrowings exceed 5% of its net assets)).
4. The Arizona Tax-Free, National Tax-Free and Oregon Tax-Free Funds will not
at any time knowingly have more than 15% of their respective net assets in
illiquid securities. However, if a percentage restriction on the investment or
use of assets set forth in this Prospectus is adhered to at the time a
transaction is effected, later changes in percentage resulting from changing
values will not be considered a violation.
5. The California Tax-Free Bond Fund may make loans of portfolio securities in
accordance with its investment policies.
As matters of nonfundamental policy:
1. Neither the California Tax-Free Bond Fund nor the California Tax-Free
Income Fund may invest more than 10% or 15%, respectively, of the current value
of the Fund's net assets in securities that are illiquid by virtue of the
absence of a readily available
PROSPECTUS A-8
<PAGE> 395
market or because of legal or contractual restrictions on resale or maturities
of more than seven days, unless the Board or investment adviser, pursuant to
guidelines adopted by the Board, determines that a liquid trading market exists.
For a discussion of whether a certain security is excluded from a Fund's
limitation see "Illiquid Securities" in this Appendix.
2. The Arizona Tax-Free, National Tax-Free and Oregon Tax-Free Funds may
invest up to 15% of the current value of each Fund's net assets in illiquid
securities.
For purposes of complying with the Code, each California Fund will diversify
its holdings so that, at the end of each quarter of the taxable year: (i) at
least 50% of the market value of each Fund's assets is represented by cash, U.S.
Government obligations and other securities limited in respect of any one issuer
to an amount not greater than 5% of the Fund's assets and 10% of the outstanding
voting securities of such issuer; and (ii) not more than 25% of the value of its
assets is invested in the securities of any one issuer (other than U.S.
Government obligations and the securities of other regulated investment
companies), or of two or more issuers which the taxpayer controls and which are
determined to be engaged in the same or similar trades or businesses or related
trades or businesses. With respect to paragraph (i), it may be possible that the
Company would own more than 10% of the outstanding voting securities of an
issuer.
A-9 PROSPECTUS
<PAGE> 396
Advised by WELLS FARGO BANK, N.A., INC. [LOGO]
Sponsored/Distributed by
Stephens Inc., Member NYSE/SIPC
NOT FDIC INSURED
<PAGE> 397
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<PAGE> 398
SPONSOR, DISTRIBUTOR AND ADMINISTRATOR
Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
INVESTMENT ADVISER, TRANSFER AND
DIVIDEND DISBURSING AGENT AND
CUSTODIAN
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
LEGAL COUNSEL
Morrison & Foerster LLP
2000 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
FOR MORE INFORMATION ABOUT THE FUNDS,
SIMPLY CALL 1-800-222-8222, OR WRITE:
Stagecoach Funds, Inc.
c/o Stagecoach Shareholder Services
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
STAGECOACH FUNDS:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- are NOT FDIC insured [LOGO]
- are NOT guaranteed by Wells Fargo Bank
- are NOT deposits or obligations of the Bank
- involve investment risk, including possible loss of
principal
</TABLE>
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<PAGE> 399
[STAGECOACH FUNDS LOGO]
P.O. Box 7066
San Francisco, CA 94120-7066
STAGECOACH FUNDS:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- are NOT FDIC insured [LOGO]
- are NOT guaranteed by Wells Fargo Bank
- are NOT deposits or obligations of the Bank
- involve investment risk, including possible loss of
principal
</TABLE>
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<PAGE> 400
[STAGCOACH FUNDS LOGO]
------------------------------
PROSPECTUS
------------------------------
BALANCED FUND
EQUITY VALUE FUND
GROWTH AND INCOME FUND
SMALL CAP FUND
INSTITUTIONAL CLASS
SEPTEMBER 6, 1996
<PAGE> 401
STAGECOACH FUNDS(R)
BALANCED, EQUITY VALUE, GROWTH AND INCOME
AND SMALL CAP FUNDS
INSTITUTIONAL CLASS
Stagecoach Funds, Inc. (the "Company") is an open-end management investment
company. This Prospectus contains information about Institutional Class shares
offered by four funds of the Stagecoach Family of Funds -- the BALANCED, EQUITY
VALUE, GROWTH AND INCOME AND SMALL CAP FUNDS (each, a "Fund" and collectively,
the "Funds").
The BALANCED FUND seeks to provide investors with both capital appreciation
and current income resulting in a high total investment return consistent with
prudent investment risk and a balanced investment approach. The EQUITY VALUE
FUND seeks to provide investors with long-term capital appreciation. The GROWTH
AND INCOME FUND seeks to earn current income and achieve long-term capital
appreciation by investing primarily in common stocks, and preferred stocks and
debt securities that are convertible into common stocks.
The SMALL CAP FUND seeks above-average long-term capital appreciation in order
to provide investors with a rate of total return exceeding that of the Russell
2000 Index (before fees and expenses) over a time horizon of three to five
years. THE FUND SEEKS TO ACHIEVE THIS OBJECTIVE BY INVESTING ALL OF ITS ASSETS
IN THE SMALL CAP MASTER PORTFOLIO ( THE "MASTER PORTFOLIO") OF MASTER INVESTMENT
TRUST (THE "MASTER TRUST"), AN OPEN-END, SERIES INVESTMENT COMPANY, RATHER THAN
IN A PORTFOLIO OF SECURITIES. THE MASTER PORTFOLIO HAS THE SAME INVESTMENT
OBJECTIVE AS THE FUND.
Please read this Prospectus before investing and retain it for future
reference. It is designed to provide you with important information and to help
you decide if a Fund's goals match your own. A Statement of Additional
Information ("SAI"), dated September 6, 1996, containing additional information
about the Funds has been filed with the Securities and Exchange Commission
("SEC") and is incorporated by reference into this Prospectus. The SAI is
available without charge by writing to Stagecoach Funds, Inc., c/o Stagecoach
Shareholder Services, Wells Fargo Bank, N.A., P.O. Box 7066, San Francisco, CA
94120-7066 or by calling 1-800-222-8222. If you hold shares in an IRA, please
call 1-800-BEST-IRA for information or assistance.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THESE AUTHORITIES PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
FUND SHARES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR ISSUED, ENDORSED OR
GUARANTEED BY, WELLS FARGO BANK, N.A. ("WELLS FARGO BANK") OR ANY OF ITS
AFFILIATES. SUCH SHARES ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT,
THE FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"), THE FEDERAL RESERVE BOARD OR
ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN A FUND INVOLVES CERTAIN RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
PROSPECTUS DATED SEPTEMBER 6, 1996
PROSPECTUS
<PAGE> 402
WELLS FARGO BANK IS THE INVESTMENT ADVISER AND IS COMPENSATED FOR PROVIDING THE
FUNDS WITH CERTAIN OTHER SERVICES. STEPHENS INC. ("STEPHENS"), WHICH IS NOT
AFFILIATED WITH WELLS FARGO BANK, IS THE FUNDS' SPONSOR, ADMINISTRATOR
AND DISTRIBUTOR.
PROSPECTUS
<PAGE> 403
TABLE OF CONTENTS
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PROSPECTUS SUMMARY 1
SUMMARY OF FUND EXPENSES 5
FINANCIAL HIGHLIGHTS 8
HOW THE FUNDS WORK 11
THE FUNDS, MASTER PORTFOLIO AND MANAGEMENT 21
INVESTING IN THE FUNDS 25
EXCHANGES 29
DIVIDENDS 30
MANAGEMENT AND SERVICING FEES 31
TAXES 34
PROSPECTUS APPENDIX - ADDITIONAL INVESTMENT POLICIES A-1
PROSPECTUS
<PAGE> 404
PROSPECTUS SUMMARY
The Funds provide investors with a convenient way to invest in a portfolio of
securities selected and supervised by professional management. The following
provides summary information about the Funds. For more information, please refer
specifically to the identified Prospectus sections and generally to the Funds'
Prospectus and SAI.
Q. WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?
A. The BALANCED FUND seeks to provide investors with both capital appreciation
and current income resulting in high total investment return consistent with
prudent investment risk and a balanced investment approach. The Fund pursues
this objective by investing in equity securities and debt instruments through
a balanced and diversified program. The Fund normally invests between 30% and
70% of its assets in common stocks that are considered by the investment
adviser to have better than average prospects for growth of capital and
income. The Fund invests primarily in domestic equity securities, but may
invest up to 5% of its assets in equity securities listed or traded
exclusively on a foreign exchange. The Fund's remaining assets are invested
in senior fixed-income securities, including corporate debt securities,
commercial paper and mortgage-backed and asset-backed securities, based on
the relative stability of income and principal of such securities. Debt
instruments in which the Fund invests are rated at least investment grade or
deemed comparable.
The EQUITY VALUE FUND seeks to provide investors with long-term capital
appreciation. The Fund pursues this objective by investing primarily in
common stocks and may invest in debt securities that are convertible into
common stocks of both domestic and foreign companies. The Fund may invest in
large, well-established companies and smaller companies with market
capitalization exceeding $50 million. The Fund may invest up to 5% of its
assets in foreign equity securities. Income generation is a secondary
consideration in selecting investments. The Fund may purchase dividend
paying stocks of particular issuers when the issuer's dividend record may,
in the investment adviser's opinion, have a favorable influence on the
market value of the securities. The Fund also may purchase convertible
securities with the same characteristics as common stocks. Under normal
market conditions, the Fund invests at least 65% of its total assets in
common stocks and securities convertible into common stocks.
The GROWTH AND INCOME FUND seeks to earn current income and achieve
long-term capital appreciation by investing primarily in common stocks, and
preferred stocks and debt securities that are convertible into common
stocks. Common stocks are selected on the basis of strong earnings growth
trend, above-average prospects for future earnings growth and
diversification among industries and companies.
1 PROSPECTUS
<PAGE> 405
Convertible securities are selected on the basis of strong earnings and
credit record, the ability to provide current income and the same
characteristics described above with respect to common stocks.
The SMALL CAP FUND seeks above-average long-term capital appreciation in
order to provide investors with a rate of total return exceeding that of the
Russell 2000 Index (before fees and expenses) over a time horizon of three
to five years. The Fund pursues this investment objective by investing all
of its assets in the Master Portfolio. The Master Portfolio has the same
investment objective as the Fund. The Master Portfolio pursues this
investment objective through the active management of a broadly diversified
portfolio consisting primarily of growth-oriented common stocks with market
capitalizations between $50 million and $1 billion at the time of
acquisition. The Master Portfolio intends to sell the common stock of any
company in its investment portfolio after such Company's market
capitalization exceeds $2 billion.
See "How the Funds Work -- Investment Objectives and Policies" and
"Prospectus Appendix -- Additional Investment Policies" for further
information on investments.
Q. WHAT ARE SOME OF THE POTENTIAL RISKS ASSOCIATED WITH THIS TYPE OF INVESTMENT?
A. An investment in a Fund or the Master Portfolio is not insured against
loss of principal. When the value of the securities that a Fund or Master
Portfolio owns declines, so does the value of your shares of the Fund.
Therefore, you should be prepared to accept some risk with the money you
invest in a Fund. The portfolio equity securities of a Fund and the Master
Portfolio are subject to equity market risk. Equity market risk is the risk
that common stock prices will fluctuate or decline over short or even
extended periods. The portfolio debt instruments of a Fund and the Master
Portfolio are subject to credit and interest-rate risk. Credit risk is the
risk that issuers of the debt instruments in which a Fund or the Master
Portfolio invests may default on the payment of principal and/or interest.
Interest-rate risk is the risk that increases in market interest rates may
adversely affect the value of the debt instruments in which a Fund or the
Master Portfolio invests and hence the value of your investment in a Fund.
The Small Cap Master Portfolio and the Growth and Income Fund may invest a
significant portion of their respective assets in securities of smaller and
newer issuers. Investments in such companies may present opportunities for
capital appreciation because of high potential earnings growth, but may
present greater risks than investments in more established companies with
longer operating histories and greater financial capacity. Investments in
foreign securities by a Fund or Master Portfolio involve special risks and
considerations not usually associated with investments in U.S. Companies. As
with all mutual funds, there can be no assurance that the Funds or the
Master Portfolio will achieve their
PROSPECTUS 2
<PAGE> 406
investment objectives. See "How the Funds Work -- Investment Objectives and
Policies", "How the Funds Work -- Risk Factors" and "Prospectus Appendix --
Additional Investment Policies" below and "Additional Permitted Investment
Activities" in the SAI for further information about the Funds' investments
and related risks.
Q. WHO MANAGES MY INVESTMENTS?
A. Wells Fargo Bank, as each Fund's and the Master Portfolio's investment
adviser, manages your investments. Wells Fargo Bank also provides the Funds
and Master Portfolio with transfer agency, dividend disbursing agency and
custodial services. In addition, Wells Fargo Bank is a shareholder servicing
agent and a selling agent for the Funds. See "The Funds, Master Portfolio
and Management" and "Management and Servicing Fees" for further information.
Q. HOW DO I INVEST?
A. Qualified investors may invest by purchasing Institutional Class shares
of the Funds at the net asset value per share without a sales charge
("NAV"). Qualified investors include certain customers of affiliate,
franchise or correspondent banks of Wells Fargo & Company and other selected
institutions ("Institutions"). Customers may include individuals, trusts,
partnerships and corporations. Purchases are effected through the customer's
account with the Institution under the terms of the customer's account
agreement with the Institution. Investors wishing to purchase a Fund's
Institutional Class shares should contact their account representatives. See
"Investing in the Funds" for additional information.
Q. ARE EXCHANGES TO OTHER FUNDS PERMITTED?
A. Yes. The exchange privilege enables investors to exchange Fund shares
for shares of another fund offered by the Company, or shares of certain
other funds offered by other investment companies in the Stagecoach Family
of Funds, to the extent such shares are offered for sale in your state of
residence. Exchanges are effected through the customer's account with the
Institution under the terms of the customer's account agreement with the
Institution. See "Exchanges."
Q. HOW MAY I REDEEM SHARES?
A. Investors may redeem shares at NAV, without charge by the Company.
Institutional Class shares held by an Institution on behalf of its customers
must be redeemed under the terms of the customer's account agreement with
the Institution. Institutions are responsible for transmitting redemption
requests to the Company and crediting its customers' accounts. The Company
reserves the right to impose charges for wiring redemption proceeds. See
"Investing in the Funds -- Redemption of Institutional Class Shares."
3 PROSPECTUS
<PAGE> 407
Q. HOW WILL I RECEIVE DIVIDENDS AND ANY CAPITAL GAINS?
A. Dividends from net investment income of the Balanced, Equity Value and Growth
and Income Funds are declared and paid quarterly. Dividends from net
investment income of the Small Cap Fund are declared and paid annually.
Dividends are automatically reinvested in additional Institutional Class
shares of the respective Fund at NAV. Shareholders also may elect to receive
dividends in cash. Any capital gains are distributed at least annually in the
same manner as dividends. See "Dividends" for additional information.
Q. WHAT ARE DERIVATIVES AND DO THE FUNDS USE THEM?
A. Derivatives are financial instruments whose value is derived, at least in
part, from the price of another security or a specified asset, index or rate.
Some of the permissible investments described in this Prospectus, such as
buying and selling options and futures and entering into currency exchange
contracts or swap agreements, are considered derivatives. Some derivatives
may be more sensitive than direct securities to changes in interest rates or
sudden market moves. Some derivatives also may be susceptible to fluctuations
in yield or value due to their structure or contract terms. If a Fund's
adviser judges market conditions incorrectly, the use of certain derivatives
could result in a loss, regardless of the adviser's intent in using the
derivatives.
Q. WHAT STEPS DO THE FUNDS TAKE TO CONTROL DERIVATIVES-RELATED RISKS?
A. Wells Fargo Bank, as investment adviser to the Funds and Master Portfolio,
uses a variety of internal risk management procedures to ensure that
derivatives' use is consistent with a Fund's investment objective, does not
expose the Fund to undue risks and is closely monitored. These procedures
include providing periodic reports to the Board of Directors concerning the
use of derivatives. Derivatives use by a Fund also is subject to broadly
applicable investment policies. For example, a Fund may not invest more than
a specified percentage of its assets in "illiquid securities," including
derivatives that do not have active secondary markets. Nor may a Fund use
certain derivatives without establishing adequate "cover" in compliance with
SEC rules limiting the use of leverage. For more information on a Fund's
investment activities, see "How the Funds Work" and "Prospectus Appendix --
Additional Investment Policies."
PROSPECTUS 4
<PAGE> 408
SUMMARY OF FUND EXPENSES
INSTITUTIONAL CLASS SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
BALANCED EQUITY GROWTH AND SMALL CAP
FUND VALUE FUND INCOME FUND FUND
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed
on Purchases (as a
percentage of offering
price)..................... None None None None
Sales Charge Imposed on
Reinvested Dividends....... None None None None
Sales Charge Imposed on
Redemptions................ None None None None
Exchange Fees................ None None None None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
BALANCED EQUITY GROWTH AND SMALL CAP
FUND VALUE FUND INCOME FUND FUND
<S> <C> <C> <C> <C>
Management Fee............... 0.60% 0.50% 0.50% 0.60%
Other Expenses (after waivers
or reimbursements)(1)...... 0.35% 0.45% 0.63% 0.15%
----- ----- ----- -----
TOTAL FUND OPERATING EXPENSES
(after waivers or
reimbursements)(2)......... 0.95% 0.95% 1.13% 0.75%
===== ===== ===== =====
</TABLE>
- ---------------------------------
(1) Other Expenses (before waivers or reimbursements) would be 0.67%, 0.50%,
0.66% and 0.40%, respectively, for the Balanced, Equity Value, Growth and
Income and Small Cap Funds.
(2) Total Fund Operating Expenses (before waivers or reimbursements) would be
1.27%, 1.00%, 1.16% and 1.00%, respectively, for the Balanced, Equity Value,
Growth and Income and Small Cap Funds. Note: The table does not reflect any
charges that may be imposed by Wells Fargo Bank or another Institution
directly on certain customer accounts in connection with an investment in a
Fund.
5 PROSPECTUS
<PAGE> 409
EXAMPLE OF EXPENSES
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following
expenses on a $1,000 investment in
a Fund's Institutional Class
shares, assuming a 5% annual return
and redemption at the end of each
time period indicated:
Balanced Fund.................. $ 10 $30 $53 $117
Equity Value Fund.............. $ 10 $30 $53 $117
Growth and Income Fund......... $ 12 $36 $62 $137
Small Cap Fund................. $ 8 $24 N/A N/A
</TABLE>
EXPLANATION OF TABLES
The purpose of the above tables is to help a shareholder understand the
various costs and expenses that a shareholder in the Funds will bear directly or
indirectly. The tables reflect expenses at both the Fund and Master Portfolio
levels.
SHAREHOLDER TRANSACTION EXPENSES are charges incurred when a shareholder buys
or sells Fund shares. Institutional Class shares are sold with no shareholder
transaction charges imposed by the Fund. The Company reserves the right to
impose a charge for wiring redemption proceeds.
ANNUAL FUND OPERATING EXPENSES for the Institutional Class shares of the Funds
(except the Small Cap Fund) are based on applicable contract amounts and derived
from amounts incurred during its most recent fiscal year, restated to reflect
voluntary fee waivers and expense reimbursements that are expected to continue
to reduce expenses during the Company's current fiscal year. Annual Fund
Operating Expenses for the Institutional Class shares of the Small Cap Fund are
based on applicable contract amounts currently in effect, except that the
amounts shown under "Other Expenses" and "Total Fund Operating Expenses" are
based on estimated amounts for the current fiscal year. Wells Fargo Bank and
Stephens have agreed to waive or reimburse all or a portion of their respective
fees charged to, or expenses paid by, each Fund to ensure that the Total Fund
Operating Expenses do not exceed, on an annual basis, 0.95%, 0.95% or 1.13%
respectively, of the Balanced, Equity Value or Growth and Income Funds' average
daily net assets through August 31, 1997. Any waivers or reimbursements will
reduce a Fund's or Master Portfolio's total expenses. There can be no assurance
that waivers or reimbursements will continue after that time. For more complete
descriptions of the various costs and expenses you can expect to incur as an
investor in the Funds, please see "Management and Servicing Fees."
PROSPECTUS 6
<PAGE> 410
EXAMPLE OF EXPENSES is a hypothetical illustration of the expenses associated
with a $1,000 investment over stated periods, based on the expenses in the above
tables and an assumed annual rate of return of 5%. This annual rate of return
should not be considered an indication of actual or expected performance of a
Fund nor a representation of past or future expenses; actual expenses and
returns may be greater or lesser than those shown.
With regard to the combined fees and expenses of the Small Cap Fund and its
Master Portfolio, the Company's Board of Directors has considered whether
various costs and benefits of investing all of the Fund's assets in a
corresponding Master Portfolio rather than directly in a portfolio of securities
would be more or less than if the Fund invested in portfolio securities
directly. The Company's Board of Directors believes that the aggregate per share
expenses of the Fund will not be more than the expenses incurred by the Fund if
the Fund invested directly in the type of securities held by the Master
Portfolio. In addition to selling its interests to the Small Cap Fund, the
Master Portfolio may sell its interests to other mutual funds or accredited
investors. Information regarding these and any other investment options in a
Master Portfolio may be obtained by calling Stephens at 1-800-643-9691.
Additional information regarding such Funds' and the corresponding Master
Portfolio expenses is included under "The Funds, Master Portfolio and
Management" and "Management and Servicing Fees" and in the SAI under
"Management" and "Servicing Plans."
7 PROSPECTUS
<PAGE> 411
FINANCIAL HIGHLIGHTS
The following information has been derived from the Financial Highlights in
the financial statements for the fiscal period ended March 31, 1996 for Pacifica
Funds Trust's Balanced and Equity Value Funds, the respective predecessor
portfolios to the Funds. This information is provided to assist you in
evaluating the performance of each Fund since its commencement of operations.
The financial information for the fiscal years ended September 30, 1991, through
1995 and for the period ended September 30, 1990 were each audited by former
independent accountants to the predecessor funds. The financial information and
the report on the audit for the year ended September 30, 1995 are incorporated
by reference into the SAI. The unaudited financial information and the related
notes for the six months ended March 31, 1996 also are incorporated by reference
into the SAI. See "The Funds, Master Portfolio and Management" below and
"Capital Stock" in the SAI. This information should be read in conjunction with
the related financial statements and the notes thereto.
The Institutional shares in the tables for the Balanced and Equity Value Funds
are the predecessors of the Institutional Class shares offered for such Funds by
this prospectus. Financial Highlights for the Institutional Class shares of the
Growth and Income and Small Cap Funds are not provided because Institutional
Class shares of the Growth and Income Fund were not offered during the periods
presented and shares of the Small Cap Fund are being offered for the first time
by this prospectus.
PROSPECTUS 8
<PAGE> 412
BALANCED FUND
FOR A SHARE OUTSTANDING AS SHOWN
<TABLE>
<CAPTION>
(INSTITUTIONAL
SHARES)* PERIOD
PERIOD ENDED YEAR ENDED SEPTEMBER 30, ENDED
MARCH 31, 1996 ------------------------------------------------- SEPT. 30,
(UNAUDITED) 1995 1994 1993 1992 1991 1990(1)
-------------- ------- -------- -------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value -- beginning of period............. $ 11.84 $ 11.67 $ 12.71 $ 11.18 $ 10.80 $ 9.50 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(2)......................... 0.21 0.46 0.43 0.44 0.42 0.52 0.14
Net gain (loss) on securities (both realized and
unrealized)(2)................................. 0.58 0.68 (0.13) 1.72 0.53 1.40 (0.64)
-------- ------- -------- -------- ------- ------- --------
Total from investment operations............... 0.79 1.14 0.30 2.16 0.95 1.92 (0.50)
-------- ------- -------- -------- ------- ------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income............. (0.20) (0.47) (0.46) (0.43) (0.43) (0.62) --
Distributions from capital gains................. (0.05) (0.50) (0.88) (0.20) (0.14) -- --
-------- ------- -------- -------- ------- ------- --------
Total distributions............................ 0.25 (0.97) (1.34) (0.63) (0.57) (0.62) --
-------- ------- -------- -------- ------- ------- --------
Net asset value -- end of period................. $ 12.38 $ 11.84 $ 11.67 $ 12.71 $ 11.18 $ 10.80 $ 9.50
======== ======= ======== ======== ======= ======= =======
Total return (excluding sales load)............ 6.74% 10.62% 2.30% 19.83% 9.03% 20.78% (5.00)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).................. $ 89,485 $89,034 $108,290 $104,434 $65,226 $50,038 $33,185
Ratio of expenses to average net assets.......... 0.94% 1.03% 1.09% 1.01% 1.02% 0.96% 0.93%(3)
Effect of waivers on above ratio................. 0.03% 0.02% 0.02% 0.05% 0.08% 0.22% 0.67%(3)
Ratio of net investment income to average net
assets......................................... 3.36% 4.05% 3.55% 3.62% 3.76% 5.88% 5.87%(3)
Portfolio turnover rate.......................... 50% 90% 35% 60% 49% 30% 12%
Average Commission Rate(4)....................... $ 0.076 -- -- -- -- -- --
</TABLE>
- -------------------
<TABLE>
<S> <C>
* Institutional shares commenced operations on October 1, 1995.
(1) Commencement of operations was on July 2, 1990.
(2) Per share data are based upon average monthly shares outstanding.
(3) Annualized.
(4) For fiscal years beginning on or after September 1, 1995, a Fund is required to disclose its average commission rate per
share for security trades on which commissions are charged. This amount may vary from period to period and fund to fund
depending on the mix of trades executed in various markets where trading practices and commission rate structures may
differ.
</TABLE>
9 PROSPECTUS
<PAGE> 413
EQUITY VALUE FUND
FOR A SHARE OUTSTANDING AS SHOWN
<TABLE>
<CAPTION>
(INSTITUTIONAL
SHARES)* PERIOD
PERIOD ENDED YEAR ENDED SEPTEMBER 30, ENDED
MARCH 31, 1996 -------------------------------------------------- SEPT. 30,
(UNAUDITED) 1995 1994 1993 1992 1991 1990(1)
-------------- -------- -------- -------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value -- beginning of period............ $ 13.27 $ 12.36 $ 13.17 $ 10.73 $ 10.45 $ 8.48 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(2)........................ 0.10 0.24 0.20 0.21 0.20 0.28 0.08
Net gain (loss) on securities (both realized and
unrealized)(2)................................ 1.12 1.63 0.74 2.75 0.49 1.98 (1.60)
-------- -------- -------- -------- ------- ------- -------
Total from investment operations.............. 1.22 1.87 0.94 2.96 0.69 2.26 (1.52)
-------- -------- -------- -------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income............ (0.09) (0.25) (0.21) (0.23) (0.22) (0.29) --
Distributions from capital gains................ (0.55) (0.71) (1.54) (0.29) (0.19) -- --
-------- -------- -------- -------- ------- ------- -------
Total distributions........................... (0.64) (0.96) (1.75) (0.52) (0.41) (0.29) --
-------- -------- -------- -------- ------- ------- -------
Net asset value -- end of period................ $ 13.85 $ 13.27 $ 12.36 $ 13.17 $ 10.73 $ 10.45 $ 8.48
======== ======== ======== ======= ======= ======= =======
Total return (excluding sales load)........... 9.60% 16.58% 7.49% 28.22% 6.81% 27.05% (15.20)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)................. $215,434 $170,406 $168,852 $140,551 $92,915 $68,412 $26,100
Ratio of expenses to average net assets......... 0.90%(3) 0.96% 0.99% 0.98% 1.02% 0.98% 0.91%(3)
Effect of waivers on above ratio................ 0.02%(3) 0.02% 0.02% 0.01% -- 0.13% 0.95%(3)
Ratio of net investment income to average net
assets........................................ 1.46%(3) 1.97% 1.60% 1.73% 1.86% 2.69% 3.38%(3)
Portfolio turnover rate......................... 43% 75% 41% 82% 78% 36% 21%
Average Commission Rate(4)...................... $ 0.059 -- -- -- -- -- --
</TABLE>
- -------------------
<TABLE>
<S> <C>
* Institutional shares commenced operations on October 1, 1995.
(1) Commencement of operations was on July 2, 1990.
(2) Per share data are based upon average monthly shares outstanding.
(3) Annualized.
(4) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average commission rate
per share for security trades on which commissions are charged. This amount may vary from period to period and fund to
fund depending on the mix of trades executed in various markets where trading practices and commission rate structures
may differ.
</TABLE>
PROSPECTUS 10
<PAGE> 414
HOW THE FUNDS WORK
INVESTMENT OBJECTIVES AND POLICIES
The EQUITY VALUE FUND'S investment objective is to seek to provide investors
with long-term capital appreciation. The Fund pursues this objective by
investing primarily in equity securities, including common stocks and may invest
in debt instruments that are convertible into common stocks of both domestic and
foreign companies. The Fund may invest in large, well-established companies and
smaller companies with market capitalization exceeding $50 million. The Fund may
invest up to 5% of its assets in foreign equity securities. Income generation is
a secondary consideration. The Fund may purchase dividend paying stocks of
particular issuers when the issuer's dividend record may, in the investment
adviser's opinion, have a favorable influence on the market value of the
securities. The Fund also may purchase convertible securities with the same
characteristics as common stocks. As with all mutual funds, there can be no
assurance that the Fund, which is a diversified portfolio, will achieve its
investment objective. The Fund invests, under normal market conditions,
substantially all of its total assets in income-producing securities, including
both debt instruments and equity securities, and, under normal market
conditions, at least 65% of its total assets in common stocks and securities
convertible into common stocks. Any change in the investment objective of the
Equity Value Fund by the Board of Directors may result in the Fund having an
investment objective different from the objective which a shareholder considered
appropriate at the time of investment in the Fund.
The BALANCED FUND'S investment objective is to seek to provide investors with
both capital appreciation and current income resulting in a high total
investment return consistent with prudent investment risk and a balanced
investment approach. The Fund pursues this objective by investing in equity
securities and debt instruments through a balanced and diversified program. The
Fund normally invests between 30% and 70% of its assets in common stocks that
are considered by the investment adviser to have better than average prospects
for growth of capital and income. The Fund invests primarily in domestic equity
securities, but may invest up to 5% of its assets in equity securities listed or
traded exclusively on a foreign exchange. The remaining balance of the Fund's
assets is invested in senior fixed-income securities, including corporate debt
securities, commercial paper and mortgage-backed and asset-backed securities,
based on the relative stability of income and principal of such securities. Debt
instruments in which the Fund may invest are rated at least investment grade or
deemed comparable.
Senior Fixed-Income Securities
In selecting senior fixed-income securities for the Balanced Fund, the adviser
seeks to select those debt instruments that appear best calculated to achieve
the Fund's
11 PROSPECTUS
<PAGE> 415
investment objective within the credit and risk tolerances established for the
Fund. In accordance with those policies, the Balanced Fund may purchase
commercial paper rated "A-2" or better by S&P or "Prime-2" or better by Moody's,
corporate debt securities rated "BBB" or better by S&P or "Baa" or better by
Moody's (which contain some speculative characteristics) and mortgage-backed and
asset-backed securities rated "AA" or better by S&P or "Aa" or better by Moody's
(or the foregoing types of debt securities given equivalent ratings by at least
two other nationally recognized statistical rating organizations ("NRSROs"), or,
if any such securities are not rated, are of comparable quality in the adviser's
opinion).
The Balanced Fund may also purchase zero-coupon bonds (i.e., discount debt
obligations that do not make periodic interest payments) that are subject to
greater market fluctuations from changing interest rates than debt obligations
of comparable maturities which make current distributions of interest.
Equity Investments
In selecting equity investments (which may include common stocks of both
domestic and foreign companies) for the Equity Value and Balanced Funds, the
adviser selects companies for investment using both quantitative and qualitative
analysis to identify those issuers that, in the adviser's opinion, exhibit
below-average valuation multiples, above-average financial strength, a strong
position in their industry and a history of steady profit growth.
The adviser also may select other equity securities in addition to common
stocks for investment by the Equity Value and Balanced Funds. Such other equity
securities are preferred stocks, high grade securities convertible into common
stocks, and warrants. Neither Fund will invest more than 5% of its net assets in
warrants, no more than 2% of which will be invested in warrants which are not
listed on the New York or American Stock Exchanges. Under normal market
conditions, the Equity Value and Balanced Funds will each invest at least 65% of
its total assets in common stocks or securities convertible into common stocks.
For temporary defensive purposes, however, both the Equity Value and Balanced
Funds may invest in U.S. Government obligations, certificates of deposit,
bankers acceptances, commercial paper, repurchase agreements (maturing in seven
days or less) and debt obligations of corporations (corporate bonds, debentures,
notes and other similar corporate debt instruments) that are rated investment
grade or better by S&P or Moody's.
The Equity Value and Balanced Funds also may hold short-term U.S. Government
obligations, money market instruments, repurchase agreements, securities issued
by other investment companies within the limits prescribed by the Investment
Company Act of 1940, as amended (the "1940 Act"), and cash, pending investment,
to meet anticipated redemption requests or if, in the opinion of the investment
adviser, suitable investments for a Fund are unavailable. Such investments may
be made in such
PROSPECTUS 12
<PAGE> 416
proportions as, in the opinion of the investment adviser, existing circumstances
may warrant, and may include obligations of foreign banks and foreign branches
of U.S. banks. For additional descriptions of the types of securities and
investment practices used by the Equity Value and Balanced Funds, see
"Prospectus Appendix -- Additional Investment Policies" and the SAI.
GROWTH AND INCOME FUND
The Growth and Income Fund seeks to earn current income and achieve long-term
capital appreciation by investing primarily in common stocks, and preferred
stocks and debt securities that are convertible into common stocks. There can be
no assurance that the Fund, which is a diversified portfolio, will achieve its
investment objective. Under normal market conditions, the Fund will invest at
least 65% of its total assets in common stocks and securities which are
convertible into common stocks and at least 65% of its total assets in
income-producing securities. Up to 25% of the Fund's assets may be invested in
securities of foreign issuers.
The Growth and Income Fund invests in common stocks of issuers that, in the
opinion of Wells Fargo Bank, as the Fund's investment adviser, exhibit a strong
earnings growth trend and that are believed by Wells Fargo Bank to have
above-average prospects for future earnings growth. The Fund maintains a
portfolio of common stocks diversified among industries and companies. The Fund
may invest in common stocks of large companies (i.e., for the purposes of the
Fund, those companies with more than $750 million in capitalization) which Wells
Fargo Bank believes offer the potential for long-term earnings growth or
above-average dividend yield. Emphasis may be placed on common stocks which are
trading at low price-to-earnings ratios, either relative to the overall market
or to the security's historic price-to-earnings relationship, and on common
stocks of issuers that have historically paid above-average dividends. Some
investments also may be made in common stocks of medium- and smaller-size
companies (i.e., for the purposes of the Fund, those companies with at least
$250 million, but less than $750 million in capitalization) which may have the
potential to generate high levels of future revenue and earnings growth and
where the investment opportunity may not be fully reflected in the price of the
securities but which may involve greater risks than investments in larger
companies.
The Growth and Income Fund intends to invest less than 50% of its assets in
the securities of medium- and smaller-size companies and the remainder in
securities of larger-size companies. However, the actual percentages may vary
according to changes in market conditions and the judgment of the adviser of how
best to achieve the Fund's investment objective.
The Growth and Income Fund may invest in securities of foreign governmental
and private issuers and may also invest in equity securities of companies in
"emerging" or less developed markets.
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The Growth and Income Fund may temporarily hold assets in cash or make
short-term investments to the extent appropriate to maintain adequate liquidity
for redemption requests or other cash management needs, or for temporary
defensive purposes. The short-term investments that the Fund may purchase for
liquidity purposes include U.S. Treasury bills, shares of other mutual funds and
repurchase agreements (as described below).
THE SMALL CAP FUND
The Small Cap Fund's investment objective is to seek above-average long-term
capital appreciation in order to provide investors with a rate of total return
exceeding that of the Russell 2000 Index (before fees and expenses) over a time
horizon of three to five years. The Small Cap Fund seeks to achieve its
investment objective by investing all of its assets in the Small Cap Master
Portfolio, which has the same investment objective as the Fund. The Fund and
Master Portfolio seek to provide above-average capital growth for investors
willing to assume above-average risk. The Master Portfolio seeks to achieve this
investment objective through the active management of a broadly diversified
portfolio of growth-oriented common stocks. The Master Portfolio invests
primarily in companies with market capitalizations between $50 million and $1
billion at the time of acquisition, although it may sometimes invest in
companies with capitalizations greater or less than these amounts. The Master
Portfolio invests primarily in common stocks of domestic and foreign companies
believed by Wells Fargo Bank, as investment adviser, to be characterized by new
or innovative products, services or processes and to have above-average
prospects for capital appreciation. The Master Portfolio will sell the common
stock of any company in its investment portfolio after such company's market
capitalization exceeds $2 billion.
The equity securities in the Master Portfolio's investment portfolio may have
some of the following characteristics: low or no dividends; smaller market
capitalizations (less than $1 billion); less market liquidity; newly public
companies (i.e., recent initial public offering); relatively short operating
histories; aggressive capitalization structures (including high debt levels);
and involvement in rapidly growing/changing industries and/or new technologies.
Under normal market conditions, the Small Cap Master Portfolio holds at least
20 common stock issues spread across multiple industry groups and sectors of the
economy. The majority of these holdings consist of smaller capitalization
companies, established growth companies and turnaround or acquisition
candidates. The Master Portfolio may acquire securities through initial public
offerings of companies whose securities have been offered to the public for
three months or less ("IPOs") and may acquire and hold securities of start-up
companies and other newer issuers. It is expected that no more than 20% of the
Master Portfolio's assets will be invested in these highly aggressive issues at
one time.
PROSPECTUS 14
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The Small Cap Fund may invest in securities of foreign governmental and
private issuers and may also invest in equity securities of companies in
"emerging" or less developed markets.
Under ordinary market conditions, up to 5% of the Master Portfolio's net
assets will be invested in convertible debt securities that are not either rated
in the four highest rating categories by one or more NRSROs, such as Moody's or
S&P, or unrated securities determined by Wells Fargo Bank to be of comparable
quality. Securities rated in the fourth lowest rating category (i.e., rated
"BBB" by S&P or "Baa" by Moody's) are regarded by S&P as having an adequate
capacity to pay interest and repay principal, but changes in economic conditions
or other circumstances are more likely to lead to a weakened capacity to make
such repayments. Moody's considers such securities as having speculative
characteristics.
From time to time Wells Fargo Bank may determine that conditions in the
securities markets make pursuing the Small Cap Master Portfolio's basic
investment strategy inconsistent with the best interests of the Master
Portfolio's investors. At such times, Wells Fargo Bank may use temporary
alternative strategies, primarily designed to reduce fluctuations in the value
of the Master Portfolio's assets. In implementing these temporary "defensive"
strategies, the Master Portfolio may invest in preferred stock or
investment-grade debt securities and in money market securities. It is expected
that these temporary "defensive" investments will not exceed 35% of the Master
Portfolio's total assets.
The Small Cap Master Portfolio pursues an active trading investment strategy,
and the length of time the Master Portfolio has held a particular security is
not generally a consideration in investment decisions. Accordingly, the Master
Portfolio's portfolio turnover rate may be higher than that of other funds that
do not pursue an active trading investment strategy. Portfolio turnover
generally involves some expense to the Master Portfolio, including brokerage
commissions or dealer mark-ups and other transactions costs on the sale of
securities and the reinvestment in other securities. Portfolio turnover also can
generate capital gains tax consequences.
For additional descriptions of the types of securities and investment
practices used by the Funds and Master Portfolios, see "Risk Factors,"
"Prospectus Appendix -- Additional Investment Policies" in this Prospectus and
"Investment Restrictions" and "Additional Permitted Investment Activities" in
the SAI.
MASTER/FEEDER STRUCTURE -- THE SMALL CAP MASTER PORTFOLIO
The Small Cap Fund invests all of its assets in the Master Portfolio of the
Master Trust which has the same investment objective as the Fund. See
"Investment Objective and Policies" for a description of the Fund's and Master
Portfolio's objectives and policies and "Management and Servicing Fees" for a
description of the Fund's and Master
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Portfolio's management. The Master Trust was organized as a Delaware business
trust on August 15, 1991.
The Master Portfolio is the successor to certain assets of the Small
Capitalization Growth Fund for Employment Retirement Plans, a collective
investment fund (the "Collective Investment Fund"). The Collective Investment
Fund was a private, non-registered investment fund previously managed by Wells
Fargo. Immediately prior to the commencement of the Fund's operations, the
assets of the Collective Investment Fund were purchased by the Master Portfolio
and the Collective Investment Trust redeemed all of its outstanding interests
and ceased operating as a trust. The Master Portfolio manages its investments in
a manner identical in all material respects to the operation of the Collective
Investment Fund.
The Company's Board of Directors believes that if other investors invest their
assets in the Master Portfolio, certain economic efficiencies may be realized
with respect to the Master Portfolio. For example, fixed expenses that otherwise
would have been borne solely by the Fund would be spread among a potentially
larger asset base provided by more than one fund investing in the Master
Portfolio. There can be no assurance that these economic efficiencies will be
achieved. The Fund and other entities investing in the Master Portfolio are each
liable for all obligations of the Master Portfolio. However, the risk of the
Fund incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance existed and the Master Trust
itself is unable to meet its obligations. Accordingly, the Company's Board of
Directors believes that neither the Fund nor its shareholders will be adversely
affected by investing Fund assets in the Master Portfolio. However, if a mutual
fund or other investor withdraws its investment from the Master Portfolio, the
economic efficiencies (e.g., spreading fixed expenses among a larger asset base)
that the Company's Board believes may be available through investment in the
Master Portfolio may not be fully achieved. In addition, given the relative
novelty of the master/feeder structure, accounting or operational difficulties,
although unlikely, could arise. See "Management and Servicing Fees" for
additional description of the Fund's and Master Portfolio's expenses and
management.
The Fund may withdraw its investment in the Master Portfolio only if the
Company's Board of Directors determines that such action is in the best
interests of the Fund and its shareholders. Upon such withdrawal, the Company's
Board would consider alternative investments, including investing all of the
Fund's assets in another investment company with the same investment objective
as the Fund or hiring an investment adviser to manage the Fund's assets in
accordance with the investment policies described below with respect to the
Master Portfolio.
The investment objective and other fundamental policies of the Master
Portfolio cannot be changed without approval by the holders of a majority (as
defined in the 1940 Act) of the Master Portfolio's outstanding interests. See
"Investment Objectives and
PROSPECTUS 16
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Policies." Whenever the Fund, as an interestholder of the Master Portfolio, is
requested to vote on any matter submitted to interestholders of the Master
Portfolio, the Fund will hold a meeting of its shareholders to consider such
matters. The Fund will cast its votes in proportion to the votes received from
its shareholders. Shares for which the Fund receives no voting instructions will
be voted in the same proportion as the votes received from the other Fund
shareholders.
Certain policies of the Master Portfolio which are non-fundamental may be
changed by vote of a majority of the Master Trust's Trustees without
interestholder approval. If the Master Portfolio's investment objective or
fundamental or non-fundamental policies are changed, the Fund may elect to
change its objective or policies to correspond to those of the Master Portfolio.
The Fund may also elect to redeem its interests in the Master Portfolio and
either seek a new investment company with a matching objective in which to
invest or retain its own investment adviser to manage the Fund's portfolio in
accordance with its objective. In the latter case, the Fund's inability to find
a substitute investment company in which to invest or equivalent management
services could adversely affect shareholders' investments in the Fund. The Fund
will provide shareholders with 30 days' written notice prior to the
implementation of any change in the investment objective of the Fund or the
Master Portfolio, to the extent possible. See "Investment Objective and
Policies" for additional information regarding the Fund's and the Master
Portfolio's investment objectives and policies. Additional information regarding
the officers and Directors/Trustees of the Company and the Master Trust is
located in the Fund's SAI under "Management."
In addition to Institutional Class Shares, the Fund offers two other classes
of shares to retail investors -- the Class A and Class B Shares, which are also
invested in the Master Portfolio. The Master Portfolio may sell its interests to
other mutual funds or accredited investors. The expenses and, correspondingly,
the investment returns of Class A and Class B Shares and other investment
options in the Master Portfolio may differ from those of the Institutional Class
Shares of the Fund. Information regarding these and other (if any) investment
options in the Master Portfolio may be obtained by calling Stephens at
1-800-643-9691. Additional information regarding the Fund's and the Master
Portfolio's expenses is included under the heading "Summary of Expenses."
RISK FACTORS
The price per share of each of the Funds will fluctuate with changes in value
of the investments held by a Fund. Shareholders of a Fund should, therefore,
expect the value of their shares to fluctuate with changes in the value of the
securities owned by that Fund.
The market value of a Fund's investment in fixed-income securities will change
in response to changes in interest rates and the relative financial strength of
each issuer. During periods of falling interest rates, the value of fixed-income
securities generally
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rises. Conversely, during periods of rising interest rates, the value of such
securities generally declines. Debt securities with longer maturities, which
tend to produce higher yields, are subject to potentially greater capital
appreciation and depreciation than obligations with shorter maturities. Changes
in the financial strength of an issuer or changes in the ratings of any
particular security also may affect the value of these investments. Fluctuations
in the market value of fixed-income securities subsequent to their acquisition
will not affect cash income from such securities but will be reflected in a
Fund's net asset value. Securities rated in the fourth highest rating category
are regarded by S&P as having an adequate capacity to pay interest and repay
principal, but changes in economic conditions or other circumstances are more
likely to lead to a weakened capacity to make such repayments. Moody's considers
such securities as having speculative characteristics. Subsequent to its
purchase by the Fund, an issue of securities may cease to be rated or its rating
may be reduced below the minimum rating required for purchase by the Fund. The
adviser will consider such an event in determining whether the Balanced Fund
should continue to hold the obligation. Securities rated below the fourth
highest rating category (sometimes called "junk bonds") are often considered to
be speculative and involve greater risk of default or price changes due to
changes in the issuer s credit-worthiness. The market prices of these securities
may fluctuate more than higher quality securities and may decline significantly
in periods of general economic difficulty.
There may be some additional risks associated with investments in smaller
and/or newer companies because their shares tend to be less liquid than
securities of larger companies. Further, shares of small and new companies are
generally more sensitive to purchase and sale transactions and changes in the
issuer's financial condition and, therefore, the prices of such stocks may be
more volatile than those of larger company stocks and may be subject to more
abrupt price movements than securities of larger companies.
Investing in the securities of issuers in any foreign country, including
American Depositary Receipts ("ADRs") and European Depositary Receipts ("EDRs")
and similar securities, involves special risks and considerations not typically
associated with investing in U.S. companies. These include differences in
accounting, auditing and financial reporting standards; generally higher
commission rates on foreign portfolio transactions; the possibility of
nationalization, expropriation or confiscatory taxation; adverse changes in
investment or exchange control regulations (which may include suspension of the
ability to transfer currency from a country); and political, social and monetary
instability or diplomatic developments that could adversely affect U.S.
investments in foreign countries. Additionally, foreign securities and dividends
and interest payable on those securities may be subject to foreign taxes,
including taxes withheld from payments on those securities. Foreign securities
often trade with less frequency and volume than domestic securities and,
therefore, may exhibit greater price volatility. Additional costs associated
with an investment in foreign securities may
PROSPECTUS 18
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include higher custodial fees than apply to domestic custodial arrangements and
transaction costs of foreign currency conversions. Changes in foreign exchange
rates also will affect the value of securities denominated or quoted in
currencies other than the U.S. dollar. A Fund's performance may be affected
either unfavorably or favorably by fluctuations in the relative rates of
exchange between the currencies of different nations, by exchange control
regulations and by indigenous economic and political developments.
There are special risks involved in investing in emerging-market countries.
Most are heavily dependent on international trade, and some are especially
vulnerable to recessions in other countries. Some of these countries are also
sensitive to world commodity prices and may be subject to political and social
uncertainties. Many investments in emerging markets can be considered
speculative, and their prices can be much more volatile than in the more
developed nations of the world. This difference reflects the greater
uncertainties of investing in less established markets and economies. In
addition, the financial markets of emerging market countries are generally less
well capitalized and thus securities of issuers based in such countries may be
less liquid.
Illiquid securities, which may include certain restricted securities, may be
difficult to sell promptly at an acceptable price. Certain restricted securities
may be subject to legal restrictions on resale. Delay or difficulty in selling
securities may result in a loss or be costly to a Fund.
The adviser may use certain derivative investments or techniques, such as
buying and selling options and futures contracts and entering into currency
exchange contracts or swap agreements, to adjust the risk and return
characteristics of a Fund's portfolio. Derivatives are financial instruments
whose value is derived, at least in part, from the price of another security or
a specified asset, index or rate. Some derivatives may be more sensitive than
direct securities to changes in interest rates or sudden market moves. Some
derivatives also may be susceptible to fluctuations in yield or value due to
their structure or contract terms. If a Fund's adviser judges market conditions
incorrectly, the use of certain derivatives could result in a loss, regardless
of the adviser's intent in using the derivatives.
The Small Cap Master Portfolio pursues an active trading investment strategy,
and the length of time the Master Portfolio has held a particular security is
not generally a consideration in investment decisions. Accordingly, the
portfolio turnover rate for such Master Portfolio may be higher than that of
other funds that do not pursue an active trading investment strategy. Portfolio
turnover generally involves some expense to the Master Portfolio, including
brokerage commissions or dealer mark-ups and other transaction costs on the sale
of securities and the reinvestment in other securities. Portfolio turnover also
can generate short-term capital gains tax consequences.
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There is, of course, no assurance that a Fund will achieve its investment
objective or be successful in preventing or minimizing the risk of loss that is
inherent in investing in particular types of investment products. See
"Prospectus Appendix -- Additional Investment Policies" and the SAI for further
information about investment policies and risks.
PERFORMANCE
Fund performance may be advertised from time to time in terms of average
annual total return, cumulative total return and yield. Performance figures are
based on historical results and are not intended to indicate future performance.
Performance figures are calculated separately for each class of shares of a
Fund.
Average annual total return is based on the overall dollar or percentage
change in value of a hypothetical investment in shares of a Fund's class and
assumes the investment is at NAV and all dividends and capital-gain
distributions attributable to a class are also reinvested at NAV in shares of
the class. Cumulative total return is calculated similarly except that the
return figure is aggregated over the relevant period instead of annualized.
Yield refers to the income generated by an investment in a class of a Fund's
shares over a specified period (usually 30 days), expressed as an annual
percentage rate. Effective yield is calculated similarly but assumes
reinvestment of the income earned from a Fund. Because of the effects of
compounding, effective yields are slightly higher than yields. The
tax-equivalent yield of a class of shares is similarly calculated but assumes
that a stated income tax rate has been applied to determine the tax-equivalent
figure.
In addition to presenting these standardized performance calculations, at
times, the Funds may also present non-standard performance figures, such as
three-month total returns and, for purposes of sales literature, yields and
distribution rates. Because of the differences in the fees and/or expenses borne
by shares of each class of the Funds, the performance figures on one class of
shares can be expected, at any given time, to vary from the performance figures
for other classes of the Funds.
The performance information advertised by the Small Cap Fund for periods prior
to September 6, 1996, the date the Fund and the Master Portfolio commenced
operations, is based upon the prior performance of the Small Capitalization
Growth Fund for BRP Employee Retirement Plans, a Wells Fargo Bank Collective
Investment Fund for Business Retirement Programs (the "CIF"). The performance
information is adjusted to reflect the Fund's and the Master Portfolio's current
level of operating expenses, including any front-end sales loads or contingent
deferred sales charges. The prior performance of the CIF is deemed relevant
because the Fund invests all of its assets in the Master Portfolio which
acquired the assets of the CIF immediately prior to the commencement of the
Fund's operations. The Master Portfolio, as successor to the assets
PROSPECTUS 20
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of the CIF is managed by Wells Fargo in a manner that is in all material
respects equivalent to the management of the CIF.
Additional performance information is contained in the SAI under "Performance
Calculations" and in the Annual Report, which are available upon request free of
charge by calling the Company at 1-800-222-8222 or by writing the Company at the
address shown on the front cover of the Prospectus.
THE FUNDS, MASTER PORTFOLIO
AND MANAGEMENT
THE FUNDS AND MASTER PORTFOLIO
The Funds are four of the funds offered by the Stagecoach Family of Funds. The
Company was organized as a Maryland corporation on September 9, 1991 and
currently offers shares of the following funds: Aggressive Growth, Arizona
Tax-Free, Asset Allocation, Balanced, California Tax-Free Bond, California
Tax-Free Income, California Tax-Free Money Market Mutual, Corporate Stock,
Diversified Income, Equity Value, Ginnie Mae, Government Money Market Mutual,
Growth and Income, Intermediate Bond, Money Market Mutual, Money Market Trust,
National Tax-Free, National Tax-Free Money Market Mutual, Oregon Tax-Free, Prime
Money Market Mutual, Short-Intermediate U.S. Government Income, Small Cap,
Treasury Money Market Mutual, and U.S. Government Allocation Funds. The Arizona
Tax-Free, Balanced, California Tax-Free Bond, Equity Value, Ginnie Mae, Growth
and Income, Intermediate Bond, Money Market Mutual, National Tax-Free, Oregon
Tax-Free, Prime Money Market Mutual, Small Cap and Treasury Money Market Mutual
Funds each offer three classes of shares. The Aggressive Growth, Asset
Allocation, California Tax-Free Income, Diversified Income, Short-Intermediate
U.S. Government Income and U.S. Government Allocation Funds each offer two
classes of shares. The California Tax-Free Money Market Mutual, Corporate Stock,
Government Money Market Mutual, Money Market Trust, and National Tax-Free Money
Market Mutual Funds each offer one class of shares. Most of the Company's funds
are authorized to issue multiple classes of shares, one class generally subject
to a front-end sales charge and, in some cases, a class subject to a
contingent-deferred sales charge, that are offered to retail investors. Certain
of the Company's funds also are authorized to issue other classes of shares,
which are sold primarily to institutional investors at NAV. Each class of shares
in a fund represents an equal, proportionate interest in a fund with other
shares of the same class. Shareholders of each class bear their pro rata portion
of the fund's operating expenses, except for certain class-specific expenses
(e.g., any state securities registration fees, shareholder servicing fees or
distribution fees that may be paid under Rule 12b-1) that are allocated to a
particular
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class and, accordingly, may affect performance. Please contact Stagecoach
Shareholder Services at 1-800-222-8222 or Stephens at 1-800-643-9691 if you
would like additional information about investment options in a Master Portfolio
or other funds or classes of shares offered.
The Company's Board of Directors supervises the Funds' activities and monitors
their contractual arrangements with various service providers. Although the
Company is not required to hold annual shareholder meetings, special meetings
may be required for purposes such as electing or removing Directors, approving
advisory contracts and distribution plans, and changing a Fund's investment
objective or fundamental investment policies. All shares of the Company have
equal voting rights and are voted in the aggregate, rather than by series or
class, unless otherwise required by law (such as when the voting matter affects
only one series or class). A Fund shareholder of record is entitled to one vote
for each share owned and fractional votes for fractional shares owned. A more
detailed description of the voting rights and attributes of the shares is
contained in the "Capital Stock" section of the SAI.
MANAGEMENT
Wells Fargo Bank is the investment adviser to the Small Cap Master Portfolio
and the Balanced, Equity Value and Growth and Income Funds. In addition, Wells
Fargo Bank serves as the Funds transfer and dividend disbursing agent and is a
shareholder servicing agent and selling agent. Wells Fargo Bank, one of the
largest banks in the United States, was founded in 1852 and is the oldest bank
in the western United States. As of June 30, 1996, Wells Fargo Bank and its
affiliates provided investment advisory services for approximately $56 billion
of assets of individuals, trusts, estates and institutions. Wells Fargo Bank
also serves as investment adviser to the other separately managed funds (or
master portfolios in which such funds invest) of the Company, and as investment
adviser or sub-adviser to five other registered, open-end, management investment
companies. Wells Fargo Bank, a wholly owned subsidiary of Wells Fargo & Company,
is located at 420 Montgomery Street, San Francisco, California 94104.
Subsequent to acquisition by Wells Fargo & Company of First Interstate Bancorp
on April 1, 1996, Wells Fargo Investment Management, Inc. ("WFIM") (formerly,
First Interstate Capital Management, Inc.) served as investment adviser to the
predecessor funds of the Balanced and Equity Value Funds. WFIM, a wholly owned
subsidiary of Wells Fargo & Company, is located at 444 Market Street, San
Francisco, California 94105. Prior to March 18, 1994, such predecessor funds'
investment adviser was San Diego Financial Capital Management, Inc. (predecessor
to First Interstate Capital Management, Inc.) which was acquired by First
Interstate Bancorp through its merger with San Diego Financial Corporation.
Mr. Brian Mulligan is primarily responsible, as co-manager, for the day-to-day
management of the portfolio of the Growth and Income Fund. Mr. Mulligan has been
co-
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manager since October 1, 1995. Mr. Mulligan is also co-manager of the Wells
Fargo Core Equities Group. He is a Vice-President and Manager of the San
Francisco Investment Office, where he is primarily responsible for personal
accounts including individuals, charitable foundations and IRAs. He also covers,
from a research standpoint, the telecommunications and electric utility
industries. Mr. Mulligan has been with Wells Fargo Bank since its merger with
Crocker National Bank in 1986. Mr. Mulligan was graduated from Skidmore College
with a B.S. degree in business management. He is a Chartered Financial Analyst
and serves as a member of the staff of graders. In addition, Mr. Mulligan is a
former member of the Board of Governors for the Los Angeles Society of Financial
Analysts and a present member of the San Francisco Security Analysts Society.
Mr. Robert Bissell assumed sole responsibility as a portfolio manager for the
day-to-day management of the Equity Value Fund, and assumed responsibility as a
co-portfolio manager for the day-to-day management of the equity portion of the
Balanced Fund, as of the commencement of operations of the Funds on September 6,
1996. Mr. Bissell has also been responsible for the day-to-day management of the
Growth and Income Fund since January 1992. Mr. Bissell is a Senior
Vice-President and Manager of equities at Wells Fargo Bank. Mr. Bissell joined
Wells Fargo Bank at the time of its merger with Crocker Bank and been with the
combined organization for over 20 years. Prior to joining Wells Fargo Bank, he
was Vice-President and Investment Counsel with M.H. Edie Investment Counseling,
where he managed institutional and high-net-worth portfolios. Mr. Bissell holds
a finance degree from the University of Virginia. He is a Chartered Financial
Analyst and a member of the Los Angeles Society of Financial Analysts.
Ms. Tamyra Thomas assumed responsibility as a co-portfolio manager for the
day-to-day management of the bond portion of the Balanced Fund as of the
commencement of operations of the Fund. She is a Senior Vice-President and the
Chief Fixed Income Investment Officer of the Investment Management Group of
Wells Fargo Bank. She is also Chair of the Investment Management Group Policy
Committee. Ms. Thomas has managed bond portfolios for over a decade. She
currently manages in excess of $1 billion of long-term taxable bond portfolios
for various foundations, defined benefit plans and other clients. Prior to
joining Wells Fargo Bank in early 1988, she held a number of senior investment
positions for the Valley Bank & Trust Company of Utah including Vice-President
and Manager of the Investment Department and Chairman of the Trust Investment
Committee. She holds a B.S. degree from the University of Utah and was past
president of the Utah Bond Club. Ms. Thomas is a Chartered Financial Analyst.
Mr. Jon Hickman, as Manager of the Growth Equity Team, has overseen the
management of the Small Cap Master Portfolio since its inception in September of
1996. In addition, Mr. Hickman also manages equity and balanced portfolios for
individuals and employee benefit plans. He has over ten years of experience in
the investment management field and is a member of Wells Fargo Bank's Equity
Strategy Committee.
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Mr. Hickman has a B.A. and an M.B.A. in finance from Brigham Young University
and has been with Wells Fargo Bank since its merger with Crocker National Bank
in 1986.
Ms. Sandra Thornton, as portfolio co-manager of the Small Cap Master
Portfolio, is primarily responsible for the day-to-day management of the Master
Portfolio. Ms. Thornton has been co-manager of the Master Portfolio since its
inception in September of 1996. Ms. Thornton co-managed the Small Capitalization
Growth Fund, from November, 1994 until the sale of its assets to the Master
Portfolio in September 1996. Ms. Thornton manages other equity portfolios for
Wells Fargo and is a member of the Wells Fargo Growth Equity Team. Ms. Thornton
joined Wells Fargo in 1993. Prior to this, she worked in the research department
of RCM Capital Management beginning in 1991. She obtained her license as a
Certified Public Accountant from the State of California while performing
tax/financial planning services at Price Waterhouse. She holds a B.A. from
Albertus Magnus College and is a Chartered Financial Analyst.
Mr. Steve Enos, as portfolio co-manager of the Small Cap Master Portfolio,
also is primarily responsible for the day-to-day management of the Master
Portfolio. Mr. Enos has been co-manager of the Master Portfolio since its
inception in September of 1996. Mr. Enos co-managed the Small Capitalization
Growth Fund since November 1994 until the sale of its assets to the Small Cap
Master Portfolio in September 1996. Mr. Enos joined Wells Fargo in 1993 and is a
member of the Wells Fargo Bank Growth Equity Team. He began his career with
First Interstate Bank, where he was assistant vice president and portfolio
manager. From 1991 to 1993, Mr. Enos was a principal at Dolan Capital Management
where he managed both personal and pension portfolios. Mr. Enos received his
undergraduate degree in economics from the University of California at Davis.
Mr. Enos is a Chartered Financial Analyst and a member of the Association for
Investment Management and Research.
Morrison & Foerster LLP, counsel to the Company and the Master Trust and
special counsel to Wells Fargo Bank, has advised the Company, the Master Trust
and Wells Fargo Bank that Wells Fargo Bank and its affiliates may perform the
services contemplated by the Advisory Contracts and this Prospectus without
violation of the Glass-Steagall Act. Such counsel has pointed out, however, that
there are no controlling judicial or administrative interpretations or decisions
and that future judicial or administrative interpretations of, or decisions
relating to, present federal or state statutes, including the Glass-Steagall
Act, and regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, as well as future changes in such statutes,
regulations and judicial or administrative decisions or interpretations, could
prevent such entities from continuing to perform, in whole or in part, such
services. If any such entity were prohibited from performing any such services,
it is expected that new agreements would be proposed or entered into with
another entity or entities qualified to perform such services.
PROSPECTUS 24
<PAGE> 428
Stephens is the Funds' sponsor and administrator and distributes the Funds'
shares. Stephens is a full service broker/dealer and investment advisory firm
located at 111 Center Street, Little Rock, Arkansas 72201. Stephens and its
predecessor have been providing securities and investment services for more than
60 years. Additionally, they have been providing discretionary portfolio
management services since 1983. Stephens currently manages investment portfolios
for pension and profit sharing plans, individual investors, foundations,
insurance companies and university endowments.
INVESTING IN THE FUNDS
Institutional Class shares may be purchased on any day the Funds are open. The
Funds are open for business each day the New York Stock Exchange ("NYSE") is
open for trading (a "Business Day"). Currently, the NYSE is closed on New Year's
Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day (each a "Holiday"). When any Holiday falls on
a weekend, the NYSE typically is closed on the weekday immediately before or
after such Holiday.
The Company or Stephens may make the Prospectus available in an electronic
format. Upon receipt of a request from an investor or the investor's
representative, the Company or Stephens will transmit or cause to be transmitted
promptly, without charge, a paper copy of the electronic Prospectus.
SHARE VALUE
The value of a share of each class is its NAV. Wells Fargo Bank calculates the
NAV of each class of a Fund as of the close of regular trading on the NYSE
(referred to hereafter as "the close of the NYSE"), which is currently 1:00 p.m.
(Pacific time). The NAV per share for each class of shares is computed by
dividing the value of a Fund's assets allocable to a particular class, less the
liabilities charged to that class by the total number of the outstanding shares
of that class. All expenses, including fees paid to the investment adviser and
administrator, are accrued daily and taken into account for the purpose of
computing the NAV, which is expected to fluctuate daily.
Except for debt obligations with remaining maturities of 60 days or less,
which are valued at amortized cost, the other assets of the Funds are valued at
current market prices or, if such prices are not readily available, at fair
value as determined in good faith by the Company's Board of Directors. Prices
used for such valuations may be obtained from independent pricing services.
The portfolio investments of the Master Portfolio are generally valued at
current market prices, or if such prices are not readily available, at fair
value as determined in good faith by the Company's Board of Directors or the
Master Trust's Board of Trustees. Prices
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used for such valuations may be provided by independent pricing services. The
Master Portfolio values debt obligations with remaining maturities of 60 days or
less at amortized cost.
PURCHASE OF INSTITUTIONAL CLASS SHARES
Institutional Class shares of the Funds are sold at NAV (without a sales
charge) on a continuous basis primarily to certain customers ("Customers") of
affiliate, franchise or correspondent banks of Wells Fargo & Company and other
selected institutions (previously defined as Institutions). Customers may
include individuals, trusts, partnerships and corporations. Share purchases are
effected through a Customer's account at an Institution under the terms of the
Customer's account agreement with the Institution, and confirmations of share
purchases and redemptions are sent by the Funds to the Institution involved.
Institutions (or their nominees), acting on behalf of their Customers, normally
are the holders of record of Institutional Class shares. Customers' beneficial
ownership of Institutional Class shares is reflected in the account statements
provided by Institutions to their Customers. The exercise of voting rights and
the delivery to Customers of shareholder communications from the Funds is
governed by the Customers' account agreements with an Institution. Investors
wishing to purchase Institutional Class shares of the Funds should contact their
account representatives.
Institutional Class shares of the Funds are sold at the NAV per share next
determined after a purchase order has become effective. Purchase orders placed
by an Institution for Institutional Class shares in a Fund must be received by
the Company by 1:00 p.m. (Pacific time) on any Business Day. Payment for such
shares may be made by Institutions in federal funds or other funds immediately
available to the custodian no later than 1:00 p.m. (Pacific time) on the next
Business Day following the receipt of the purchase order.
Institutions are responsible for transmitting orders for purchases by their
Customers and delivering required funds on a timely basis. If funds are not
received within the periods described above, the order will be canceled, notice
thereof will be given, and the Institution will be responsible for any loss to a
Fund or its shareholders. Institutions may charge certain account fees depending
on the type of account the investor has established with the Institution. In
addition, an Institution may receive fees from the Funds with respect to the
investments of its Customers as described under "Management and Servicing Fees."
Payment for Institutional Class shares of a Fund may, in the discretion of the
investment adviser, be made in the form of securities that are permissible
investments for the Fund. For further information see "Additional Purchase and
Redemption Information" in the SAI.
The Company reserves the right to reject any purchase order or to suspend
sales at any time. Payment for orders that are not received will be returned
after prompt inquiry. The
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issuance of Institutional Class shares is recorded on the Company's books, and
share certificates are not issued.
WIRE INSTRUCTIONS -- DIRECT PURCHASES BY INSTITUTIONS
1. Complete an Account Application.
2. Instruct the wiring bank to transmit the specified amount in federal funds
to:
Wells Fargo Bank, N.A.
San Francisco, California
Bank Routing Number: 121000248
Wire Purchase Account Number: 4068-000587
Attention: Stagecoach Funds (Name of Fund and designate the Institutional
Class)
Account Name(s): Name(s) in which to be registered
Account Number: (if investing into an existing account)
3. A completed Account Application should be sent by telefacsimile, with the
original subsequently mailed, to the following address immediately after
funds are wired, and must be received and accepted by the transfer agent
before an account can be opened:
Wells Fargo Bank, N.A.
Stagecoach Shareholder Services
P.O. Box 7066
San Francisco, California 94120-7066
Telefacsimile: 1-415-543-9538
4. Share purchases are effected at the NAV next determined after the Account
Application is received and accepted.
STATEMENTS AND REPORTS
Institutions (or their nominees) typically send investors a confirmation or
statement of the account after every transaction that affects their share
balance or the Fund account registration. A statement with tax information for
each year is mailed by January 31 of the following year and also is filed with
the Internal Revenue Service ("IRS"). At least twice a year, shareholders
receive financial statements.
REDEMPTION OF INSTITUTIONAL CLASS SHARES
Redemption requests are effected at the NAV per share next determined after
receipt of a redemption request in good order by the Company. Institutional
Class shares held by an Institution on behalf of its Customers must be redeemed
in accordance with instructions and limitations pertaining to the Customer's
accounts at the Institution. Institutions are responsible for transmitting
redemption requests to the Company and crediting its Customers' accounts with
the redemption proceeds on a timely basis. The
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redemption proceeds for Institutional Class shares of the Funds normally are
wired to the redeeming Institution the following Business Day after receipt of
the request by the Company. The Company reserves the right to delay the wiring
of redemption proceeds for up to seven days after it receives a redemption order
if, in the judgment of the investment adviser, an earlier payment could
adversely affect the Funds or unless the SEC permits a longer period under
extraordinary circumstances. Such extraordinary circumstances could include a
period during which an emergency exists as a result of which (a) disposal by the
Funds of securities owned by them is not reasonably practicable or (b) it is not
reasonably practicable for the Funds to fairly determine the value of their net
assets, or a period during which the SEC by order permits deferral of
redemptions for the protection of security holders of a Fund.
With respect to former shareholders of Westcore Trust or Pacifica Fund Trust
who do not have a relationship with an Institution, shares of the Funds may be
redeemed by writing or calling the Funds directly at the address and phone
number shown on the first page of the Prospectus. When Institutional Class
shares are redeemed directly from the Funds, the Funds ordinarily send the
proceeds by check to the shareholder at the address of record on the next
Business Day unless payment by wire is requested. The Funds may take up to seven
days to make payment, although this will not be the customary practice. Also, if
the NYSE is closed (or when trading is restricted) for any reason other than the
customary weekend or holiday closing or if an emergency condition as determined
by the SEC merits such action, the Funds may suspend redemptions or postpone
payment dates.
To be accepted by a Fund, a letter requesting redemption must include: (i) the
Fund's name and account registration from which the Institutional Class shares
are being redeemed; (ii) the account number; (iii) the amount to be redeemed;
(iv) the signatures of all registered owners; and (v) a signature guarantee by
any eligible guarantor institution. An "eligible guarantor institution" includes
a commercial bank that is an FDIC member, a trust company, a member firm of a
domestic stock exchange, a savings association, or a credit union that is
authorized by its charter to provide a signature guarantee. Signature guarantees
by notaries public are not acceptable. Further documentation may be requested
from corporations, administrators, executors, personal representatives, trustees
or custodians.
All redemptions of Institutional Class shares of the Funds are made in cash,
except that the commitment to redeem Institutional Class shares in cash extends
only to redemption requests made by each Fund shareholder during any 90-day
period of up to the lesser of $250,000 or 1% of the NAV of the Funds at the
beginning of such period. This commitment is irrevocable without the prior
approval of the SEC. In the case of redemption requests by shareholders in
excess of such amounts, the Board of Directors reserves the right to have the
Funds make payment, in whole or in part, in securities or other assets, in case
of an emergency or any time a cash distribution would impair the liquidity of
the Funds to the detriment of the existing shareholders. In this event, the
PROSPECTUS 28
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securities would be valued in the same manner as the securities of the Funds are
valued. If the recipient were to sell such securities, the investor would incur
brokerage charges.
A redemption may result in a recognized gain or loss for federal income tax
purposes, irrespective of whether the redemption is paid in cash or in kind.
REDEMPTIONS BY TELEPHONE
Telephone exchange or redemption privileges authorize the transfer agent to
act on telephone instructions from any person representing himself or herself to
be the shareholder of record and reasonably believed by the transfer agent to be
genuine. The Company requires the transfer agent to employ reasonable
procedures, such as requiring a form of personal identification, to confirm that
instructions are genuine and, if it does not follow such procedures, the Company
and the transfer agent may be liable for any losses due to unauthorized or
fraudulent instructions. Neither the Company nor the transfer agent will be
liable for following telephone instructions reasonably believed to be genuine.
EXCHANGES
The Funds offer a convenient way to exchange Institutional Class shares in one
Fund for Institutional Class shares in another fund of the Company. Before
engaging in an exchange transaction, an investor should read carefully the
Prospectus describing the fund into which the exchange will occur, which is
available without charge and can be obtained by writing or by calling the
Company at the address or phone number listed on the first page of the
Prospectus. A shareholder may not exchange Institutional Class shares of one
fund for Institutional Class shares of another fund if Institutional Class
shares of both funds are not qualified for sale in the state of the
shareholder's residence. The Company may terminate or amend the terms of the
exchange privilege at any time.
Exchange transactions are effected through a Customer's account at an
Institution under the terms of the Customer's account agreement with the
Institution, and confirmations of share exchanges are sent by a Fund to the
Institution involved. Institutions (or their nominees), acting on behalf of
their Customers, normally are the holders of record of Institutional Class
shares. Institutions are responsible for transmitting orders for exchanges to
the Company on a timely basis. Customers' exchange transactions are generally
reflected in the account statements provided by Institutions to their Customers.
Investors wishing to exchange Institutional Class shares of a Fund for
Institutional Class shares of another fund should contact their account
representatives. Investors with questions may call the Company at
1-800-222-8222.
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A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. All exchanges are
made at the NAV of the respective funds next determined following receipt of the
request by the Company in good order.
Each exchange, in effect, represents the redemption of shares of one fund and
the purchase of shares of another, which may result in a recognized gain or loss
for federal income tax purposes. Investors should receive written confirmation
of the exchange from the Institution within a few days of the completion of the
transaction.
To exchange Institutional Class shares, or if you have any questions, simply
call the Company at 1-800-222-8222. A shareholder of record should be prepared
to give the telephone representative the following information: (i) the account
number, social security or taxpayer identification number and account
registration; (ii) the name of the fund from and the fund into which the
transfer is to occur; and (iii) the dollar or share amount of the exchange. The
conversation may be recorded to protect shareholders and the Company. Telephone
exchanges are available unless the shareholder of record has declined the
privilege on the Purchase Application.
In addition, Institutional Class shares of the Funds may be exchanged for each
of the Funds' Class A shares in connection with the distribution of assets held
in a qualified trust, agency or custodial account maintained with the trust
department of a Wells Fargo Bank or another bank, trust company or thrift
institution, or in other cases where Institutional Class shares are not held in
such qualified accounts. Similarly, Class A shares may be exchanged for the
Funds' Institutional Class shares if the shares are to be held in such a
qualified trust, agency or custodial account. These exchanges are made at the
respective NAVs of the Institutional Class shares next determined after the
exchange request is received by the Company.
DIVIDENDS
The Funds (other than the Small Cap Fund) intend to declare and pay quarterly
dividends of substantially all of their net investment income. The Small Cap
Fund intends to declare and pay annual dividends of substantially all of their
net investment income. Shareholders begin earning dividends on the Business Day
following the date the purchase order is effective and continue to earn
dividends through the day such shares are redeemed. Expenses, such as state
securities registration fees and transfer agency fee, that are attributable to a
particular class may affect the relative dividends and/or capital-gain
distributions of a class of shares.
Dividends and capital gain distributions have the effect of reducing the NAV
per share by the amount distributed. Although such dividends and distributions
paid on newly
PROSPECTUS 30
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issued shares shortly after a purchase would represent, in substance, a return
of capital, the dividend or distribution would ordinarily be taxable to you.
Dividends for a Saturday, Sunday or Holiday are declared payable to
shareholders of record as of the preceding Business Day. If a shareholder
redeems shares before the dividend payment date, any dividends credited to the
shareholder are paid on the following dividend payment date unless the
shareholder has redeemed all of the shares in the account, in which case the
shareholder receives accrued dividends together with redemption proceeds. The
Funds intend to distribute any capital gains at least annually.
MANAGEMENT AND SERVICING FEES
INVESTMENT ADVISER
Subject to the overall supervision of the Company's Board of Directors, Wells
Fargo Bank, as the investment adviser to the Balanced, Equity Value and Growth
and Income Funds and the Small Cap Master Portfolio, provides investment
guidance and policy direction in connection with the management of the Funds'
and Master Portfolio's assets. Wells Fargo Bank furnishes the Company's Board of
Directors and the Master Trust's Board of Trustees with periodic reports on the
Funds' and Master Portfolios' investment strategy and performance.
For its services as investment adviser to the Balance Fund and Small Cap
Master Portfolio, Wells Fargo Bank is entitled to monthly investment advisory
fees at the annual rate of 0.60% of each Fund's and Master Portfolio's
respective average daily net assets. For its services as investment adviser to
the Equity Value Fund, Wells Fargo Bank is entitled to monthly investment
advisory fees at the annual rate of 0.50% of the Fund's respective average daily
net assets. For its services as investment adviser to the Growth and Income
Fund, Wells Fargo Bank is entitled to monthly investment advisory fees at the
annual rate of 0.50% of the first $250 million of such Master Portfolio's or
Fund's average daily net assets, 0.40% of the next $250 million, and 0.30% of
the average daily net assets in excess of $500 million. From time to time, each
of the Funds, consistent with its investment objective, policies and
restrictions, may invest in securities of companies with which Wells Fargo Bank
has a lending relationship.
For the year ended December 31, 1995, the Growth and Income Fund paid an
advisory fee at the annual rate of 0.50% of the portfolio's average daily net
assets to Wells Fargo Bank. For the fiscal period ended September 30, 1995, the
predecessor funds of the Balanced and Equity Value Funds paid advisory fees at
the annual rates of 0.60% and 0.60% of each portfolio's respective average daily
net assets to First Interstate Capital Management ("FICM"), 7501 E. McCormick
Parkway, Scottsdale, Arizona, which served
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as investment advisor to the predecessor portfolios. FICM was an indirect,
wholly owned subsidiary of First Interstate Bancorp.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
Wells Fargo Bank serves as the Funds' custodian and transfer and dividend
disbursing agent. Under the Custody Agreement, a Fund may, at times, borrow
money from Wells Fargo Bank as needed to satisfy temporary liquidity needs.
Wells Fargo Bank charges interest on such overdrafts at a rate determined
pursuant to the Custody Agreement. Wells Fargo Bank performs its custodial and
transfer and dividend disbursing agency services at 525 Market Street, San
Francisco, California 94105.
INSTITUTIONS AND SHAREHOLDER SERVICING AGENT
The Funds have entered into shareholder servicing agreements with Wells Fargo
Bank and may enter into similar agreements with other Institutions ("Shareholder
Servicing Agents"). Under such agreements, Shareholder Servicing Agents
(including Wells Fargo Bank) agree, as agents for their customers, to provide
shareholder administrative and liaison services with respect to Fund shares,
which include, without limitation, aggregating and transmitting shareholder
orders for purchases, exchanges and redemptions; maintaining shareholder
accounts and records; and providing such other related services as the Company
or a shareholder may reasonably request. For these services, a Shareholder
Servicing Agent is entitled to receive a fee at the annual rate of up to 0.25%
of the average daily net assets attributable to the Institutional Class shares
owned of record or beneficially by investors with whom the Shareholder Servicing
Agent maintains a servicing relationship. In no case shall payments exceed any
maximum amount that may be deemed applicable under applicable laws, regulations
or rules, including the Rules of Fair Practice of the NASD ("NASD Rules").
A Shareholder Servicing Agent also may impose certain conditions and/or fees
on its customers, subject to the terms of this Prospectus, in addition to or
different from those imposed by a Fund, such as requiring a higher minimum
initial investment or payment of a separate fee for additional services. Each
Shareholder Servicing Agent has agreed to disclose any fees it may directly
charge its customers who are shareholders of a Fund and to notify them in
writing at least 30 days before it imposes any transaction fees.
SPONSOR, ADMINISTRATOR AND DISTRIBUTOR
Subject to the overall supervision of the Company's Board of Directors,
Stephens provides each Fund with administrative services, including general
supervision of each Fund's operation, coordination of the other services
provided to a Fund, compilation of information for reports to the SEC and the
state securities commissions, preparation of proxy statements and shareholder
reports, and general supervision of data compilation in connection with
preparing periodic reports to the Company's Directors and officers. Stephens
also furnishes office space and certain facilities to conduct each Fund's
PROSPECTUS 32
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business and compensates the Directors and officers who are affiliated with
Stephens. For these services, Stephens is entitled to receive from the Growth
and Income Fund, a monthly fee at the annual rate of 0.03% of the Fund's average
daily net assets. From the Balanced, Equity Value and Small Cap Funds, Stephens
is entitled to receive a monthly fee at the annual rate of 0.05% of each Fund's
average daily net assets.
Stephens, as the principal underwriter of the Funds within the meaning of the
1940 Act, has entered into Distribution Agreements with the Company pursuant to
which Stephens acts as agent for the Funds for the sale of their shares and may
enter into selling agreements with other agents ("Selling Agents") that wish to
make available shares of the Funds to their respective customers.
Stephens has established a cash and non-cash compensation program, pursuant to
which broker/dealers or financial institutions that sell shares of the Company's
funds may earn additional compensation in the form of trips to sales seminars or
vacation destinations, tickets to sporting events, theater or other
entertainment, opportunities to participate in golf or other outings and gift
certificates for meals or merchandise or the cash value of a non-cash
compensation item.
Financial institutions acting as Shareholder Servicing Agents, Selling Agents,
or in certain other capacities, may be required to register as dealers pursuant
to applicable state securities laws which may differ from federal law and any
interpretations expressed herein.
FUND EXPENSES
From time to time, Wells Fargo Bank and Stephens may waive their respective
fees in whole or in part and reimburse expenses payable to others. Any such
waivers or reimbursements will reduce a fund's expenses and, accordingly, have a
favorable impact on the fund's yield and total return. Except for the expenses
borne by Wells Fargo Bank and Stephens, each fund of the Company bears all costs
of its operations, including its pro rata portion of Company expenses such as
fees and expenses of its independent auditors and legal counsel, compensation of
the Company's directors who are not affiliated with the adviser, administrator
or any of their affiliates; advisory, transfer agency, custody and
administration fees, and any extraordinary expenses. Expenses attributable to
each Fund are charged against the assets of the Fund. General expenses of the
Company are allocated among all of the funds of the Company, including the
Funds, in a manner proportionate to the net assets of each fund, on a
transactional basis, or on such other basis as the Company's Board of Directors
deems equitable. The Small Cap Fund also bears a pro rata portion of the costs
of the Master Portfolio in which it invests.
The Small Cap Master Portfolio's Investment Advisory Contract and the
Administration Agreements with the Master Portfolio and the Fund provide that,
if in any fiscal year, the total aggregate expenses of the Master Portfolio and
the Fund incurred by, or allocated to, the Master Portfolio and the Fund
(excluding taxes, interest, brokerage commissions
33 PROSPECTUS
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and other portfolio transaction expenses, expenditures that are capitalized in
accordance with generally accepted accounting principles, extraordinary expenses
and amounts accrued or paid under a Plan) exceed the most restrictive expense
limitation applicable to a Fund imposed by the securities laws or regulations of
the states in which the Fund's shares are registered for sale, Wells Fargo and
Stephens shall waive their fees proportionately under the Investment Advisory
Contract and the Administration Agreements, respectively, for the fiscal year to
the extent of the excess, or reimburse the excess, but only to the extent of
their respective fees. The Investment Advisory Contract and the Administration
Agreements further provide that the total expenses shall be reviewed monthly so
that, to the extent the annualized expenses for such month exceed the most
restrictive applicable annual expense limitation, the monthly fees under the
Investment Advisory Contract and the Administration Agreements shall be reduced
as necessary. Currently, the most stringent applicable state expense ratio
limitation is 2.50% of the first $30 million of the Fund's average net assets
for its current fiscal year, 2% of the next $70 million of such assets, and
1.50% of such assets in excess of $100 million.
TAXES
The Company intends to qualify each Fund as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), as long as such qualification is in the best interest of the Fund's
shareholders. Each Fund is treated as a separate entity for federal income tax
purposes and, thus, the provisions of the Code applicable to regulated
investment companies are applied to the Funds separately, rather than to the
Company as a whole. In addition, net capital gains, net investment income, and
operating expenses are determined separately for each Fund. By complying with
the applicable provisions of the Code, a Fund will not be subject to federal
income taxes with respect to net investment income and any net realized capital
gains distributed to its shareholders. Each Fund intends to pay out
substantially all of its net investment income and net realized capital gains
(if any) for each year.
Dividends from net investment income and net realized short-term capital gains
(excess of net short-term capital gains over net long-term capital losses)
declared and paid by a Fund will be taxable as ordinary income to its
shareholders. Any capital gain distributions, attributable to a Fund's net
realized long-term capital gains (the excess of net long-term capital gains over
net short-term capital losses), will generally be taxable to shareholders as
long-term capital gain, regardless of the length of time that the Fund's shares
have been held.
You may be eligible to defer the taxation of dividends and capital gain
distributions on Fund shares that are held under a qualified tax-deferred
retirement plan. Corporate shareholders of the Funds may be eligible for the
dividends-received deduction on the dividends paid by the Funds. In general,
dividend income of a Fund distributed to qualifying corporate shareholders is
eligible for the dividends-received deduction only
PROSPECTUS 34
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to the extent that (i) the Fund's income consists of dividends paid by U.S.
corporations and (ii) the Fund would have been entitled to the
dividends-received deduction with respect to such dividend income if the Fund
were not a regulated investment company under the Code. A corporate shareholder
of the Fund must hold the Fund shares upon which the qualifying dividend is paid
for at least 46 days to be entitled to the dividends-received deduction. The
Code also provides other limitations with respect to the ability of a qualifying
corporate shareholder to claim the dividends-received deduction in connection
with holding shares of a Fund.
The Small Cap Fund seeks to qualify as a regulated investment company by
investing all of its assets in a Master Portfolio. The Master Portfolio will be
treated as a non-publicly traded partnership rather than as a regulated
investment company or a corporation under the Code, and as such, shall not be
subject to federal income tax. As a non-publicly traded partnership, any
interest, dividends, gains and losses of the Master Portfolio shall be deemed to
have been "passed through" to its corresponding Fund (and other investors, if
any) in proportion to the Fund's ownership interest in the Master Portfolio. If
the Master Portfolio were to accrue but not distribute any interest, dividends
or gains, the Fund would be deemed to have realized and recognized its
proportionate share of such income, regardless of whether or not such income has
been distributed by the Master Portfolio. However, the Master Portfolio will
seek to minimize recognition by the Fund and other investors, if any, of
interest, dividends and gains without a corresponding distribution.
An investor must provide a valid taxpayer identification number ("TIN"),
generally the investor's social security or employer identification number, upon
opening or reopening an account. Failure to furnish a valid TIN to the Company
could subject the investor to penalties imposed by the IRS. In addition, the
Company may be required to withhold, subject to certain exemptions, at a rate of
31% ("backup withholding") on dividends, capital gain distributions, and
redemption proceeds (including proceeds from exchanges) paid or credited to an
individual Fund shareholder, unless a shareholder certifies that the TIN
provided is correct and that the shareholder is not subject to backup
withholding, or the IRS notifies the Company that the shareholder's TIN is
incorrect or that the shareholder is subject to backup withholding. Such tax
withheld does not constitute any additional tax imposed on the shareholder, and
may be claimed as a tax payment on the shareholder's federal income tax return.
The foregoing discussion is based on tax laws in effect as of the date of this
Prospectus and summarizes only some of the important federal income tax
considerations generally affecting the Funds and their shareholders. It is not
intended as a substitute for careful tax planning; you should consult your tax
advisor with respect to your specific tax situation and state and local taxes.
Further federal income tax considerations are discussed in the SAI.
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PROSPECTUS APPENDIX --
ADDITIONAL INVESTMENT POLICIES
FUND AND MASTER PORTFOLIO INVESTMENTS
Set forth below, except where otherwise indicated, is a description of certain
investments and additional investment policies for each Fund and Master
Portfolio.
Temporary Investments
From time to time, for temporary defensive purposes, the Funds and Master
Portfolio may hold assets in cash or make short-term investments, to the extent
appropriate, to maintain adequate liquidity for redemption requests or other
cash management needs or for temporary defensive purposes. The short-term
investments that the Funds and Master Portfolio may purchase for liquidity
purposes include U.S. Treasury bills, shares of other mutual funds and
repurchase agreements (as discussed below). Other permissible investments
include: (i) obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities (including government-sponsored enterprises)
("U.S. Government obligations"); (ii) negotiable certificates of deposit,
bankers' acceptances and fixed time deposits and other obligations of domestic
banks (including foreign branches) that have more than $1 billion in total
assets at the time of investment and are members of the Federal Reserve System
or are examined by the Comptroller of the Currency or whose deposits are insured
by the FDIC; (iii) commercial paper rated at the date of purchase "P-1" by
Moody's or "A-1+" or "A-1" by S&P, or, if unrated, of comparable quality as
determined by Wells Fargo Bank, as investment adviser; and (iv) short-term, U.S.
dollar-denominated obligations of foreign banks (including U.S. branches) that,
at the time of investment: (a) have more than $10 billion, or the equivalent in
other currencies, in total assets; (b) are among the 75 largest foreign banks in
the world as determined on the basis of assets; (c) have branches or agencies in
the United States; and (d) in the opinion of Wells Fargo Bank, as investment
adviser, are of comparable quality to obligations of U.S. banks which may be
purchased by the Funds or Master Portfolio.
U.S. Government Obligations
U.S. Government obligations include securities issued or guaranteed as to
principal and interest by the U.S. Government and supported by the full faith
and credit of the U.S. Treasury. U.S. Treasury obligations differ mainly in the
length of their maturity. Treasury bills, the most frequently issued marketable
government securities, have a maturity of up to one year and are issued on a
discount basis. U.S. Government obligations also include securities issued or
guaranteed by federal agencies or
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instrumentalities, including government-sponsored enterprises. Some obligations
of agencies or instrumentalities of the U.S. Government are supported by the
full faith and credit of the United States or U.S. Treasury guarantees; others,
by the right of the issuer or guarantor to borrow from the U.S. Treasury; still
others, by the discretionary authority of the U.S. Government to purchase
certain obligations of the agency or instrumentality; and others, only by the
credit of the agency or instrumentality issuing the obligation. In the case of
obligations not backed by the full faith and credit of the United States, the
investor must look principally to the agency or instrumentality issuing or
guaranteeing the obligation for ultimate repayment, which agency or
instrumentality may be privately owned. There can be no assurance that the U.S.
Government will provide financial support to its agencies or instrumentalities
where it is not obligated to do so. In addition, U.S. Government obligations are
subject to fluctuations in market value due to fluctuations in market interest
rates. As a general matter, the value of debt instruments, including U.S.
Government obligations, declines when market interest rates increase and rises
when market interest rates decrease. Certain types of U.S. Government
obligations are subject to fluctuations in yield or value due to their structure
or contract terms.
Floating- and Variable-Rate Instruments
Certain of the debt instruments that the Funds and Master Portfolio may
purchase bear interest at rates that are not fixed, but vary, for example with
changes in specified market rates or indices or specified intervals. Certain of
these instruments may carry a demand feature that would permit the holder to
tender them back to the issuer at par value prior to maturity. The Funds and
Master Portfolio may, in accordance with SEC rules, account for these
instruments as maturing at the next interest rate readjustment date or the date
at which the Funds and Master Portfolio may tender the instrument back to the
issuer, whichever is later. The floating- and variable-rate instruments that the
Funds and Master Portfolio may purchase include certificates of participation in
such obligations.
Wells Fargo Bank, as investment adviser, monitors on an ongoing basis the
ability of an issuer of a demand instrument to pay principal and interest on
demand. Events affecting the ability of the issuer of a demand instrument to
make payment when due may occur between the date a Fund or Master Portfolio
elects to demand payment and the date payment is due. Such events may affect the
ability of the issuer of the instrument to make payment when due, thereby
affecting a Fund's or Master Portfolio's ability to obtain payment at par,
except when such demand instruments permit same-day settlement. Demand
instruments whose demand feature is not exercisable within seven days may be
treated as liquid, provided that an active secondary market exists.
The Balanced and Equity Funds may also hold derivative instruments that have
interest rates that re-set inversely to changing current market rates and/or
have embedded interest rate floors and caps that require the issuer to pay an
adjusted interest rate if
PROSPECTUS A-2
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market rates fall below or rise above a specified rate. These instruments
represent relatively recent innovations in the bond markets, and the trading
market for these instruments is less developed than the markets for traditional
types of debt instruments. It is uncertain how these instruments will perform
under different economic and interest-rate scenarios. Because certain of these
instruments are leveraged, their market values may be more volatile than other
types of bonds and may present greater potential for capital-gain or loss. In
some cases, it may be difficult to determine the fair value of a structured or
derivative instrument because of a lack of reliable objective information and an
established secondary market for some instruments may not exist. As new types of
derivative securities are developed and offered to investors, the adviser will,
consistent with each Fund's investment objective, policies and quality
standards, consider making investments in such new types of derivative
securities.
Repurchase Agreements
The Funds and Master Portfolio may enter into repurchase agreements wherein
the seller of a security to a Fund or Master Portfolio agrees to repurchase that
security from such Fund or Master Portfolio at a mutually agreed-upon time and
price. The period of maturity is usually quite short, often overnight or a few
days, although it may extend over a number of months. A Fund or Master Portfolio
may enter into repurchase agreements only with respect to other obligations that
could otherwise be purchased by the Fund or Master Portfolio. All repurchase
agreements must be collateralized at 102% based on values that are
marked-to-market daily. Although the maturities of the underlying securities in
a repurchase agreement transaction entered into by a Fund or Master Portfolio
may be greater than one year, the term of the repurchase agreement must be less
than one year. If the seller defaults and the value of the underlying securities
has declined, a Fund may incur a loss. In addition, if bankruptcy proceedings
are commenced with respect to the seller of the security, a Fund's or Master
Portfolio's disposition of the security may be delayed or limited. The Funds and
Master Portfolios may enter into repurchase agreements only with primary
reporting dealers and commercial banks that meet guidelines established by the
applicable Board of Directors or Trustees and are not affiliated with a Fund's
or Master Portfolio's investment adviser or sub-adviser. The Funds and Master
Portfolio may participate in pooled repurchase agreement transactions with other
funds advised by Wells Fargo Bank.
Loans of Portfolio Securities
The Funds and Master Portfolio may lend securities from their portfolios to
brokers, dealers and financial institutions (but not individuals) if cash, U.S.
Government obligations or other high-quality debt instruments equal to at least
100% of the current market value of the securities loan (including accrued
interest thereon) plus the interest payable to a Fund with respect to the loan
is maintained with such Fund or Master Portfolio. In determining whether to lend
a security to a particular broker, dealer
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or financial institution, a Fund's or Master Portfolio's investment adviser
considers all relevant facts and circumstances, including the creditworthiness
of the broker, dealer or financial institution. Any loans of portfolio
securities are fully collateralized based on values that are marked-to-market
daily. The Funds and Master Portfolio will not enter into any portfolio security
lending arrangement having a duration of longer than one year. Any securities
that a Fund or Master Portfolio may receive as collateral do not become part of
the portfolio of such Fund or Master Portfolio at the time of the loan and, in
the event of a default by the borrower, such Fund or Master Portfolio, if
permitted by law, will dispose of such collateral except for such part thereof
that is a security in which the Fund or Master Portfolio is permitted to invest.
During the time securities are on loan, the borrower agrees to pay such Fund or
Master Portfolio any accrued income on those securities, and such Fund or Master
Portfolio may invest the cash collateral and earn additional income or receive
an agreed-upon fee from a borrower that has delivered cash-equivalent
collateral. The Funds and Master Portfolio will not lend securities having a
value that exceeds one-third of the current value of their respective total
assets. Loans of securities by a Fund or Master Portfolio will be subject to
termination at the Fund's, Master Portfolio's or the borrower's option. The
Funds and Master Portfolio may pay reasonable administrative and custodial fees
in connection with a securities loan and may pay a negotiated portion of the
interest or fee earned with respect to the collateral to the borrower or the
placing broker. Except consistent with the SEC's rules, regulations, published
positions and/or exemptions, borrowers and placing brokers may not be
affiliated, directly or indirectly, with the Company, the investment adviser, or
the Distributor.
Convertible Securities
The Funds and Master Portfolio may invest in convertible securities that
provide current income and are issued by companies with the characteristics
described above for each Fund and that have a strong earnings and credit record.
The Funds may purchase convertible securities that are fixed-income debt
securities or preferred stocks, and which may be converted at a stated price
within a specified period of time into a certain quantity of the common stock of
the same issuer. Convertible securities, while usually subordinate to similar
nonconvertible securities, are senior to common stocks in an issuer's capital
structure. Convertible securities offer flexibility by providing the investor
with a steady income stream (which generally yield a lower amount than similar
nonconvertible securities and a higher amount than common stocks) as well as the
opportunity to take advantage of increases in the price of the issuer's common
stock through the conversion feature. Fluctuations in the convertible security's
price can reflect changes in the market value of the common stock or changes in
market interest rates. At most, 5% of each Fund's net assets will be invested,
at the time of purchase, in convertible securities that are not rated in the
four highest rating categories by one or
PROSPECTUS A-4
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more NRSROs, such as Moody's or S&P, or unrated but determined by the Adviser to
be of comparable quality.
Other Investment Companies
The Funds and Master Portfolio may invest in shares of other open-end,
management investment companies, subject to the limitations of Section 12(d)(1)
of the 1940 Act, provided that any such purchases will be limited to temporary
investments in shares of unaffiliated investment companies and the investment
adviser waives its advisory fees for that portion of a Fund's or Master
Portfolio's assets so invested, except when such purchase is part of a plan of
merger, consolidation, reorganization or acquisition. Notwithstanding any other
investment policy or limitation (whether or not fundamental), as a matter of
fundamental policy, the Balanced, Equity Value and Small Cap Funds may each
invest all of its assets in the securities of a single open-end, management
investment company with substantially the same fundamental investment objective,
policies and limitations as such Fund. Subject to the limitations of the 1940
Act, the Funds may purchase shares of exchange-listed, closed-end funds
consistent with pursuing their investment objectives.
Foreign Obligations and Securities
The Small Cap Master Portfolio and the Growth and Income Fund each may invest
up to 25% of their respective assets in securities of foreign governmental and
private issuers that are denominated in and pay interest in U.S. dollars. The
Balanced and Equity Value Funds may invest up to 5% of their respective assets
in equity securities listed or traded exclusively on a foreign exchange. These
securities may take the form of American Depositary Receipts ("ADRs"), Canadian
Depositary Receipts ("CDRs"), European Depositary Receipts ("EDRs"),
International Depositary Receipts ("IDRs") and Global Depositary Receipts
("GDRs") or other similar securities convertible into securities of foreign
issuers. These securities may not necessarily be denominated in the same
currency as the securities into which they may be converted. ADRs (sponsored or
unsponsored) are receipts typically issued by a U.S. bank or trust company and
traded on a U.S. stock exchange, and CDRs are receipts typically issued by a
Canadian bank or trust company, that evidence ownership of underlying foreign
securities. Issuers of unsponsored ADRs are not contractually obligated to
disclose material information in the U.S. and, therefore, such information may
not correlate to the market value of the unsponsored ADR. EDRs and IDRs are
receipts typically issued by European banks and trust companies, and GDRs are
receipts issued by either a U.S. or non-U.S. banking institution, that evidence
ownership of the underlying foreign securities. Generally, ADRs in registered
form are designed for use in U.S. securities markets and EDRs and IDRs in bearer
form are designed primarily for use in Europe.
A-5 PROSPECTUS
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Investments in foreign securities involve certain considerations that are not
typically associated with investing in domestic securities. There may be less
publicly available information about a foreign issuer than about a domestic
issuer. Foreign issuers also are not generally subject to the same accounting,
auditing and financial reporting standards or governmental supervision as
domestic issuers. In addition, with respect to certain foreign countries,
interest may be withheld at the source under foreign income tax laws, and there
is a possibility of expropriation or confiscatory taxation, political, social
and monetary instability or diplomatic developments that could adversely affect
investments in, the liquidity of, and the ability to enforce contractual
obligations with respect to, securities of issuers located in those countries.
Emerging Markets
The Small Cap Master Portfolio and the Growth and Income Fund each may invest
up to 15% of their respective assets in equity securities of companies in
"emerging markets." The Fund and Master Portfolio consider countries with
emerging markets to include the following: (i) countries with an emerging stock
market as defined by the International Finance Corporation; (ii) countries with
low- to middle-income economies according to the International Bank for
Reconstruction and Development (more commonly referred to as the World Bank);
and (iii) countries listed in World Bank publications as developing. The adviser
may invest in those emerging markets that have a relatively low gross national
product per capita, compared to the world's major economies, and which exhibit
potential for rapid economic growth. The adviser believes that investment in
equity securities of emerging market issuers offers significant potential for
long-term capital appreciation.
Equity securities of emerging market issuers may include common stock,
preferred stocks (including convertible preferred stocks) and warrants; bonds,
notes and debentures convertible into common or preferred stock; equity
interests in foreign investment funds or trusts and real estate investment trust
securities. The Capital Appreciation and Small Cap Master Portfolios may invest
in ADRs, CDRs, GDRs, EDRs, and IDRs of such issuers.
Emerging market countries include, but are not limited to: Argentina, Brazil,
Chile, China, the Czech Republic, Columbia, Ecuador, Greece, Hong Kong,
Indonesia, India, Malaysia, Mexico, the Philippines, Poland, Portugal, Peru,
Russia, Singapore, South Africa, Thailand, Taiwan and Turkey. A company is
considered in a country, market or region if it conducts its principal business
activities there, namely, if it derives a significant portion (at least 50%) of
its revenues or profits from goods produced or sold, investments made, or
services performed therein or has at least 50% of its assets situated in such
country, market or region.
PROSPECTUS A-6
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There are special risks involved in investing in emerging-market countries.
Most are heavily dependent on international trade, and some are especially
vulnerable to recessions in other countries. Many of these countries are also
sensitive to world commodity prices. Some countries may still have obsolete
financial systems, economic problems or archaic legal systems. In addition, many
of these nations are experiencing political and social uncertainties. Many
investments in emerging markets can be considered speculative, and their prices
can be much more volatile than in the more developed nations of the world. This
difference reflects the greater uncertainties of investing in less established
markets and economies. The financial markets of emerging markets countries are
generally less well capitalized and thus securities of issuers based in such
countries may be less liquid.
Money Market Instruments
The Funds and Master Portfolio may invest in the following types of high
quality money market instruments that have remaining maturities not exceeding
one year: (i) U.S. Government obligations; (ii) negotiable certificates of
deposit, bankers' acceptances and fixed time deposits and other obligations of
domestic banks (including foreign branches) that have more than $1 billion in
total assets at the time of investment and are members of the Federal Reserve
System or are examined by the Comptroller of the Currency or whose deposits are
insured by the FDIC; (iii) commercial paper rated at the date of purchase
"Prime-1" by Moody's or "A-1" or "A-1+" by S&P, or, if unrated, of comparable
quality as determined by Wells Fargo Bank, as investment adviser; and (iv)
repurchase agreements. The Master Portfolio also may invest in short-term U.S.
dollar-denominated obligations of foreign banks (including U.S. branches) that
at the time of investment: (i) have more than $10 billion, or the equivalent in
other currencies, in total assets; (ii) are among the 75 largest foreign banks
in the world as determined on the basis of assets; (iii) have branches or
agencies in the United States; and (iv) in the opinion of Wells Fargo Bank, as
investment adviser, are of comparable quality to obligations of U.S. banks which
may be purchased by the Master Portfolio.
Options
The Balanced and Equity Funds and the Small Cap Master Portfolio may purchase
or sell options on individual securities or options on indices of securities as
described below. The purchaser of an option risks a total loss of the premium
paid for the option if the price of the underlying security does not increase or
decrease sufficiently to justify exercise. The seller of an option, on the other
hand, will recognize the premium as income if the option expires unrecognized
but foregoes any capital appreciation in excess of the exercise price in the
case of a call option and may be required to pay a price in excess of current
market value in the case of a put option.
A-7 PROSPECTUS
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Call and Put Options on Specific Securities. The Balanced and Equity Funds and
the Small Cap Master Portfolio may invest in call and put options on a specific
security. Each of the Balanced and Equity Funds may purchase put and call
options listed on a national securities exchange and issued by the Options
Clearing Corporation in an amount not exceeding 5% of its net assets.
A call option gives the purchaser of the option the right to buy, and
obligates the writer to sell, an underlying security at the exercise price at
any time during the option period. Conversely, a put option gives the purchaser
of the option the right to sell, and obligates the writer to buy, an underlying
security at the exercise price at any time during the option period. Investments
by a Fund or Master Portfolio in off-exchange options will be treated as
"illiquid" and therefore subject to the Master Portfolio's policy of not
investing more than 15% of its net assets in illiquid securities.
The Balanced and Equity Funds and the Small Cap Master Portfolio may write
covered call option contracts and secured put options as Wells Fargo deems
appropriate. A covered call option is a call option for which the writer of the
option owns the security covered by the option. Covered call options written by
a Fund or Master Portfolio expose the Fund or Master Portfolio during the term
of the option (i) to the possible loss of opportunity to realize appreciation in
the market price of the underlying security or (ii) to possible loss caused by
continued holding of a security which might otherwise have been sold to protect
against depreciation in the market price of the security. If a Fund or Master
Portfolio writes a secured put option, it assumes the risk of loss should the
market value of the underlying security decline below the exercise price of the
option. The aggregate value of the securities subject to options written by a
Fund or the Master Portfolio will not exceed 25% of the value of the assets of
the Balanced or Equity Funds or 15% of the net assets of the Small Cap Master
Portfolio. The use of covered call options and securities put options will not
be a primary investment technique of the Funds or Master Portfolio, and they are
expected to be used infrequently. If the adviser is incorrect in its forecast of
market value or other factors when writing the foregoing options, a Fund would
be in a worse position than it would have been had the foregoing investment
techniques not been used.
Each Fund and the Master Portfolio may engage in unlisted over-the-counter
options with broker/dealers deemed creditworthy by the adviser. Closing
transactions for such options are usually effected directly with the same
broker/dealer that effected the original option transaction. A Fund bears the
risk that the broker/dealer will fail to meet its obligations. There is no
assurance that a liquid secondary trading market exists for closing out an
unlisted option position. Furthermore, unlisted options are not subject to the
protections afforded purchasers of listed options by the Options Clearing
Corporation, which performs the obligations of its members who fail to perform
in connection with the purchase or sale of options.
PROSPECTUS A-8
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Stock Index Options. The Small Cap Master Portfolio may each purchase call and
put options and write covered call options on stock indices listed on national
securities exchanges or traded in the over-the-counter market to the extent of
15% of the value of its net assets.
The effectiveness of purchasing or writing stock index options will depend
upon the extent to which price movements in the Master Portfolio's investment
portfolio correlate with price movements of the stock index selected. Because
the value of a stock index option depends upon changes to the price of all
stocks comprising the index rather than the price of a particular stock, whether
the Master Portfolio will realize a gain or loss from the purchase or writing of
options on an index depends upon movements in the price of all stocks in the
index, rather than movements in the price of a particular stock. Accordingly,
successful use by a Master Portfolio of options on stock indexes will be subject
to Wells Fargo's ability to correctly analyze movements in the direction of the
stock market generally or of particular industry or market segments.
Forward Commitments, When-Issued Purchases and Delay-Delivery Transactions
Each Fund and Master Portfolio may purchase or sell securities on a
when-issued or delayed-delivery basis and make contracts to purchase or sell
securities for a fixed price at a future date beyond customary settlement time.
Securities purchased or sold on a when-issued, delayed-delivery or forward
commitment basis involve a risk of loss if the value of the security to be
purchased declines, or the value of the security to be sold increases, before
the settlement date. Although a Fund will generally purchase securities with the
intention of acquiring them, a Fund may dispose of securities purchased on a
when-issued, delayed-delivery or a forward commitment basis before settlement
when deemed appropriate by the adviser.
For additional information relating to option trading practices, including the
particular risks thereof, see the SAI.
Futures Contracts
The Balanced and Equity Funds may engage in futures transactions as discussed
below. A futures transaction involves a firm agreement to buy or sell a
commodity or financial instrument at a particular price on a specified future
date, while an option transaction generally involves a right, which may or may
not be exercised, to buy or sell a commodity of financial instrument at a
particular price on a specified future date. Futures contracts and options are
standardized and exchange-traded, where the exchange serves as the ultimate
counterparty for all contracts. Consequently, the only credit risk on futures
contracts is the creditworthiness of the exchange. Futures contracts, however,
are subject to market risk (i.e., exposure to adverse price changes).
A-9 PROSPECTUS
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The Master Portfolio's futures transactions must constitute permissible
transactions pursuant to regulations promulgated by the Commodity Futures
Trading Commission. In addition, the Master Portfolio may not engage in futures
transactions if the sum of the amount of initial margin deposits and premiums
paid for unexpired options on futures contracts, other than those contracts
entered into for bona fide hedging purposes, would exceed 5% of the liquidation
value of the Master Portfolio's assets, after taking into account unrealized
profits and unrealized losses on such contracts; provided, however, that in the
case of an option on a futures contract that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%
liquidation amount. Pursuant to regulations and/or published positions of the
SEC, the Master Portfolio may be required to segregate cash, U.S. Government
obligations or other high-quality debt instruments in connection with its
futures transactions in an amount generally equal to the entire value of the
underlying commitment.
Initially, when purchasing or selling futures contracts the Master Portfolio
will be required to deposit with the Master Portfolio's custodian in the
broker's name an amount of cash or cash equivalents up to approximately 10% of
the contract amount. This amount is subject to change by the exchange or board
of trade on which the contract is traded, and members of such exchange or board
of trade may impose their own higher requirements. This amount is known as
"initial margin" and is in the nature of a performance bond or good faith
deposit on the contract that is returned to the Master Portfolio upon
termination of the futures position, assuming all contractual obligations have
been satisfied. Subsequent payments, known as "variation margin", to and from
the broker will be made daily as the price of the index or securities underlying
the futures contract fluctuates, making the long and short positions in the
futures contract more or less valuable. At any time prior to the expiration of a
futures contract, the Master Portfolio may elect to close the position by taking
an opposite position, at the then prevailing price, thereby terminating its
existing position in the contract.
Although the Master Portfolio intends to purchase or sell futures contracts
only if there is an active market for such contracts, no assurance can be given
that a liquid market will exist for any particular contract at any particular
time. Many futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single trading day. Once the daily
limit has been reached in a particular contract, no trades may be made that day
at a price beyond that limit or trading may be suspended for specified periods
during the trading day. Futures contracts prices could move to the limit for
several consecutive trading days with little or no trading, thereby preventing
prompt liquidation of futures positions and potentially subjecting the Master
Portfolio and the Fund to substantial losses. If it is not possible, or the
Master Portfolio determines not, to close a futures position in anticipation of
adverse price movements, the Master Portfolio will be required to make daily
cash payments of variation margin.
PROSPECTUS A-10
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An option on a futures contract gives the purchaser the right, in return for
the premium paid, to assume a position in a futures contract (a long position if
the option is a call and a short position if the option is a put) at a specified
exercise price at any time during the option exercise period. The writer (i.e.,
seller) of the option is required upon exercise to assume an offsetting futures
position (a short position if the option is a call and a long position if the
option is a put). Upon exercise of the option, the assumption of offsetting
futures positions by both the writer and the holder of the option will be
accompanied by delivery of the accumulated cash balance in the writer's futures
margin account in the amount by which the market price of the futures contract,
at exercise, exceeds (in the case of a call) or is less than (in the case of a
put) the exercise price of the option on the futures contract.
ADDITIONAL INVESTMENT POLICIES -- BALANCED AND EQUITY FUNDS
Mortgage-Related Securities
Mortgage pass-through securities are securities representing interests in
"pools" of mortgages in which payments of both interest and principal on the
securities are made monthly, in effect "passing through" monthly payments made
by the individual borrowers on the residential mortgage loans which underlie the
securities (net of fees paid to the issuer or guarantor of the securities).
Early repayment of principal on mortgage pass-through securities (arising from
prepayments of principal due to sale of the underlying property, refinancing, or
foreclosure, net of fees and costs which may be incurred) may expose a Fund to a
lower rate of return upon reinvestment of principal. Also, if a security subject
to prepayment has been purchased at a premium, in the event of prepayment the
value of the premium would be lost. Like other fixed-income securities, when
interest rates rise, the value of a mortgage-related security generally will
decline; however, when interest rates decline, the value of mortgage-related
securities with prepayment features may not increase as much as other
fixed-income securities. Payment of principal and interest on some mortgage
pass-through securities (but not the market value of the securities themselves)
may be guaranteed by the full faith and credit of the U.S. Government or its
agencies or instrumentalities. Mortgage pass-through securities created by
non-government issuers (such as commercial banks, savings and loan institutions,
private mortgage insurance companies, mortgage bankers and other secondary
market issuers) may be supported by various forms of insurance or guarantees,
including individual loan, title, pool and hazard insurance, and letters of
credit, which may be issued by governmental entities, private insurers or the
mortgage poolers. The Balanced Fund may also invest in investment grade
Collateralized Mortgage Obligations ("CMOs"). CMOs may be collateralized by
whole mortgage loans but are more typically collateralized by portfolios of
mortgage pass-through securities guaranteed by GNMA, FHLMC or FNMA. CMOs are
structured into multiple classes, with each class bearing a different stated
maturity. Payments of principal, including prepayments, are first returned to
investors holding the shortest maturity class; investors
A-11 PROSPECTUS
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holding the longer maturity classes receive principal only after the first class
has been retired. As new types of mortgage-related securities are developed and
offered to investors, the Adviser will, consistent with a Fund's investment
objective, policies and quality standards, consider making investments in such
new types of mortgage-related securities.
Other Asset-Backed Securities
The Balanced and Equity Funds may purchase asset-backed securities unrelated
to mortgage loans. These asset-backed securities may consist of undivided
fractional interests in pools of consumer loans or receivables held in trust.
Examples include certificates for automobile receivables (CARS) and credit card
receivables (CARDS). Payments of principal and interest on these asset-backed
securities are "passed through" on a monthly or other periodic basis to
certificate holders and are typically supported by some form of credit
enhancement, such as a letter of credit, surety bond, limited guaranty, or
subordination. The extent of credit enhancement varies, but usually amounts to
only a fraction of the asset-backed security's par value until exhausted.
Ultimately, asset-backed securities are dependent upon payment of the consumer
loans or receivables by individuals, and the certificate holder frequently has
no recourse to the entity that originated the loans or receivables. The actual
maturity and realized yield will vary based upon the prepayment experience of
the underlying asset pool and prevailing interest rates at the time of
prepayment. Asset-backed securities are relatively new instruments and may be
subject to greater risk of default during periods of economic downturn than
other instruments. Also, the secondary market for certain asset-backed
securities may not be as liquid as the market for other types of securities,
which could result in a Fund experiencing difficulty in valuing or liquidating
such securities.
Stripped Obligations
To the extent consistent with their respective investment objectives, the
Funds may purchase Treasury receipts and other "stripped" securities that
evidence ownership in either the future interest payments or the future
principal payments on U.S. Government and other obligations. These
participations, which may be issued by the U.S. Government (or a U.S. Government
agency or instrumentality) or by private issuers such as banks and other
institutions, are issued at a discount to their "face value," and, with respect
to the Balanced Fund, may include stripped mortgage-backed securities ("SMBS").
Stripped securities, particularly, SMBS, may exhibit greater price volatility
than ordinary debt securities because of the manner in which their principal and
interest are returned to investors.
PROSPECTUS A-12
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Custodial Receipts for Treasury Securities
To the extent consistent with their respective investment objectives, the
Funds may purchase participations in trusts that hold U.S. Treasury securities
(such as TIGRs and CATS) or other obligations where the trust participations
evidence ownership in either the future interest payments or the future
principal payments on the obligations. These participations are normally issued
at a discount to their "face value," and can exhibit greater price volatility
than ordinary debt securities because of the way in which their principal and
interest are returned to investors. Investments by a Fund in such participations
will not exceed 5% of the value of that Fund's total assets.
Forward Currency Transactions
The Equity Value and Balanced Funds may enter into forward foreign currency
exchange contracts in order to protect against uncertainty in the level of
future foreign exchange rates. See the SAI for further information concerning
foreign currency transactions.
ADDITIONAL INVESTMENT POLICIES -- SMALL CAP MASTER PORTFOLIOS
Privately Issued Securities (Rule 144A)
The Small Cap Master Portfolio may invest in privately issued securities which
may be resold in accordance with Rule 144A under the Securities Act of 1933
("Rule 144A Securities"). Rule 144A Securities are restricted securities which
are not publicly traded. Accordingly, the liquidity of the market for specific
Rule 144A Securities may vary. Wells Fargo Bank, using guidelines approved by
the Board of Directors of the Company, evaluates the liquidity characteristics
of each Rule 144A Security proposed for purchase by the Master Portfolio on a
case-by-case basis and considers the following factors, among others, in their
evaluation: (1) the frequency of trades and quotes for the Rule 144A Security;
(2) the number of dealers willing to purchase or sell the Rule 144A Security and
the number of other potential purchasers; (3) dealer undertakings to make a
market in the Rule 144A Security; and (4) the nature of the Rule 144A Security
and the nature of the marketplace trades (e.g., the time needed to dispose of
the Rule 144A Security, the method of soliciting offers and the mechanics of
transfer). Privately issued securities that are determined by the Master
Portfolio's investment adviser to be "illiquid" are subject to the Master
Portfolio's policy of not investing more than 15% of its net assets in illiquid
securities.
Corporate Reorganizations
The Small Cap Master Portfolio may invest in securities for which a tender or
exchange offer has been made or announced, and in securities of companies for
which a merger, consolidation, liquidation or similar reorganization proposal
has been announced if, in
A-13 PROSPECTUS
<PAGE> 452
the judgment of Wells Fargo Bank, there is a reasonable prospect of capital
appreciation significantly greater than the added portfolio turnover expenses
inherent in the short term nature of such transactions. The principal risk
associated with such investments is that such offers or proposals may not be
consummated within the time and under the terms contemplated at the time of the
investment, in which case, unless such offers or proposals are replaced by
equivalent or increased offers or proposals which are consummated, the Master
Portfolio may sustain a loss.
INVESTMENT POLICIES AND RESTRICTIONS
Each Fund's investment objective, as set forth in "How the Funds
Work -- Investment Objectives and Policies," is fundamental; that is, it may not
be changed without approval by the vote of the holders of a majority of a Fund's
outstanding voting securities, as described under "Capital Stock" in the SAI for
each Fund. If the Board of Directors determines, however, that a Fund's
investment objective can best be achieved by a substantive change in a
nonfundamental investment policy or strategy, the Company may make such change
without shareholder approval and will disclose any such material changes in the
then-current Prospectus.
As matters of fundamental policy, the Funds: (i) may not purchase securities
of any issuer, except U.S. Government obligations, if as a result, more than 5%
of the value of such Fund's total assets would be invested in the securities of
such issuer or a Fund would own more than 10% of the outstanding voting
securities of such issuer; (ii) each such Fund may borrow from banks up to 10%
of the current value of its net assets for temporary purposes only in order to
meet redemptions, and these borrowings may be secured by the pledge of up to 10%
of the current value of its net assets (but investments may not be purchased by
a Fund while any such outstanding borrowings exceed 5% of the Fund's net
assets); (iii) each such Fund may make loans of portfolio securities in
accordance with its investment policies; and (iv) each such Fund may not invest
25% or more of its assets (i.e., concentrate) in any particular industry, except
that a Fund may invest 25% or more of its assets in U.S. Government obligations.
With respect to fundamental investment policy (i) above, the Small Cap Fund is
subject to this restriction only with respect to 75% of its respective assets,
and, with regard to the Fund, it may be possible that the Company would own more
than 10% of the outstanding voting securities of the issuer. With respect to
fundamental investment policy (iii) above, the Small Cap Fund may not make loans
of portfolio securities having a value that exceeds 33 1/3% of the current value
of its net assets.
As a matter of nonfundamental policy, the Growth and Income Fund may invest up
to 10% of the current value of its respective net assets in illiquid securities.
The Balanced Fund, Equity Value Fund and Small Cap Fund (and the corresponding
Master Portfolio of the Small Cap Fund) may each invest up to 15% of its
respective net assets in illiquid securities. For these purposes, illiquid
securities include, among others, (a) securities
PROSPECTUS A-14
<PAGE> 453
that are illiquid by virtue of the absence of a readily available market or
legal or contractual restrictions on resale, (b) fixed time deposits that are
subject to withdrawal penalties and that have maturities of more than seven days
and (c) repurchase agreements not terminable within seven days.
Illiquid securities shall not include securities eligible for resale pursuant
to Rule 144A under the Securities Act of 1933 (the "1933 Act") that have been
determined to be liquid by the adviser, pursuant to guidelines established by
the Company's Board of Directors, and commercial paper that is sold under
Section 4(2) of the 1933 Act that (i) is not traded flat or in default as to
interest or principal and (ii) is rated in one of the two highest categories by
at least two nationally recognized statistical rating organizations and the
adviser, pursuant to guidelines established by the Company's Board of Directors,
has determined the commercial paper to be liquid; or (iii) is rated in one of
the two highest categories by one nationally recognized statistical rating
organization and the adviser, pursuant to guidelines established by the
Company's Board of Directors has determined that the commercial paper is of
equivalent quality and is liquid, if by any reason thereof the value of its
aggregate investment in such classes of securities will exceed 10% of its total
assets.
A-15 PROSPECTUS
<PAGE> 454
Advised by WELLS FARGO BANK, N.A.
Sponsored/Distributed by
Stephens Inc., Member NYSE/SIPC
[LOGO]
NOT FDIC INSURED
<PAGE> 455
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE> 456
SPONSOR, DISTRIBUTOR AND ADMINISTRATOR
Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
INVESTMENT ADVISER, TRANSFER AND
DIVIDEND DISBURSING AGENT AND
CUSTODIAN
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
LEGAL COUNSEL
Morrison & Foerster LLP
2000 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
FOR MORE INFORMATION ABOUT THE FUNDS, SIMPLY CALL 1-800-222-8222, OR WRITE:
Stagecoach Funds, Inc.
c/o Stagecoach Shareholder Services
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
STAGECOACH FUNDS:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- are NOT FDIC insured
- are NOT guaranteed by Wells Fargo Bank
- are NOT deposits or obligations of the Bank
- involve investment risk, including possible loss of [LOGO]
principal
</TABLE>
[RECYCLE LOGO]
Printed on Recycled Paper SC0228 (9/96)
<PAGE> 457
[STAGECOACH FUNDS LOGO]
P.O. Box 7066
San Francisco, CA 94120-7066
STAGECOACH FUNDS:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- are NOT FDIC insured
- are NOT guaranteed by Wells Fargo Bank
- are NOT deposits or obligations of the Bank
- involve investment risk, including possible loss of [LOGO]
principal
</TABLE>
[RECYCLE LOGO]
Printed on Recycled Paper SC0228 (9/96)
<PAGE> 458
[STAGECOACH FUNDS LOGO]
------------------------------
PROSPECTUS
------------------------------
GINNIE MAE FUND
INTERMEDIATE BOND FUND
SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND
INSTITUTIONAL CLASS
SEPTEMBER 6, 1996
<PAGE> 459
STAGECOACH FUNDS(R)
GINNIE MAE, INTERMEDIATE BOND, AND SHORT-INTERMEDIATE
U.S. GOVERNMENT INCOME FUNDS
INSTITUTIONAL CLASS
Stagecoach Funds, Inc. (the "Company") is an open-end management investment
company. This Prospectus contains information about Institutional Class shares
offered by three funds of the Stagecoach Family of Funds -- the GINNIE MAE,
INTERMEDIATE BOND, AND SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUNDS (each, a
"Fund" and, collectively, the "Funds").
The GINNIE MAE FUND seeks to provide investors with a long-term total rate of
return through preserving capital and earning high interest income by investing
principally in a portfolio of U.S. Government mortgage pass-through securities,
consisting primarily of securities issued by the Government National Mortgage
Association (popularly called "Ginnie Maes"), Federal National Mortgage
Association and Federal Home Loan Mortgage Corporation. The INTERMEDIATE BOND
FUND seeks to provide investors with a high level of current income consistent
with the preservation of capital and maintenance of liquidity. The
SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND seeks to provide investors with
current income, while preserving capital, by investing primarily in a portfolio
consisting of short- to intermediate-term securities issued or guaranteed by the
U.S. Government, its agencies and instrumentalities.
Please read this Prospectus before investing and retain it for future
reference. It is designed to provide you with important information and to help
you decide if a Fund's goals match your own. A Statement of Additional
Information ("SAI"), dated September 6, 1996, containing additional information
about each Fund, has been filed with the Securities and Exchange Commission
("SEC") and is incorporated by reference into this Prospectus. The SAI is
available without charge by writing to Stagecoach Funds, Inc., c/o Stagecoach
Shareholder Services, Wells Fargo Bank, N.A., P.O. Box 7066, San Francisco, CA
94120-7066 or by calling 1-800-222-8222. If you hold shares in an IRA, please
call 1-800-BEST-IRA for information or assistance.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THESE AUTHORITIES PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
FUND SHARES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR ISSUED, ENDORSED OR
GUARANTEED BY, WELLS FARGO BANK, N.A. ("WELLS FARGO BANK") OR ANY OF ITS
AFFILIATES. SUCH SHARES ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT,
THE FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"), THE FEDERAL RESERVE BOARD OR
ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN A FUND INVOLVES CERTAIN RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
PROSPECTUS DATED SEPTEMBER 6, 1996
PROSPECTUS
<PAGE> 460
ALTHOUGH CERTAIN PORTFOLIO INSTRUMENTS HELD BY THE GINNIE MAE AND SHORT-
INTERMEDIATE U.S. GOVERNMENT INCOME FUNDS MAY BE INSURED OR GUARANTEED BY THE
UNITED STATES OR ANY FEDERAL AGENCY OR INSTRUMENTALITY, SHARES OF THE FUNDS ARE
NOT.
WELLS FARGO BANK IS THE INVESTMENT ADVISER AND IS COMPENSATED FOR PROVIDING
THE FUNDS WITH CERTAIN OTHER SERVICES. STEPHENS INC. ("STEPHENS"), WHICH
IS NOT AFFILIATED WITH WELLS FARGO BANK, IS THE FUNDS'
SPONSOR, ADMINISTRATOR AND DISTRIBUTOR.
PROSPECTUS
<PAGE> 461
TABLE OF CONTENTS
-------
PROSPECTUS SUMMARY 1
SUMMARY OF FUND EXPENSES 5
FINANCIAL HIGHLIGHTS 7
HOW THE FUNDS WORK 9
THE FUNDS AND MANAGEMENT 17
INVESTING IN THE FUNDS 20
EXCHANGES 24
DIVIDENDS 25
MANAGEMENT AND SERVICING FEES 26
TAXES 28
PROSPECTUS APPENDIX - ADDITIONAL INVESTMENT POLICIES A-1
PROSPECTUS
<PAGE> 462
PROSPECTUS SUMMARY
The Funds provide investors with a convenient way to invest in various
portfolios of securities selected and supervised by professional management. The
following provides summary information about the Funds. For more information,
please refer to the identified Prospectus sections and generally to the
Prospectus and SAI.
Q. WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?
A. The GINNIE MAE FUND seeks to provide investors with a long-term total rate of
return through preserving capital and earning high interest income by
investing principally in a portfolio of U.S. Government mortgage
pass-through securities, consisting primarily of securities issued by the
Government National Mortgage Association ("GNMA"), Federal National Mortgage
Association ("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC").
Under normal market conditions, the Fund will invest at least 65% of its
assets in securities issued by GNMA.
The INTERMEDIATE BOND FUND seeks to provide investors with a high level of
current income consistent with the preservation of capital and maintenance
of liquidity. In pursuing its investment objective, the Fund may invest in a
broad range of corporate debt obligations, such as fixed and variable-rate
bonds, zero coupon bonds, debentures, obligations convertible into common
stock, and various types of demand instruments, obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities, and
U.S. dollar-denominated debt obligations of foreign issuers, including
foreign corporations and foreign governments, and money market instruments.
The Fund is also permitted to acquire obligations issued by state and local
governments ("municipal obligations"), mortgage-backed and certain other
asset-backed securities. Under normal market conditions, the Fund expects to
maintain a dollar-weighted average portfolio maturity between three and ten
years and the policy of the Fund is to invest at least 65% of the total
value of its assets in corporate and government bonds.
The SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND seeks to provide
investors with current income, while preserving capital, by investing
primarily in a portfolio consisting of short- to intermediate-term
securities issued or guaranteed by the U.S. Government, its agencies and
instrumentalities. The Fund invests primarily in U.S. Treasury securities,
notes and bonds and obligations issued or guaranteed by federal agencies or
instrumentalities, including government-sponsored enterprises such as GNMA
and FNMA. Under normal market conditions, at least 65% of the Fund's total
assets will be invested in U.S. Government obligations and the
dollar-weighted effective average maturity of the portfolio is expected to
be between two and five years. The Fund may also invest in investment-grade
1 PROSPECTUS
<PAGE> 463
corporate debt obligations. The Fund is designed for investors with
investment horizons of two to five years.
See "How the Funds Work -- Investment Objectives and Policies" and
"Prospectus Appendix -- Additional Investment Policies" for further
information on investments.
Q. WHAT ARE SOME OF THE POTENTIAL RISKS ASSOCIATED WITH THIS TYPE OF INVESTMENT?
A. Investments in a Fund are not insured against loss of principal. When the
value of the securities that a Fund owns declines, so does the value of the
Fund's shares. Therefore, you should be prepared to accept some risk with
the money you invest in a Fund.
The market value of investments in fixed-income securities changes in
response to changes in interest rates and the relative financial strength of
each issuer. During periods of falling interest rates, the value of
fixed-income securities generally rises. Conversely, during periods of
rising interest rates, the value of such securities generally declines. Debt
securities with longer maturities, which tend to produce higher yields, are
subject to potentially greater capital appreciation and depreciation than
obligations with shorter maturities. Changes in the financial strength of an
issuer or changes in the ratings of any particular security may also affect
the value of these investments. Fluctuations in the market value of fixed-
income securities subsequent to their acquisition does not affect cash
income from such securities but are reflected in a Fund's net asset value.
Each Fund may also purchase zero-coupon bonds (i.e., discount debt
obligations that do not make periodic interest payments) that are subject to
greater market fluctuations from changing interest rates than debt
obligations of comparable maturities which make current distributions of
interest. The Intermediate Bond and Short-Intermediate U.S. Government
Income Funds may invest in certain foreign securities. Investing in the
securities of issuers in any foreign country involves special risks and
considerations not typically associated with investing in U.S. companies. In
addition, the corporate debt securities are subject to credit risk, which is
the risk that the issuer cannot pay all or a portion of the obligation
represented by a particular security.
U.S. Government obligations include securities issued or guaranteed as to
principal and interest by the U.S. Government and supported by the full
faith and credit of the U.S. Treasury. U.S. Government obligations also
include securities issued or guaranteed by federal agencies or
instrumentalities, including government-sponsored enterprises. Some
obligations of agencies or instrumentalities of the U.S. Government are
supported by the full faith and credit of the United States or U.S. Treasury
guarantees; others, by the right of the issuer or guarantor to borrow from
the U.S. Treasury; still others, by the discretionary authority of the
PROSPECTUS 2
<PAGE> 464
U.S. Government to purchase certain obligations of the agency or
instrumentality; and others, only by the credit of the agency or
instrumentality issuing the obligation. In the case of obligations not
backed by the full faith and credit of the United States, the investor must
look principally to the agency or instrumentality issuing or guaranteeing
the obligation for ultimate repayment, which agency or instrumentality may
be privately owned. There can be no assurance that the U.S. Government will
provide financial support to its agencies or instrumentalities where it is
not obligated to do so. Certain types of U.S. Government obligations are
subject to fluctuations in yield or value due to their structure or contract
terms. The adjustable rate feature of the mortgages underlying the
adjustable rate mortgage securities ("ARMS") and the collateralized mortgage
obligations ("CMOs") in which the Short-Intermediate U.S. Government Income
Fund invests should reduce, but will not eliminate, price fluctuations in
such securities.
The net asset value of shares of the Funds will fluctuate. As with all
mutual funds, there can be no assurance that a Fund will achieve its
investment objective. See "How the Funds Work -- Investment Objectives and
Policies -- Risk Factors" below and "Additional Permitted Investment
Activities" in the SAI for further information about the Funds' investments
and related risks.
Q. WHO MANAGES MY INVESTMENTS?
A. Wells Fargo Bank, as the Funds' investment adviser, manages your investments.
Wells Fargo Bank also provides transfer agency, dividend disbursing agency
and custodial services to the Fund. In addition, Wells Fargo Bank is a
shareholder servicing agent and a selling agent of the Funds. See "The Funds
and Management" and "Management and Servicing Fees" for further information.
Q. HOW DO I INVEST?
A. Qualified investors may invest by purchasing Institutional Class shares of
the Funds at the net asset value per share without a sales charge ("NAV").
Qualified investors include certain customers of affiliate, franchise or
correspondent banks of Wells Fargo & Company and other selected institutions
("Institutions"). Customers may include individuals, trusts, partnerships
and corporations. Purchases are effected through the customer's account with
the Institution under the terms of the customer's account agreement with the
Institution. Investors wishing to purchase a Fund's Institutional Class
shares should contact their account representatives. See "Investing in the
Funds" for additional information.
Q. ARE EXCHANGES TO OTHER FUNDS PERMITTED?
A. Yes. The exchange privilege enables investors to exchange Fund shares for
shares of another fund offered by the Company, or shares of certain other
funds offered by other investment companies in the Stagecoach Family of
Funds, to the extent such shares are offered for sale in your state of
residence. Exchanges are effected
3 PROSPECTUS
<PAGE> 465
through the customer's account with the Institution under the terms of the
customer's account agreement with the Institution. See "Exchanges."
Q. HOW MAY I REDEEM SHARES?
A. Investors may redeem shares at NAV, without charge by the Company.
Institutional Class shares held by an Institution on behalf of its customers
must be redeemed under the terms of the customer's account agreement with
the Institution. Institutions are responsible for transmitting redemption
requests to the Company and crediting its customers' accounts. The Company
reserves the right to impose charges for wiring redemption proceeds. See
"Investing in the Funds -- Redemption of Institutional Class Shares."
Q. HOW WILL I RECEIVE DIVIDENDS AND ANY CAPITAL GAINS?
A. Dividends from net investment income of the Ginnie Mae, Intermediate Bond and
Short-Intermediate U.S. Government Income Funds are declared daily and paid
monthly. Dividends are automatically reinvested in additional Institutional
Class shares of the respective Fund at NAV. Shareholders also may elect to
receive dividends in cash. Any capital gains are distributed at least
annually in the same manner as dividends. See "Dividends" for additional
information.
Q. WHAT ARE DERIVATIVES AND DO THE FUNDS USE THEM?
A. Derivatives are financial instruments whose value is derived, at least in
part, from the price of another security or a specified asset, index or
rate. Some of the permissible investments described in this Prospectus, such
as floating- and variable-rate instruments, structured notes and certain
U.S. Government obligations, are considered derivatives. Some derivatives
may be more sensitive than direct securities to changes in interest rates or
sudden market moves. Some derivatives also may be susceptible to
fluctuations in yield or value due to their structure or contract terms.
Q. WHAT STEPS DO THE FUNDS TAKE TO CONTROL DERIVATIVES-RELATED RISKS?
A. Wells Fargo Bank, as investment adviser to the Funds, uses a variety of
internal risk management procedures to ensure that derivatives' use is
consistent with a Fund's investment objective, does not expose the Fund to
undue risks and is closely monitored. These procedures include providing
periodic reports to the Board of Directors concerning the use of
derivatives. Derivatives use by a Fund also is subject to broadly applicable
investment policies. For example, a Fund may not invest more than a
specified percentage of its assets in "illiquid securities," including
derivatives that do not have active secondary markets. Nor may the Fund use
certain derivatives without establishing adequate "cover" in compliance with
SEC rules limiting the use of leverage. For more information on the Funds'
investment activities, see "How the Funds Work" and "Prospectus
Appendix -- Additional Investment Policies."
PROSPECTUS 4
<PAGE> 466
SUMMARY OF FUND EXPENSES
INSTITUTIONAL CLASS SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
SHORT-INTERMEDIATE
GINNIE MAE INTERMEDIATE U.S. GOVERNMENT
FUND BOND FUND INCOME FUND
<S> <C> <C> <C>
Maximum Sales Charge
Imposed on Purchases (as
a percentage
of offering price)..... None None None
Sales Charge Imposed on
Reinvested Dividends... None None None
Sales Charge Imposed on
Redemptions............ None None None
Exchange Fees.............. None None None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
SHORT-INTERMEDIATE
GINNIE MAE INTERMEDIATE U.S. GOVERNMENT
FUND BOND FUND INCOME FUND
<S> <C> <C> <C>
Management Fee (after
waivers or
reimbursements)(1)....... 0.50% 0.40% 0.27%
Other Expenses (after
waivers or
reimbursements)(2)....... 0.27% 0.35% 0.38%
----- ----- -----
TOTAL FUND OPERATING
EXPENSES (after waivers
or reimbursements)(3).... 0.77% 0.75% 0.65%
===== ===== =====
</TABLE>
- -------------------------------
<TABLE>
<S> <C>
(1) Management Fees (before waivers or reimbursements) would be
0.50%, 0.50% and 0.50%, respectively.
(2) Other Expenses (before waivers or reimbursements) would be 0.64%,
0.59% and 0.86%, respectively.
(3) Total Fund Operating Expenses (before waivers or reimbursements)
would be 1.14%, 1.09% and 1.36%, respectively.
</TABLE>
Note: The table does not reflect any charges that may be imposed by Wells Fargo
Bank or another Institution directly on certain customer accounts in
connection with an investment in the Funds.
5 PROSPECTUS
<PAGE> 467
EXAMPLE OF EXPENSES
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following
expenses on a $1,000 investment in
a Fund's Institutional Class
shares, assuming a 5% annual return
and redemption at the end of each
time period indicated:
Ginnie Mae Fund................ $8 $25 $43 $95
Intermediate Bond Fund......... $8 $24 $42 $93
Short-Intermediate U.S.
Government Income Fund....... $7 $21 $37 $82
</TABLE>
EXPLANATION OF TABLES
The purpose of the above tables is to help a shareholder understand the
various costs and expenses that an investor in the Funds will bear directly or
indirectly.
SHAREHOLDER TRANSACTION EXPENSES are charges incurred when a shareholder buys
or sells Fund shares. Institutional Class shares are sold with no shareholder
transaction charges imposed by the Company. The Company reserves the right to
impose a charge for wiring redemption proceeds.
ANNUAL FUND OPERATING EXPENSES for the Institutional Class shares of the Funds
are based on applicable contract amounts and derived from amounts incurred
during the most recent fiscal year, restated to reflect voluntary fee waivers
and expense reimbursements that are expected to continue to reduce expenses
during the Company's current fiscal year. Wells Fargo Bank and Stephens have
agreed to waive or reimburse all or a portion of their respective fees charged
to, or expenses paid by, each Fund to ensure that the Total Fund Operating
Expenses do not exceed, on an annual basis, 0.77%, 0.75%, or 0.65%,
respectively, of the Ginnie Mae, Intermediate Bond or Short-Intermediate U.S.
Government Income Funds' average daily net assets through August 31, 1997. Any
waivers or reimbursements will reduce a Fund's total expenses. There can be no
assurance that waivers or reimbursements will continue after that time. For more
complete descriptions of the various costs and expenses you can expect to incur
as an investor in the Funds, please see "Management and Servicing Fees."
EXAMPLE OF EXPENSES is a hypothetical illustration of the expenses associated
with a $1,000 investment over stated periods, based on the expenses in the above
tables and an assumed annual rate of return of 5%. The rate of return should not
be considered an indication of actual or expected performance of a Fund nor a
representation of past or future expenses; actual expenses and returns may be
greater or lesser than those shown.
PROSPECTUS 6
<PAGE> 468
FINANCIAL HIGHLIGHTS
For the Intermediate Bond Fund, the following information has been derived
from the Financial Highlights in the annual and semi-annual financial statements
for the fiscal periods ended September 30, 1995 and March 31, 1996 for Pacifica
Funds Trust's Intermediate Bond Fund, the predecessor portfolio to the Fund.
This information is provided to assist you in evaluating the performance of each
Fund since its commencement of operations. The financial information for the
period ended September 30, 1995 and for the years ended May 31, 1992 through May
31, 1995 were each audited by former independent accountants to the predecessor
portfolio. The financial information and the reports for the period ended
September 30, 1995 and the year ended May 31, 1995 on such audits are
incorporated by reference into the SAI. The unaudited financial information and
the related notes for the six months ended March 31, 1996 also are incorporated
by reference into the SAI. This information should be read in conjunction with
the related financial statements and the notes thereto. The predecessor
portfolio offered a single class of shares to institutional investors, which are
the predecessor shares of the Institutional Class shares offered by this
prospectus.
Financial Highlights for the Institutional Class shares of the Ginnie Mae and
Short-Intermediate U.S. Government Income Funds are not provided because the
Institutional Class shares were not offered during the periods presented.
7 PROSPECTUS
<PAGE> 469
INTERMEDIATE BOND FUND(1)
FOR A SHARE OUTSTANDING AS SHOWN
<TABLE>
<CAPTION>
SIX-MONTH FOUR-MONTH
PERIOD PERIOD
ENDED ENDED YEAR ENDED MAY 31,
MARCH 31, SEPT. 30, ----------------------------------------
1996 1995(2) 1995 1994 1993 1992
----------- ---------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net asset value -- beginning of period....................... $ 14.76 $ 14.77 $ 14.36 $ 15.72 $ 15.69 $ 15.52
Income from investment operations
Net investment income....................................... 0.43 0.30 0.91 0.99 1.17 1.14
Net realized and unrealized gain (loss) on investments...... (0.12) (0.01) 0.47 (0.90) 0.40 0.65
------- -------- ------- ------- ------- -------
Total income from investment operations..................... 0.31 0.29 1.38 0.09 1.57 1.79
------- -------- ------- ------- ------- -------
Dividends and distributions to shareholders
Dividends from net investment income........................ (0.43) (0.30) (0.97) (0.85) (1.04) (1.41)
Distributions from net realized gain on investments......... (0.00) (0.00) (0.00) (0.60) (0.50) (0.21)
------- -------- ------- ------- ------- -------
Total dividends and distributions to shareholders......... (0.43) (0.30) (0.97) (1.45) (1.54) (1.62)
------- -------- ------- ------- ------- -------
Net asset value -- end of period............................ $ 14.64 $ 14.76 $ 14.77 $ 14.36 $ 15.72 $ 15.69
======= ======== ======= ======= ======= =======
Total return (excluding sales load)....................... 2.20% 6.14%(3) 10.13% 0.35% 10.42% 11.96%
Ratios/Supplemental Data
Net assets, end of period (000)............................. $51,262 $ 55,628 $56,087 $58,199 $61,207 $54,203
Ratio of expenses to average net assets..................... 0.78%(3) 0.89%(3) 0.81% 0.79% 0.76% 0.68%
Ratio of net investment income to average net assets........ 5.82%(3 5.94%(3) 6.35% 5.33% 6.01% 7.14%
Ratio of expenses to average net assets without fee
waivers................................................... 0.95%(3) 0.94%(3) 0.85% 0.82% 0.79% 0.73%
Ratio of net investment income to average net assets without
fee waivers............................................... 5.65%(3) 5.89%(3) 6.31% 5.30% 5.98% 7.09%
Portfolio turnover rate(4).................................. 18% 54% 76% 163% 146% 102%
<CAPTION>
1991 1990 1989
------- ------- -------
<S> <C> <C> <C>
Net asset value -- beginning of period....................... $ 15.08 $ 15.13 $ 15.00
Income from investment operations
Net investment income....................................... 1.25 1.26 1.22
Net realized and unrealized gain (loss) on investments...... 0.54 (0.05) 0.08
------- ------- -------
Total income from investment operations..................... 1.79 1.21 1.30
------- ------- -------
Dividends and distributions to shareholders
Dividends from net investment income........................ (1.25) (1.26) (1.17)
Distributions from net realized gain on investments......... (0.10) -- --
------- ------- -------
Total dividends and distributions to shareholders......... (1.35) (1.26) (1.17)
------- ------- -------
Net asset value -- end of period............................ $ 15.52 $ 15.08 $ 15.13
======= ======= =======
Total return (excluding sales load)....................... 12.36% 8.25% 9.07%
Ratios/Supplemental Data
Net assets, end of period (000)............................. $54,074 $79,471 $74,002
Ratio of expenses to average net assets..................... 0.66% 0.68% 0.69%
Ratio of net investment income to average net assets........ 8.00% 8.25% 8.25%
Ratio of expenses to average net assets without fee
waivers................................................... 0.71% 0.73% 0.74%
Ratio of net investment income to average net assets without
fee waivers............................................... 7.95% 8.20% 8.20%
Portfolio turnover rate(4).................................. 78% 32% 36%
</TABLE>
(1) The Fund commenced operations as the Bonds Plus Fund of Westcore Trust from
June 1, 1988, and was advised by First Interstate Bank of Oregon, N.A. until
the reorganization as a portfolio of Pacifica Funds Trust on October 1,
1995, when First Interstate Capital Management, Inc. ("FICM") assumed
investment advisory responsibilities. In connection with the merger of First
Interstate Bancorp into Wells Fargo & Co. on April 1, 1996, FICM was renamed
as Wells Fargo Investment Management, Inc.
(2) The Fund changed its fiscal year from May 31 to September 30.
(3) Annualized.
(4) A portfolio turnover rate is, in general, the percentage computed by taking
the lesser of purchases or sales of portfolio securities (excluding
securities with a maturity date of one year or less at the time of
acquisition) for a period and dividing it by the monthly average of the
market value of such securities during the period.
PROSPECTUS 8
<PAGE> 470
HOW THE FUNDS WORK
INVESTMENT OBJECTIVES AND POLICIES
GINNIE MAE FUND
The Ginnie Mae Fund seeks to provide investors with a long-term total rate of
return through preserving capital and earning high interest income by investing
principally in a portfolio of U.S. Government mortgage pass-through securities,
consisting primarily of securities issued by GNMA, FNMA and FHLMC. This
investment objective is fundamental and cannot be changed without shareholder
approval. As with all mutual funds, there can be no assurance that the Fund,
which is a diversified portfolio, will achieve its investment objective. Under
normal market conditions, the Fund will invest at least 65% of its total assets
in GNMA securities. These securities may bear interest at rates that are not
fixed ("floating- and variable-rate instruments") or may be purchased on a
"when-issued" or "firm commitment basis." The Fund also may invest in U.S.
Treasury securities, which are backed by the full faith and credit of the U.S.
Government, and repurchase agreements.
GNMAs, FNMAs and FHLMCs are mortgage-backed securities representing part
ownership of a pool of residential mortgage loans. A "pool" or group of such
mortgages is assembled and, after being approved by the entity, is offered to
investors through securities dealers. Once approved by GNMA, a government
corporation within the U.S. Department of Housing and Urban Development, the
timely payment of interest and principal of a GNMA security is guaranteed by the
full faith and credit of the U.S. Government. FNMA and FHLMC are federally
chartered corporations supervised by the U.S. Government and acting as
government-sponsored enterprises. FNMA and FHLMC securities are not direct
obligations of the U.S. Treasury, and are supported by the credit of FNMA or
FHLMC only. FNMA guarantees timely payment of interest and principal on its
securities; FHLMC guarantees timely payment of interest and ultimate payment of
principal only.
The Ginnie Mae Fund may temporarily invest some of its assets in shares of
unaffiliated registered, open-end investment companies, subject to the
limitations of the Investment Company Act of 1940, as amended (the "1940 Act").
The Fund may also invest in high-quality money market instruments, which include
U.S. Government obligations, obligations of domestic and foreign banks, and
short-term corporate debt obligations. Such temporary investments would most
likely be made when there is an unexpected or abnormal level of investor
purchases or redemptions of Fund shares or because of unusual market conditions.
The Fund also may lend its portfolio securities. A more complete description of
the Fund's investments and investment activities is contained in "Prospectus
Appendix -- Additional Investment Policies" and in the SAI.
9 PROSPECTUS
<PAGE> 471
INTERMEDIATE BOND FUND
The Intermediate Bond Fund seeks to provide investors with a high level of
current income consistent with the preservation of capital and maintenance of
liquidity. In pursuing its investment objective, the Fund may invest in a broad
range of corporate debt obligations such as fixed and variable-rate bonds, zero
coupon bonds, debentures, obligations convertible into common stock and various
types of demand instruments, obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, dollar-denominated debt
obligations of foreign issuers, including foreign corporations and foreign
governments, and money market instruments. The Fund is also permitted to acquire
obligations issued by state and local governments ("municipal obligations"). The
purchase of municipal obligations may be advantageous when, as a result of
prevailing economic, regulatory or other circumstances, the yield of such
securities, on a pre-tax basis, is comparable to that of corporate or U.S.
Government obligations. The Fund may also purchase mortgage-backed and certain
other asset-backed securities. During normal market conditions, the Fund will
maintain a dollar-weighted average portfolio maturity between three and ten
years.
In acquiring particular portfolio securities, the Advisor will consider, among
other things, historical yield relationships between corporate and government
bonds, intermarket yield relationships among various industry sectors, current
economic cycles and the attractiveness and creditworthiness of particular
issuers. Depending upon its analysis of these and other factors, the Fund's
holdings in issuers in particular industry sectors may be overweighed when
compared to the relative industry weightings in the Shearson Lehman Brothers
Intermediate Index or other recognized indexes.
The policy of the Fund is to invest at least 65% of the total value of its
assets in corporate and government bonds during normal market conditions. Debt
obligations acquired by the Fund will be investment grade at the time of
purchase -- that is, obligations rated "AAA", "AA", "A" or "BBB" by Standard &
Poor's Ratings Group ("S&P") or "Aaa", "Aa", "A" or "Baa" by Moody's Investors
Service, Inc. ("Moody's"). Debt obligations may also be unrated but deemed by
the Investment Advisor to be comparable in quality to instruments that are so
rated. The Fund's dollar weighted average portfolio quality of the corporate
bond portion of the Fund's portfolio is expected to be "A" or better.
Obligations rated in the lowest of the top four rating categories ("Baa" by
Moody's or "BBB" by S&P) are considered to have speculative characteristics. See
the Appendix in the SAI for a description of applicable S&P and Moody's debt
ratings.
The Fund may also invest in obligations convertible into common stocks, and
may purchase common stocks, warrants or other rights to buy shares if they are
attached to a fixed income obligation. As a general matter, however, the Fund
will not invest in common stocks. Common stock received through the conversion
of convertible debt obligations will normally be sold in an orderly manner as
soon as possible. Up to 20% of
PROSPECTUS 10
<PAGE> 472
the total assets of the Fund may be invested directly in dollar-denominated debt
obligations of foreign issuers. These obligations may include obligations of
foreign corporations as well as investments in obligations of foreign
governments and their political subdivisions (which will be limited to direct
government obligations and government-guaranteed securities). The Fund may
invest no more than 5% of its net assets at the time of purchase in warrants
(other than those that have been acquired in units or attached to other
securities) and not more than 2% of its net assets in warrants which are not
listed on the New York or American Stock Exchange.
The Fund may also hold short-term U.S. Government obligations, money market
instruments, repurchase agreements, securities issued by other investment
companies within the limits prescribed by the 1940 Act, and cash, pending
investment, to meet anticipated redemption requests or if, in the opinion of the
Advisor, suitable investments for a Fund are unavailable. Such investments may
be made in such proportions as, in the opinion of the Advisor, existing
circumstances may warrant, and may include obligations of foreign banks and
foreign branches of U.S. banks. For additional descriptions of the types of
securities and investment practices used by the Fund, see "Prospectus
Appendix -- Additional Investment Policies."
The Fund may also purchase zero-coupon bonds (i.e., discount debt obligations
that do not make periodic interest payments) which are subject to greater market
fluctuations from changing interest rates than debt obligations of comparable
maturities which make current distributions of interest.
SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND
The Short-Intermediate U.S. Government Income Fund (sometimes, the "Income
Fund") seeks to provide investors with current income, while preserving capital,
by investing primarily in a portfolio consisting of short- to intermediate-term
securities issued or guaranteed by the U.S. Government, its agencies and
instrumentalities. This investment objective is fundamental and cannot be
changed without shareholder approval. As with all mutual funds, there can be no
assurance that the Fund, which is a diversified portfolio, will achieve its
investment objective.
The Income Fund may invest in obligations of any maturity. Under ordinary
circumstances, the dollar-weighted effective average maturity of the Fund's
portfolio is generally expected to be between two and five years, and at least
65% of the value of its total assets will be invested in U.S. Government
obligations. The Fund seeks to enhance its total return by shortening the
average maturity of portfolio securities when interest rates are anticipated to
increase and lengthening the maturity of such portfolio securities to take
advantage of anticipated interest rate declines. Portfolio turnover generally
involves some expense to the Fund, including dealer mark-ups.
11 PROSPECTUS
<PAGE> 473
The Income Fund's assets may be invested in U.S. Government obligations and in
investment-grade corporate debt obligations rated at the date of purchase in the
top four rating groups by Standard & Poor's Rating Group ("S&P") or Moody's
Investor Services, Inc. ("Moody's"), i.e., "AAA"/"Aaa," "AA"/"Aa," "A/A," and
"BBB"/"Baa" by S&P and Moody's, respectively. Securities rated "BBB"/"Baa" have
speculative characteristics. In addition, it is possible that securities in
which the Fund may invest could be downgraded by a ratings group subsequent to
purchase by the Fund. The Fund will not hold more than 5% of its assets in
securities that have been downgraded below investment grade subsequent to
purchase.
The Income Fund also may purchase "stripped securities" that include
participations in trusts that hold U.S. Treasury obligations (such as TIGRs and
CATS) and interests in U.S. Treasury obligations reflected in the Federal
Reserve-Book Entry System that represent ownership in either the future interest
payments or the future principal payments on the U.S. Treasury obligations
(sometimes referred to as "STRIPs"). Stripped securities have significantly
different investment characteristics than the instruments from which they
derive. S&P and Moody's assign ratings based upon their judgment of the risk of
default of the securities underlying the stripped securities. Stripped
securities are issued at a discount to their "face value" and may exhibit
greater price volatility than ordinary debt obligations because of the manner in
which their principal and interest are paid to investors. Investors should
understand that most of the risk of these securities comes from interest-rate
risk and not from the risk of default. Stripped securities may have
significantly greater interest-rate risk than traditional government securities
with identical ratings.
The Income Fund may invest in ARMS with interest rates that periodically reset
when market rates change. The Fund is designed for investors who seek a
relatively stable net asset value while providing high current income relative
to high-quality, short-term investment alternatives. ARMS are pass-through
certificates representing ownership interests in a pool of adjustable-rate
mortgages and the resulting cash flow from those mortgages. The ARMS in which
the Fund may invest are issued or guaranteed by GNMA, FNMA or FHLMC. Unlike
conventional debt securities, which provide for periodic (usually semi-annual)
payments of interest and payments of principal at maturity or on specified call
dates, ARMS provide for monthly payments based on a pro rata share of both
periodic interest and principal payments and prepayments of principal on the
underlying mortgage pool (less GNMA's, FNMA's or FHLMC's fees and any applicable
loan servicing fees.)
The Income Fund also may invest in the adjustable-rate portions of CMOs issued
by government agencies, instrumentalities or government-sponsored enterprises
including, primarily, FNMA and FHLMC, and collateralized by pools of mortgage
loans. Payments of principal and interest on the collateral mortgages are used
to pay debt service on the
PROSPECTUS 12
<PAGE> 474
CMOs. All CMOs purchased by the Fund are rated, at the time of purchase, "AAA"
by S&P or "Aaa" by Moody's.
On a temporary basis, the Income Fund may invest cash balances in shares of
unaffiliated, registered, open-end investment companies, subject to the
limitations of the 1940 Act. The Fund also may invest in U.S. Treasury bills,
engage in repurchase agreements and lend its portfolio securities, provided the
value of such loans of portfolio securities does not exceed one-third of the
current value of its total assets. Such temporary investments would most likely
be made when there is an unexpected or abnormal level of investor purchases or
redemptions of Fund shares or because of unusual market conditions. For
additional descriptions of the types of securities and investment practices used
by the Funds, see "Risk Factors," "Prospectus Appendix -- Additional Investment
Policies" in this Prospectus and "Investment Restrictions" and "Additional
Permitted Investment Activities" in the SAI.
RISK FACTORS
For the Ginnie Mae, Intermediate Bond and Short-Intermediate U.S. Government
Income Funds, illiquid securities, which may include certain restricted
securities, may be difficult to sell promptly at an acceptable price. Certain
restricted securities may be subject to legal restrictions on resale. Delay or
difficulty in selling securities may result in a loss or be costly to a Fund.
The adviser may use certain derivative investments or techniques, such as
investments in floating- and variable-rate instruments, structured notes and
certain U.S. Government obligations, to adjust the risk and return
characteristics of a Fund's portfolio. Derivatives are financial instruments
whose value is derived, at least in part, from the price of another security or
a specified asset, index or rate. Some derivatives may be more sensitive than
direct securities to changes in interest rates or sudden market moves. Some
derivatives also may be susceptible to fluctuations in yield or value due to
their structure or contract terms. If a Fund's adviser judges market conditions
incorrectly, the use of certain derivatives could result in a loss, regardless
of the adviser's intent in using the derivatives.
INTERMEDIATE BOND FUND
The price per share of the Intermediate Bond Fund will fluctuate with changes
in value of the investments held by the Fund. Shareholders of the Fund should,
therefore, expect the value of their shares to fluctuate with changes in the
value of the securities owned by the Fund.
The market value of the Fund's investment in fixed income securities will
change in response to changes in interest rates and the relative financial
strength of each issuer. During periods of falling interest rates, the value of
fixed income securities generally
13 PROSPECTUS
<PAGE> 475
rises. Conversely, during periods of rising interest rates the value of such
securities generally declines. Debt securities with longer maturities, which
tend to produce higher yields, are subject to potentially greater capital
appreciation and depreciation than obligations with shorter maturities. Changes
in the financial strength of an issuer or changes in the ratings of any
particular security may also affect the value of these investments. Fluctuations
in the market value of fixed income securities subsequent to their acquisition
will not affect cash income from such securities, but will be reflected in the
Fund's net asset value.
For the Intermediate Bond Fund, investing in the securities of issuers in any
foreign country, including American Depository Receipts ("ADRs") and European
Depository Receipts ("EDRs"), involves special risks and considerations not
typically associated with investing in U.S. companies. These include differences
in accounting, auditing and financial reporting standards; generally higher
commission rates on foreign portfolio transactions; the possibility of
nationalization, expropriation or confiscatory taxation; adverse changes in
investment or exchange control regulations (which may include suspension of the
ability to transfer currency from a country); and political instability which
could affect U.S. investments in foreign countries. Additionally, foreign
securities and dividends and interest payable on those securities may be subject
to foreign taxes, including taxes withheld from payments on those securities.
Foreign securities often trade with less frequency and volume than domestic
securities and, therefore, may exhibit greater price volatility. Additional
costs associated with an investment in foreign securities may include higher
custodial fees than apply to domestic custodial arrangements and transaction
costs of foreign currency conversions. Changes in foreign exchange rates also
will affect the value of securities denominated or quoted in currencies other
than the U.S. dollar. The Fund's objective may be affected either unfavorably or
favorably by fluctuations in the relative rates of exchange between the
currencies of different nations, by exchange control regulations and by
indigenous economic and political developments. See the SAI for further
information about foreign securities.
There is, of course, no assurance that the Fund will achieve its investment
objective or be successful in preventing or minimizing the risk of loss that is
inherent in investing in particular types of investment products.
GINNIE MAE AND SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUNDS
Although GNMA securities are guaranteed by the U.S. Government as to timely
payment of principal and interest and ARMS are guaranteed by the U.S.
Government, its agencies or instrumentalities (including government-sponsored
enterprises as noted above), the market value of these securities, upon which
the Funds' daily net asset value is based, will fluctuate. The Funds are subject
to interest-rate risk, that is, the risk that increases in interest rates may
adversely affect the value of the securities in which the
PROSPECTUS 14
<PAGE> 476
Funds invest, and hence the value of your investment in the Funds. The value of
the securities in which a Fund invests generally changes inversely to changes in
interest rates. However, the adjustable-rate feature of the mortgages underlying
the ARMS and the CMOs in which the Income Fund may invest should reduce, but
will not eliminate, price fluctuations in such securities, particularly during
periods of extreme fluctuations in market interest rates.
The full and timely payment of principal and interest on GNMA ARMS is
guaranteed by GNMA and backed by the full faith and credit of the U.S.
Government. FNMA also guarantees full and timely payment of both interest and
principal, while FHLMC guarantees full and timely payment of interest and
ultimate payment of principal. FNMA and FHLMC ARMS are not backed by the full
faith and credit of the U.S. Government. However, because FNMA and FHLMC are
government-sponsored enterprises, these securities are considered by some
investors to be high-quality investments that present minimal credit risks. The
yields provided by these ARMS have historically exceeded the yields on other
types of U.S. Government securities with comparable maturities. Of course, there
can be no assurance that this historical performance will continue or that
either Fund, which are diversified funds, will meet its investment objective.
Moreover, no assurance can be given that the U.S. Government would supply
financial support to U.S. Government-sponsored enterprises such as FNMA and
FHLMC in the event of a default in payment on the underlying mortgages which the
government-sponsored enterprise is unable to make good. Principal on the
mortgages underlying the mortgage pass-through securities in which the Funds may
invest may be prepaid in advance of maturity. Such prepayments tend to increase
when interest rates decline and may present a Fund with more principal to invest
at lower rates. The converse also tends to be the case. Portfolio turnover
should not adversely affect the Funds since portfolio transactions ordinarily
are made directly with principals on a net basis and, consequently, the Funds do
not incur brokerage expenses.
Furthermore, there can be no assurance that the U.S. Government would supply
financial support to its agencies or instrumentalities, where it is not
obligated to do so. Principal on the mortgages underlying the mortgage
pass-through securities in which the Short-Intermediate U.S. Government Income
Fund invests may be prepaid in advance of maturity; these prepayments tend to
increase when interest rates decline, presenting the Fund with more principal to
invest at lower rates. The converse also tends to be the case when interest
rates rise.
S&P and Moody's assign ratings based upon their judgment of the risk of
default (i.e., the risk that the issuer or guarantor may default in the payment
of principal and/or interest) of the securities underlying the CMOs. However,
investors should understand that most of the risk of these securities comes from
interest-rate risk (i.e., the risk that market interest rates may adversely
affect the value of the securities in which a Fund invests) and not from the
risk of default. CMOs may have significantly greater interest
15 PROSPECTUS
<PAGE> 477
rate risk than traditional government securities with identical ratings. The
adjustable-rate portions of CMOs have significantly less interest rate risk.
U.S. Government obligations have been selected by Wells Fargo Bank as the
Income Fund's principal investments because of their relatively low purchase and
sale transaction costs and because of the low default risk associated with them
(i.e., they are issued or guaranteed as to principal and interest by the U.S.
Government, its agencies or instrumentalities).
See "Prospectus Appendix -- Additional Investment Policies" and the SAI for
further information about investment policies and risks.
PERFORMANCE
Fund performance may be advertised from time to time in terms of average
annual total return, cumulative total return and yield. Performance figures are
based on historical results and are not intended to indicate future performance.
Performance figures are calculated separately for each class of shares of a
Fund.
Average annual total return of the Institutional Class of shares is based on
the overall dollar or percentage change of an investment in a Fund's
Institutional Class and assumes the investment is at NAV and all dividends and
any capital-gain distributions attributable to a class are also reinvested at
NAV in shares of the class. Cumulative total return is calculated similarly
except that the return figure is aggregated over the relevant period instead of
annualized.
Yield refers to the income generated by an investment in a class of a Fund's
shares over a specified period (usually 30 days), expressed as an annual
percentage rate. Effective yield is calculated similarly but assumes
reinvestment of the income earned from a Fund. Because of the effects of
compounding, effective yields are slightly higher than yields. The
tax-equivalent yield of a class of shares is similarly calculated but assumes
that a stated income tax rate has been applied to determine the tax-equivalent
figure.
In addition to presenting these standardized performance calculations, at
times, a Fund may also present non-standard performance figures, such as such as
three-month total returns or, in sales literature, distribution rates. Because
of the differences in the fees and/or expenses borne by shares of each class of
a Fund, the performance figures on one class of shares can be expected, at any
given time, to vary from the performance figures for other classes of the Fund.
Additional performance information is contained in the SAI under "Performance
Calculations" and the Annual Report, which are available upon request free of
charge by calling the Company at 1-800-222-8222 or by writing the Company at the
address shown on the front cover of the Prospectus.
PROSPECTUS 16
<PAGE> 478
THE FUNDS AND MANAGEMENT
The Funds are three of the funds of the Stagecoach Family of Funds. The
Company was organized as a Maryland corporation on September 9, 1991 and
currently offers shares of the following funds: Aggressive Growth, Arizona
Tax-Free, Asset Allocation, Balanced, California Tax-Free Bond, California
Tax-Free Income, California Tax-Free Money Market Mutual, Corporate Stock,
Diversified Income, Equity Value, Ginnie Mae, Government Money Market Mutual,
Growth and Income, Intermediate Bond, Money Market Mutual, Money Market Trust,
National Tax-Free, National Tax-Free Money Market Mutual, Oregon Tax-Free, Prime
Money Market Mutual, Short-Intermediate U.S. Government Income, Small Cap,
Treasury Money Market Mutual, and U.S. Government Allocation Funds. The Arizona
Tax-Free, Balanced, California Tax-Free Bond, Equity Value, Ginnie Mae, Growth
and Income, Intermediate Bond, Money Market Mutual, National Tax-Free, Oregon
Tax-Free, Prime Money Market Mutual, Small Cap and Treasury Money Market Mutual
Funds each offer three classes of shares. The Aggressive Growth, Asset
Allocation, California Tax-Free Income, Diversified Income, Short-Intermediate
U.S. Government Income and U.S. Government Allocation Funds each offer two
classes of shares. The California Tax-Free Money Market Mutual, Corporate Stock,
Government Money Market Mutual, Money Market Trust, and National Tax-Free Money
Market Mutual Funds each offer one class of shares. Most of the Company's funds
are authorized to issue multiple classes of shares, one class generally subject
to a front-end sales charge and, in some cases, a class subject to a
contingent-deferred sales charge, that are offered to retail investors. Certain
of the Company's funds also are authorized to issue other classes of shares,
which are sold primarily to institutional investors at NAV. Each class of shares
in a fund represents an equal, proportionate interest in a fund with other
shares of the same class. Shareholders of each class bear their pro rata portion
of the fund's operating expenses, except for certain class-specific expenses
(e.g., any state securities registration fees, shareholder servicing fees or
distribution fees that may be paid under Rule 12b-1) that are allocated to a
particular class and, accordingly, may affect performance. Please contact
Stagecoach Shareholder Services at 1-800-222-8222 if you would like additional
information about other funds or classes of shares offered.
The Company's Board of Directors supervises each Fund's activities and
monitors its contractual arrangements with various service-providers. Although
the Company is not required to hold annual shareholder meetings, special
meetings may be required for purposes such as electing or removing Directors,
approving advisory contracts and distribution plans, and changing a Fund's
investment objective or fundamental investment policies. All shares of the
Company have equal voting rights and are voted in the aggregate, rather than by
series or class, unless otherwise required by law (such as when the voting
matter affects only one series or class). A Fund shareholder of record is
entitled to one vote for each share owned and fractional votes for fractional
shares
17 PROSPECTUS
<PAGE> 479
owned. A more detailed description of the voting rights and attributes of the
shares is contained under "Capital Stock" in the SAI.
MANAGEMENT
Wells Fargo Bank serves as the Funds' investment adviser, transfer and
dividend disbursing agent, and custodian. In addition, Wells Fargo Bank is a
shareholder servicing agent and a selling agent of the Funds. Wells Fargo Bank,
one of the largest banks in the United States, was founded in 1852 and is the
oldest bank in the western United States. As of June 30, 1996, Wells Fargo Bank
and its affiliates provided investment advisory services for approximately $56
billion of assets of individuals, trusts, estates and institutions. Wells Fargo
Bank also serves as the investment adviser to other separately managed funds (or
the master portfolio in which a fund invests) of the Company, and as investment
adviser or sub-adviser to separately managed funds of five other registered,
open-end, management investment companies. Wells Fargo Bank, a wholly owned
subsidiary of Wells Fargo & Company, is located at 420 Montgomery Street, San
Francisco, California 94104.
Subsequent to its acquisition by Wells Fargo & Company on April 1, 1996, Wells
Fargo Investment Management, Inc. ("WFIM") (formerly, First Interstate Capital
Management, Inc.) served as investment adviser to the predecessor portfolios.
WFIM, a wholly owned subsidiary of Wells Fargo & Company, is located at 444
Market Street, San Francisco, California 94105. Prior to October 1, 1995, First
Interstate Bank of Oregon, N.A, a subsidiary of First Interstate Bancorp and an
affiliate of First Interstate Capital Management, Inc., served as investment
adviser to the predecessor portfolio.
Ms. Tamyra Thomas assumed responsibility as a co-portfolio manager for the
day-to-day management of the Intermediate Bond Fund as of the commencement of
operations of the Fund. She is a Senior Vice-President and the Chief Fixed
Income Investment Officer of the Investment Management Group of Wells Fargo
Bank. She is also Chair of the Investment Management Group Policy Committee. Ms.
Thomas has managed bond portfolios for over a decade. She currently manages in
excess of $1 billion of long-term taxable bond portfolios for various
foundations, defined benefit plans and other clients. Prior to joining Wells
Fargo Bank in early 1988, she held a number of senior investment positions for
the Valley Bank & Trust Company of Utah including Vice-President and Manager of
the Investment Department and Chairman of the Trust Investment Committee. She
holds a B.S. degree from the University of Utah and was past president of the
Utah Bond Club. Ms. Thomas is a Chartered Financial Analyst.
Mr. Paul Single assumed responsibility for the day-to-day management of the
portfolio of the Ginnie Mae Fund on May 1, 1995. Mr. Single has managed taxable
bond portfolios for over a decade, and has specific expertise in mortgage-backed
securities. Prior to joining Wells Fargo Bank, in early 1988, he was a senior
portfolio manager for Benham Capital Management Group. Mr. Single received his
B.S. from Springfield College.
PROSPECTUS 18
<PAGE> 480
Mr. Mark Kraschel has been responsible for the day-to-day management of the
portfolio of the Short-Intermediate U.S. Government Income Fund since October
1993. He has also been responsible for the day-to-day management of the
portfolio of the Ginnie Mae Fund since May 1, 1995. He has specialized in
short-term bond investment applications for over a decade. He joined Wells Fargo
Bank in 1988 after five years in fixed-income management at First Boston
Corporation. Mr. Kraschel holds a B.S. in business administration from the
University of Oregon and an M.B.A. in finance from the University of San
Francisco.
Mr. Scott Smith assumed responsibility as a co-portfolio manager for the
day-to-day management of the Intermediate Bond Fund as of the commencement of
operations of the Fund. Mr. Smith has also been responsible for the day-to-day
management of the portfolio of the Short-Intermediate U.S. Government Income
Fund since 1993 and has been responsible for the management of the portfolio of
the Ginnie Mae Fund since May 1, 1995. He joined Wells Fargo Bank in 1988 as a
taxable money market portfolio specialist. Currently, Mr. Smith holds the
position of liquidity management specialist/portfolio manager with Wells Fargo
Bank. His experience includes a position with a private money management firm
with mutual fund investment operations. Mr. Smith holds a B.A. degree from the
University of San Diego and is a Chartered Financial Analyst.
Morrison & Foerster LLP, counsel to the Company and special counsel to Wells
Fargo Bank has advised the Company and Wells Fargo Bank that Wells Fargo Bank
and its affiliates may perform the services contemplated by the Advisory
Contracts and this Prospectus without violation of the Glass-Steagall Act. Such
counsel has pointed out, however, that there are no controlling judicial or
administrative interpretations or decisions and that future judicial or
administrative interpretations of, or decisions relating to, present federal or
state statutes, including the Glass-Steagall Act, and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as future changes in such statutes, regulations and judicial or
administrative decisions or interpretations, could prevent such entities from
continuing to perform, in whole or in part, such services. If any such entity
were prohibited from performing any such services, it is expected that new
agreements would be proposed or entered into with another entity or entities
qualified to perform such services.
Stephens is the Fund's sponsor and administrator and distributes the Fund's
shares. Stephens is a full service broker/dealer and investment advisory firm
located at 111 Center Street, Little Rock, Arkansas 72201. Stephens and its
predecessor have been providing securities and investment services for more than
60 years. Additionally, they have been providing discretionary portfolio
management services since 1983. Stephens currently manages investment portfolios
for pension and profit sharing plans, individual investors, foundations,
insurance companies and university endowments.
19 PROSPECTUS
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INVESTING IN THE FUNDS
Institutional Class shares may be purchased on any day the Funds are open. The
Funds are open for business each day the New York Stock Exchange ("NYSE") is
open for trading (a "Business Day"). Currently, the NYSE is closed on New Year's
Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day (each a "Holiday"). When any Holiday falls on
a weekend, the NYSE typically is closed on the weekday immediately before or
after such Holiday.
The Company or Stephens may make the Prospectus available in an electronic
format. Upon receipt of a request from an investor or the investor's
representative, the Company or Stephens will transmit or cause to be transmitted
promptly, without charge, a paper copy of the electronic Prospectus.
SHARE VALUE
The value of a share of each class is its NAV. Wells Fargo Bank calculates the
NAV of each class of a Fund as of the close of regular trading on the NYSE
(referred to hereafter as "the close of the NYSE"), which is currently 1:00 p.m.
(Pacific time). The NAV per share for each class of shares is computed by
dividing the value of a Fund's assets allocable to a particular class, less the
liabilities charged to that class by the total number of the outstanding shares
of that class. All expenses, including fees paid to the investment adviser and
administrator, are accrued daily and taken into account for the purpose of
computing the NAV, which is expected to fluctuate daily.
Except for debt obligations with remaining maturities of 60 days or less,
which are valued at amortized cost, the other assets of the Funds are valued at
current market prices or, if such prices are not readily available, at fair
value as determined in good faith by the Company's Board of Directors. Prices
used for such valuations may be obtained from independent pricing services.
PURCHASE OF INSTITUTIONAL CLASS SHARES
Institutional Class shares of the Funds are sold at NAV (without a sales
charge) on a continuous basis primarily to certain customers ("Customers") of
affiliate, franchise or correspondent banks of Wells Fargo & Company and other
selected institutions (previously defined as Institutions). Customers may
include individuals, trusts, partnerships and corporations. Share purchases are
effected through a Customer's account at an Institution under the terms of the
Customer's account agreement with the Institution, and confirmations of share
purchases and redemptions are sent by the Funds to the Institution involved.
Institutions (or their nominees), acting on behalf of their Customers, normally
are the holders of record of Institutional Class shares. Customers'
PROSPECTUS 20
<PAGE> 482
beneficial ownership of Institutional Class shares is reflected in the account
statements provided by Institutions to their Customers. The exercise of voting
rights and the delivery to Customers of shareholder communications from the
Funds is governed by the Customers' account agreements with an Institution.
Investors wishing to purchase Institutional Class shares of the Funds should
contact their account representatives.
Institutional Class shares of the Funds are sold at the NAV per share next
determined after a purchase order has become effective. Purchase orders placed
by an Institution for Institutional Class shares in a Fund must be received by
the Company by 1:00 p.m. (Pacific time) on any Business Day. Payment for such
shares may be made by Institutions in federal funds or other funds immediately
available to the custodian no later than 1:00 p.m. (Pacific time) on the next
Business Day following the receipt of the purchase order.
Institutions are responsible for transmitting orders for purchases by their
Customers and delivering required funds on a timely basis. If funds are not
received within the periods described above, the order will be canceled, notice
thereof will be given, and the Institution will be responsible for any loss to
the Funds or its shareholders. Institutions may charge certain account fees
depending on the type of account the investor has established with the
Institution. In addition, an Institution may receive fees from the Funds with
respect to the investments of its Customers as described under "Management and
Servicing Fees." Payment for Institutional Class shares of a Fund may, in the
discretion of the investment adviser, be made in the form of securities that are
permissible investments for the Fund. For further information see "Additional
Purchase and Redemption Information" in the SAI.
The Company reserves the right to reject any purchase order or to suspend
sales at any time. Payment for orders that are not received will be returned
after prompt inquiry. The issuance of Institutional Class shares is recorded on
the Company's books, and share certificates are not issued.
WIRE INSTRUCTIONS -- DIRECT PURCHASES BY INSTITUTIONS
1. Complete an Account Application.
2. Instruct the wiring bank to transmit the specified amount in federal funds
to:
Wells Fargo Bank, N.A.
San Francisco, California
Bank Routing Number: 121000248
Wire Purchase Account Number: 4068-000587
Attention: Stagecoach Funds (Name of Fund and designate the Institutional
Class)
Account Name(s): Name(s) in which to be registered
Account Number: (if investing into an existing account)
21 PROSPECTUS
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3. A completed Account Application should be sent by telefacsimile, with the
original subsequently mailed, to the following address immediately after
funds are wired, and must be received and accepted by the transfer agent
before an account can be opened:
Wells Fargo Bank, N.A.
Stagecoach Shareholder Services
P.O. Box 7066
San Francisco, California 94120-7066
Telefacsimile: 1-415-543-9538
4. Share purchases are effected at the NAV next determined after the Account
Application is received and accepted.
STATEMENTS AND REPORTS
Institutions (or their nominees) typically send investors a confirmation or
statement of the account after every transaction that affects their share
balance or the Fund account registration. A statement with tax information for
each year is mailed by January 31 of the following year and also is filed with
the Internal Revenue Service ("IRS"). At least twice a year, shareholders
receive financial statements.
REDEMPTION OF INSTITUTIONAL CLASS SHARES
Redemption requests are effected at the NAV per share next determined after
receipt of a redemption request in good order by the Company. Institutional
Class shares held by an Institution on behalf of its Customers must be redeemed
in accordance with instructions and limitations pertaining to the Customer's
accounts at the Institution. Institutions are responsible for transmitting
redemption requests to the Company and crediting its Customers' accounts with
the redemption proceeds on a timely basis. The redemption proceeds for
Institutional Class shares of the Funds normally are wired to the redeeming
Institution the following Business Day after receipt of the request by the
Company. The Company reserves the right to delay the wiring of redemption
proceeds for up to seven days after it receives a redemption order if, in the
judgment of the investment adviser, an earlier payment could adversely affect
the Funds or unless the SEC permits a longer period under extraordinary
circumstances. Such extraordinary circumstances could include a period during
which an emergency exists as a result of which (a) disposal by the Funds of
securities owned by them is not reasonably practicable or (b) it is not
reasonably practicable for the Funds to fairly determine the value of their net
assets, or a period during which the SEC by order permits deferral of
redemptions for the protection of security holders of a Fund.
With respect to former shareholders of Westcore Trust or Pacifica Fund Trust
who do not have a relationship with an Institution, shares of the Funds may be
redeemed by
PROSPECTUS 22
<PAGE> 484
writing or calling the Funds directly at the address and phone number shown on
the first page of the Prospectus. When Institutional Class shares are redeemed
directly from the Funds, the Funds ordinarily send the proceeds by check to the
shareholder at the address of record on the next Business Day unless payment by
wire is requested. The Funds may take up to seven days to make payment, although
this will not be the customary practice. Also, if the NYSE is closed (or when
trading is restricted) for any reason other than the customary weekend or
holiday closing or if an emergency condition as determined by the SEC merits
such action, the Funds may suspend redemptions or postpone payment dates.
To be accepted by a Fund, a letter requesting redemption must include: (i) the
Fund's name and account registration from which the Institutional Class shares
are being redeemed; (ii) the account number; (iii) the amount to be redeemed;
(iv) the signatures of all registered owners; and (v) a signature guarantee by
any eligible guarantor institution. An "eligible guarantor institution" includes
a commercial bank that is an FDIC member, a trust company, a member firm of a
domestic stock exchange, a savings association, or a credit union that is
authorized by its charter to provide a signature guarantee. Signature guarantees
by notaries public are not acceptable. Further documentation may be requested
from corporations, administrators, executors, personal representatives, trustees
or custodians.
All redemptions of Institutional Class shares of the Funds are made in cash,
except that the commitment to redeem Institutional Class shares in cash extends
only to redemption requests made by each Fund shareholder during any 90-day
period of up to the lesser of $250,000 or 1% of the NAV of the Funds at the
beginning of such period. This commitment is irrevocable without the prior
approval of the SEC. In the case of redemption requests by shareholders in
excess of such amounts, the Board of Directors reserves the right to have the
Funds make payment, in whole or in part, in securities or other assets, in case
of an emergency or any time a cash distribution would impair the liquidity of
the Funds to the detriment of the existing shareholders. In this event, the
securities would be valued in the same manner as the securities of the Funds are
valued. If the recipient were to sell such securities, the investor would incur
brokerage charges.
A redemption may result in a recognized gain or loss for federal income tax
purposes, irrespective of whether the redemption is paid in cash or in kind.
REDEMPTIONS BY TELEPHONE
Telephone exchange or redemption privileges authorize the transfer agent to
act on telephone instructions from any person representing himself or herself to
be the shareholder of record and reasonably believed by the transfer agent to be
genuine. The Company requires the transfer agent to employ reasonable
procedures, such as requiring a form of personal identification, to confirm that
instructions are genuine and,
23 PROSPECTUS
<PAGE> 485
if it does not follow such procedures, the Company and the transfer agent may be
liable for any losses due to unauthorized or fraudulent instructions. Neither
the Company nor the transfer agent will be liable for following telephone
instructions reasonably believed to be genuine.
EXCHANGES
The Funds offer a convenient way to exchange Institutional Class shares in one
Fund for Institutional Class shares in another fund of the Company. Before
engaging in an exchange transaction, an investor should read carefully the
Prospectus describing the fund into which the exchange will occur, which is
available without charge and can be obtained by writing or by calling the
Company at the address or phone number listed on the first page of the
Prospectus. A shareholder may not exchange Institutional Class shares of one
fund for Institutional Class shares of another fund if Institutional Class
shares of both funds are not qualified for sale in the state of the
shareholder's residence. The Company may terminate or amend the terms of the
exchange privilege at any time.
Exchange transactions are effected through a Customer's account at an
Institution under the terms of the Customer's account agreement with the
Institution, and confirmations of share exchanges are sent by a Fund to the
Institution involved. Institutions (or their nominees), acting on behalf of
their Customers, normally are the holders of record of Institutional Class
shares. Institutions are responsible for transmitting orders for exchanges to
the Company on a timely basis. Customers' exchange transactions are generally
reflected in the account statements provided by Institutions to their Customers.
Investors wishing to exchange Institutional Class shares of a Fund for
Institutional Class shares of another fund should contact their account
representatives. Investors with questions may call the Company at
1-800-222-8222.
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. All exchanges are
made at the NAV of the respective funds next determined following receipt of the
request by the Company in good order.
Each exchange, in effect, represents the redemption of shares of one fund and
the purchase of shares of another, which may result in a recognized gain or loss
for federal income tax purposes. Investors should receive written confirmation
of the exchange from the Institution within a few days of the completion of the
transaction.
To exchange Institutional Class shares, or if you have any questions, simply
call the Company at 1-800-222-8222. A shareholder of record should be prepared
to give the telephone representative the following information: (i) the account
number, social security or taxpayer identification number and account
registration; (ii) the name of the
PROSPECTUS 24
<PAGE> 486
fund from and the fund into which the transfer is to occur; and (iii) the dollar
or share amount of the exchange. The conversation may be recorded to protect
shareholders and the Company. Telephone exchanges may be available unless the
shareholder of record has declined the privilege on the Purchase Application.
In addition, Institutional Class shares of the Funds may be exchanged for each
of the Funds' Class A shares in connection with the distribution of assets held
in a qualified trust, agency or custodial account maintained with the trust
department of a Wells Fargo Bank or another bank, trust company or thrift
institution, or in other cases where Institutional Class shares are not held in
such qualified accounts. Similarly, Class A shares may be exchanged for the
Funds' Institutional Class shares if the shares are to be held in such a
qualified trust, agency or custodial account. These exchanges are made at the
respective NAVs of the Institutional Class shares next determined after the
exchange request is received by the Company.
DIVIDENDS
Dividends from net investment income of the Ginnie Mae, Intermediate Bond and
Short-Intermediate U.S. Government Income Funds are declared daily and paid
monthly. Dividends declared in a month generally are paid on the last Business
Day of the month to shareholders of record. The Funds distribute any capital
gains at least annually. Dividends and capital-gain distributions are
automatically invested in additional whole and fractional shares of the same
class unless the shareholder has elected to receive payment in cash. Expenses,
such as state securities registration fees and transfer agency fees that are
attributable to a particular class may affect the relative dividends and/or
capital-gain distributions of a class of shares.
Dividends and capital-gain distributions have the effect of reducing the NAV
per share by the amount distributed. Although such dividends and distributions
paid on newly issued shares shortly after a purchase would represent, in
substance, a return of capital, the dividend or distribution would be
attributable to net investment income or capital-gain and, accordingly, would be
taxable to the shareholder.
Dividends for a Saturday, Sunday or Holiday are declared payable to
shareholders of record as of the preceding Business Day. If a shareholder
redeems shares before the dividend payment date, any dividends credited to the
shareholder are paid on the following dividend payment date unless the
shareholder has redeemed all of the shares in the account, in which case the
shareholder receives accrued dividends together with redemption proceeds.
25 PROSPECTUS
<PAGE> 487
MANAGEMENT AND SERVICING FEES
Subject to the overall supervision of the Company's Board of Directors, Wells
Fargo Bank, as the Funds' adviser, provides investment guidance and policy
direction in connection with the management of the Funds' assets. The adviser
also furnishes the Board of Directors with periodic reports on the Funds'
investment strategy and performance. For its services as investment adviser to
the Intermediate Bond and Short-Intermediate U.S. Government Income Funds, Wells
Fargo Bank is entitled to monthly investment advisory fees at the annual rate of
0.50% of the Funds' average daily net assets. For its services as investment
adviser to the Ginnie Mae Fund, Wells Fargo Bank is entitled to a monthly
investment advisory fee at an annual rate equal to 0.50% of the first $250
million of the Fund's average daily net assets, 0.40% of the next $250 million,
and 0.30% in excess of $500 million. From time to time, a Fund, consistent with
its investment objective, policies and restrictions, may invest in securities of
companies with which Wells Fargo Bank has a lending relationship.
For the fiscal period ended September 30, 1995, the predecessor portfolio to
the Intermediate Bond Fund paid advisory fees at the annual rate of 0.50% of the
portfolio's average daily net assets to First Interstate Capital Management,
Inc. ("FICM"), 7501 E. McCormick Parkway, Scottsdale, Arizona, which served as
investment adviser to the predecessor portfolio. FICM was an indirect, wholly
owned subsidiary of First Interstate Bancorp. For the year ended December 31,
1995, the Ginnie Mae and the Short-Intermediate U.S. Government Income Funds
paid advisory fees at the annual rates of 0.50% and 0.27% of each portfolio's
respective average daily net assets to Wells Fargo Bank.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
Wells Fargo Bank serves as the Funds' custodian and transfer and dividend
disbursing agent. Under the Custody Agreement, each Fund may, at times, borrow
money from Wells Fargo Bank as needed to satisfy temporary liquidity needs.
Wells Fargo Bank charges interest on such overdrafts at a rate determined
pursuant to each Fund's Custody Agreement. Wells Fargo Bank performs its
custodial and transfer and dividend disbursing agency services at 525 Market
Street, San Francisco, California 94105.
INSTITUTIONS AND SHAREHOLDER SERVICING AGENT
The Funds have entered into shareholder servicing agreements with Wells Fargo
Bank and may enter into similar agreements with other Institutions ("Shareholder
Servicing Agents"). Under such agreements, Shareholder Servicing Agents
(including Wells Fargo Bank) agree, as agent for their customers, to provide
shareholder administrative and liaison services with respect to Fund shares,
which include, without limitation, aggregating and transmitting shareholder
orders for purchases, exchanges and
PROSPECTUS 26
<PAGE> 488
redemptions; maintaining shareholder accounts and records; and providing such
other related services as the Company or a shareholder may reasonably request.
For these services, a Shareholder Servicing Agent is entitled to receive a fee,
at the annual rate of up to 0.25% of the average daily net assets attributable
to the Institutional Class shares owned of record or beneficially by investors
with whom the Shareholder Servicing Agent maintains a servicing relationship. In
no case shall payments exceed any maximum amount that may be deemed applicable
under applicable laws, regulations or rules, including the Rules of Fair
Practice of the NASD ("NASD Rules").
A Shareholder Servicing Agent also may impose certain conditions on its
customers, subject to the terms of this Prospectus, in addition to or different
from those imposed by the Funds, such as requiring a higher minimum initial
investment or payment of a separate fee for additional services. Each
Shareholder Servicing Agent has agreed to disclose any fees it may directly
charge its customers who are shareholders of the Funds and to notify them in
writing at least 30 days before it imposes any transaction fees.
SPONSOR, ADMINISTRATOR AND DISTRIBUTOR
Subject to the overall supervision of the Company's Board of Directors,
Stephens provides each Fund with administrative services, including general
supervision of each Fund's operation, coordination of other services provided to
a Fund, compilation of information for reports to the SEC and the state
securities commissions, preparation of proxy statements and shareholder reports,
and general supervision of data compilation in connection with preparing
periodic reports to the Company's Directors and officers. Stephens also
furnishes office space and certain facilities to conduct each Fund's business
and compensates the Directors and officers who are affiliated with Stephens. For
these services, Stephens is entitled to receive from the Intermediate Bond Fund
a monthly fee at the annual rate of 0.05% of the Fund's average daily net assets
and from the Ginnie Mae and Short-Intermediate U.S. Government Income Funds,
monthly fees at the annual rate of up to 0.03% of each Fund's average daily net
assets.
Stephens, as the principal underwriter of the Funds within the meaning of the
1940 Act, has entered into a Distribution Agreement with the Company pursuant to
which Stephens acts as agent for a Fund for the sale of its shares and may enter
into selling agreements with other agents ("Selling Agents") that wish to make
available shares of the Funds to their respective customers.
Stephens has established a cash and non-cash compensation program, pursuant to
which broker/dealers or financial institutions that sell shares of the Company's
funds may earn additional compensation in the form of trips to sales seminars or
vacation destinations, tickets to sporting events, theater or other
entertainment, opportunities to participate in golf or other outings and gift
certificates for meals or merchandise or the cash value of a non-cash
compensation item.
27 PROSPECTUS
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Financial institutions acting as Shareholder Servicing Agents, Selling Agents,
or in certain other capacities, may be required to register as dealers pursuant
to applicable state securities laws which may differ from federal law and any
interpretations expressed herein.
FUND EXPENSES
From time to time, Wells Fargo Bank and Stephens may waive their respective
fees in whole or in part and reimburse expenses payable to others. Any such
waivers or reimbursements will reduce a fund's expenses and, accordingly, have a
favorable impact on the fund's performance. Except for the expenses borne by
Wells Fargo Bank and Stephens, the funds bear all costs of their operations.
Expenses attributable to each fund or class are charged against the assets of
the fund or class. General expenses of the Company are allocated among all of
the funds of the Company in a manner proportionate to the net assets of each
fund, on a transactional basis, or on such other basis as the Company's Board of
Directors deems equitable.
TAXES
The Company intends to qualify each Fund each year as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), as long as such qualification is in the best interest of each Fund's
shareholders. Each Fund is treated as a separate entity for federal income tax
purposes and, thus, the provisions of the Code applicable to regulated
investment companies are applied to each Fund separately, rather than to the
Company as a whole. In addition, net capital gains, net investment income, and
operating expenses are determined separately for each Fund. By complying with
the applicable provisions of the Code, a Fund will not be subject to federal
income taxes with respect to net investment income and any net realized capital
gains distributed to its shareholders. Each Fund intends to pay out
substantially all of its net investment income and any net realized capital
gains each year.
Dividends from net investment income and net realized short-term capital gains
(the excess of net short-term capital gains over net long-term capital losses)
declared and paid by each Fund are taxable as ordinary income to Fund
shareholders. Dividends and distributions declared payable in October, November
and December and made payable to shareholders of record in such a month are
treated as paid and are thereby taxable as of December 31, provided that such
dividends or distributions are actually paid no later than January 31 of the
following year. Any capital gain distributions, attributable to the Fund's net
realized long-term capital gains (the excess of net long-term capital gains over
net short-term capital losses), are generally taxable to shareholders as
long-term capital gain, regardless of the length of time that the Fund's shares
have been held. Such
PROSPECTUS 28
<PAGE> 490
dividends and distributions are taxable to shareholders irrespective of whether
the shareholder takes them in cash or has them automatically reinvested in
additional Fund shares. For the Intermediate Bond Fund, a portion of the Fund's
dividends may qualify for the dividends-received deduction allowed to corporate
shareholders, if such shareholders satisfy certain requirements pursuant to the
Code. For the Ginnie Mae and Short-Intermediate U.S. Government Income Funds,
the Funds' dividends do not qualify for the dividends-received deduction allowed
to corporate shareholders.
The Company or your Institution on its behalf regularly will inform investors
of the amount and nature of each Fund's dividends and capital-gain
distributions. You should keep all statements you receive to assist in your
personal recordkeeping. In addition, an investor must provide a valid social
security or tax identification number ("TIN") upon opening or reopening an
account. Failure to furnish a valid TIN to the Company could subject the
investor to penalties imposed by the IRS. In addition, the Company may be
required to withhold, subject to certain exemptions, at a rate of 31% ("backup
withholding") on dividends, capital-gain distributions, and redemption proceeds
(including proceeds from exchanges) paid or credited to an individual Fund
investor, unless the investor certifies that the TIN provided is correct and
that the investor is not subject to backup withholding, or the IRS notifies the
Company that the investor's TIN is incorrect or that the investor is subject to
backup withholding. Such tax withheld does not constitute any additional tax
imposed on the investor, and may be claimed as a tax payment on the investor's
federal income tax return.
Foreign investors may be subject to different tax treatment, including a
withholding tax. See "Federal Income Taxes -- Foreign Shareholders" in the SAI.
The foregoing discussion is based on tax laws in effect as of the date of this
Prospectus and summarizes only some of the important federal income tax
considerations generally affecting the Funds and their shareholders. It is not
intended as a substitute for careful tax planning; you should consult your tax
advisor with respect to your specific tax situation and state and local taxes.
Further federal income tax considerations are discussed in the SAI.
29 PROSPECTUS
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PROSPECTUS APPENDIX --
ADDITIONAL INVESTMENT POLICIES
FUND INVESTMENTS
Temporary Investments
From time to time, for temporary defensive purposes, the Funds may hold assets
in cash or make short-term investments, to the extent appropriate, to maintain
adequate liquidity for redemption requests or other cash management needs or for
temporary defensive purposes. The short-term investments that the Funds may
purchase for liquidity purposes include: (i) U.S. Treasury bills, shares of
other mutual funds and repurchase agreements (as discussed below); (ii)
negotiable certificates of deposit, bankers' acceptances and fixed time deposits
and other obligations of domestic banks (including foreign branches) that have
more than $1 billion in total assets at the time of investment and are members
of the Federal Reserve System or are examined by the Comptroller of the Currency
or whose deposits are insured by the FDIC; (iii) commercial paper rated at the
date of purchase "Prime-1" by Moody's or "A-1+" or "A-1" by S&P, or, if unrated,
of comparable quality as determined by Wells Fargo Bank, as investment adviser;
and (iv) short-term, U.S. dollar-denominated obligations of foreign banks
(including U.S. branches) that, at the time of investment: (a) have more than
$10 billion, or the equivalent in other currencies, in total assets; (b) are
among the 75 largest foreign banks in the world as determined on the basis of
assets; (c) have branches or agencies in the United States; and (d) in the
opinion of Wells Fargo Bank, as investment adviser, are of comparable quality to
obligations of U.S. banks that may be purchased by a Fund.
U.S. Government Obligations
The Funds may invest in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities (including government-sponsored
enterprises) ("U.S. Government obligations"). U.S. Government obligations
include securities issued or guaranteed as to principal and interest by the U.S.
Government and supported by the full faith and credit of the U.S. Treasury. U.S.
Treasury obligations differ mainly in the length of their maturity. Treasury
bills, the most frequently issued marketable government securities, have a
maturity of up to one year and are issued on a discount basis. U.S. Government
obligations also include securities issued or guaranteed by federal agencies or
instrumentalities, including government-sponsored enterprises. Some obligations
of agencies or instrumentalities of the U.S. Government are supported by the
full faith and credit of the United States or U.S. Treasury guarantees; others,
by the right of the issuer or guarantor to borrow from the U.S. Treasury; still
others, by the discretionary authority
A-1 PROSPECTUS
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of the U.S. Government to purchase certain obligations of the agency or
instrumentality; and others, only by the credit of the agency or instrumentality
issuing the obligation. In the case of obligations not backed by the full faith
and credit of the United States, the investor must look principally to the
agency or instrumentality issuing or guaranteeing the obligation for ultimate
repayment, which agency or instrumentality may be privately owned. There can be
no assurance that the U.S. Government will provide financial support to its
agencies or instrumentalities where it is not obligated to do so. In addition,
U.S. Government obligations are subject to fluctuations in market value due to
fluctuations in market interest rates. As a general matter, the value of debt
instruments, including U.S. Government obligations, declines when market rates
increase and rises when market interest rates decrease. Certain types of U.S.
Government obligations are subject to fluctuations in yield or value due to
their structure or contract terms.
Foreign Securities
The Intermediate Bond Fund may invest up to 20% of its assets in U.S. dollar-
denominated debt obligations of foreign issuers. Investments in securities of
foreign issuers, including ADRs and EDRs, involve certain considerations that
are not typically associated with investing in domestic securities. There may be
less publicly available information about a foreign issuer than about a domestic
issuer. Foreign issuers also are not generally subject to the same accounting,
auditing and financial reporting standards or governmental supervision as
domestic issuers. In addition, with respect to certain foreign countries, taxes
may be withheld at the source under foreign income tax laws, and there is a
possibility of expropriation or confiscatory taxation, political or social
instability or diplomatic developments that could adversely affect investments
in, the liquidity of, and the ability to enforce contractual obligations with
respect to, securities of issuers located in those countries.
Mortgage-Related Securities
The Intermediate Bond Fund may invest in mortgage-related securities. Mortgage
pass-through securities are securities representing interests in "pools" of
mortgages in which payments of both interest and principal on the securities are
made monthly, in effect "passing through" monthly payments made by the
individual borrowers on the residential mortgage loans which underlie the
securities (net of fees paid to the issuer or guarantor of the securities).
Early repayment of principal on mortgage pass-through securities (arising from
prepayments of principal due to sale of the underlying property, refinancing, or
foreclosure, net of fees and costs which may be incurred) may expose the Fund to
a lower rate of return upon reinvestment of principal. Also, if a security
subject to prepayment has been purchased at a premium, in the event of
prepayment the value of the premium would be lost. Like other fixed-income
securities, when interest rates rise, the value of a mortgage-related security
generally will decline; however,
PROSPECTUS A-2
<PAGE> 493
when interest rates decline, the value of mortgage-related securities with
prepayment features may not increase as much as other fixed-income securities.
Payment of principal and interest on some mortgage pass-through securities (but
not the market value of the securities themselves) may be guaranteed by the full
faith and credit of the U.S. Government or its agencies or instrumentalities.
Mortgage pass-through securities created by non-government issuers (such as
commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers) may be supported
by various forms of insurance or guarantees, including individual loan, title,
pool and hazard insurance, and letters of credit, which may be issued by
governmental entities, private insurers or the mortgage poolers.
The Fund may also invest in investment grade Collateralized Mortgage
Obligations ("CMOs"). CMOs may be collateralized by whole mortgage loans but are
more typically collateralized by portfolios of mortgage pass-through securities
guaranteed by GNMA, FHLMC or FNMA. CMOs are structured into multiple classes,
with each class bearing a different stated maturity. Payments of principal,
including prepayments, are first returned to investors holding the shortest
maturity class; investors holding the longer maturity classes receive principal
only after the first class has been retired. As new types of mortgage-related
securities are developed and offered to investors, the Adviser will, consistent
with the Fund's investment objective, policies and quality standards, consider
making investments in such new types of mortgage-related securities.
Other Asset-Backed Securities
Other asset-backed securities (unrelated to mortgage loans) have been offered
to Intermediate Bond Fund investors. These asset-backed securities may consist
of undivided fractional interests in pools of consumer loans or receivables held
in trust. Examples include certificates for automobile receivables (CARS) and
credit card receivables (CARDS). Payments of principal and interest on these
asset-backed securities are "passed through" on a monthly or other periodic
basis to certificate holders and are typically supported by some form of credit
enhancement, such as a letter of credit, surety bond, limited guaranty, or
subordination. The extent of credit enhancement varies, but usually amounts to
only a fraction of the asset-backed security's par value until exhausted.
Ultimately, asset-backed securities are dependent upon payment of the consumer
loans or receivables by individuals, and the certificate holder frequently has
no recourse to the entity that originated the loans or receivables. The actual
maturity and realized yield will vary based upon the prepayment experience of
the underlying asset pool and prevailing interest rates at the time of
prepayment. Asset-backed securities are relatively new instruments and may be
subject to greater risk of default during periods of economic downturn than
other instruments. Also, the secondary market for certain asset-backed
securities may not be as liquid as the market for other types of securities,
which could result in a Fund experiencing difficulty in valuing or liquidating
such securities.
A-3 PROSPECTUS
<PAGE> 494
Derivative Securities
The Intermediate Bond Fund may invest in structured notes, bonds or other
instruments with interest rates that are determined by reference to changes in
the value of other interest rates, indices or financial reference to changes in
the value of other interest rates, indices or financial indicators
("References") or the relative change in two or more References. The Fund may
also hold derivative instruments that have interest rates that re-set inversely
to changing current market rates and/or have embedded interest rate floors and
caps that require the issuer to pay an adjusted interest rate if market rates
fall below or rise above a specified rate. These instruments represent
relatively recent innovations in the bond markets, and the trading market for
these instruments is less developed than the markets for traditional types of
debt instruments. It is uncertain how these instruments will perform under
different economic and interest-rate scenarios. Because certain of these
instruments are leveraged, their market values may be more volatile than other
types of bonds and may present greater potential for capital gain or loss. On
the other hand, the embedded option features of other derivative instruments
could limit the amount of appreciation the Fund can realize on its investment,
could cause the Fund to hold a security it might otherwise sell or could force
the sale of a security at inopportune times or for prices that do not reflect
current market value. The possibility of default by the issuer or the issuer's
credit provider may be greater for these structured and derivative instruments
than for other types of instruments. In some cases, it may be difficult to
determine the fair value of a structured or derivative instrument because of a
lack of reliable objective information and an established secondary market for
some instruments may not exist. As new types of derivative securities are
developed and offered to investors, the adviser will, consistent with the Fund's
investment objective, policies and quality standards, consider making
investments in such new types of derivative securities.
Stripped Obligations
To the extent consistent with their respective investment objectives, the
Intermediate Bond Fund may purchase Treasury receipts and other "stripped"
securities that evidence ownership in either the future interest payments or the
future principal payments on U.S. Government and other obligations. These
participations, which may be issued by the U.S. Government (or a U.S. Government
agency or instrumentality) or by private issuers such as banks and other
institutions, are issued at a discount to their "face value," and may include
stripped mortgage-backed securities ("SMBS"). Stripped securities, particularly,
SMBS, may exhibit greater price volatility than ordinary debt securities because
of the manner in which their principal and interest are returned to investors.
PROSPECTUS A-4
<PAGE> 495
Custodial Receipts for Treasury Securities
To the extent consistent with its respective investment objective, the
Intermediate Bond Fund may purchase participations in trusts that hold U.S.
Treasury securities (such as TIGRs and CATS) or other obligations where the
trust participations evidence ownership in either the future interest payments
or the future principal payments on the obligations. These participations are
normally issued at a discount to their "face value," and can exhibit greater
price volatility than ordinary debt securities because of the way in which their
principal and interest are returned to investors. Investments by the Fund in
such participations will not exceed 5% of the value of the Fund's total assets.
Options
The Intermediate Bond Fund may purchase put and call options listed on a
national securities exchange and issued by the Options Clearing Corporation in
an amount not exceeding 5% of its net assets. Purchasing options is a
specialized investment technique that entails a substantial risk of a complete
loss of the amounts paid as premiums to the writer of the option.
The Fund may also write covered call and secured put options from time to time
as the adviser deems appropriate. By writing a covered call option, the Fund
forgoes the opportunity to profit from an increase in the market of the
underlying security above the exercise price except insofar as the premium
represents such a profit, and it is not able to sell the underlying security
until the option expires or is exercised or the Fund effects a closing purchase
transaction by purchasing an option of the same series. If the Fund writes a
secured put option, it assumes the risk of loss should the market value of the
underlying security decline below the exercise price of the option. The
aggregate value of the securities subject to options written by the Fund will
not exceed 25% of the value of its net assets. The use of covered call options
and securities put options will not be a primary investment technique of the
Fund, and they are expected to be used infrequently. If the adviser is incorrect
in its forecast of market value or other factors when writing the foregoing
options, the Fund would be in a worse position than it would have been had the
foregoing investment techniques not been used.
For additional information relating to option trading practices, including the
particular risks thereof, see the SAI.
Forward Commitments, When-Issued Purchases and Delay-Delivery Transactions
The Funds may purchase or sell securities on a when-issued or delayed-delivery
basis and make contracts to purchase or sell securities for a fixed price at a
future date beyond customary settlement time. Securities purchased or sold on a
when-issued, delayed-delivery or forward commitment basis involve a risk of loss
if the value of the security to be purchased declines, or the value of the
security to be sold increases, before the
A-5 PROSPECTUS
<PAGE> 496
settlement date. Although a Fund will generally purchase securities with the
intention of acquiring them, a Fund may dispose of securities purchased on a
when-issued, delayed-delivery or a forward commitment basis before settlement
when deemed appropriate by the adviser. During the period between commitment and
settlement, no payment is made by a Fund and no interest accrues to the Fund. In
some instances, a Fund may sell a security and at the same time make a
commitment to purchase the same security at a future date at a specified price.
Conversely, a Fund may purchase a security and at the same time make a
commitment to sell the same security at a future date at a specified price.
These types of transactions are executed simultaneously in what are known as
"roll" transactions. For example, a securities dealer may seek to purchase a
particular security which a Fund owns. The Fund will sell that security to the
dealer and simultaneously enter into a "firm commitment" agreement to buy back
the same security at a future date, as described above. The net effect of these
transactions is to generate income for the Fund since the dealer is willing to
execute these transactions at prices favorable to the Fund in order to acquire
the specific security which it buys in the initial purchase transaction. Wells
Fargo Bank will limit these transactions to a maximum of 35% of a Fund's total
assets. There is a risk that a party with whom a Fund enters into when-issued or
firm commitment agreements may not perform its obligation to deliver or purchase
the securities, which could result in a gain or loss to the Fund. To minimize
the risk of default, a Fund enters into such transactions only with those major
banks and non-bank U.S. Government securities dealers who are recognized by the
Board of Governors of the Federal Reserve System as primary dealers. As
described further in its SAI, a Fund may purchase certain securities on a
when-issued basis, although it currently does not expect to invest more than 5%
of its assets in such securities.
Commercial Paper
The Funds may invest in commercial paper (including variable amount master
demand notes) which refers to short-term, unsecured promissory notes issued by
corporations to finance short-term credit needs. Commercial paper is usually
sold on a discount basis and has a maturity at the time of issuance not
exceeding nine months. Variable amount master demand notes are demand
obligations which permit the investment of fluctuating amounts at varying market
rates of interest pursuant to arrangements between the issuer and a commercial
bank acting as agent for the payee of such notes whereby both parties have the
right to vary the amount of the outstanding indebtedness on the notes.
Investments by the Intermediate Bond Fund in commercial paper (including
variable rate demand notes and variable rate master demand notes issued by
domestic and foreign bank holding companies, corporations and financial
institutions, as well as similar instruments issued by government agencies and
instrumentalities) will consist of issues that are rated in one of the two
highest rating categories by a NRSRO. In addition, the Intermediate Bond Fund
may acquire unrated commercial paper and corporate bonds that are determined by
the adviser at the time of purchase to be of
PROSPECTUS A-6
<PAGE> 497
comparable quality to rated instruments that may be acquired by such Fund.
Commercial paper may include variable and floating rate instruments.
Floating- and Variable-Rate Instruments
Certain of the debt instruments that the Funds may purchase bear interest at
rates that are not fixed, but vary, for example, with changes in specified
market rates or indices or specified intervals. Certain of these instruments may
carry a demand feature that would permit the holder to tender them back to the
issuer at par value prior to maturity. The Funds may, in accordance with SEC
rules, account for these instruments as maturing at the next interest rate
readjustment date or the date which the Fund may tender the instrument back to
the issuer, whichever is later. The floating and variable-rate instruments that
the Fund may purchase include certificates of participation in such obligations.
Wells Fargo Bank, as investment adviser, will monitor on an ongoing basis the
ability of an issuer of a demand instrument to pay principal and interest on
demand. Events affecting the ability of the issuer of a demand instrument to
make payment when due may occur between the time the Fund elects to demand
payment and the time payment is due, thereby affecting the Fund's ability to
obtain payment at par, except when such demand instruments permit same-day
settlement. Demand instruments whose demand feature is not exercisable within
seven days may be treated as liquid, provided that an active secondary market
exists.
Repurchase Agreements
The Funds may enter into repurchase agreements wherein the seller of a
security to the Fund agrees to repurchase that security from such Fund at a
mutually agreed-upon time and price. The period of maturity is usually quite
short, often overnight or a few days, although it may extend over a number of
months. The Funds may enter into repurchase agreements only with respect to U.S.
Government obligations and other obligations that could otherwise be purchased
by the Funds. All repurchase agreements must be fully collateralized based on
values that are marked to market daily. The maturities of the underlying
securities in a repurchase agreement transaction entered into by a Fund may be
greater than one year. If the seller defaults and the value of the underlying
securities has declined, a Fund may incur a loss. In addition, if bankruptcy
proceedings are commenced with respect to the seller of the security, a Fund's
disposition of the security may be delayed or limited. The Funds will enter into
repurchase agreements only with registered broker/dealers and commercial banks
that meet guidelines established by the Company's Board of Directors and that
are not affiliated with Wells Fargo Bank. The Funds may participate in pooled
repurchase agreement transactions with other funds advised by Wells Fargo Bank.
A-7 PROSPECTUS
<PAGE> 498
Loans of Portfolio Securities
The Intermediate Bond and Short-Intermediate U.S. Government Income Funds may
lend securities from their portfolios to brokers, dealers and financial
institutions if cash, U.S. Government obligations or other high-quality debt
instruments equal to at least 100% of the current market value of the securities
loan (including accrued interest thereon) plus the interest payable to a Fund
with respect to the loan is maintained with such Fund. In determining whether to
lend a security to a particular broker, dealer or financial institution, a
Funds' investment adviser will consider all relevant facts and circumstances,
including the creditworthiness of the broker, dealer or financial institution.
Any loans of portfolio securities must be fully collateralized based on values
that are marked-to-market daily. The Funds will not enter into any portfolio
security lending arrangement having a duration of longer than one year. Any
securities that the Funds may receive as collateral will not become part of the
Funds' portfolio at the time of the loan and, in the event of a default by the
borrower, the Funds, if permitted by law, will dispose of such collateral except
for such part thereof that is a security in which the Funds are permitted to
invest. During the time securities are on loan, the borrower will pay the Funds
any accrued income on those securities, and the Funds may invest the cash
collateral and earn additional income or receive an agreed-upon fee from a
borrower that has delivered cash-equivalent collateral. The Funds will not lend
securities having a value that exceeds one-third of the current value of the
Funds' total assets. Loans of securities by the Funds will be subject to
termination at the Funds' or the borrower's option. The Funds may pay reasonable
administrative and custodial fees in connection with a securities loan and may
pay a negotiated portion of the interest or fee earned with respect to the
collateral to the borrower or the placing broker. Borrowers and placing brokers
may not be affiliated, directly or indirectly, with the Company, the adviser, or
the Distributor.
Other Investment Companies
The Funds may invest in shares of other open-end, management investment
companies, subject to the limitations of the 1940 Act, provided that any such
purchases will be limited to temporary investments in shares of unaffiliated
investment companies and the investment adviser will waive its advisory fees for
that portion of the Funds' assets so invested, except when such purchase is part
of a plan of merger, consolidation, reorganization or acquisition.
Notwithstanding any other investment policy or limitation (whether or not
fundamental), as a matter of fundamental policy, the Short-Intermediate U.S.
Government Income Fund may invest all of its assets in the securities of a
single open-end, management investment company with substantially the same
fundamental investment objective, policies and limitations as the Fund.
PROSPECTUS A-8
<PAGE> 499
Additional Investments -- Ginnie Mae Fund
FHLMC issues two types of mortgage pass-through securities: mortgage
participation certificates ("PCs") and guaranteed mortgage certificates
("GMCs"). PCs resemble GNMA certificates in that each PC represents a pro rata
share of all interest and principal payments made and owed on the underlying
pool of mortgages. GMCs also represent a pro rata interest in a pool of
mortgages. These instruments, however, pay interest semiannually and return
principal once a year in guaranteed minimum payments.
These mortgage-backed securities differ from bonds in that principal is paid
back by the borrower over the length of the loan rather than returned in a lump
sum at maturity. They are called "pass-through" securities because both interest
and principal payments, including prepayments, are passed through to the holder
of the security. The GNMA securities in which the Ginnie Mae Fund will invest
are of the "modified" type, which entitles the holder of such certificates to
receive its share of all interest and principal payments owed on the underlying
pool of mortgage loans, regardless of whether or not the mortgagors actually
make the payments.
The payment of principal on the underlying mortgages may exceed the minimum
required by the schedule of payments for the mortgages. Such prepayments are
made at the option of the mortgagors for a wide variety of reasons reflecting
their individual circumstances. For example, mortgagors may speed up the rate at
which they prepay their mortgages when interest rates decline sufficiently to
encourage refinancing. The Ginnie Mae Fund, when such prepayments are passed
through to it, may be able to reinvest them only at a lower rate of interest. As
a result, if the Fund purchases such securities at a premium, a prepayment rate
that is faster than expected will reduce yield to maturity, while a prepayment
rate that is slower than expected will have the opposite effect of increasing
yield to maturity. Conversely, if the Fund purchased such securities at a
discount, faster than expected prepayments will increase, while slower than
expected prepayments will reduce, yield to maturity. Accelerated prepayments on
securities purchased by the Fund at a premium also impose a risk of loss of
principal because the premium may not have been fully amortized at the time the
principal is repaid in full. In choosing specific issues, Wells Fargo Bank, as
investment adviser, will have made assumptions about the likely speed of
prepayment. Actual experience may vary from this assumption resulting in a
higher or lower investment return than anticipated.
Additional Investments -- Short-Intermediate U.S. Government Income Fund
The mortgages underlying ARMS guaranteed by GNMA are fully insured or
guaranteed by the Federal Housing Administration, the Veterans Administration or
the Farmers Home Administration, while those underlying ARMS issued by FNMA or
FHLMC are typically conventional residential mortgages which are not so insured
or guaranteed, but which conform to specific underwriting, size and maturity
standards.
A-9 PROSPECTUS
<PAGE> 500
In a CMO, a series of bonds or certificates is issued in multiple classes.
Each class of CMOs, often referred to as a "tranche," is issued at a specified
coupon rate and has a stated maturity or final distribution date. The principal
and interest payment on the underlying mortgages may be allocated among the
classes of CMOs in several ways. Typically, payments of principal, including any
prepayments, on the underlying mortgages are applied to the classes in the order
of their respective stated maturities or final distribution dates, so that no
payment of principal is made on CMOs of a class until all CMOs of other classes
having earlier stated maturities or final distribution dates have been paid in
full. One or more classes of CMOs may have coupon rates that reset periodically
based on an index, such as the London Interbank Offered Rate ("LIBOR").
The interest rates on the mortgages underlying the ARMS and the CMOs in which
the Short-Intermediate U.S. Government Income Fund may invest generally are
readjusted at intervals of one year or less in response to changes in a
predetermined interest rate index. There are two main categories of indices:
those based on U.S. Treasury securities and those derived from a calculated
measure, such as cost-of-funds index or a moving average of mortgage rates.
Commonly utilized indices include the one-year and five-year constant maturity
U.S. Treasury note rates, the three-month U.S. Treasury bill rate, the 180-day
U.S. Treasury bill rate, rates on longer-term U.S. Treasury securities, the
National Median Cost of Funds, the one-month, three-month, six-month or one-year
LIBOR, a published prime rate, or commercial paper rates. Certain of these
indices follow overall market interest rates more closely than others.
Adjustable rate mortgages, an increasingly common form of residential
financing, generally are originated by banks and thrift institutions and have a
specified maturity date. Most provide for amortization of principal in a manner
similar to fixed-rate mortgages but have interest payment amounts that change in
response to changes in a specified interest rate index. The rate of interest due
on such a mortgage is calculated by adding an agreed-upon "margin" to the
specified index, although there generally are limitations or "caps" on interest
rate movements in any given period or over the life of the mortgage. To the
extent that the interest rates on adjustable rate mortgages underlying the ARMS
or the CMOs in which the Short-Intermediate U.S. Government Income Fund may
invest cannot be adjusted in response to interest rate changes because of such
caps, the ARMS or CMOs are likely to respond to changes in market rates more
like fixed-rate securities. In other words, interest rate increases in excess of
such caps can be expected to cause the ARMS or CMOs backed by mortgages that
have such caps to decline in value to a greater extent than would be the case in
the absence of such caps. Conversely, interest rate decreases below such floors
can be expected to cause the ARMS or CMOs backed by mortgages that have such
floors to increase in value to a greater extent than would be the case in the
absence of such floors.
Since the interest rates on many mortgages underlying ARMS and CMOs are reset
on an annual basis and generally are subject to caps, it can be expected that
the prices of such
PROSPECTUS A-10
<PAGE> 501
ARMS and CMOs will fluctuate to the extent prevailing market interest rates are
not reflected in the interest rates payable on the underlying adjustable rate
mortgages or the CMO. In this regard, the NAV of the Short-Intermediate U.S.
Government Income Fund's shares could fluctuate to the extent interest rates on
underlying mortgages differ from prevailing market interest rates during interim
periods between interest rate reset dates. Accordingly, investors could
experience some principal loss or less gain than might otherwise be achieved if
they redeem their Fund shares before the interest rates on the mortgages
underlying the Fund's portfolio securities are adjusted to reflect prevailing
market interest rate.
The holder of ARMS and certain CMOs receives not only monthly scheduled
payments of principal and interest but also may receive unscheduled principal
payments representing prepayments on the underlying mortgages. An investor,
therefore, may have to reinvest the periodic payments and any unscheduled
prepayments of principal it receives at a rate of interest which is lower than
the rate on the ARMS and CMOs held by it.
The Short-Intermediate U.S. Government Income Fund also may invest cash
balances temporarily in U.S. Treasury bills, which are short-term U.S.
Government obligations with maturities which do not exceed one year.
Foreign Obligations
The Short-Intermediate U.S. Government Income Fund may invest up to 25% of its
assets in high-quality, short-term debt obligations of foreign branches of U.S.
banks or U.S. branches of foreign banks that are denominated in and pay interest
in U.S. dollars. Investments in foreign obligations involve certain
considerations that are not typically associated with investing in domestic
obligations. There may be less publicly available information about a foreign
issuer than about a domestic issuer. Foreign issuers also are not subject to the
same uniform accounting, auditing and financial reporting standards or
governmental supervision as domestic issuers. In addition, with respect to
certain foreign countries, taxes may be withheld at the source under foreign
income tax laws, and there is a possibility of expropriation or confiscatory
taxation, political or social instability or diplomatic developments that could
adversely affect investments in, the liquidity of, and the ability to enforce
contractual obligations with respect to, securities of issuers located in those
countries.
INVESTMENT POLICIES AND RESTRICTIONS
Each Fund's investment objective, as set forth in "How the Funds
Work -- Investment Objectives and Policies," is not fundamental; that is, it may
be changed without approval by the vote of the holders of a majority of such
Fund's outstanding voting securities, as described under "Capital Stock" in the
SAI for each Fund. If the Board of Directors determines that a Fund's investment
objective can best be achieved by a substantive
A-11 PROSPECTUS
<PAGE> 502
change in a nonfundamental investment policy or strategy, the Company may make
such change without shareholder approval and will disclose any such material
changes in the then-current Prospectus.
As a matter of fundamental policy for the Intermediate Bond Fund, the Fund may
not purchase or sell commodity contracts or invest in oil, gas or mineral
exploration or development programs, except that the Fund may enter into futures
contracts and related options. The Fund may not purchase or sell real estate,
except that the Fund may purchase securities of issuers that deal in real estate
and may purchase securities that are secured by interests in real estate. The
Fund may not purchase securities of companies for the purpose of exercising
control. The Fund may not acquire any other investment company except in
connection with a merger, consolidation, reorganization or acquisition of assets
or where otherwise permitted by the Investment Company Act of 1940. The Fund may
not act as an underwriter of securities within the meaning of the Securities Act
of 1933. The Fund may not write or sell put options, call options, straddles,
spreads, or any combination thereof, except that the Fund may enter into
transactions in options on securities, futures contracts and options on futures
contracts. The Fund may not borrow money or issue senior securities, except that
the Fund may borrow from banks and enter into reverse repurchase agreements for
temporary purposes in amounts up to 10% of the value of the total assets at the
time of such borrowing. The Fund may not purchase securities (except U.S.
Government securities and repurchase agreements collateralized by such
securities) if more than 5% of its total assets at the time of purchase will be
invested in securities of any one issuer, except that up to 25% of a Fund's
total assets may be invested without regard to this 5% limitation. Subject to
the foregoing 25% exception, the Fund may not purchase more than 10% of the
outstanding voting securities of any issuer. The Fund may not invest 25% or more
of its total assets at the time of purchase in securities of issuers whose
principal business activities are in the same industry. The Fund may not borrow
money except in amounts up to 10% of the value of its total assets at the time
of borrowing.
For the Funds, if a percentage restriction on the investment or use of assets
set forth in this Prospectus is adhered to at the time a transaction is
effected, later changes in percentages resulting from changing values will not
be considered a violation, however, each Fund will not at any time have more
than 15% (10% for the Ginnie Mae Fund) of its net assets invested in illiquid
securities.
As matters of fundamental policy for the Ginnie Mae and Short-Intermediate
U.S. Government Income Funds, a Fund may: (i) not purchase securities of any
issuer (except U.S. Government obligations) if as a result more than 5% of the
value of a Fund's total assets would be invested in the securities of such
issuer or a Fund would own more than 10% of the outstanding voting securities of
such issuer; (ii) make loans of portfolio securities in accordance with its
investment policies; and (iii) not invest 25% or more of its assets (i.e.,
concentrate) in any particular industry, except that the Fund
PROSPECTUS A-12
<PAGE> 503
may invest 25% or more of its assets in U.S. Government obligations. In
addition, as a matter of fundamental policy, the Short-Intermediate U.S.
Government Income Fund may borrow from banks up to 10% of the current value of
its net assets for temporary purposes only in order to meet redemptions, and
these borrowings may be secured by the pledge of up to 10% of the current value
of its net assets. As a matter of fundamental policy, the Ginnie Mae Fund may
borrow from banks up to 20% of the current value of its net assets for temporary
purposes only in order to meet redemptions, and these borrowings may be secured
by the pledge of up to 20% of the current value of its net assets. Each Fund may
not purchase investments while any such outstanding borrowing exceeds 5% of such
Fund's net assets.
With respect to fundamental investment policy (i) above, the
Short-Intermediate U.S. Government Income Fund is subject to this restriction
only with respect to 75% of the Fund's assets, and, with regard to both Funds,
it may be possible that the Company would own more than 10% of the outstanding
voting securities of the issuer. With respect to fundamental investment policy
concerning bank borrowing above, the Ginnie Mae Fund presently does not intend
to put at risk more than 5% of its assets during the coming year. With respect
to fundamental investment policy (ii) above, the Short-Intermediate U.S.
Government Income Fund does not intend to make loans of its portfolio securities
during the coming year, and the Ginnie Mae Fund does not intend to put at risk
more than 5% of its assets during the coming year.
As a matter of nonfundamental policy, the Ginnie Mae Fund may invest up to 10%
of the current value of its net assets in repurchase agreements having
maturities of more than seven days, illiquid securities and fixed time deposits
that are subject to withdrawal penalties and that have maturities of more than
seven days.
As a matter of nonfundamental policy, the Short-Intermediate U.S. Government
Income Fund may invest up to 15% of the current value of its net assets in
illiquid securities. For this purpose, illiquid securities include, among
others, (a) securities that are illiquid by virtue of the absence of a readily
available market or legal or contractual restrictions on resale, (b) fixed time
deposits that are subject to withdrawal penalties and that have maturities of
more than seven days, and (c) repurchase agreements not terminable within seven
days.
Illiquid securities shall not include securities eligible for resale pursuant
to Rule 144A under the Securities Act of 1933 (the "1933 Act") that have been
determined to be liquid by the adviser, pursuant to guidelines established by
the Company's Board of Directors, and commercial paper that is sold under
Section 4(2) of the 1933 Act that (i) is not traded flat or in default as to
interest or principal and (ii) is rated in one of the two highest categories by
at least two nationally recognized statistical rating organizations and the
adviser, pursuant to guidelines established by the Company's Board of Directors,
has determined the commercial paper to be liquid; or (iii) is rated in one of
the two highest categories by one nationally recognized statistical rating
A-13 PROSPECTUS
<PAGE> 504
organization and the adviser, pursuant to guidelines established by the
Company's Board of Directors has determined that the commercial paper is of
equivalent quality and is liquid, if by any reason thereof the value of its
aggregate investment in such classes of securities will exceed 10% of its total
assets.
Advised by WELLS FARGO BANK, N. A.
- Sponsored/Distributed by Stephens Inc., Member NYSE/SIPC
NOT FDIC INSURED
PROSPECTUS A-14
<PAGE> 505
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE> 506
SPONSOR, DISTRIBUTOR AND ADMINISTRATOR
Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
INVESTMENT ADVISER, TRANSFER AND
DIVIDEND DISBURSING AGENT AND
CUSTODIAN
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
LEGAL COUNSEL
Morrison & Foerster LLP
2000 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
FOR MORE INFORMATION ABOUT THE FUND,
SIMPLY CALL 1-800-222-8222, OR WRITE:
Stagecoach Funds, Inc.
c/o Stagecoach Shareholder Services
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
STAGECOACH FUNDS:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- are NOT FDIC insured
- are NOT guaranteed by Wells Fargo Bank
- are NOT deposits or obligations of the Bank
- involve investment risk, including possible loss of [LOGO]
principal
</TABLE>
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<PAGE> 507
[STAGECOACH FUNDS LOGO]
P.O. Box 7066
San Francisco, CA 94120-7066
STAGECOACH FUNDS:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- are NOT FDIC insured
- are NOT guaranteed by Wells Fargo Bank
- are NOT deposits or obligations of the Bank
- involve investment risk, including possible loss of [LOGO]
principal
</TABLE>
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<PAGE> 508
[STAGECOACH FUNDS LOGO]
------------------------------
PROSPECTUS
------------------------------
PRIME MONEY MARKET MUTUAL FUND
TREASURY MONEY MARKET MUTUAL FUND
INSTITUTIONAL CLASS
SEPTEMBER 6, 1996
<PAGE> 509
STAGECOACH FUNDS(R)
PRIME MONEY MARKET MUTUAL AND
TREASURY MONEY MARKET MUTUAL FUNDS
INSTITUTIONAL CLASS
Stagecoach Funds, Inc. (the "Company") is an open-end management investment
company. This Prospectus contains information about Institutional Class shares
offered by two funds of the Stagecoach Family of Funds -- the PRIME MONEY MARKET
MUTUAL and TREASURY MONEY MARKET MUTUAL FUNDS (each, a "Fund" and collectively,
the "Funds").
AN INVESTMENT IN A FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT A FUND WILL BE ABLE TO MAINTAIN A
CONSTANT $1.00 NET ASSET VALUE PER SHARE.
Please read this Prospectus before investing and retain it for future
reference. It is designed to provide you with important information and to help
you decide if a Fund's goals match your own. A Statement of Additional
Information ("SAI"), dated September 6, 1996, containing additional information
about the Funds has been filed with the Securities and Exchange Commission
("SEC") and is incorporated by reference into this Prospectus. The SAI is
available without charge by writing to Stagecoach Funds, Inc., c/o Stagecoach
Shareholder Services, Wells Fargo Bank, N.A., P.O. Box 7066, San Francisco, CA
94120-7066 or by calling 1-800-222-8222. If you hold shares in an IRA, please
call 1-800-BEST-IRA for information or assistance.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THESE AUTHORITIES PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
FUND SHARES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR ISSUED, ENDORSED OR
GUARANTEED BY, WELLS FARGO BANK, N.A. ("WELLS FARGO BANK") OR ANY OF ITS
AFFILIATES. SUCH SHARES ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT,
THE FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"), THE FEDERAL RESERVE BOARD OR
ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN A FUND INVOLVES CERTAIN RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
WELLS FARGO BANK IS THE INVESTMENT ADVISER AND PROVIDES THE FUNDS WITH CERTAIN
OTHER SERVICES FOR WHICH IT IS COMPENSATED. STEPHENS INC. ("STEPHENS"), WHICH IS
NOT AFFILIATED WITH WELLS FARGO BANK, IS THE FUNDS' SPONSOR, ADMINISTRATOR AND
DISTRIBUTOR.
PROSPECTUS DATED SEPTEMBER 6, 1996
PROSPECTUS
<PAGE> 510
The PRIME MONEY MARKET MUTUAL FUND seeks to provide investors with maximized
current income to the extent consistent with preservation of capital and
maintenance of liquidity.
The TREASURY MONEY MARKET MUTUAL FUND seeks to provide investors with current
income and stability of principal.
PROSPECTUS
<PAGE> 511
TABLE OF CONTENTS
-------
<TABLE>
<S> <C>
PROSPECTUS SUMMARY 1
SUMMARY OF FUND EXPENSES 3
FINANCIAL HIGHLIGHTS 5
HOW THE FUNDS WORK 10
THE FUNDS AND MANAGEMENT 15
INVESTING IN THE FUNDS 17
EXCHANGES 22
DIVIDENDS 23
MANAGEMENT AND SERVICING FEES 23
TAXES 25
PROSPECTUS APPENDIX - ADDITIONAL
INVESTMENT POLICIES A-1
</TABLE>
PROSPECTUS
<PAGE> 512
PROSPECTUS SUMMARY
The Funds provide investors with a convenient way to invest in a portfolio of
securities selected and supervised by professional management. The following
provides summary information about the Funds. For more information, please refer
specifically to the identified Prospectus sections and generally to the Funds'
Prospectus and SAI.
Q. WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?
A. The PRIME MONEY MARKET MUTUAL FUND seeks to provide investors with maximized
current income to the extent consistent with preservation of capital and
maintenance of liquidity. The Fund pursues its objective by investing its
assets in a broad range of short-term, high quality U.S. dollar-denominated
money market instruments, which have remaining maturities not exceeding 397
days (13 months), and in certain repurchase agreements.
The TREASURY MONEY MARKET MUTUAL FUND seeks to provide investors with
current income and stability of principal. The Fund's fundamental policy is
to seek its objective by investing its assets only in obligations issued or
guaranteed by the U.S. Treasury and in notes and other instruments,
including repurchase agreements, collateralized or secured by such
obligations, which have remaining maturities not exceeding 397 days (13
months).
See "How the Funds Work -- Investment Objectives and Policies" and
"Prospectus Appendix -- Additional Investment Policies" for further
information on investments.
Q. WHAT ARE SOME OF THE POTENTIAL RISKS ASSOCIATED WITH THIS TYPE OF INVESTMENT?
A. Investments in a Fund are not bank deposits or obligations of Wells Fargo
Bank and are not insured by the FDIC, nor are they insured or guaranteed
against loss of principal. Therefore, investors should be willing to accept
some risk with money invested in a Fund. Although each Fund seeks to
maintain a stable net asset value of $1.00 per share, there is no assurance
that it will be able to do so. A Fund may not achieve as high a level of
current income as other mutual funds that do not limit their investment to
the high credit quality instruments in which each Fund invests. As with all
mutual funds, there can be no assurance that a Fund will achieve its
investment objective.
Q. WHO MANAGES MY INVESTMENTS?
A. Wells Fargo Bank, as each Fund's investment adviser, manages your
investments. Wells Fargo Bank also provides the Funds with transfer agency,
dividend disbursing agency, and custodial services. In addition, Wells Fargo
Bank is a selling agent for
1 PROSPECTUS
<PAGE> 513
the Funds. See "The Funds and Management" and "Management and Servicing
Fees" for further information.
Q. HOW DO I INVEST?
A. Qualified investors may invest by purchasing Institutional Class shares of
the Funds at the net asset value per share without a sales charge ("NAV").
Qualified investors include certain customers of affiliate, franchise or
correspondent banks of Wells Fargo & Company and other selected institutions
("Institutions"). Customers may include individuals, trusts, partnerships
and corporations. Purchases are effected through the customer's account with
the Institution under the terms of the customer's account agreement with the
Institution. Investors wishing to purchase a Fund's Institutional Class
shares should contact their account representatives. The minimum initial
purchase amount on Institutional Class shares is generally $5 million and
the minimum subsequent purchase amount on such shares is generally $25,000.
Investors in Pacifica Funds Trust's Prime Money Market and Treasury Money
Market Funds, investors in various fiduciary accounts and certain other
investors are not subject to minimum initial or subsequent purchase amount
requirements. See "Investing in the Funds" for additional information.
Q. ARE EXCHANGES TO OTHER FUNDS PERMITTED?
A. Yes. The exchange privilege enables you to exchange Fund shares for shares of
another fund offered by the Company, or shares of certain other funds
offered by other investment companies in the Stagecoach Family of Funds, to
the extent such shares are offered for sales in your state of residence.
Exchanges are effected through the customer's account with the Institution
under the terms of the customer's account agreement with the Institution.
See "Exchanges."
Q. HOW MAY I REDEEM SHARES?
A. You may redeem your shares at NAV, without charge by the Company.
Institutional Class shares held by an Institution on behalf of its customers
must be redeemed under the terms of the customer's account agreement with
the Institution. It is the responsibility of an Institution to transmit
redemption requests to the Company and to credit its customers' accounts.
The Company reserves the right to impose charges for wiring redemption
proceeds. See "Investing in the Funds -- Redemption of Institutional Class
Shares."
Q. HOW WILL I RECEIVE DIVIDENDS AND ANY CAPITAL GAINS?
A. Dividends from net investment income of a Fund are declared daily, paid
monthly and automatically reinvested in additional Institutional Class
shares of such Fund at NAV. Shareholders may also elect to receive dividends
in cash. Any capital gains are distributed at least annually in the same
manner as dividends. See "Dividends" for additional information.
PROSPECTUS 2
<PAGE> 514
SUMMARY OF FUND EXPENSES
Institutional Class Shares
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
PRIME MONEY TREASURY MONEY
MARKET MUTUAL FUND MARKET MUTUAL FUND
<S> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price).............. None None
Sales Charge Imposed on
Reinvested Dividends......... None None
Sales Charge Imposed on
Redemptions.................. None None
Exchange Fees.................. None None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
PRIME MONEY TREASURY MONEY
MARKET MUTUAL FUND MARKET MUTUAL FUND
<S> <C> <C>
Management Fee (after waivers
or reimbursements)1.......... 0.12% 0.12%
Rule 12b-1 Fee................. None None
Other Expenses (after waivers
or reimbursements)2.......... 0.13% 0.13%
----- -----
TOTAL FUND OPERATING EXPENSES
(after waivers or
reimbursements)3............. 0.25% 0.25%
</TABLE>
- -------------------------------
1 Management Fee (before waivers or reimbursements) would be payable
at maximum annual rates of 0.25% and 0.25%, respectively.
2 Other Expenses (before waivers or reimbursements) would be 0.33%
and 0.32%, respectively.
3 Total Fund Operating Expenses (before waivers or reimbursements)
would be 0.58% and 0.57%, respectively.
Note: The table does not reflect any charges that may be imposed by a
Wells Fargo Bank or another Institution directly on certain
customer accounts in connection with an investment in a Fund.
3 PROSPECTUS
<PAGE> 515
EXAMPLE OF EXPENSES
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following
expenses on a $1,000 investment in
a Fund's Institutional Class
shares, assuming a 5% annual return
and redemption at the end of each
time period indicated:
Prime Money Market Mutual
Fund........................... $3 $ 8 $14 $ 32
Treasury Money Market Mutual
Fund........................... $3 $ 8 $14 $ 32
</TABLE>
EXPLANATION OF TABLES
The purpose of the foregoing tables is to help a shareholder understand the
various costs and expenses that an investor in a Fund will bear directly or
indirectly.
SHAREHOLDER TRANSACTION EXPENSES are charges incurred when a shareholder buys
or sells Fund shares. Institutional Class shares are sold with no shareholder
transaction expenses imposed by the Company. The Company reserves the right to
impose a charge for wiring redemption proceeds.
ANNUAL FUND OPERATING EXPENSES for the Institutional Class shares of the Funds
are based on applicable contract amounts and derived from amounts incurred
during the most recent fiscal year, restated to reflect voluntary fee waivers
and expense reimbursements that are expected to continue to reduce expenses
during the Company's current fiscal year. Wells Fargo Bank and Stephens have
agreed to waive or reimburse all or a portion of their respective fees charged
to, or expenses paid by, each Fund to ensure that the Total Fund Operating
Expenses do not exceed, on an annual basis, 0.25% or 0.25%, respectively, of the
Prime Money Market Mutual Fund's or Treasury Money Market Mutual Fund's average
daily net assets through August 31, 1997. Any waivers or reimbursements will
reduce a Fund's total expenses. There can be no assurance that waivers or
reimbursements will continue after that time. For more complete descriptions of
the various costs and expenses you can expect to incur as an investor in the
Funds, please see "Management and Servicing Fees."
EXAMPLE OF EXPENSES is a hypothetical illustration of the expenses associated
with a $1,000 investment over stated periods, based on the expenses in the above
tables and an assumed annual rate of return of 5%. The rate of return should not
be considered an indication of actual or expected performance of a Fund nor a
representation of past or future expenses; actual expenses and returns may be
greater or lesser than those shown.
PROSPECTUS 4
<PAGE> 516
FINANCIAL HIGHLIGHTS
The following information has been derived from the Financial Highlights in
the annual and semi-annual financial statements for the periods ended September
30, 1995 and March 31, 1996 for Pacifica Funds Trust's Prime Money Market and
Treasury Money Market Funds, the predecessor portfolios to the Funds. This
information is provided to assist you in evaluating the performance of the Funds
for each of the ten years in the periods presented. The financial information
for the year ended September 30, 1995 and six months ended September 30, 1994
has been audited by the predecessor portfolios' independent auditors, whose
report on the financial statements for the year ended September 30, 1995 appears
in the 1995 Annual Report to Shareholders for the predecessor portfolios. This
report and the related financial statements are incorporated by reference into
the SAI. The financial information for each of the four years in the period
ended March 31, 1994 has been audited by the predecessor portfolios' former
independent accountants. Prior to August 11, 1995, the predecessor portfolios
offered only one class of shares to certain institutional investors, which class
was known as Service shares. The financial data shown below through the fiscal
year ended September 30, 1995 pertain only to the Service shares of the
predecessor portfolios. The financial data for the additional period ended
September 30, 1995, as well as the six-month period ended March 31, 1996,
pertain only to the Institutional shares of the predecessor portfolios, which
commenced operations on August 11, 1995. The unaudited financial information and
the related notes for the six months ended March 31, 1996 also are incorporated
by reference into the SAI. See "The Funds and Management" below and "Capital
Stock" in the SAI. This information should be read in conjunction with the
related financial statements and the notes thereto.
5 PROSPECTUS
<PAGE> 517
PRIME MONEY MARKET MUTUAL FUND(1)
<TABLE>
<CAPTION>
(SERVICE SHARES)
------------------------------------------------------------------------------------------
FISCAL YEAR ENDED MARCH 31,
-------------------------------------------------------------------------------------------
1986 1987 1988 1989 1990 1991 1992 1993
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:
Net asset value, beginning
of year.................. $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ .9997
-------- -------- -------- -------- -------- -------- -------- --------
Investment Operations:
Investment income-net...... 0.754 .0581 0.634 .0764 .0849 .0745 .0510 .0327
Net realized gain (loss) on
investments.............. -- -- -- -- -- -- (.0003) .0001
-------- -------- -------- -------- -------- -------- -------- --------
Total from Investment
Operations............. 0.754 .0581 0.634 .0764 .0849 .0745 .0507 .0328
-------- -------- -------- -------- -------- -------- -------- --------
Distributions:
Dividends from investment
income-net............... (0.754) (.0581) (.0634) (.0764) (.0849) (.0745) (.0510) (.0327)
-------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of
year..................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ .9997 $ .9998
======== ======== ======== ======== ======== ======== ======== ========
Total Investment
Return................. 7.80% 5.97% 6.50% 7.88% 8.82% 7.72% 5.22% 3.32%
Ratios/Supplemental Data:
Ratio of expenses to
average net assets....... .66%(6) .68%(7) .58%(8) .56%(8) .54%(9) .47%(10) .43%(11) .41%(12)
Ratio of net investment
income to average net
assets................... 7.47%(6) 5.81%(7) 6.38%(8) 7.58%(8) 7.95%(9) 7.38%(10) 5.09%(11) 3.27%(12)
Net Assets, end of year
(000's Omitted).......... $350,344 $407,815 $628,987 $496,675 $493,641 $543,834 $528,397 $468,479
<CAPTION>
(SERVICE SHARES) (INSTITUTIONAL SHARES)(2)
----------------------------------------- --------------------------
SIX FISCAL
MONTHS YEAR PERIOD SIX MONTHS
ENDED ENDED ENDED ENDED
-------- SEPT. 30, SEPT. 30, SEPT. 30, MARCH 31,
1994 1994(3) 1995(4) 1995 1996
-------- --------- --------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Per Share Data:
Net asset value, beginning
of year.................. $ .9998 $ .9998 $ .9998 $ 1.0000 $ 1.0000
-------- -------- -------- -------- ---------
Investment Operations:
Investment income-net...... .0296 .0185 .0546 .0079 .0273
Net realized gain (loss) on
investments.............. -- -- -- -- (.0002)
-------- -------- -------- -------- ---------
Total from Investment
Operations............. .0296 .0185 .0546 .0079 .0271
-------- -------- -------- -------- ---------
Distributions:
Dividends from investment
income-net............... (.0296) (.0185) (.0546) (.0079) (.0273)
-------- -------- -------- -------- ---------
Net asset value, end of
year..................... $ .9998 $ .9998 $ .9998 $ 1.0000 $ .9998
======== ========= ======== ======== =========
Total Investment
Return................. 3.00% 3.71%(5) 5.60% 5.65%(5) 5.50%(5)
Ratios/Supplemental Data:
Ratio of expenses to
average net assets....... .41%(13) .41%(5,14) .41%(15) .26%(6) .25%(5,17)
Ratio of net investment
income to average net
assets................... 2.96%(13) 3.67%(5,14) 5.47%(15) 5.67%(6) 5.46%(5,17)
Net Assets, end of year
(000's Omitted).......... $527,599 $565,305 $614,101 $ 30,606 $ 396,613
</TABLE>
PROSPECTUS 6
<PAGE> 518
- -------------------
(1) The Prime Fund operated as Pacific American Liquid Assets, Inc. from
commencement of operations on April 30, 1981 until it was reorganized as a
portfolio of Pacific American Fund on October 1, 1985. On October 1, 1994,
the Fund was reorganized as the "Pacific American Money Market Portfolio,"
a portfolio of Pacifica Funds Trust. In July 1995, the Fund was renamed the
"Pacifica Prime Money Market Fund," and on or about September 6, 1996, the
Fund was reorganized as the Prime Money Market Mutual Fund of Stagecoach
Funds, Inc.
(2) Financial Data for the period ended September 30, 1995 and the six-month
period ended March 31, 1996 is for Institutional shares only, which were
initially offered on August 11, 1995.
(3) On October 1, 1994, the Fund's fiscal year end changed from March 31 to
September 30.
(4) On May 12, 1995, the Funds' Board of Trustees approved the issuance of
multiple classes of shares of each Fund. Effective August 11, 1995,
existing Funds' shares were classified as Service shares and the Funds
began offering both Service and Institutional shares to investors.
Effective October 1, 1995, the funds began offering Investor shares to
investors.
(5) Annualized basis.
(6) During the year ended March 31, 1986, the Fund's adviser waived a portion
of its fees (.13% of average net assets).
(7) During the year ended March 31, 1987, the Fund's adviser waived a portion
of its fees (.25% of average net assets). In addition, during the period
from January 1, 1987 to March 31, 1987, the Fund's adviser waived an
additional portion of its fees (.02% of average net assets).
(8) During the years ended March 31, 1988 and 1989, the Fund's adviser waived a
portion of its fees (.35% and .34% of average net assets, respectively).
(9) During the year ended March 31, 1990, the Fund's adviser and the Fund's
prior distributor waived a portion of their respective fees (.36% of
average net assets).
(10) During the year ended March 31, 1991, the Fund's adviser and the Fund's
Service Organizations waived a portion of their respective fees (.47% of
average net assets).
(11) During the year ended March 31, 1992, the Fund's adviser and the Fund's
Service Organizations waived a portion of their respective fees (.48% of
average net assets).
(12) During the year ended March 31, 1993, the Fund's adviser and the Fund's
Service Organizations waived a portion of their respective fees (.48% of
average net assets).
(13) During the year ended March 31, 1994, the Fund's adviser and the Fund's
Service Organizations waived a portion of their respective fees (.48% of
average net assets).
(14) During the six month period ended September 30, 1994, the Fund's adviser
and the Fund's Service Organizations waived a portion of their respective
fees (.48% (annualized) of average net assets).
(15) During the year ended September 30, 1995, the Fund's adviser and the Fund's
Service Organizations waived a portion of their respective fees (.27% of
average net assets).
(16) During the period ended September 30, 1995, the Fund's adviser and the
Fund's Service Organizations waived a portion of their respective fees with
regard to Institutional Class Shares (.43% of average net assets).
(17) During the six month period ended March 31, 1996, the Fund's adviser and
the Fund's Service Organizations waived a portion of their respective fees
with regard to Institutional Class Shares (.41% of average net assets).
7 PROSPECTUS
<PAGE> 519
TREASURY MONEY MARKET MUTUAL FUND(1)
(SERVICE SHARES)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
------------------------------------------------------------------------------------------------
1986(3) 1987 1988 1989 1990 1991 1992
-------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Per Share Data:
Net asset value, beginning
of year.................. $ 1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0001
-------- ------- ------- ------- ------- ------- -------
Investment Operations:
Investment income-net...... .0353 .0550 .0604 .0743 .0827 .0716 .0489
Net realized gain (loss) on
investment............... -- -- -- -- -- .0003 .0002
-------- ------- ------- ------- ------- ------- -------
Total from Investment
Operations............. .0353 .0550 .0604 .0743 .0827 .0719 .0491
-------- ------- ------- ------- ------- ------- -------
Distributions:
Dividends from investment
income-net............... (.0353) (.0550) (.0604) (.0743) (.0827) (.0716) (.0489)
Dividends from net realized
gain on investment....... -- -- -- -- -- (.0002) (.0004)
-------- ------- ------- ------- ------- ------- -------
Total Distributions...... (.0353) (.0550) (.0604) (.0743) (.0827) (.0718) (.0493)
-------- ------- ------- ------- ------- ------- -------
Net asset value, end of
year..................... $ 1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0001 $ .9999
======== ======= ======= ======= ======= ======= =======
Total Investment Return 7.18%(6) 5.64% 6.20% 7.63% 8.58% 7.42% 5.03%
Ratios/Supplemental Data:
Ratio of expenses to
average net assets....... .80%(6,7) .69%(8) .69%(9) .63%(10) .56%(11) .48%(12) .45%(13)
Ratio of net investment
income to average net
assets................... 6.91%(6,7) 5.50%(8) 6.12%(9) 7.36%(10) 7.73%(11) 7.10%(12) 4.73%(13)
Net Assets, end of year
(000's Omitted).......... $123,243 $134,375 $101,066 $90,672 $98,398 $118,623 $281,343
<CAPTION>
(INSTITUTIONAL SHARES)(2)
SIX FISCAL ---------------------------
MONTHS YEAR PERIOD SIX MONTHS
FISCAL YEAR ENDED MARCH 31, ENDED ENDED ENDED ENDED
--------------------------- SEPT. 30, SEPT. 30, SEPT. 30, MARCH 31,
1993 1994 1994(4) 1995(5) 1995 1996
---------- ----------- --------- ---------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Per Share Data:
Net asset value, beginning
of year.................. $ .9999 $ 1.0001 $ 1.0000 $ 1.0000 $1.0000 $ 1.0000
-------- -------- -------- ---------- ------- --------
Investment Operations:
Investment income-net...... .0309 .0277 .0186 .0529 .0077 .0266
Net realized gain (loss) on
investment............... .0002 -- -- -- -- (.0002)
-------- -------- -------- ---------- ------- --------
Total from Investment
Operations............. .0311 .0277 .0186 .0529 .0077 .0264
-------- -------- -------- ---------- ------- --------
Distributions:
Dividends from investment
income-net............... (.0309) (.0277) (.0186) (.0529) (.0077) (.0266)
Dividends from net realized
gain on investment....... -- (.0001) -- -- -- --
-------- -------- -------- ---------- ------- --------
Total Distributions...... (.0309) (.0278) (.0186) (.0529) (.0077) (.0266)
-------- -------- -------- ---------- ------- --------
Net asset value, end of
year..................... $ 1.0001 $ 1.0000 $ 1.0000 $ 1.0000 $1.0000 $ .9998
======== ======== ======== ========== ======= ========
Total Investment Return 3.13% 2.81% 3.75%(6) 5.42% 5.51% 5.37%(6)
Ratios/Supplemental Data:
Ratio of expenses to
average net assets....... .43%(14) .43%(15) .43%(6,16) .42%(17) .26%(6,18) .25%(6,19)
Ratio of net investment
income to average net
assets................... 3.04%(14) 2.77%(15) 3.72%(6,16) 5.32%(17) 5.42%(6,18) 5.32%(6,19)
Net Assets, end of year
(000's Omitted).......... $614,237 $654,950 $690,630 $1,001,707 $36,443 $743,877
</TABLE>
PROSPECTUS 8
<PAGE> 520
- -------------------
(1) Prior to August 1, 1990, the Treasury Money Market Mutual Fund was known as
the Short-Term Government Fund and invested in obligations issued or
guaranteed by agencies and instrumentalities of the U.S. Government in
accordance with fundamental policies that were then effective for the Fund.
The Fund operated as a portfolio of Pacific American Fund through October
1, 1994, when it was reorganized as the "Pacific American U.S. Treasury
Portfolio," a portfolio of Pacifica Funds Trust. In July 1995, the Fund was
renamed the "Pacifica Treasury Money Market Fund," and on or about
September 6, 1996, the Fund was reorganized as a fund of Stagecoach Funds,
Inc.
(2) Financial Data, for the period ended September 30, 1995 and the six-month
period ended March 31, 1996 is for Institutional shares only, which were
initially offered on August 11, 1995.
(3) From October 1, 1985 (commencement of operations) to March 31, 1986.
(4) On October 1, 1994, the Fund's fiscal year end was changed from March 31 to
September 30, and on or about September 6, 1996 the Fund's fiscal year end
was changed from September 30 to December 31.
(5) On May 12, 1995, the Funds' Board of Trustees approved the issuance of
multiple classes of shares of each Fund. Effective August 11, 1995,
existing Funds' shares were classified as Service shares and the Funds
began offering both Service and Institutional shares to investors.
Effective October 1, 1995, the funds began offering Investor shares to
investors.
(6) Annualized basis.
(7) During the period from October 1, 1985 (Commencement of Operations) to
March 31, 1986, the Fund's adviser waived a portion of its fees (.25%
(annualized) of average net assets).
(8) During the year ended March 31, 1987, the Fund's adviser waived a portion
of its fees aggregating $264,629 (.25% of average net assets). In addition,
during the period from January 1, 1987 to March 31, 1987, the Fund's
adviser and the Fund's prior distributor waived a portion of their
respective fees (.09% of average net assets).
(9) During the year ended March 31, 1988, the Fund's adviser and the Fund's
prior distributor waived a portion of their respective fees (.36% of
average net assets).
(10) During the year ended March 31, 1989, the Fund's adviser waived a portion
of its fees (.35% of average net assets).
(11) During the year ended March 31, 1990, the Fund's adviser and the Fund's
prior distributor waived a portion of their respective fees (.41% of
average net assets).
(12) During the year ended March 31, 1991, the Fund's adviser and the Fund's
Service Organizations waived a portion of their respective fees (.46% of
average net assets).
(13) During the year ended March 31, 1992, the Fund's adviser and the Fund's
Service Organizations waived a portion of their respective fees (.48% of
average net assets).
(14) During the year ended March 31, 1993, the Fund's adviser and the Fund's
Service Organizations waived a portion of their respective fees (.48% of
average net assets).
(15) During the year ended March 31, 1994, the Fund's adviser and the Fund's
Service Organizations waived a portion of their respective fees (.47% of
average net assets).
(16) During the six month period ended September 30, 1994, the Fund's adviser
and the Fund's Service Organizations waived a portion of their respective
fees (.47% (annualized) of average net assets).
(17) During the year ended September 30, 1995, the Fund's adviser and the Fund's
Service Organizations waived a portion of their respective fees (.24% of
average net assets).
(18) During the period ended September 30, 1995, the Fund's adviser and the
Fund's Service Organizations waived a portion of their respective fees with
regard to Institutional Class shares (.43% of average net assets).
(19) During the six month period ended March 31, 1996, the Fund's adviser and
the Fund's Service Organizations waived a portion of their respective fees
with regard to Institutional Class shares (.39% of average net assets).
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HOW THE FUNDS WORK
INVESTMENT OBJECTIVES AND POLICIES
Set forth below is a description of the investment objectives and related
policies of the Funds. Each Fund seeks to maintain a net asset value of $1.00
per share. Their assets consist only of obligations with remaining maturities
(as defined by the SEC) of 397 days (13 months) or less at the date of
acquisition, and the dollar-weighted average maturity of each Fund's investments
is 90 days or less. There can be no assurance that each Fund's investment
objective will be achieved or that either Fund will be able to maintain a net
asset value of $1.00 per share.
The PRIME MONEY MARKET MUTUAL FUND seeks to provide investors with maximized
current income to the extent consistent with the preservation of capital and
maintenance of liquidity. The Fund pursues its objective by investing in a broad
range of short-term, high quality U.S. dollar-denominated money market
instruments, which have remaining maturities not exceeding 397 days (13 months),
and in certain repurchase agreements.
The TREASURY MONEY MARKET MUTUAL FUND seeks to provide investors with current
income and stability of principal. The Fund's fundamental policy is to invest
only in obligations issued or guaranteed by the U.S. Treasury and in notes and
other instruments, including repurchase agreements, collateralized or secured by
such obligations, which have remaining maturities not exceeding 397 days (13
months).
All securities acquired by the Funds will be U.S. Government obligations (see
below) or "First Tier Eligible Securities" as defined under Rule 2a-7 of the
Investment Company Act of 1940 (the "1940 Act"). First Tier Eligible Securities
generally consist of instruments that are either rated at the time of purchase
in the highest rating category by one or more unaffiliated nationally recognized
statistical rating organizations ("NRSROs") or issued by issuers with such
ratings. The Appendix to the SAI includes a description of the applicable
ratings. Unrated instruments purchased by the Fund will be of comparable quality
as determined by the adviser pursuant to guidelines approved by the Board of
Directors.
The Funds' investment objectives, and the Treasury Money Market Mutual Fund's
fundamental policy stated above, may not be changed without the vote of a
majority of the outstanding shares of the particular Fund.
U.S. Treasury and U.S. Government Obligations. The Treasury Money Market
Mutual Fund may invest only in obligations issued or guaranteed by the U.S.
Treasury such as bills, notes, bonds and certificates of indebtedness, and in
notes and repurchase agreements collateralized or secured by such obligations.
These obligations may also include U.S. Treasury STRIPS (U.S. Treasury
securities that have been separated into
PROSPECTUS 10
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their component parts of principal and interest payments and recorded as such in
the Federal Reserve book-entry record keeping system). The Prime Money Market
Mutual Fund may invest in U.S. Treasury obligations, as well as in obligations
of agencies and instrumentalities of the U.S. Government ("U.S. Government
obligations"). U.S. Government obligations in which the Fund may invest include
securities issued or guaranteed as to principal and interest by the U.S.
Government and supported by the full faith and credit of the U.S. Treasury. U.S.
Treasury obligations differ mainly in the length of their maturity. Treasury
bills, the most frequently issued marketable government securities, have a
maturity of up to one year and are issued on a discount basis. U.S. Government
obligations also include securities issued or guaranteed by federal agencies or
instrumentalities, including government-sponsored enterprises. Some obligations
of agencies or instrumentalities of the U.S. Government are supported by the
full faith and credit of the United States or U.S. Treasury guarantees; others,
by the right of the issuer or guarantor to borrow from the U.S. Treasury; still
others, by the discretionary authority of the U.S. Government to purchase
certain obligations of the agency or instrumentality; and others, only by the
credit of the agency or instrumentality issuing the obligation. In the case of
obligations not backed by the full faith and credit of the United States, the
investor must look principally to the agency or instrumentality issuing or
guaranteeing the obligation for ultimate repayment, which agency or
instrumentality may be privately owned. There can be no assurance that the U.S.
Government will provide financial support to its agencies or instrumentalities
where it is not obligated to do so. As a general matter, the value of debt
instruments, including U.S. Government obligations, declines when market
interest rates increase and rises when market interest rates decrease. Certain
types of U.S. Government obligations are subject to fluctuations in yield or
value due to their structure or contract terms.
The Prime Money Market Mutual Fund may also purchase "stripped securities"
such as TIGRs or CATs, which are interests in U.S. Treasury obligations offered
by broker-dealers and other financial institutions that represent ownership in
either the future interest payments or the future principal payments on the U.S.
Treasury obligations. Stripped securities are issued at a discount to their
"face value" and may exhibit greater price volatility than ordinary debt
securities because of the manner in which their principal and interest are paid
to investors.
In addition to the types of instruments described above, the Prime Money
Market Mutual Fund may purchase U.S. dollar-denominated bank obligations such as
time deposits, certificates of deposit, bankers' acceptances, bank notes and
deposit notes issued by domestic and foreign banks. Time deposits are
non-negotiable deposits maintained at a banking institution for a specified
period of time normally at a stated interest rate. Certificates of deposit are
certificates evidencing the obligation of a bank to repay funds deposited with
it for a specified period of time. Bankers acceptances are negotiable deposits
or bills of exchange, normally drawn by an importer or exporter to pay for
specific merchandise, which are "accepted" by a bank (meaning, in effect, that
11 PROSPECTUS
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the bank unconditionally agrees to pay the face value of the instrument at
maturity). Bank notes usually represent senior debt of the bank.
The Prime Money Market Mutual Fund may also purchase commercial paper, short-
term notes, medium-term notes and bonds issued by domestic and foreign
corporations that meet the Fund's maturity limitations.
The Prime Money Market Mutual Fund may also invest in U.S. dollar denominated
obligations issued or guaranteed by foreign governments or any of their
political subdivisions, agencies or instrumentalities. Such obligations include
debt obligations of supranational entities. Supranational entities include
international organizations designated or supported by governmental entities to
promote economic reconstruction or development and international banking
institutions and related government agencies. Examples of these include the
International Bank for Reconstruction and Development (the "World Bank"), the
Asian Development Bank and the InterAmerican Development Bank.
The Prime Money Market Mutual Fund may purchase asset-backed securities, which
are securities backed by mortgages, installment sales contracts, credit-card
receivables or other assets. The average life of asset-backed securities varies
with the maturities of the underlying instruments, and the average life of a
mortgage-backed instrument, in particular, is likely to be substantially less
than the original maturity of the mortgage pools underlying the securities as
the result of mortgage prepayments. For this and other reasons, an asset-backed
security's stated maturity may be shortened, and the securities' total return
may be difficult to predict precisely. Such difficulties are not, however,
expected to have a significant effect on the Fund since the remaining maturity
of any asset-backed security acquired will be thirteen months or less.
The Funds may attempt to increase yields by trading to take advantage of
short-term market variations result in high portfolio turnover, which should not
adversely affect the Funds since they do not ordinarily pay brokerage
commissions on the purchase of short-term debt obligations.
For additional descriptions of the types of securities and investment
practices used by the Funds, see "Risk Factors," "Prospectus
Appendix -- Additional Investment Policies" in this Prospectus and "Investment
Restrictions" and "Additional Permitted Investment Activities" in the SAI.
RISK FACTORS
Investments in the Fund are not bank deposits or obligations of Wells Fargo
Bank and are not insured by the FDIC, nor are they insured or guaranteed against
loss of principal. Therefore, investors should be willing to accept some risk
with money invested in the Fund. Although the Fund seeks to maintain a stable
net asset value of $1.00 per share, there is no assurance that it will be able
to do so. The Fund may not achieve as high a
PROSPECTUS 12
<PAGE> 524
level of current income as other mutual funds that do not limit their investment
to the high credit quality instruments in which the Fund invest. Illiquid
securities, which may include certain restricted securities, may be difficult to
sell promptly at an acceptable price. Certain restricted securities may be
subject to legal restrictions on resale. Delay or difficulty in selling
securities may result in a loss or be costly to a Fund. As with all mutual
funds, there can be no assurance that the Fund will achieve its investment
objective.
The Funds, under the 1940 Act, must comply with certain investment criteria
designed to provide liquidity, reduce risk, and allow the Funds to each maintain
a stable net asset value of $1.00 per share. Each Fund's dollar-weighted average
portfolio maturity must not exceed 90 days. Any security that a Fund purchases
must have a remaining maturity of not more than 397 days. In addition, a Fund
purchase must present minimal credit risks and be of the highest quality (i.e.,
be rated in the top rating category by the requisite NRSROs or, if unrated,
determined to be of comparable quality to such rated securities by Wells Fargo
Bank, as the Funds' investment adviser, under guidelines adopted by the
Company's Board of Directors).
Each Fund seeks to reduce risk by investing its assets in securities of
various issuers. As such, each Fund is considered to be diversified for purposes
of the 1940 Act. In addition, the Funds emphasize safety of principal and high
credit quality. In particular, the internal investment policies of Wells Fargo
Bank, the Funds' investment adviser, prohibit the purchase for a Fund of many
types of floating-rate derivative securities that are considered potentially
volatile. The following types of derivative securities ARE NOT permitted
investments for either Fund:
- capped floaters (on which interest is not paid when market rates move above
a certain level);
- leveraged floaters (whose interest rate reset provisions are based on a
formula that magnifies changes in interest rates);
- range floaters (which do not pay any interest if market interest rates move
outside of a specified range);
- dual index floaters (whose interest rate reset provisions are tied to more
than one index so that a change in the relationship between these indices
may result in the value of the instrument falling below face value); and
- inverse floaters (which reset in the opposite direction of their index).
Additionally, neither Fund may invest in securities whose interest rate reset
provisions are tied to an index that materially lags short-term interest rates,
such as Cost of Funds Index ("COFI") floaters." The Funds may invest only in
floating-rate securities that bear interest at a rate that resets quarterly or
more frequently and which resets based on changes in standard money market rate
indices such as U.S. Government Treasury bills, London Interbank Offered Rate or
LIBOR, the prime rate, published commercial paper
13 PROSPECTUS
<PAGE> 525
rates, federal funds rates, Public Securities Associates ("PSA") floaters or JJ
Kenney index floaters.
The Treasury Money Market Mutual Fund restricts its investment to U.S.
Treasury obligations that meet all of the standards described above. Obligations
issued or guaranteed by the U.S. Treasury have historically involved little risk
of loss of principal if held to maturity. However, due to fluctuations in
interest rates, the market value of such obligations may vary during the period
a shareholder owns shares of the Fund. It should be noted that neither the
United States, nor any agency or instrumentality thereof, has guaranteed,
sponsored or approved the Fund or its shares.
Since the Prime Money Market Mutual Fund may purchase U.S. dollar-denominated
securities issued by foreign issuers, the Fund may be subject to investment
risks which are different in some respects from those incurred by a fund that
invests exclusively in debt obligations of domestic issuers. Such potential
risks include future political and economic developments, the possible
imposition of withholding taxes on interest income payable on the securities by
the particular country in which the issuer is located, the possible seizure or
nationalization of foreign deposits, the possible establishment of exchange
controls or the adoption of other foreign governmental restrictions that might
adversely affect the payment of principal and interest on these securities. In
addition, foreign banks and other issuers are not necessarily subject to the
same regulatory requirements that apply to domestic issuers (such as reserve
requirements, loan limitations, examinations, accounting, auditing and
recordkeeping requirements, and public availability of information), and the
Fund may experience difficulties in obtaining or enforcing a judgment against a
foreign issuer. Absent any unusual market conditions, the Fund will not invest
more than 25% of its total assets in securities issued by foreign issuers.
Generally, securities in which the Funds invest will not earn as high a yield
as securities of longer maturity and/or of lesser quality that are more subject
to market volatility. Each Fund attempts to maintain the value of its shares at
a constant $1.00 per share, although there can be no assurance that a Fund will
always be able to do so. See "Prospectus Appendix -- Additional Investment
Policies" and the SAI for further information about investment policies and
risks.
PERFORMANCE
Fund performance may be advertised from time to time in terms of current
yield, effective yield or average annual total return. Performance figures are
based on historical results and are not intended to indicate future performance.
Performance figures are calculated separately for each class of shares of a
Fund.
Yield refers to the income generated by an investment in a class of a Fund's
shares over a specified period (usually 7 days), expressed as an annual
percentage rate. Effective
PROSPECTUS 14
<PAGE> 526
yield is calculated similarly but assumes that the income earned from the shares
is reinvested at NAV in shares of the same class of a Fund. Because of the
effects of compounding, effective yields are slightly higher than yields.
Average annual total return of Institutional Class shares is based on the
overall dollar or percentage change of an investment in such shares and assumes
the investment is at NAV and all dividends and any capital-gain distributions
attributable to a class are also reinvested at NAV in shares of the class.
In addition to presenting these standardized performance calculations, at
times, the Funds may also present non-standard performance figures, such as
yields and effective yields for a 30-day period or, in sales literature,
distribution rates. Because of the differences in the fees and/or expenses borne
by shares of each class of the Funds, the performance figures on one class of
shares can be expected, at any given time, to vary from the performance figures
for other classes of the Funds.
Additional performance information is contained in the SAI under "Performance
Calculations" and in the Annual Report, which are available upon request without
charge by calling the Company at 1-800-222-8222 or by writing the Company at the
address shown on the front cover of the Prospectus.
THE FUNDS AND MANAGEMENT
The Funds are two funds in the Stagecoach Family of Funds. The Company was
organized as a Maryland corporation on September 9, 1991 and currently offers
shares of the following series: Aggressive Growth, Arizona Tax-Free, Asset
Allocation, Balanced, California Tax-Free Bond, California Tax-Free Income,
California Tax-Free Money Market Mutual, Corporate Stock, Diversified Income,
Equity Value, Ginnie Mae, Government Money Market Mutual, Growth and Income,
Intermediate Bond, Money Market Mutual, Money Market Trust, National Tax-Free,
National Tax-Free Money Market Mutual, Oregon Tax-Free, Prime Money Market
Mutual, Short-Intermediate U.S. Government Income, Small Cap, Treasury Money
Market Mutual and U.S. Government Allocation Funds. The Arizona Tax-Free,
Balanced, California Tax-Free Bond, Equity Value, Ginnie Mae, Growth and Income,
Intermediate Bond, Money Market Mutual, National Tax-Free, Oregon Tax-Free,
Prime Money Market Mutual, Small Cap and Treasury Money Market Mutual Funds each
offer three classes of shares. The Aggressive Growth, Asset Allocation,
California Tax-Free Income, Diversified Income, Short-Intermediate U.S.
Government Income and U.S. Government Allocation Funds each offer two classes of
shares. The California Tax-Free Money Market Mutual, Corporate Stock, Government
Money Market Mutual, Money Market Trust, and National Tax-Free Money Market
Mutual Funds each offer one class of shares. Most of the Company's funds are
authorized to issue multiple classes of shares, one class generally subject to a
front-
15 PROSPECTUS
<PAGE> 527
end sales charge and, in some cases, a class subject to a contingent-deferred
sales charge, that are offered to retail investors. Certain of the Company's
funds also are authorized to issue other classes of shares, which are sold
primarily to institutional investors at NAV. Each class of shares represents an
equal proportionate interest in a Fund with other shares of the same class.
Shareholders of each class bear their pro rata portion of a Fund's operating
expenses except for certain class-specific expenses (e.g., any state securities
registration fees, shareholder servicing fees or distribution fees that may be
paid under Rule 12b-1) that are allocated to a particular class and,
accordingly, may affect performance. For information on another fund or a class
of shares, please call Stagecoach Shareholder Services at 1-800-222-8222 or
write the Company at the address shown on the front cover of the Prospectus.
The Company's Board of Directors supervises the Funds' activities and monitors
their contractual arrangements with various service providers. Although the
Company is not required to hold annual shareholder meetings, special meetings
may be required for purposes such as electing or removing Directors, approving
advisory contracts and distribution plans, and changing a fund's investment
objective or fundamental investment policies. All shares of the Company have
equal voting rights and are voted in the aggregate, rather than by fund or
class, unless otherwise required by law (such as when the voting matter affects
only one fund or class). A Fund shareholder of record is entitled to one vote
for each share owned and fractional votes for fractional shares owned. See
"Management" in the SAI for more information on the Company's Directors and
Officers. A more detailed description of the voting rights and attributes of the
shares is contained under "Capital Stock" in the SAI.
MANAGEMENT
Wells Fargo Bank serves as each Fund's investment adviser, custodian, transfer
agent and dividend disbursing agent (the "Transfer Agent"). In addition, Wells
Fargo Bank serves as a selling agent of the Funds. Wells Fargo Bank, one of the
largest banks in the United States, was founded in 1852 and is the oldest bank
in the western United States. As of June 30, 1996, Wells Fargo Bank and its
affiliates provided investment advisory services for approximately $56 billion
of assets of individuals, trusts, estates and institutions. Wells Fargo Bank
also serves as investment adviser to other separately managed funds (or the
master portfolio in which a fund may invest) of the Company, and as investment
adviser or sub-adviser to separately managed funds of five other registered,
open-end, management investment companies. Wells Fargo Bank, a wholly owned
subsidiary of Wells Fargo & Company, is located at 420 Montgomery Street, San
Francisco, California 94104. Wells Fargo Investment Management, Inc. ("WFIM"), a
wholly owned subsidiary of Wells Fargo & Company, is located at 444 Market
Street, San Francisco, California 94105.
PROSPECTUS 16
<PAGE> 528
Subsequent to its acquisition by Wells Fargo & Company on April 1, 1996, WFIM
(formerly, First Interstate Capital Management, Inc.) served as investment
adviser to the predecessor portfolios. Prior to March 18, 1994, the predecessor
portfolios' investment adviser was San Diego Financial Capital Management, Inc.,
which was acquired by First Interstate Bancorp through its merger with San Diego
Financial Corporation.
Morrison & Foerster LLP, counsel to the Company and special counsel to Wells
Fargo Bank, has advised the Company and Wells Fargo Bank that Wells Fargo Bank
and its affiliates may perform the services contemplated by the Advisory
Contracts and this Prospectus without violation of the Glass-Steagall Act. Such
counsel has pointed out, however, that there are no controlling judicial or
administrative interpretations or decisions and that future judicial or
administrative interpretations of, or decisions relating to, present federal or
state statutes, including the Glass-Steagall Act, and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as future changes in such statutes, regulations and judicial or
administrative decisions or interpretations, could prevent such entities from
continuing to perform, in whole or in part, such services. If any such entity
were prohibited from performing any such services, it is expected that new
agreements would be proposed or entered into with another entity or entities
qualified to perform such services.
Stephens is the Company's sponsor and administrator and distributes the Funds'
shares. Stephens is a full service broker/dealer and investment advisory firm
located at 111 Center Street, Little Rock, Arkansas 72201. Stephens and its
predecessor have been providing securities and investment services for more than
60 years. Additionally, they have been providing discretionary portfolio
management services since 1983. Stephens currently manages investment portfolios
for pension and profit-sharing plans, individual investors, foundations,
insurance companies and university endowments.
INVESTING IN THE FUNDS
Institutional Class shares may be purchased on any day the Funds are open for
business, provided Wells Fargo Bank also is open for business (a "Business
Day"). Currently, Wells Fargo Bank is closed on New Year's Day, Presidents' Day,
Martin Luther King's Birthday, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veterans Day, Thanksgiving Day and Christmas Day (each, a
"Holiday"). When any Holiday falls on a weekend, the Funds are typically closed
on the weekday immediately before or after such Holiday.
The Company or Stephens may make the Prospectus available in an electronic
format. Upon receipt of a request from an investor or the investor's
representative, the Company or Stephens will transmit or cause to be transmitted
promptly, without charge, a paper copy of the electronic Prospectus.
17 PROSPECTUS
<PAGE> 529
SHARE VALUE
The value of a share of each class is its NAV. Wells Fargo Bank calculates the
NAV of each class of the Funds as of 12:00 Noon and 1:00 p.m. (Pacific time) on
each Business Day. The NAV per share of each class of shares of a Fund is
computed by dividing the value of a Fund's assets allocable to a particular
class, less the liabilities charged to that class by the total number of
outstanding shares of that class. All expenses, including fees paid to the
investment adviser and administrator, are accrued daily and taken into account
for the purpose of determining the NAV. As noted above, the Funds seek to
maintain a constant $1.00 NAV share price, although there is no assurance that
they will be able to do so.
Each Fund's NAV is calculated on the basis of the amortized-cost method. This
valuation method is based on the receipt of a steady rate of payment on
portfolio instruments from the date of purchase until maturity rather than
actual changes in market value. The Company's Board of Directors believes that
this valuation method accurately reflects fair value.
PURCHASE OF INSTITUTIONAL CLASS SHARES
Institutional Class shares of the Funds are sold at NAV (without a sales
charge) on a continuous basis primarily to certain customers ("Customers") of
affiliate, franchise or correspondent banks of Wells Fargo & Company and other
selected institutions (previously defined as Institutions). Customers may
include individuals, trusts, partnerships and corporations. Share purchases are
effected through a Customer's account at an Institution under the terms of the
Customer's account agreement with the Institution, and confirmations of share
purchases and redemptions are sent by the Funds to the Institution involved. The
minimum initial purchase amount on Institutional Class shares is generally $5
million and the minimum subsequent purchase amount on such shares is generally
$25,000. Investors in Pacifica Funds Trust's Prime Money Market and Treasury
Money Market Funds, investors in various fiduciary accounts and certain other
investors are not subject to minimum initial or subsequent purchase amount
requirements.
Institutions (or their nominees), acting on behalf of their Customers,
normally are the holders of record of Institutional Class shares. Customers'
beneficial ownership of Institutional Class shares is reflected in the account
statements provided by Institutions to their Customers. The exercise of voting
rights and the delivery to Customers of shareholder communications from the
Funds is governed by the Customers' account agreements with an Institution.
Investors wishing to purchase Institutional Class shares of the Funds should
contact their account representatives.
Institutional Class shares of the Funds are sold at the NAV per share next
determined after a purchase order has become effective. Purchase orders placed
by an Institution
PROSPECTUS 18
<PAGE> 530
must be received by the Company by 12:00 Noon (Pacific time) on any Business
Day. Payment for such shares may be made by Institutions in federal funds or
other funds immediately available to the custodian no later than 1:00 p.m.
(Pacific time) on that Business Day.
Institutions are responsible for transmitting orders for purchases by their
Customers and delivering required funds on a timely basis. If funds are not
received within the periods described above, the order will be canceled, notice
thereof will be given, and the Institution will be responsible for any loss to a
Fund or its shareholders. Institutions may charge certain account fees depending
on the type of account the investor has established with the Institution. In
addition, an Institution may receive fees from the Funds with respect to the
investments of its Customers as described under "Management and Servicing Fees."
Payment for Institutional Class shares of a Fund may, in the discretion of the
investment adviser, be made in the form of securities that are permissible
investments for the Fund. For further information see "Additional Purchase and
Redemption Information" in the SAI.
The Company reserves the right to reject any purchase order or to suspend
sales at any time. Payment for orders that are not received will be returned
after prompt inquiry. The issuance of Institutional Class shares is recorded on
the Company's books, and share certificates are not issued.
WIRE INSTRUCTIONS DIRECT PURCHASES BY INSTITUTIONS
1. Complete an Account Application.
2. Instruct the wiring bank to transmit the specified amount in federal funds
to:
Wells Fargo Bank, N.A.
San Francisco, California
Bank Routing Number: 121000248
Wire Purchase Account Number: 4068-000587
Attention: Stagecoach Funds (Name of Fund and designate the Institutional
Class)
Account Name(s): Name(s) in which to be registered
Account Number: (if investing into an existing account)
3. A completed Account Application should be sent by telefacsimile, with the
original subsequently mailed, to the following address immediately after the
funds are wired and must be received and accepted by the Transfer Agent
before an account can be opened:
Wells Fargo Bank, N.A.
Stagecoach Shareholder Services
P.O. Box 7066
San Francisco, California 94120-7066
Telefacsimile: 1-415-543-9538
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4. Share purchases are effected at the NAV next determined after the Account
Application is received and accepted.
STATEMENTS AND REPORTS
Institutions (or their nominees) typically send investors a confirmation or
statement of the account after every transaction that affects their share
balance or the Fund account registration. A statement with tax information for
each year is mailed by January 31 of the following year and also is filed with
the Internal Revenue Service ("IRS"). At least twice a year, shareholders
receive financial statements.
REDEMPTION OF INSTITUTIONAL CLASS SHARES
Redemption requests are effected at the NAV per share next determined after
receipt of a redemption request in good order by the Company. Institutional
Class shares held by an Institution on behalf of its Customers must be redeemed
in accordance with instructions and limitations pertaining to the Customer's
accounts at the Institution. Institutions are responsible for transmitting
redemption requests to the Company and crediting its Customers' accounts with
the redemption proceeds on a timely basis. The redemption proceeds for
Institutional Class shares of the Funds normally are wired to the redeeming
Institution the following Business Day after receipt of the request by the
Company. The Company reserves the right to delay the wiring of redemption
proceeds for up to seven days after it receives a redemption order if, in the
judgment of the investment adviser, an earlier payment could adversely affect
the Funds or unless the SEC permits a longer period under extraordinary
circumstances. Such extraordinary circumstances could include a period during
which an emergency exists as a result of which (a) disposal by the Funds of
securities owned by them is not reasonably practicable or (b) it is not
reasonably practicable for the Funds to fairly determine the value of their net
assets, or a period during which the SEC by order permits deferral of
redemptions for the protection of security holders of a Fund.
With respect to former shareholders of Westcore Trust or Pacifica Funds Trust
who do not have a relationship with an Institution, shares of the Funds may be
redeemed by writing or calling the Funds directly at the address or phone number
shown on the first page of the Prospectus. When Institutional Class shares are
redeemed directly from the Funds, the Funds ordinarily send the proceeds by
check to the shareholder at the address of record on the next Business Day
unless payment by wire is requested. The Funds may take up to seven days to make
payment, although this will not be the customary practice. Also, if the New York
Stock Exchange is closed (or when trading is restricted) for any reason other
than the customary weekend or holiday closing or if an emergency condition as
determined by the SEC merits such action, the Funds may suspend redemptions or
postpone payment dates.
PROSPECTUS 20
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To be accepted by a Fund, a letter requesting redemption must include: (i) the
Fund's name and account registration from which the Institutional Class shares
are being redeemed; (ii) the account number; (iii) the amount to be redeemed;
(iv) the signatures of all registered owners; and (v) a signature guarantee by
any eligible guarantor institution. An "eligible guarantor institution" includes
a commercial bank that is an FDIC member, a trust company, a member firm of a
domestic stock exchange, a savings association, or a credit union that is
authorized by its charter to provide a signature guarantee. Signature guarantees
by notaries public are not acceptable. Further documentation may be requested
from corporations, administrators, executors, personal representatives, trustees
or custodians.
All redemptions of Institutional Class shares of the Funds are made in cash,
except that the commitment to redeem Institutional Class shares in cash extends
only to redemption requests made by each Fund shareholder during any 90-day
period of up to the lesser of $250,000 or 1% of the NAV of the Funds at the
beginning of such period. This commitment is irrevocable without the prior
approval of the SEC. In the case of redemption requests by shareholders in
excess of such amounts, the Board of Directors reserves the right to have the
Funds make payment, in whole or in part, in securities or other assets, in case
of an emergency or any time a cash distribution would impair the liquidity of
the Funds to the detriment of the existing shareholders. In this event, the
securities would be valued in the same manner as the securities of the Funds are
valued. If the recipient were to sell such securities, the investors would incur
brokerage charges.
A redemption may result in a recognized gain or loss for federal income tax
purposes, irrespective of whether the redemption is paid in cash or in kind.
REDEMPTIONS BY TELEPHONE
Telephone exchange or redemption privileges authorize the Transfer Agent to
act on telephone instructions from any person representing himself or herself to
be the shareholder of record and reasonably believed by the Transfer Agent to be
genuine. The Company requires the Transfer Agent to employ reasonable
procedures, such as requiring a form of personal identification, to confirm that
instructions are genuine and, if it does not follow such procedures, the Company
and the Transfer Agent may be liable for any losses due to unauthorized or
fraudulent instructions. Neither the Company nor the Transfer Agent will be
liable for following telephone instructions reasonably believed to be genuine.
21 PROSPECTUS
<PAGE> 533
EXCHANGES
The Funds offer a convenient way to exchange Institutional Class shares in one
Fund for Institutional Class shares in another fund of the Company. Before
engaging in an exchange transaction, an investor should read carefully the
Prospectus describing the fund into which the exchange will occur, which is
available without charge and can be obtained by writing or by calling the
Company at the address or phone number listed on the first page of the
Prospectus. A shareholder may not exchange Institutional Class shares of one
fund for Institutional Class shares of another fund if Institutional Class
shares of both funds are not qualified for sale in the state of the
shareholder's residence. The Company may terminate or amend the terms of the
exchange privilege at any time.
Exchange transactions are effected through a Customer's account at an
Institution under the terms of the Customer's account agreement with the
Institution, and confirmations of share exchanges are sent by a Fund to the
Institution involved. Institutions (or their nominees), acting on behalf of
their Customers, normally are the holders of record of Institutional Class
shares. Institutions are responsible for transmitting orders for exchanges to
the Company on a timely basis. Customers' exchange transactions are generally
reflected in the account statements provided by Institutions to their Customers.
Investors wishing to exchange Institutional Class shares of a Fund for
Institutional Class shares of another fund should contact their account
representatives. Investors with questions may call the Company at
1-800-222-8222.
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. All exchanges are
made at the NAV of the respective funds next determined following receipt of the
request by the Company in good order.
Each exchange, in effect, represents the redemption of shares of one fund and
the purchase of shares of another, which may result in a recognized gain or loss
for federal income tax purposes. Investors should receive written confirmation
of the exchange from the Institution within a few days of the completion of the
transaction.
To exchange Institutional Class shares, or if you have questions, simply call
the Company at 1-800-222-8222. A shareholder of record should be prepared to
give the telephone representative the following information: (i) the account
number, social security or taxpayer identification number and account
registration; (ii) the name of the fund from and the fund into which the
transfer is to occur; and (iii) the dollar or share amount of the exchange. The
conversation may be recorded to protect shareholders and the Company. Telephone
exchanges are available unless the shareholder of record has declined the
privilege on the Purchase Application.
PROSPECTUS 22
<PAGE> 534
In addition, Institutional Class shares of the Funds may be exchanged for each
of the Funds' Class A shares in connection with the distribution of assets held
in a qualified trust, agency or custodial account maintained with the trust
department of a Wells Fargo Bank or another bank, trust company or thrift
institution, or in other cases where Institutional Class shares are not held in
such qualified accounts. Similarly, Class A shares may be exchanged for the
Funds' Institutional Class shares if the shares are to be held in such a
qualified trust, agency or custodial account. These exchanges are made at the
respective NAVs of the Institutional Class shares next determined after the
exchange request is received by the Company.
DIVIDENDS
Dividends from net investment income of the Funds are declared daily payable
to Institutional Class shareholders of record as of 1:00 p.m. (Pacific time).
Institutional Class shareholders begin earning dividends on the Business Day the
investment is effected and continue to earn dividends through the day before the
date that the shares are redeemed. Dividends for a Saturday, Sunday or Holiday
are declared payable to shareholders of record as of the preceding Business Day.
The Funds declare and distribute any capital gains at least annually. Expenses,
such as state securities registration fees and transfer agent fees, that are
attributable to a particular class may affect the relative dividends and/or
capital-gain distributions of a class of shares.
Dividends declared in a month generally are paid on the last Business Day of
the each month. Dividends and any capital-gain distributions are automatically
invested in additional whole and fractional shares unless the shareholder has
elected to receive payment in cash.
MANAGEMENT AND SERVICING FEES
INVESTMENT ADVISER
Subject to the overall supervision of the Company's Board of Directors, Wells
Fargo Bank, as the Funds' investment adviser, provides investment guidance and
policy direction in connection with the management of the Funds' assets. Wells
Fargo Bank also furnishes the Board of Directors with periodic reports on the
Funds' investment strategies and performance. For these services, Wells Fargo
Bank is entitled to receive monthly investment advisory fees at the annual rate
of 0.25% of the average daily net assets of each Fund. From time to time, Wells
Fargo Bank may waive such fees in whole or in part. Any such waiver will reduce
the expenses of the Funds and, accordingly, have a favorable impact on the
Funds' yields and returns. From time to time, the Funds,
23 PROSPECTUS
<PAGE> 535
consistent with their investment objective, policies and restrictions, may
invest in securities of entities with which Wells Fargo Bank has a lending
relationship. For the year ended December 31, 1995, Wells Fargo Bank was paid at
an annual rate equal to 0.25% of each Fund's average daily net assets for its
services as investment adviser.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
Wells Fargo Bank also serves as the Funds' custodian and transfer and dividend
disbursing agent. Under the Custody Agreement, a Fund may, at times, borrow
money from Wells Fargo Bank as needed to satisfy temporary liquidity needs.
Wells Fargo Bank charges interest on such overdrafts at a rate determined
pursuant to the Custody Agreement. Wells Fargo Bank performs its custodial and
transfer and dividend disbursing agency services at 525 Market Street, San
Francisco, California 94105.
SPONSOR, ADMINISTRATOR AND DISTRIBUTOR
Subject to the overall supervision of the governing Board of Directors,
Stephens provides each Fund with administrative services, including general
supervision of each Fund's operation, coordination of the other services
provided to a Fund, compilation of information for reports to the SEC and the
state securities commissions, preparation of proxy statements and shareholder
reports and general supervision of data compilation in connection with preparing
periodic reports. Stephens also furnishes office space and certain facilities to
conduct each Fund's business and compensates the Directors and officers who are
affiliated with Stephens. For these services, Stephens is entitled to receive a
monthly fee at the annual rate of 0.05% of the Funds' average daily net assets.
From time to time, Stephens may waive its fees charged to a Fund in whole or in
part. Any such waivers will reduce a Fund's expenses and, accordingly, have a
favorable impact on the Fund's performance.
Stephens, as the principal underwriter of the Funds within the meaning of the
1940 Act, has entered into Distribution Agreements with the Company pursuant to
which Stephens acts as agent for the Funds for the sale of their shares and may
enter into selling agreements with other agents ("Selling Agents") that wish to
make available shares of the Funds to their respective customers.
Stephens has established a cash and non-cash compensation program, pursuant to
which broker/dealers or financial institutions that sell shares of the Company's
funds may earn additional compensation in the form of trips to sales seminars or
vacation destinations, tickets to sporting events, theater or other
entertainment, opportunities to participate in golf or other outings and gift
certificates for meals or merchandise or the cash value of a non-cash
compensation item.
PROSPECTUS 24
<PAGE> 536
Financial institutions acting as Selling Agents or in certain other
capacities, may be required to register as dealers pursuant to applicable state
securities laws which may differ from federal law and any interpretations
expressed herein.
FUND EXPENSES
From time to time, Wells Fargo Bank and Stephens may waive their respective
fees in whole or in part and reimburse expenses payable to others. Any such
waivers or reimbursements will reduce the Fund's expenses, and, accordingly,
have a favorable impact on the Fund's performance. Except for the expenses borne
by Wells Fargo Bank and Stephens, each fund of the Company bears all costs of
its operations, including its pro rata portion of the Company expenses such as
fees and expenses of its independent auditors and legal counsel, compensation of
the Company's directors who are not affiliated with the adviser, administrator
or any of their affiliates; advisory, transfer agency, custody and
administration fees, and any extraordinary expenses. Expenses attributable to
each fund or class are charged against the assets of the class. General expenses
of the Company are allocated among all of the funds of the Company, including
the Funds, in a manner proportionate to the net assets of each fund, on a
transactional basis, or on such other basis as the Company's Board of Directors
deems equitable.
TAXES
The Company intends to qualify each Fund each year as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), as long as such qualification is in the best interest of the Funds'
shareholders. Each Fund is treated as a separate entity for federal income tax
purposes and, thus, the provisions of the Code applicable to regulated
investment companies are applied to the Funds separately, rather than to the
Company as a whole. In addition, net capital gains, net investment income, and
operating expenses are determined separately for each Fund. By complying with
the applicable provisions of the Code, a Fund will not be subject to federal
income taxes with respect to net investment income and any net realized capital
gains distributed to its shareholders. Each Fund intends to pay out
substantially all of its net investment income and any net realized capital
gains each year.
Dividends from net investment income and net realized short-term capital gains
(the excess of net short-term capital gains over net long-term capital losses)
declared and paid by a Fund will be taxable as ordinary income to its
shareholders. Any capital gain distributions, attributable to a Fund's net
realized long-term capital gains (the excess of net long-term capital gains over
net short-term capital losses), will generally be taxable to shareholders as
long-term capital gain, regardless of the length of time that the Fund's shares
have been held. Such dividends and distributions will be taxable to shareholders
irrespective of whether the shareholder takes them in cash or has them
automatically
25 PROSPECTUS
<PAGE> 537
reinvested in additional Fund shares. You may be eligible to defer the taxation
of dividend and capital gain distributions on Fund shares which are held under a
qualified tax-deferred retirement plan. The Funds do not expect its dividends to
qualify for the dividends-received deduction allowed to corporate shareholders.
An investor must provide a valid taxpayer identification number ("TIN"),
generally the investor's social security or employer identification number, upon
opening or reopening an account. Failure to furnish a valid TIN to the Company
could subject the investor to penalties imposed by the IRS. In addition, the
Company may be required to withhold, subject to certain exemptions, at a rate of
31% ("backup withholding") on dividends, capital gain distributions, and
redemption proceeds (including proceeds from exchanges) paid or credited to an
individual Fund shareholder, unless the shareholder certifies that the TIN
provided is correct and that the shareholder is not subject to backup
withholding, or the IRS notifies the Company that the shareholder's TIN is
incorrect or that the shareholder is subject to backup withholding. Such tax
withheld does not constitute any additional tax imposed on the shareholder, and
may be claimed as a tax payment on the shareholder's federal income tax return.
Foreign shareholders may be subject to different tax treatment, including a
withholding tax. See "Federal Income Taxes -- Foreign Shareholders" in the SAI.
The foregoing discussion is based on federal tax laws in effect as of the date
of this Prospectus and summarizes only some of the important federal income tax
considerations generally affecting the Funds and their shareholders. It is not
intended as a substitute for careful tax planning; you should consult your tax
advisor with respect to your particular tax situation and the state and local
tax status of investments in Fund shares. Further federal tax considerations are
discussed in the SAI.
PROSPECTUS 26
<PAGE> 538
PROSPECTUS APPENDIX --
ADDITIONAL INVESTMENT POLICIES
FUND INVESTMENTS
Treasury Money Market Mutual Fund
The Treasury Money Market Mutual Fund may invest in the following:
(i) obligations issued or guaranteed by the U.S. Treasury such as bills,
notes, bonds and certificates of indebtedness, and in notes and
repurchase agreements collateralized or secured by such obligations (see
below);
(ii) certain repurchase agreements ("repurchase agreements") (discussed
below);
(iii) certain floating- and variable-rate instruments ("variable-rate
instruments);
(iv) securities purchased on a "when-issued" basis and securities purchased
or sold on a "forward-commitment" basis or "delayed-settlement" basis"
(discussed below);
(v) certain reverse repurchase agreements ("reverse repurchase agreements")
(discussed below); and
(vi) certain securities issued by other investment companies.
Prime Money Market Mutual Fund
The Prime Money Market Mutual Fund may invest in the following:
(i) obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, including government-sponsored enterprises, including
U.S. Treasury obligations ("U.S. Government obligations") (discussed
below);
(ii) certain repurchase agreements ("repurchase agreements") (discussed
below);
(iii) certain floating- and variable-rate instruments ("variable-rate
instruments");
(iv) securities purchased on a "when-issued" basis and securities purchased
or sold on a "forward commitment" basis or "delayed settlement" basis"
(discussed below);
(v) certain reverse repurchase agreements ("reverse repurchase agreements")
(discussed below);
(vi) certain securities issued by other investment companies;
A-1 PROSPECTUS
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(vii) negotiable certificates of deposit, fixed time deposits, bankers'
acceptances or other short-term obligations of U.S. banks (including
foreign branches) that have more than $1 billion in total assets at the
time of investment and are members of the Federal Reserve System or are
examined by the Comptroller of the Currency or whose deposits are
insured by the FDIC ("bank instruments");
(viii) commercial paper rated at the date of purchase Prime-1 by Moody's
Investors Service, Inc. ("Moody's") or "A-1+" or "A-1" by Standard &
Poor's Corporation ("S&P") ("rated commercial paper");
(ix) commercial paper unrated at the date of purchase but secured by a
letter of credit from a U.S. bank that meets the above criteria for
investment;
(x) short-term, U.S. dollar-denominated obligations of U.S. branches of
foreign banks that at the time of investment have more than $10
billion, or the equivalent in other currencies, in total assets
("foreign bank obligations") (discussed below).
(xi) mortgage-backed securities (discussed below); and
(xii) certain other asset-backed securities (discussed below).
U.S. Government Obligations
U.S. Government obligations include securities issued or guaranteed as to
principal and interest by the U.S. Government and supported by the full faith
and credit of the U.S. Treasury. U.S. Treasury obligations differ mainly in the
length of their maturity. Treasury bills, the most frequently issued marketable
government securities, have a maturity of up to one year and are issued on a
discount basis. U.S. Government obligations also include securities issued or
guaranteed by federal agencies or instrumentalities, including
government-sponsored enterprises. Some obligations of agencies or
instrumentalities of the U.S. Government are supported by the full faith and
credit of the United States or U.S. Treasury guarantees; others, by the right of
the issuer or guarantor to borrow from the U.S. Treasury; still others, by the
discretionary authority of the U.S. Government to purchase certain obligations
of the agency or instrumentality; and others, only by the credit of the agency
or instrumentality issuing the obligation. In the case of obligations not backed
by the full faith and credit of the United States, the investor must look
principally to the agency or instrumentality issuing or guaranteeing the
obligation for ultimate repayment, which agency or instrumentality may be
privately owned. There can be no assurance that the U.S. Government will provide
financial support to its agencies or instrumentalities where it is not obligated
to do so. In addition, U.S. Government obligations are subject to fluctuations
in market value due to fluctuations in market interest rates. As a general
matter, the value of debt instruments, including U.S. Government obligations,
declines when market rates increase and rises
PROSPECTUS A-2
<PAGE> 540
when market interest rates decrease. Certain types of U.S. Government
obligations are subject to fluctuations in yield or value due to their structure
or contract terms.
Repurchase Agreements
Each Fund may enter into repurchase agreements wherein the seller of a
security to the Funds agrees to repurchase that security from the Funds at a
mutually agreed-upon time and price. The period of maturity is usually quite
short, often overnight or a few days, although it may extend over a number of
months. The Funds may enter into repurchase agreements only with respect to U.S.
Treasury obligations and other obligations that could otherwise be purchased by
the Funds. All repurchase agreements must be collateralized at 102% based on
values that are marked-to-market daily. While the maturities of the underlying
securities in a repurchase agreement transaction may be greater than 397 days,
the term of any repurchase agreement on behalf of the Funds will always be less
than one year. If the seller defaults and the value of the underlying securities
has declined, a Fund may incur a loss. In addition, if bankruptcy proceedings
are commenced with respect to the seller of the security, the Fund's disposition
of the security may be delayed or limited. The Funds will enter into repurchase
agreements only with primary reporting dealers and commercial banks that meet
guidelines established by the Board of Directors and that are not affiliated
with Wells Fargo Bank. The Funds may participate in pooled repurchase agreement
transactions with other funds advised by Wells Fargo Bank.
Floating- and Variable-Rate Instruments
Certain of the debt instruments that the Funds may purchase bear interest at
rates that are not fixed, but vary for example, with changes in specified market
rates or indices or at specified intervals. Certain of these instruments may
carry a demand feature that would permit the holder to tender them back to the
issuer at par value prior to maturity. The Funds may, in accordance with SEC
rules, account for these instruments as maturing at the next interest rate
readjustment date or the date at which the Funds may tender the instrument back
to the issuer, whichever is later. The floating- and variable-rate instruments
that the Funds may purchase include certificates of participation in such
obligations. The Funds may invest in floating- and variable-rate obligations
even if they carry stated maturities in excess of 397 days, upon compliance with
certain conditions of the SEC, in which case such obligations will be treated in
accordance with these conditions as having maturities not exceeding 397 days.
The investment adviser to the Funds will monitor on an ongoing basis the
ability of an issuer of a demand instrument to pay principal and interest on
demand. Events affecting the ability of the issuer of a demand instrument to
make payment when due may occur between the time a Fund elects to demand payment
and the time payment is due, thereby affecting the Fund's ability to obtain
payment at par. Demand instruments whose
A-3 PROSPECTUS
<PAGE> 541
demand feature is not exercisable within seven days may be treated as liquid,
provided that an active secondary market exists.
Securities Loans
The Prime Money Market Mutual Fund may also lend its portfolio securities in
order to increase income to broker-dealers and other institutional investors
pursuant to agreements requiring that the loans be continuously secured by
collateral equal at all times in value to at least the market value of the
securities loaned plus accrued interest. Collateral for such loans may include
cash, U.S. Treasury securities or other U.S. government securities or an
irrevocable letter of credit issued by a bank which meets the investment
standards of the Fund. Such loans will not be made if, as a result, the
aggregate of all outstanding loans of the Fund exceeds one-third of the value of
its total assets. There may be risks of delay in receiving additional collateral
or in recovering the securities loaned or even a loss of rights in the
collateral should the borrower of the securities fail financially.
When-Issued, Forward-Commitment and Delayed-Settlement Securities
Each Fund may purchase securities on a "when-issued" basis and may purchase or
sell securities on a "forward-commitment" basis. The Funds may also purchase or
sell securities on a "delayed-settlement" basis. When-issued and
forward-commitment transactions, which involve a commitment by a Fund to
purchase or sell particular securities with payment and delivery taking place at
a future date (perhaps one or two months later), permit the Funds to lock in a
price or yield on a security it owns or intends to purchase, regardless of
future changes in interest rates. Delayed settlement describes settlement of a
securities transaction in the secondary market that will occur sometime in the
future. When-issued, forward-commitment and delayed-settlement transactions
involve the risk, however, that the yield or price obtained in a transaction may
be less favorable than the yield or price available in the market when the
securities delivery takes place. A Fund's forward commitments, when-issued
purchases and delayed settlements are not expected to exceed 25% of the value of
the Fund's total assets absent unusual market conditions. The Funds do not
intend to engage in these transactions for speculative purposes but only in
furtherance of their investment objectives.
Other Investment Companies
The Funds may invest up to 10% of their assets in shares of other open-end
investment companies that invest exclusively in the high-quality, short-term
money market instruments in which the Funds may invest. The Treasury Money
Market Mutual Fund may only invest in shares of other investment companies that
are structured to seek an investment objective that is similar to the Fund's
investment objective. The investment
PROSPECTUS A-4
<PAGE> 542
companies can be expected to charge management fees and other operating expenses
that would be in addition to those charged to a Fund; however, the Funds'
adviser has undertaken to waive its advisory fees with respect to that portion
of the Fund's assets so invested. The Funds may invest in shares of other
open-end investment companies up to the limits prescribed by the 1940 Act.
Foreign Obligations
The Prime Money Market Mutual Fund may invest up to 25% of its assets in high-
quality, short-term (thirteen months or less) debt obligations of foreign
branches of U.S. banks or U.S. branches of foreign banks that are denominated in
and pay interest in U.S. dollars. The Prime Money Market Mutual Fund may also
invest in U.S. dollar-denominated obligations issued or guaranteed by foreign
governments or any of their political subdivisions, agencies or
instrumentalities. Such obligations include debt obligations of supranational
entities. Supranational entities include international organizations designated
or supported by governmental entities to promote economic reconstruction or
development and international banking institutions and related government
agencies.
Investments in foreign obligations involve certain considerations that are not
typically associated with investing in domestic obligations. There may be less
publicly available information about a foreign issuer than about a domestic
issuer. Foreign issuers also are not subject to the same uniform accounting,
auditing and financial reporting standards or governmental supervision as
domestic issuers. In addition, with respect to certain foreign countries, taxes
may be withheld at the source under foreign income tax laws, and there is a
possibility of expropriation or confiscatory taxation, political or social
instability or diplomatic developments that could adversely affect investments
in, the liquidity of, and the ability to enforce contractual obligations with
respect to, securities of issuers located in those countries.
Mortgage-Backed And Other Asset-Backed Securities
The Prime Money Market Mutual Fund may purchase asset-backed securities, which
are securities backed by mortgages, installment sales contracts, credit card
receivables or other assets. The average life of asset-backed securities varies
with the maturities of the underlying instruments, and the average life of a
mortgage-backed instrument, in particular, is likely to be substantially less
than the original maturity of the mortgage pools underlying the securities as
the result of mortgage prepayments. For this and other reasons, an asset-backed
security's stated maturity may be shortened, and the securities' total return
may be difficult to predict precisely. Such difficulties are not, however,
expected to have a significant effect on the Fund since the remaining maturity
of any asset-backed security acquired will be 397 days or less. Asset-backed
securities purchased
A-5 PROSPECTUS
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by the Fund may include collateralized mortgage obligations ("CMOs") issued by
private companies.
INVESTMENT POLICIES AND RESTRICTIONS
Each Fund's investment objective, as set forth under "How the Funds Work --
Investment Objectives and Policies", is fundamental; that is, it may not be
changed without approval by the vote of the holders of a majority of the Fund's
outstanding voting securities, as described under "Capital Stock" in the SAI. In
addition, any fundamental investment policy may not be changed without such
shareholder approval. If the Company's Board of Directors determines, however,
that a Fund's investment objective could best be achieved by a substantive
change in a nonfundamental investment policy or strategy, the Company's Board
may make such change without shareholder approval and will disclose any such
material changes in the then-current prospectus.
As matters of fundamental policy, each Fund may: (i) borrow from banks up to
20% of the current value of its net assets only for temporary purposes in order
to meet redemptions, and these borrowings may be secured by the pledge of up to
10% of the current value of its net assets (but investments may not be purchased
by a Fund while any such outstanding borrowing in excess of 5% of its net assets
exists); and (ii) not invest more than 25% of its assets (i.e., concentrate) in
any particular industry, excluding, U.S. Government obligations and, with
respect to the Prime Money Market Mutual Fund, the obligations of U.S. banks and
certain U.S. branches of foreign banks.
These investment restrictions are applied at the time investment securities
are purchased. As a matter of nonfundamental policy, the Funds may make loans of
portfolio securities or other assets, although neither Fund intends to do so
during the current fiscal year.
As a matter of nonfundamental policy, neither Fund may: (i) purchase
securities of any issuer (except for U.S. Government obligations, for certain
temporary purposes and for certain guarantees and unconditional puts) if as a
result more than 5% of the value of its total assets would be invested in the
securities of such issuer, except that a Fund may invest up to 25% of its assets
in the highest-rated obligations of any one issuer for a period of up to three
business days, or if a Fund would own more than 10% of the outstanding voting
securities of such issuer; and (ii) invest more than 10% of the current value of
its net assets in securities that are illiquid by virtue of the absence of a
readily available market or legal or contractual restrictions on resale or that
have maturities of more than seven days. With respect to item (i), it may be
possible that the Company would own more than 10% of the outstanding voting
securities of an issuer. Also, as a matter of non-fundamental policy and in
accordance with the current regulations of the SEC, the Prime Money Market
Mutual Fund intends to limit its investments in the obligations of any one
non-U.S. governmental issuer to not more than 5% of its total assets at the time
of purchase, provided that the Fund may invest up to 25% of its assets in
PROSPECTUS A-6
<PAGE> 544
the obligations of one non-U.S. governmental issuer for a period of up to three
business days. For purposes of item (ii), repurchase agreements that do not
provide for payment to the Funds within seven days after notice are subject to
this 10% limit, unless the Company's Board of Directors or the Funds' investment
adviser, pursuant to guidelines adopted by the Board of Directors, determines
that a liquid trading market exists. Illiquid securities shall not include (a)
securities eligible for resale pursuant to Rule 144A Securities Act of 1933 (the
"1933 Act") Act that have been determined to be liquid by the adviser, pursuant
to guidelines established by the Company's Board of Directors, and (b)
commercial paper sold under Section 4(2) of the 1933 Act that (i) is not traded
flat or in default as to interest or principal and (ii) is rated in one of the
two highest categories by at least two NRSROs and the adviser, pursuant to
guidelines established by the Company's Board of Directors, has determined the
commercial paper to be liquid; or (iii) is rated in one of the two highest
categories by one NRSRO and the adviser, pursuant to guidelines established by
the Company's Board of Directors, has determined that the commercial paper is of
equivalent quality and is liquid, if by any reason thereof the value of its
aggregate investment in such classes of securities will exceed 10% of its total
assets.
A-7 PROSPECTUS
<PAGE> 545
SPONSOR, DISTRIBUTOR AND ADMINISTRATOR
Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
INVESTMENT ADVISER, TRANSFER AND
DIVIDEND DISBURSING AGENT AND
CUSTODIAN
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
LEGAL COUNSEL
Morrison & Foerster LLP
2000 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
FOR MORE INFORMATION ABOUT THE FUNDS,
SIMPLY CALL 1-800-222-8222, OR WRITE:
Stagecoach Funds, Inc.
c/o Stagecoach Shareholder Services
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
STAGECOACH MONEY MARKET MUTUAL FUNDS:
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<TABLE>
<S> <C>
- are NOT FDIC insured
- are NOT deposits or obligations of Wells Fargo Bank
- are NOT guaranteed by Wells Fargo Bank
- involve investment risk, including possible loss of
principal
- seek to maintain a stable net asset value of $1.00 per [LOGO]
share, however, there can be no assurance that either
fund will meet this goal. Yields and returns will vary
with market conditions.
</TABLE>
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[STAGECOACH FUNDS LOGO]
P.O. Box 7066
San Francisco, CA 94120-7066
STAGECOACH MONEY MARKET MUTUAL FUNDS:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- are NOT FDIC insured
- are NOT deposits or obligations of Wells Fargo Bank
- are NOT guaranteed by Wells Fargo Bank
- involve investment risk, including possible loss of
principal
- seek to maintain a stable net asset value of $1.00 per [LOGO]
share, however, there can be no assurance that either
fund will meet this goal. Yields and returns will vary
with market conditions.
</TABLE>
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[STAGECOACH FUNDS LOGO]
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PROSPECTUS
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PRIME MONEY MARKET MUTUAL FUND
TREASURY MONEY MARKET MUTUAL FUND
SERVICE CLASS
SEPTEMBER 6, 1996
<PAGE> 548
STAGECOACH FUNDS(R)
PRIME MONEY MARKET MUTUAL FUND
TREASURY MONEY MARKET MUTUAL FUND
SERVICE CLASS SHARES
Stagecoach Funds, Inc. (the "Company") is an open-end investment company. This
Prospectus contains information about one class of shares offered in two funds
of the Stagecoach Family of Funds -- the PRIME MONEY MARKET MUTUAL
FUND -- SERVICE CLASS and the TREASURY MONEY MARKET MUTUAL FUND -- SERVICE CLASS
(each, a "Fund" and collectively, the "Funds").
Please read this Prospectus before investing and retain it for future
reference. It is designed to provide you with important information and to help
you decide if a Fund's goals match your own. A Statement of Additional
Information ("SAI"), dated September 6, 1996, containing additional information
about the Funds, has been filed with the Securities and Exchange Commission
("SEC") and is incorporated by reference into this Prospectus. The Funds' SAI is
available without charge by writing to Stagecoach Funds, Inc., c/o Stagecoach
Shareholder Services, Wells Fargo Bank, N.A., P.O. Box 7066, San Francisco, CA
94120-7066 or by calling 1-800-222-8222.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THESE AUTHORITIES PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
FUND SHARES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR ISSUED, ENDORSED OR
GUARANTEED BY, WELLS FARGO BANK, N.A. ("WELLS FARGO BANK") OR ANY OF ITS
AFFILIATES. SUCH SHARES ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT,
THE FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"), THE FEDERAL RESERVE BOARD OR
ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN A FUND INVOLVES CERTAIN RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
AN INVESTMENT IN A FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT A FUND WILL BE ABLE TO MAINTAIN A
CONSTANT $1.00 NET ASSET VALUE PER SHARE.
WELLS FARGO BANK IS THE INVESTMENT ADVISER AND PROVIDES THE FUNDS WITH CERTAIN
OTHER SERVICES FOR WHICH IT IS COMPENSATED. STEPHENS INC. ("STEPHENS"),
WHICH IS NOT AFFILIATED WITH WELLS FARGO BANK, IS THE FUNDS
SPONSOR, ADMINISTRATOR AND DISTRIBUTOR.
PROSPECTUS DATED SEPTEMBER 6, 1996
PROSPECTUS
<PAGE> 549
The PRIME MONEY MARKET MUTUAL FUND seeks to provide investors with maximized
current income to the extent consistent with preservation of capital and
maintenance of liquidity. The Fund pursues its objective by investing its assets
in a broad range of short-term, high quality U.S. dollar-denominated money
market instruments, which have remaining maturities not exceeding 397 days (13
months), and in certain repurchase agreements.
The TREASURY MONEY MARKET MUTUAL FUND seeks to provide investors with current
income and stability of principal. The Fund's fundamental policy is to seek its
objective by investing its assets only in obligations issued or guaranteed by
the U.S. Treasury and in notes and other instruments, including repurchase
agreements, collateralized or secured by such obligations, which have remaining
maturities not exceeding 397 days (13 months).
PROSPECTUS
<PAGE> 550
TABLE OF CONTENTS
-------
PROSPECTUS SUMMARY 1
SUMMARY OF FUND EXPENSES 3
FINANCIAL HIGHLIGHTS 5
HOW THE FUNDS WORK 10
THE FUNDS AND MANAGEMENT 15
INVESTING IN THE FUNDS 18
EXCHANGES 22
DIVIDENDS 23
MANAGEMENT AND SERVICING FEES 23
TAXES 26
PROSPECTUS APPENDIX - ADDITIONAL INVESTMENT POLICIES A-1
PROSPECTUS
<PAGE> 551
PROSPECTUS SUMMARY
The Funds provide you with a convenient way to invest in a portfolio of
securities selected and supervised by professional management. The following
provides you with summary information about the Funds. For more information,
please refer specifically to the identified Prospectus sections and generally to
the Prospectus and SAI.
Q. WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?
A. The PRIME MONEY MARKET MUTUAL FUND seeks to provide investors with maximized
current income to the extent consistent with preservation of capital and
maintenance of liquidity. The Fund pursues its objective by investing its
assets in a broad range of short-term, high quality U.S. dollar-denominated
money market instruments, which have remaining maturities not exceeding 397
days (13 months), and in certain repurchase agreements.
The TREASURY MONEY MARKET MUTUAL FUND seeks to provide investors with
current income and stability of principal. The Fund's fundamental policy is
to seek its objective by investing its assets only in obligations issued or
guaranteed by the U.S. Treasury and in notes and other instruments,
including repurchase agreements, collateralized or secured by such
obligations, which have remaining maturities not exceeding 397 days (13
months).
See "How the Funds Work -- Investment Objectives and Policies" and
"Prospectus Appendix -- Additional Investment Policies" for further
information on investments.
Q. WHAT ARE SOME OF THE POTENTIAL RISKS ASSOCIATED WITH THIS TYPE OF INVESTMENT?
A. Investments in the Funds are not bank deposits or obligations of Wells Fargo
Bank and are not insured by the FDIC, nor are they insured or guaranteed
against loss of principal. Therefore, you should be willing to accept some
risk with money invested in the Funds. Although each Fund seeks to maintain
a stable net asset value of $1.00 per share, there can be no assurance that
they will be able to do so. The Funds may not achieve as high a level of
current income as other mutual funds that do not limit their investment to
the high credit quality instruments in which the Funds invest. As with all
mutual funds, there can be no assurance that either Fund will achieve its
investment objective.
Q. WHO MANAGES MY INVESTMENTS?
A. Wells Fargo Bank, as the Funds' investment adviser, manages your investments.
Wells Fargo Bank also provides the Funds with transfer agency, dividend
disbursing agency, and custodial services. In addition, Wells Fargo Bank is
a shareholder
1 PROSPECTUS
<PAGE> 552
servicing agent and a selling agent for the Funds. See "The Funds and
Management" and "Management and Servicing Fees."
Q. HOW DO I INVEST?
A. Qualified investors may invest by purchasing Service Class shares of a Fund
at the net asset value per share without a sales charge ("NAV"). Qualified
investors include certain customers of affiliate, franchise or correspondent
banks of Wells Fargo & Company and other selected institutions ("Banks").
Customers of a Bank's trust division, as well as individuals, corporations,
partnerships and other businesses that maintain qualified accounts at a Bank
(including Individual Retirement and Keogh Plan accounts) may invest in the
Funds. Investors purchasing Service Class shares may include officers,
directors and employees of a Bank. Purchases, exchanges and redemptions are
effected through the customer's account with the Bank under the terms of the
customer account agreement with the Bank. The Company reserves the right to
impose charges for wiring redemption proceeds. See "Investing in the Funds"
and "Exchanges" for additional information. Investors wishing to purchase a
Fund's shares should contact their account representatives to discuss
whether Service Class shares, which are sold with various shareholder
services and subject to a charge for such services, or Institutional Class
shares, sold subject to investment minimums, with no shareholder services
and no service charge imposed, best meet their service and investment needs.
Q. HOW WILL I RECEIVE DIVIDENDS AND ANY CAPITAL GAINS?
A. Dividends from net investment income are declared daily, paid monthly and
automatically reinvested in additional Service Class shares of such Fund at
NAV. Shareholders may also elect to receive dividends in cash. Any capital
gains are distributed at least annually in the same manner as dividends. See
"Dividends."
PROSPECTUS 2
<PAGE> 553
SUMMARY OF FUND EXPENSES
SERVICE CLASS SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
PRIME MONEY TREASURY MONEY
MARKET MUTUAL FUND MARKET MUTUAL FUND
<S> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price)............... None None
Sales Charge Imposed on
Reinvested Dividends.......... None None
Sales Charge Imposed on
Redemptions................... None None
Exchange Fees................... None None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
PRIME MONEY TREASURY MONEY
MARKET MUTUAL FUND MARKET MUTUAL FUND
<S> <C> <C>
Management Fee (after waivers or
reimbursements)(1).............. 0.12% 0.12%
Other Expenses (after waivers or
reimbursements)(2).............. 0.33% 0.33%
---- ----
TOTAL FUND OPERATING EXPENSES
(after waivers or
reimbursements)(3).............. 0.45% 0.45%
==== ====
</TABLE>
- ---------------------------------
(1) Management Fee (before waivers or reimbursements) would be payable at
maximum annual rates of 0.25% and 0.25%, respectively.
(2) Other Expenses (before waivers or reimbursements) would be 0.38% and 0.38%,
respectively.
(3) Total Fund Operating Expenses (before waivers or reimbursements) would be
0.63% and 0.63%, respectively.
Note: The table does not reflect any charges that may be imposed by Wells Fargo
Bank or another Institution directly on certain customer accounts in
connection with an investment in a Fund.
3 PROSPECTUS
<PAGE> 554
EXAMPLE OF EXPENSES
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following
expenses on a $1,000 investment in
the Funds Service Class shares,
assuming a 5% annual return and
redemption at the end of each time
period indicated:
Prime Money Market Mutual
Fund........................... $5 $ 14 $25 $ 57
Treasury Money Market Mutual
Fund........................... $5 $ 15 $26 $ 58
</TABLE>
EXPLANATION OF TABLES
The purpose of the above tables is to help you understand the various costs
and expenses that an investor in a Fund will bear directly or indirectly.
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or sell Fund
shares. There are no Shareholder Transaction Expenses for either Fund. However,
the Company reserves the right to impose a charge for wiring redemption
proceeds.
ANNUAL FUND OPERATING EXPENSES for the Funds Service Class shares are based on
applicable contract amounts and derived from amounts incurred by the predecessor
portfolios, the Prime Money Market Fund and Treasury Money Market Fund,
respectively, of Pacifica Funds Trust, during its most recent fiscal year,
restated to reflect voluntary fee waivers and expense reimbursements that are
expected to continue during the current fiscal year. Wells Fargo Bank and
Stephens have each agreed to waive or reimburse all or a portion of their
respective fees charged to, or expenses paid by, each Fund to ensure that the
respective Total Fund Operating Expenses do not exceed, on an annual basis,
0.45% of the Prime Money Market Mutual Fund's or Treasury Money Market Mutual
Fund's average daily net assets through August 31, 1997. Any waivers or
reimbursements would reduce a Fund's total expenses. There can be no assurances
that waivers or reimbursements will continue after that time. The Funds
understand that a Shareholder Servicing Agent also may impose certain conditions
on its customers, subject to the terms of this Prospectus, in addition to or
different from those imposed by the Funds, such as requiring a higher minimum
initial investment or payment of a separate fee for additional expenses. For
more complete descriptions of the various costs and expenses you can expect to
incur as an investor in the Funds, please see "Investing in the Funds -- How to
Buy Shares" and "Management and Servicing Fees."
PROSPECTUS 4
<PAGE> 555
EXAMPLE OF EXPENSES is a hypothetical illustration of the expenses associated
with a $1,000 investment over stated periods, based on the expenses in the above
tables and an assumed annual rate of return of 5%. The rate of return should not
be considered an indication of actual or expected performance of a Fund nor a
representation of past or future expenses; actual expenses and returns may be
greater or lesser than those shown.
FINANCIAL HIGHLIGHTS
The following information has been derived from the Financial Highlights in
the annual financial statements for the fiscal year ended September 30, 1995 and
fiscal period ended March 31, 1996, for Pacifica Funds Trust's Prime Money
Market and Treasury Money Market Funds, the predecessor portfolios to the Funds.
This information is provided to assist you in evaluating the performance of each
Fund for the past ten years. The financial information for the year ended
September 30, 1995 and six months ended September 30, 1994 has been audited by
the predecessor portfolios independent auditors, whose report on the financial
statements for the year ended September 30, 1995 appears in the 1995 Annual
Report to Shareholders for the predecessor portfolios. This report and the
related financial statements are incorporated by reference into the SAI. The
financial information for each of the four years in the period ended March 31,
1994 has been audited by the predecessor portfolios' former independent
accountants. Prior to August 11, 1995, the predecessor portfolios offered only
one class of shares to institutional investors, which class is now known as
Service Class shares. Currently, each Fund offers two other classes of shares to
investors in addition to offering Service Class shares (Class A and
Institutional Class). The unaudited financial information and the related notes
for the six months ended March 31, 1996 also are incorporated by reference into
the SAI. See "The Funds and Management" below and "Capital Stock" in the SAI.
This information should be read in conjunction with the related financial
statements and the notes thereto.
5 PROSPECTUS
<PAGE> 556
PRIME MONEY MARKET MUTUAL FUND(1)
(SERVICE SHARES)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
------------------------------------------------------------------------------
1986 1987 1988 1989 1990 1991
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Per Share Data:
Net asset value, beginning of year..... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
Investment Operations:
Investment income-net.................. 0.754 .0581 0.634 .0764 .0849 .0745
Net realized gain (loss) on
investments.......................... -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total from Investment Operations..... 0.754 .0581 0.634 .0764 .0849 .0745
-------- -------- -------- -------- -------- --------
Distributions:
Dividends from investment income-net... (0.754) (.0581) (.0634) (.0764) (.0849) (.0745)
-------- -------- -------- -------- -------- --------
Net asset value, end of year........... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
======== ======== ======== ======== ======== ========
Total Investment Return.............. 7.80% 5.97% 6.50% 7.88% 8.82% 7.72%
Ratios/Supplemental Data:
Ratio of expenses to average net
assets............................... .66%(4) .68%(5) .58%(6) .56%(6) .54%(7) .47%(8)
Ratio of net investment income to
average net assets................... 7.47%(4) 5.81%(5) 6.38%(6) 7.58%(6) 7.95%(7) 7.38%(8)
Net Assets, end of year (000's
Omitted)............................. $350,344 $407,815 $628,987 $496,675 $493,641 $543,834
<CAPTION>
SIX- FISCAL
MONTHS YEAR SIX-MONTHS
FISCAL YEAR ENDED MARCH 31, ENDED ENDED ENDED
------------------------------------- SEPT. 30, SEPT. 30, MARCH 31,
1992 1993 1994 1994(2) 1995* 1996
-------- -------- -------- --------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Per Share Data:
Net asset value, beginning of year..... $ 1.0000 $ .9997 $ .9998 $ .9998 $ .9998 $ .9998
Investment Operations:
Investment income-net.................. .0510 .0327 .0296 .0185 .0546 .0263
Net realized gain (loss) on
investments.......................... (.0003) .0001 -- -- -- --
-------- -------- -------- -------- -------- --------
Total from Investment Operations..... .0507 .0328 .0296 .0185 .0546 .0263
-------- -------- -------- -------- -------- --------
Distributions:
Dividends from investment income-net... (.0510) (.0327) (.0296) (.0185) (.0546) (.0263)
-------- -------- -------- -------- -------- --------
Net asset value, end of year........... $ .9997 $ .9998 $ .9998 $ .9998 $ .9998 $ .9998
======== ======== ======== ======== ======== ========
Total Investment Return.............. 5.22% 3.32% 3.00% 3.71%(3) 5.60% 5.31%(3)
Ratios/Supplemental Data:
Ratio of expenses to average net
assets............................... .43%(9) .41%(10) .41%(11) .41%(3,12) .41%(13) .45%(3,14)
Ratio of net investment income to
average net assets................... 5.09%(9) 3.27%(10) 2.96%(11) 3.67%(3,12) 5.47%(13) 5.24%(3,14)
Net Assets, end of year (000's
Omitted)............................. $528,397 $468,479 $527,599 $565,305 $614,101 $642,113
</TABLE>
PROSPECTUS 6
<PAGE> 557
- ---------------
* On May 12, 1995, the Funds' Board of Trustees approved the issuance of
multiple classes of shares of each Fund. Effective August 11, 1995,
existing Funds' shares were classified as Service shares, and the Funds
began offering both Service and Institutional shares to investors.
Effective October 1, 1995, the Funds began offering Investor shares to
investors.
(1) The Prime Fund operated as Pacific American Liquid Assets, Inc. from
commencement of operations on April 30, 1981 until it was reorganized as a
portfolio of Pacific American Fund on October 1, 1985. On October 1, 1994,
the Fund was reorganized as the "Pacific American Money Market Portfolio,"
a portfolio of Pacifica Funds Trust. In July 1995, the Fund was renamed the
"Pacifica Prime Money Market Fund," and on September 6, 1996, the Fund was
reorganized as the Prime Money Market Mutual Fund of Stagecoach Funds, Inc.
(2) On October 1, 1994, the Fund's fiscal year end changed from March 31 to
September 30.
(3) Annualized basis.
(4) During the year ended March 31, 1986, the Fund's adviser waived a portion
of its fees (.13% of average net assets).
(5) During the year ended March 31, 1987, the Fund's adviser waived a portion
of its fees (.25% of average net assets). In addition, during the period
from January 1, 1987 to March 31, 1987, the Fund's adviser waived an
additional portion of its fees (.02% of average net assets).
(6) During the years ended March 31, 1988 and 1989, the Fund's adviser waived a
portion of its fees (.35% and .34% of average net assets, respectively).
(7) During the year ended March 31, 1990, the Fund's adviser and the Fund's
prior distributor waived a portion of their respective fees (.36% of
average net assets).
(8) During the year ended March 31, 1991, the Fund's adviser and the Fund's
Service Organizations waived a portion of their respective fees (.47% of
average net assets).
(9) During the year ended March 31, 1992, the Fund's adviser and the Fund's
Service Organizations waived a portion of their respective fees (.48% of
average net assets).
(10) During the year ended March 31, 1993, the Fund's adviser and the Fund's
Service Organizations waived a portion of their respective fees (.48% of
average net assets).
(11) During the year ended March 31, 1994, the Fund's adviser and the Fund's
Service Organizations waived a portion of their respective fees (.48% of
average net assets).
(12) During the six month period ended September 30, 1994, the Fund's adviser
and the Fund's Service Organizations waived a portion of their respective
fees (.48% (annualized) of average net assets).
(13) During the year ended September 30, 1995, the Fund's adviser and the Fund's
Service Organizations waived a portion of their respective fees (.27% of
average net assets).
(14) During the six month period ended March 31, 1995, the Fund's adviser and
the Fund's Service Organizations waived a portion of their respective fees
(.21% of average net assets).
7 PROSPECTUS
<PAGE> 558
TREASURY MONEY MARKET MUTUAL FUND(1)
(SERVICE SHARES)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
----------------------------------------------------------------------------------------
1986(2) 1987 1988 1989 1990 1991 1992 1993 1994
-------- -------- -------- ------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:
Net asset value, beginning of
year.............................. $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0001 $ .9999 $1.0001
------- ------- ------- ------- ------- ------- ------- ------- -------
Investment Operations:
Investment income-net............... .0353 .0550 .0604 .0743 .0827 .0716 .0489 .0309 .0277
Net realized gain (loss) on
investments....................... -- -- -- -- -- .0003 .0002 .0002 --
------- ------- ------- ------- ------- ------- ------- ------- -------
Total from Investment
Operations...................... .0353 .0550 .0604 .0743 .0827 .0719 .0491 .0311 .0277
------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions:
Dividends from investment
income-net........................ (.0353) (.0550) (.0604) (.0743) (.0827) (.0716) (.0489) (.0309) (.0277)
Dividends from net realized gain on
investment........................ -- -- -- -- -- (.0002) (.0004) -- (.0001)
------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distributions............... (.0353) (.0550) (.0604) (.0743) (.0827) (.0718) (.0493) (.0309) (.0278)
------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of year........ $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0001 $ .9999 $1.0001 $1.0000
======= ======= ======= ======= ======= ======= ======= ======= =======
Total Investment Return 7.18%(4) 5.64% 6.20% 7.63% 8.58% 7.42% 5.03% 3.13% 2.81%
Ratios/Supplemental Data:
Ratio of expenses to average net
assets............................ .80%(4,5) .69%(6) .69%(7) .63%(8) .56%(9) .48%(10) .45%(11) .43%(12) .43%(13)
Ratio of net investment income to
average net assets................ 6.91%(4,5) 5.50%(6) 6.12%(7) 7.36%(8) 7.73%(9) 7.10%(10) 4.73%(11) 3.04%(12) 2.77%(13)
Net Assets, end of year
(000's Omitted)...................$123,243 $134,375 $101,066 $90,672 $98,398 $118,623 $281,343 $614,237 $654,950
<CAPTION>
SIX FISCAL
MONTHS YEAR SIX MONTHS
ENDED ENDED ENDED
SEPT. 30, SEPT. 30, MARCH 31,
1994(3) 1995* 1996
--------- ---------- -----------
(UNAUDITED)
<S> <<C> <C> <C>
Per Share Data:
Net asset value, beginning of
year.............................. $ 1.0000 $ 1.0000 $ 1.0000
-------- ---------- ----------
Investment Operations:
Investment income-net............... .0186 .0529 .0255
Net realized gain (loss) on
investments....................... -- -- --
-------- ---------- ----------
Total from Investment
Operations...................... .0186 .0529 .0255
-------- ---------- ----------
Distributions:
Dividends from investment
income-net........................ (.0186) (.0529) (.0255)
Dividends from net realized gain on
investment........................ -- -- --
-------- ---------- ----------
Total Distributions............... (.0186) (.0529) (.0255)
-------- ---------- ----------
Net asset value, end of year........ $ 1.0000 $ 1.0000 $ 1.0000
======== ========== ==========
Total Investment Return 3.75%(4) 5.42% 5.15%(4)
Ratios/Supplemental Data:
Ratio of expenses to average net
assets............................ .43%(4,14) .42%(15) .46%(4,16)
Ratio of net investment income to
average net assets................ 3.72%(4,14) 5.32%(15) 5.08%(4,16)
Net Assets, end of year
(000's Omitted)................... $690,630 $1,001,707 $1,242,213
</TABLE>
PROSPECTUS 8
<PAGE> 559
- -------------------
* On May 12, 1995, the Funds' Board of Trustees approved the issuance of
multiple classes of shares of each Fund. Effective August 11, 1995,
existing Funds' shares were classified as Service shares, and the Funds
began offering both Service and Institutional shares to investors.
Effective October 1, 1995, the Funds began offering Investor shares to
investors.
(1) Prior to August 1, 1990, the Treasury Money Market Mutual Fund was known as
the Short-Term Government Fund and invested in obligations issued or
guaranteed by agencies and instrumentalities of the U.S. Government in
accordance with fundamental policies that were then effective for the Fund.
The Fund operated as a portfolio of Pacific American Fund through October
1, 1994, when it was reorganized as the "Pacific American U.S. Treasury
Portfolio," a portfolio of Pacifica Funds Trust. In July 1995, the Fund was
renamed the "Pacifica Treasury Money Market Fund," and on September 6,
1996, the Fund was reorganized as a fund of Stagecoach Funds, Inc.
(2) From October 1, 1985 (commencement of operations) to March 31, 1986.
(3) On October 1, 1994, the Fund's fiscal year end was changed from March 31 to
September 30.
(4) Annualized basis.
(5) During the period from October 1, 1985 (Commencement of Operations) to
March 31, 1986, the Fund's adviser waived a portion of its fees (.25%
(annualized) of average net assets).
(6) During the year ended March 31, 1987, the Fund's adviser waived a portion
of its fees aggregating $264,629 (.25% of average net assets). In addition,
during the period from January 1, 1987 to March 31, 1987, the Fund's
adviser and the Fund's prior distributor waived a portion of their
respective fees (.09% of average net assets).
(7) During the year ended March 31, 1988, the Fund's adviser and the Fund's
prior distributor waived a portion of their respective fees (.36% of
average net assets).
(8) During the year ended March 31, 1989, the Fund's adviser waived a portion
of its fees (.35% of average net assets).
(9) During the year ended March 31, 1990, the Fund's adviser and the Fund's
prior distributor waived a portion of their respective fees (.41% of
average net assets).
(10) During the year ended March 31, 1991, the Fund's adviser and the Fund's
Service Organizations waived a portion of their respective fees (.46% of
average net assets).
(11) During the year ended March 31, 1992, the Fund's adviser and the Fund's
Service Organizations waived a portion of their respective fees (.48% of
average net assets).
(12) During the year ended March 31, 1993, the Fund's adviser and the Fund's
Service Organizations waived a portion of their respective fees (.48% of
average net assets).
(13) During the year ended March 31, 1994, the Fund's adviser and the Fund's
Service Organizations waived a portion of their respective fees (.47% of
average net assets).
(14) During the six month period ended September 30, 1994, the Fund's adviser
and the Fund's Service Organizations waived a portion of their respective
fees (.47% (annualized) of average net assets).
(15) During the year ended September 30, 1995, the Fund's adviser and the Fund's
Service Organizations waived a portion of their respective fees (.24% of
average net assets).
(16) During the six month period ended March 31, 1995, the Fund's adviser and
the Fund's Service Organizations waived a portion of their respective fees
(.18% of average net assets).
9 PROSPECTUS
<PAGE> 560
HOW THE FUNDS WORK
INVESTMENT OBJECTIVES AND POLICIES
Set forth below is a description of the investment objectives and related
policies of the Funds. Each Fund seeks to maintain a net asset value of $1.00
per share. Their assets consist only of obligations with remaining maturities
(as defined by the SEC) of 397 days (13 months) or less at the date of
acquisition, and the dollar-weighted average maturity of each Fund's investments
is 90 days or less. There can be no assurance that each Fund's investment
objective will be achieved or that either Fund will be able to maintain a net
asset value of $1.00 per share.
The PRIME MONEY MARKET MUTUAL FUND seeks to provide investors with maximized
current income to the extent consistent with the preservation of capital and
maintenance of liquidity. The Fund pursues its objective by investing in a broad
range of short-term, high quality U.S. dollar-denominated money market
instruments, which have remaining maturities not exceeding 397 days (13 months),
and in certain repurchase agreements.
The TREASURY MONEY MARKET MUTUAL FUND seeks to provide investors with current
income and stability of principal. The Fund's fundamental policy is to seek its
objective by investing in assets only in obligations issued or guaranteed by the
U.S. Treasury and in notes and other instruments, including repurchase
agreements, collateralized or secured by such obligations.
The Funds' investment objectives and fundamental policies stated above, may
not be changed without the vote of a majority of the outstanding shares of the
Funds.
All securities acquired by the Funds will be U.S. Government obligations (see
below) or "First Tier Eligible Securities" as defined under Rule 2a-7 of the
Investment Company Act of 1940 (the "1940 Act"). First Tier Eligible Securities
generally consist of instruments that are either rated at the time of purchase
in the highest rating category by one or more unaffiliated nationally recognized
statistical rating organizations ("NRSROs") or issued by issuers with such
ratings. The Appendix to the SAI includes a description of the applicable
ratings. Unrated instruments purchased by the Fund will be of comparable quality
as determined by the adviser pursuant to guidelines approved by the Board of
Directors.
U.S. Treasury and U.S. Government Obligations. The Treasury Money Market
Mutual Fund may invest only in obligations issued or guaranteed by the U.S.
Treasury such as bills, notes, bonds and certificates of indebtedness, and in
notes and repurchase agreements collateralized or secured by such obligations.
These obligations may also include U.S. Treasury STRIPS (U.S. Treasury
securities that have been separated into their component parts of principal and
interest payments and recorded as such in the
PROSPECTUS 10
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Federal Reserve book-entry record keeping system). The Prime Money Market Mutual
Fund may invest in U.S. Treasury obligations, as well as in obligations of
agencies and instrumentalities of the U.S. Government ("U.S. Government
obligations"). U.S. Government obligations in which the Fund may invest include
securities issued or guaranteed as to principal and interest by the U.S.
Government and supported by the full faith and credit of the U.S. Treasury. U.S.
Treasury obligations differ mainly in the length of their maturity. Treasury
bills, the most frequently issued marketable government securities, have a
maturity of up to one year and are issued on a discount basis. U.S. Government
obligations also include securities issued or guaranteed by federal agencies or
instrumentalities, including government-sponsored enterprises. Some obligations
of agencies or instrumentalities of the U.S. Government are supported by the
full faith and credit of the United States or U.S. Treasury guarantees; others,
by the right of the issuer or guarantor to borrow from the U.S. Treasury; still
others, by the discretionary authority of the U.S. Government to purchase
certain obligations of the agency or instrumentality; and others, only by the
credit of the agency or instrumentality issuing the obligation. In the case of
obligations not backed by the full faith and credit of the United States, the
investor must look principally to the agency or instrumentality issuing or
guaranteeing the obligation for ultimate repayment, which agency or
instrumentality may be privately owned. There can be no assurance that the U.S.
Government will provide financial support to its agencies or instrumentalities
where it is not obligated to do so. As a general matter, the value of debt
instruments, including U.S. Government obligations, declines when market
interest rates increase and rises when market interest rates decrease. Certain
types of U.S. Government obligations are subject to fluctuations in yield or
value due to their structure or contract terms.
The Prime Money Market Mutual Fund may also purchase "stripped securities"
such as TIGRs or CATs, which are interests in U.S. Treasury obligations offered
by broker-dealers and other financial institutions that represent ownership in
either the future interest payments or the future principal payments on the U.S.
Treasury obligations. Stripped securities are issued at a discount to their
"face value" and may exhibit greater price volatility than ordinary debt
securities because of the manner in which their principal and interest are paid
to investors.
In addition to the types of instruments described above, the Prime Money
Market Mutual Fund may purchase U.S. dollar-denominated bank obligations such as
time deposits, certificates of deposit, bankers' acceptances, bank notes and
deposit notes issued by domestic and foreign banks. Time deposits are
non-negotiable deposits maintained at a banking institution for a specified
period of time normally at a stated interest rate. Certificates of deposit are
certificates evidencing the obligation of a bank to repay funds deposited with
it for a specified period of time. Bankers acceptances are negotiable deposits
or bills of exchange, normally drawn by an importer or exporter to pay for
specific merchandise, which are "accepted" by a bank (meaning, in effect, that
11 PROSPECTUS
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the bank unconditionally agrees to pay the face value of the instrument at
maturity). Bank notes usually represent senior debt of the bank.
The Prime Money Market Mutual Fund also may purchase commercial paper, short-
term notes, medium-term notes and bonds issued by domestic and foreign
corporations that meet the Fund's maturity limitations.
Commercial paper purchased by the Fund may include paper issued in reliance on
the so-called "private placement" exemption under Section 4(2) of the Securities
Act of 1933 ("Section 4(2) paper"). Section 4(2) paper is restricted as to
disposition under the federal securities laws and generally is sold to
institutional investors such as the Fund that agree that they are purchasing the
paper for investment and not with a view to public distribution. Any resale by
the purchaser must be in an exempt transaction. Section 4(2) paper normally is
resold to other institutional investors through or with the assistance of the
issuer or investment dealers that make a market in Section 4(2) paper. Section
4(2) paper will not be subject to the Fund's 10% limitation on illiquid
securities described above where the Board of Directors or adviser (pursuant to
guidelines adopted by the Board) determines that a liquid trading market exists.
The Prime Money Market Mutual Fund also may invest in U.S. dollar denominated
obligations issued or guaranteed by foreign governments or any of their
political subdivisions, agencies or instrumentalities. Such obligations include
debt obligations of supranational entities. Supranational entities include
international organizations designated or supported by governmental entities to
promote economic reconstruction or development and international banking
institutions and related government agencies. Examples of these include the
International Bank for Reconstruction and Development (the "World Bank"), the
Asian Development Bank and the InterAmerican Development Bank.
The Prime Money Market Mutual Fund may purchase asset-backed securities, which
are securities backed by mortgages, installment sales contracts, credit-card
receivables or other assets. The average life of asset-backed securities varies
with the maturities of the underlying instruments, and the average life of a
mortgage-backed instrument, in particular, is likely to be substantially less
than the original maturity of the mortgage pools underlying the securities as
the result of mortgage prepayments. For this and other reasons, an asset-backed
security's stated maturity may be shortened, and the securities total return may
be difficult to predict precisely. Such difficulties are not, however, expected
to have a significant effect on the Fund since the remaining maturity of any
asset-backed security acquired will be thirteen months or less. Asset-backed
securities purchased by the Fund may include collateralized mortgage obligations
("CMOs") issued by private companies.
The Funds may attempt to increase yields by trading to take advantage of
short-term market variations. This policy could result in high portfolio
turnover, which should not
PROSPECTUS 12
<PAGE> 563
adversely affect the Funds since they do not ordinarily pay brokerage
commissions on the purchase of short-term debt obligations.
For additional descriptions of the types of securities and investment
practices used by the Funds, see "Risk Factors," "Prospectus
Appendix -- Additional Investment Policies" in this Prospectus and "Investment
Restrictions" and "Additional Permitted Investment Activities" in the SAI.
RISK FACTORS
Investments in a Fund are not bank deposits or obligations of Wells Fargo Bank
and are not insured by the FDIC, nor are they insured or guaranteed against loss
of principal. Therefore, investors should be willing to accept some risk with
money invested in a Fund. Although each of the Funds seek to maintain a stable
net asset value of $1.00 per share, there is no assurance that they will be able
to do so. The Funds may not achieve as high a level of current income as other
mutual funds that do not limit their investment to the high credit quality
instruments in which the Funds invest. Illiquid securities, which may include
certain restricted securities, may be difficult to sell promptly at an
acceptable price. Certain restricted securities may be subject to legal
restrictions on resale. Delay or difficulty in selling securities may result in
a loss or be costly to a Fund. As with all mutual funds, there can be no
assurance that the Funds will achieve their investment objective.
The Funds, under the 1940 Act, must comply with certain investment criteria
designed to provide liquidity, reduce risk, and allow the Funds to maintain a
stable net asset value of $1.00 per share. The Funds dollar-weighted average
portfolio maturity must not exceed 90 days. Any security that a Fund purchases
must have a remaining maturity of not more than 397 days. In addition, a Fund
purchase must present minimal credit risks and be of the highest quality (i.e.,
be rated in the top rating category by the requisite NRSROs or, if unrated,
determined to be of comparable quality to such rated securities by the Funds'
adviser under guidelines adopted by the Company's Board of Directors).
Each Fund seeks to reduce risk by investing its assets in securities of
various issuers. As such, each Fund is considered to be diversified for purposes
of the 1940 Act. In addition, the Funds emphasize safety of principal and high
credit quality. In particular, the internal investment policies of the Funds'
investment adviser prohibit the purchase for a Fund of many types of
floating-rate derivative securities that are considered potentially volatile.
The following types of derivative securities are not permitted investments for
either Fund:
- capped floaters (on which interest is not paid when market rates move
above a certain level);
- leveraged floaters (whose interest rate reset provisions are based on a
formula that magnifies changes in interest rates);
13 PROSPECTUS
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- range floaters (which do not pay any interest if market interest rates
move outside of a specified range);
- dual index floaters (whose interest rate reset provisions are tied to more
than one index so that a change in the relationship between these indices
may result in the value of the instrument falling below face value); and
- inverse floaters (which reset in the opposite direction of their index).
Additionally, neither Fund may invest in securities whose interest rate reset
provisions are tied to an index that materially lags short-term interest rates,
such as "COFI floaters." The Funds may invest only in variable or floating-rate
securities that bear interest at a rate that resets quarterly or more frequently
and that resets based on changes in standard money market rate indices such as
U.S. Treasury bills, London Interbank Offered Rate or LIBOR, the prime rate,
published commercial paper rates, federal funds rates, Public Securities
Associates ("PSA") floaters or JJ Kenney index floaters.
The Treasury Money Market Mutual Fund restricts its investment to U.S.
Treasury obligations that meet all of the standards described above. Obligations
issued or guaranteed by the U.S. Treasury have historically involved little risk
of loss of principal if held to maturity. However, due to fluctuations in
interest rates, the market value of such obligations may vary during the period
a shareholder owns shares of the Fund. It should be noted that neither the
United States, nor any agency or instrumentality thereof, has guaranteed,
sponsored or approved the Fund or its shares.
Since the Prime Money Market Mutual Fund may purchase securities issued by
foreign issuers, the Fund may be subject to investment risks that are different
in some respects from those incurred by a fund that invests exclusively in debt
obligations of domestic issuers. Such potential risks include future political
and economic developments, the possible imposition of withholding taxes on
interest income payable on the securities by the particular country in which the
issuer is located, the possible seizure or nationalization of foreign deposits,
the possible establishment of exchange controls or the adoption of other foreign
governmental restrictions that might adversely affect the payment of principal
and interest on these securities. In addition, foreign banks and other issuers
are not necessarily subject to the same regulatory requirements that apply to
domestic issuers (such as reserve requirements, loan limitations, examinations,
accounting, auditing and recordkeeping requirements, and public availability of
information), and the Fund may experience difficulties in obtaining or enforcing
a judgment against a foreign issuer. Absent any unusual market conditions, the
Fund will not invest more than 25% of its total assets in securities issued by
foreign issuers.
Generally, securities in which the Funds invest will not earn as high a yield
as securities of longer maturity and/or of lesser quality that are more subject
to market volatility. Each Fund attempts to maintain the value of its shares at
a constant $1.00 per
PROSPECTUS 14
<PAGE> 565
share, although there can be no assurance that a Fund will always be able to do
so. See "Prospectus Appendix -- Additional Investment Policies" and the SAI for
further information about investment policies and risks.
PERFORMANCE
The performance of each class of shares of a Fund may be advertised from time
to time in terms of current yield, effective yield or average annual total
return. Performance figures are based on historical results and are not intended
to indicate future performance.
Yield refers to the income generated by an investment in a Fund's class over a
specified period (usually 7 days), expressed as an annual percentage rate.
Effective yield is calculated similarly but assumes reinvestment of the income
earned from a Fund. Because of the effects of compounding, effective yields are
slightly higher than yields.
Average annual return of a class of shares is based on the overall dollar or
percentage change of an investment in a Fund's class and assumes the investment
is at NAV and all dividends and distributions attributable to a class are also
reinvested at NAV in shares of the class.
In addition to presenting these standardized performance calculations, at
times, the Funds may also present non-standard performance figures, such as
yields and effective yields for a 30-day period or, in sales literature,
distribution rates. Because of the differences in the fees and/or expenses borne
by shares of each class of the Funds, the performance figures on such shares can
be expected, at any given time, to vary from the performance figures for other
classes of the Funds.
Additional performance information is contained in the SAI under "Performance
Calculations" and in the Annual Report, which are available upon request without
charge by calling the Company at 1-800-222-8222 or by writing the Company at the
address shown on the front cover of the Prospectus.
THE FUNDS AND MANAGEMENT
The Funds are two funds in the Stagecoach Family of Funds. The Company was
organized as a Maryland corporation on September 9, 1991 and currently offers
shares of the following series: Aggressive Growth, Arizona Tax-Free, Asset
Allocation, Balanced, California Tax-Free Bond, California Tax-Free Income,
California Tax-Free Money Market Mutual, Corporate Stock, Diversified Income,
Equity Value, Ginnie Mae, Government Money Market Mutual, Growth and Income,
Intermediate Bond, Money Market Mutual, Money Market Trust, National Tax-Free,
National Tax-Free Money Market Mutual, Oregon Tax-Free, Prime Money Market
Mutual, Short-Intermediate U.S.
15 PROSPECTUS
<PAGE> 566
Government Income, Small Cap, Treasury Money Market Mutual and U.S. Government
Allocation Funds. The Arizona Tax-Free, Balanced, California Tax-Free Bond,
Equity Value, Ginnie Mae, Growth and Income, Intermediate Bond, Money Market
Mutual, National Tax-Free, Oregon Tax-Free, Prime Money Market Mutual, Small Cap
and Treasury Money Market Mutual Funds each offer three classes of shares. The
Aggressive Growth, Asset Allocation, California Tax-Free Income, Diversified
Income, Short-Intermediate U.S. Government Income and U.S. Government Allocation
Funds each offer two classes of shares. The California Tax-Free Money Market
Mutual, Corporate Stock, Government Money Market Mutual, Money Market Trust and
National Tax-Free Money Market Mutual Funds each offer one class of shares. Most
of the Company's funds are authorized to issue multiple classes of shares, one
class generally subject to a front-end sales charge and, in some cases, a class
subject to a contingent-deferred sales charge, that are offered to retail
investors. Certain of the Company's funds also are authorized to issue other
classes of shares, which are sold primarily to institutional investors at NAV.
Each class of shares represents an equal, proportionate interest in a Fund with
other shares of the same class. Shareholders of each class bear their pro rata
portion of a Fund's operating expenses except for certain class-specific
expenses (e.g., any state securities registration fees, shareholder servicing
fees or distribution fees that may be paid under Rule 12b-1) that are allocated
to a particular class and, accordingly, may affect performance. For information
on another fund or a class of shares, please call Stagecoach Shareholder
Services at 1-800-222-8222 or write the Company at the address shown on the
front cover of the Prospectus.
The Board of Directors of the Company supervises the funds' activities and
monitors their contractual arrangements with various service providers. Although
the Company is not required to hold annual shareholder meetings, special
meetings may be required for purposes such as electing or removing Directors,
approving advisory contracts and distribution plans, and changing a fund's
investment objective or fundamental investment policies. All shares of the
Company have equal voting rights and will be voted in the aggregate, rather than
by fund or class, unless otherwise required by law (such as when the voting
matter affects only one fund or class). As a Fund shareholder, you are entitled
to one vote for each share you own and fractional votes for fractional shares
you own. See "Management" in the SAI for more information on the Company's
Directors and Officers. A more detailed description of the voting rights and
attributes of the shares is contained under "Capital Stock" in the SAI.
MANAGEMENT
Wells Fargo Bank serves as each Fund's investment adviser, transfer and
dividend disbursing agent and custodian. In addition, Wells Fargo Bank serves as
a Shareholder Servicing Agent and as a Selling Agent of the Funds. Wells Fargo
Bank, one of the largest banks in the United States, was founded in 1852 and is
the oldest bank in the western United States. As of June 30, 1996, Wells Fargo
Bank and its affiliates provided
PROSPECTUS 16
<PAGE> 567
investment advisory services for approximately $56 billion of assets of
individuals, trusts, estates and institutions. Wells Fargo Bank also serves as
investment adviser to other separately managed funds (or the master portfolio in
which a fund may invest) of the Company, and as investment adviser or
sub-adviser to separately managed funds of five other registered, open-end,
management investment companies. Wells Fargo Bank, a wholly owned subsidiary of
Wells Fargo & Company, is located at 420 Montgomery Street, San Francisco,
California 94163. Wells Fargo Investment Management, Inc. ("WFIM"), a wholly
owned subsidiary of Wells Fargo & Company, is located at 420 Montgomery Street,
San Francisco, CA 94104.
Subsequent to its acquisition by Wells Fargo & Company on April 1, 1996, WFIM
(formerly, First Interstate Capital Management, Inc.) served as investment
adviser to the predecessor portfolios. Prior to March 18, 1994, the predecessor
portfolios investment adviser was San Diego Financial Capital Management, Inc.,
which was acquired by First Interstate Bancorp through its merger with San Diego
Financial Corporation.
Morrison & Foerster LLP counsel to the Company and special counsel to Wells
Fargo Bank, has advised the Company and Wells Fargo Bank that Wells Fargo Bank
and its affiliates may perform the services contemplated by the Advisory
Contracts and this Prospectus without violation of the Glass-Steagall Act. Such
counsel has pointed out, however, that there are no controlling judicial or
administrative interpretations or decisions and that future judicial or
administrative interpretations of, or decisions relating to, present federal or
state statutes, including the Glass-Steagall Act, and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as future changes in such statutes, regulations and judicial or
administrative decisions or interpretations, could prevent such entities from
continuing to perform, in whole or in part, such services. If any such entity
were prohibited from performing any such services, it is expected that new
agreements would be proposed or entered into with another entity or entities
qualified to perform such services.
Stephens is the Company's sponsor and administrator and distributes the Funds'
shares. Stephens is a full service broker/dealer and investment advisory firm
located at 111 Center Street, Little Rock, Arkansas 72201. Stephens and its
predecessor have been providing securities and investment services for more than
60 years. Additionally, they have been providing discretionary portfolio
management services since 1983. Stephens currently manages investment portfolios
for pension and profit-sharing plans, individual investors, foundations,
insurance companies and university endowments.
17 PROSPECTUS
<PAGE> 568
INVESTING IN THE FUNDS
Service Class shares of the Funds may be purchased on any day the Funds are
open for business, provided Wells Fargo Bank also is open for business (a
"Business Day"). Currently, Wells Fargo Bank is closed on New Year's Day,
President's Day, Martin Luther King Day, Memorial Day, Independence Day, Labor
Day, Columbus Day, Veterans Day, Thanksgiving Day and Christmas Day (each a
"Holiday"). When any Holiday falls on a weekend, the Funds are typically closed
on the weekday immediately before or after such Holiday.
The Company or Stephens may make a Prospectus available in an electronic
format. Upon receipt of a request from you or your representative, the Company
or Stephens will transmit or cause to be transmitted promptly, without charge, a
paper copy of the electronic Prospectus.
SHARE VALUE
The value of a Fund share is its net asset value or NAV. Wells Fargo Bank
calculates the NAV of each class of a Fund's shares as of 12:00 Noon (Pacific
time) and 1:00 p.m. (Pacific time) on each Business Day. The NAV of each class
of shares of a Fund is computed by dividing the value of the total assets
attributable to a class less the liabilities charged to the class by the total
number of outstanding shares of that class. All expenses, including fees paid to
the investment adviser and administrator, are accrued daily and taken into
account for the purpose of determining NAV. As noted above, the Funds seek to
maintain a constant $1.00 NAV share price, although there is no assurance that a
Fund will be able to do so.
Each Fund's NAV is calculated on the basis of the amortized-cost method. This
valuation method is based on the receipt of a steady rate of payment from the
date of purchase until maturity rather than actual changes in market value. The
Company's Board of Directors believes that this valuation method accurately
reflects fair value.
PURCHASE OF SERVICE CLASS SHARES
Service Class shares of the Funds are sold at NAV (without a front-end sales
charge) on a continuous basis primarily to certain customers ("Customers") of
affiliate, franchise or correspondent banks of Wells Fargo & Company and other
selected institutions (previously defined as Banks). The Funds have no minimum
investment requirement, although a Bank may impose account minimums in
connection with investments in the Funds. Customers of a Bank's trust division,
as well as individuals, corporations, partnerships and other businesses which
maintain qualified accounts at a Bank (including Individual Retirement and Keogh
accounts) may invest in the Funds. Investors purchasing Service Class shares may
include officers, directors and employees
PROSPECTUS 18
<PAGE> 569
of a Bank. Share purchases are effected through a Customer's account at a Bank
under the terms of the Customer's account agreement with the Bank, and
confirmations of share purchases and redemptions are sent by the Fund to the
Bank involved. Banks (or their nominees), acting on behalf of their Customers,
normally are the holders of record of Service Class shares. Customers'
beneficial ownership of Service Class shares is reflected in the account
statements provided by Banks to their Customers. The exercise of voting rights
and the delivery to Customers of shareholder communications from the Funds is
governed by the Customers' account agreements with a Bank. Investors wishing to
purchase Service Class shares of the Funds should contact their account
representatives.
Service Class shares of the Funds are purchased through procedures established
in connection with the requirements of a Customer's account. These procedures
may include instructions under which a Customer's account is "swept"
automatically, usually not less frequently than weekly, and amounts (federal
funds) in excess of a minimum balance agreed to by a Bank and the Customer are
invested in Service Class shares of one or both of the Funds as directed by the
Customer. The Funds expect that the Banks will transmit purchase orders for the
purchase of Service Class shares arising from automatic investment programs the
same day as the excess balances are swept. Purchase orders placed by a Bank must
be received by the Company by 12:00 Noon (Pacific time) on any Business Day.
Payment for such shares may be made by Banks in federal funds or other funds
immediately available to the custodian no later than 1:00 p.m. (Pacific time) on
that Business Day.
It is the responsibility of Banks to transmit orders for purchases by their
Customers and to deliver required funds on a timely basis. If funds are not
received within the period described above, the order will be canceled, notice
thereof will be given, and the Bank will be responsible for any loss to the Fund
or its shareholders. Banks may charge certain account fees for the automatic
sweep and other cash management services provided, depending upon the type of
account the investor has established with the Bank. In addition, a Bank may
receive fees from the Funds with respect to the investments of its Customers as
described under "Management and Servicing Fees." Payment for Service Class
shares of the Funds may, in the discretion of the investment adviser, be made in
the form of securities that are permissible investments for the Fund. For
further information see "Additional Purchase and Redemption Information" in the
SAI.
The Company reserves the right to reject any purchase order or to suspend
sales at any time. Payment for orders that are not received will be returned
after prompt inquiry. The issuance of Service Class shares is recorded on the
Company's books, and share certificates are not issued.
19 PROSPECTUS
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WIRE INSTRUCTIONS DIRECT PURCHASES BY BANKS
1. Complete an Account Application.
2. Instruct the wiring bank to transmit the specified amount in federal funds
to:
Wells Fargo Bank, N.A.
San Francisco, California
Bank Routing Number: 121000248
Wire Purchase Account Number: 4068-000587
Attention: Stagecoach Funds (Name of Fund and designate Service
Class)
Account Name(s): Name(s) in which to be registered
Account Number: (if investing into an existing account)
3. A completed Account Application should be mailed, or sent by telefacsimile
with the original subsequently mailed, to the following address immediately
after the funds are wired and must be received and accepted by the Transfer
Agent before an account can be opened:
Wells Fargo Bank, N.A.
Stagecoach Shareholder Services
P.O. Box 7066
San Francisco, California 94120-7066
Telefacsimile: 1-415-543-9538
4. Share purchases are effected at the NAV next determined after the Account
Application is received and accepted.
STATEMENTS AND REPORTS
Banks (or their nominees) will typically send you a monthly statement of your
Fund account after every month in which there has been a transaction that
affects your share balance or your Fund account registration. A statement with
tax information for each year will be mailed to you by January 31 of the
following year and also will be filed with the Internal Revenue Service ("IRS").
At least twice a year, the Company's financial statements will be mailed to you.
REDEMPTION OF SERVICE CLASS SHARES
Redemption requests are effected at the NAV per share next determined after
receipt of a redemption request in good order by the Company. Service Class
shares held by a Bank on behalf of its Customers must be redeemed in accordance
with instructions and limitations pertaining to the Customer's accounts at the
Bank. It is the responsibility of a Bank to transmit redemption requests to the
Company and to credit its Customers' accounts with the redemption proceeds on a
timely basis. The redemption proceeds for Service Class shares of the Funds
normally are wired to the redeeming Institution the
PROSPECTUS 20
<PAGE> 571
following Business Day after receipt of the request by the Company. The Company
reserves the right to delay the wiring of redemption proceeds for up to seven
days after it receives a redemption order if, in the judgment of the investment
adviser, an earlier payment could adversely affect the Funds or unless the SEC
permits a longer period under extraordinary circumstances. Such extraordinary
circumstances could include a period during which an emergency exists as a
result of which (a) disposal by the Funds of securities owned by them is not
reasonably practicable or (b) it is not reasonably practicable for the Funds to
fairly determine the value of their net assets, or a period during which the SEC
by order permits deferral of redemptions for the protection of security holders
of a Fund.
With respect to former shareholders of Westcore Trust or Pacifica Funds Trust
who do not have a relationship with a Bank, shares of the Funds may be redeemed
by writing or calling the Funds directly at the address and phone number shown
on the first page of the Prospectus. When Service Class shares are redeemed
directly from the Funds, the Funds will ordinarily send the proceeds by check to
the shareholder at the address of record on the next Business Day unless payment
by wire is requested. The Funds may take up to seven days to make payment,
although this will not be the customary practice. Also, if the New York Stock
Exchange is closed (or when trading is restricted) for any reason other than the
customary weekend or holiday closing or if an emergency condition as determined
by the SEC merits such action, the Funds may suspend redemptions or postpone
payment dates.
To be accepted by a Fund, a letter requesting redemption must include: (i) the
Fund's name and account registration from which the Service Class shares are
being redeemed; (ii) the account number; (iii) the amount to be redeemed; (iv)
the signatures of all registered owners; and (v) a signature guarantee by any
eligible guarantor institution. An "eligible guarantor institution" includes a
commercial bank that is an FDIC member, a trust company, a member firm of a
domestic stock exchange, a savings association, or a credit union that is
authorized by its charter to provide a signature guarantee. Signature guarantees
by notaries public are not acceptable. Further documentation may be requested
from corporations, administrators, executors, personal representatives, trustees
or custodians.
All redemptions of Service Class shares of the Funds are made in cash, except
that the commitment to redeem Service Class shares in cash extends only to
redemption requests made by each Fund shareholder during any 90-day period of up
to the lesser of $250,000 or 1% of the NAV of the Funds at the beginning of such
period. This commitment is irrevocable without the prior approval of the SEC. In
the case of redemption requests by shareholders in excess of such amounts, the
Board of Directors reserves the right to have a Fund make payment, in whole or
in part, in securities or other assets, in case of an emergency or any time a
cash distribution would impair the liquidity of the Fund to the detriment of the
existing shareholders. In this event, the
21 PROSPECTUS
<PAGE> 572
securities would be valued in the same manner as the securities of the Fund are
valued. If the recipient were to sell such securities, he or she would incur
brokerage charges.
A redemption may result in a recognized gain or loss for federal income tax
purposes, irrespective of whether the redemption is paid in cash or in kind.
REDEMPTIONS BY TELEPHONE
Telephone exchange or redemption privileges authorize the Transfer Agent to
act on telephone instructions from any person representing himself or herself to
be the shareholder of record and reasonably believed by the Transfer Agent to be
genuine. The Company requires the Transfer Agent to employ reasonable
procedures, such as requiring a form of personal identification, to confirm that
instructions are genuine and, if it does not follow such procedures, the Company
and the Transfer Agent may be liable for any losses due to unauthorized or
fraudulent instructions. Neither the Company nor the Transfer Agent will be
liable for following telephone instructions reasonably believed to be genuine.
EXCHANGES
The Funds offer a convenient way to exchange Service Class shares of one Fund
for Service Class shares of the other Fund. A shareholder, however, may not
exchange Service Class shares of one Fund for Service Class shares of the other
Fund if Service Class shares of either Fund are not qualified for sale in the
state of the shareholder's residence. The Company may terminate or amend the
terms of the exchange privilege at any time.
Exchange transactions are effected through a Customer's account at a Bank
under the terms of the Customer's account agreement with the Bank, and
confirmations of share exchanges are sent by a Fund to the Bank involved. Banks
(or their nominees), acting on behalf of their Customers, normally are the
holders of record of Service Class shares. Banks are responsible for
transmitting orders for exchanges to the Company on a timely basis. Customers'
exchange transactions are generally reflected in the account statements provided
by Institutions to their Customers. Investors wishing to exchange Service Class
shares of a Fund for Service Class shares of the other Fund should contact their
account representatives. Investors with questions may call the Company at 1-800-
222-8222.
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. All exchanges are
made at the NAV of the respective fund next determined following receipt of the
request by the Company in good order.
PROSPECTUS 22
<PAGE> 573
Each exchange, in effect, represents the redemption of shares of one fund and
the purchase of shares of another, which may result in a gain or loss for
federal income tax purposes. Shareholders should receive written confirmation of
the exchange from the Bank within a few days of the completion of the
transaction.
To exchange Service Class shares, or if you have any questions, simply call
the Company at 1-800-222-8222. A shareholder of record should be prepared to
give the telephone representative the following information: (i) the account
number, social security number and account registration; (ii) the name of the
fund from and the fund into which the transfer is to occur; and (iii) the dollar
or share amount of the exchange. The conversation may be recorded to protect
shareholders and the Company. Telephone exchanges are available unless the
shareholder of record has declined the privilege on the Purchase Application.
DIVIDENDS
The Funds intend to declare dividends on a daily basis payable to Service
Class shareholders of record as of 1:00 p.m. (Pacific time). Service Class
shareholders begin earning dividends on the Business Day the investment is
effected and continue to earn dividends through the day before the date that the
shares are redeemed. Dividends for a Saturday, Sunday or Holiday are declared
payable to shareholders of record as of the preceding Business Day. The Funds
declare and distribute any capital gains at least annually. Expenses, such as
state securities registration fees and transfer agent fees, that are
attributable to a particular class may affect the relative dividends and/or
capital-gain distributions of a class of shares.
Dividends declared in a month generally are paid on the last Business Day of
the each month. Dividends and any capital-gain distributions are automatically
invested in additional whole and fractional shares unless the shareholder has
elected to receive payment in cash.
MANAGEMENT AND SERVICING FEES
INVESTMENT ADVISER
Subject to the overall supervision of the Company's Board of Directors, Wells
Fargo Bank, as the Funds' investment adviser, provides investment guidance and
policy direction in connection with the management of the Funds' assets. Wells
Fargo Bank also furnishes the Board of Directors with periodic reports on the
Funds' investment strategies and performance. For these services, Wells Fargo
Bank is entitled to receive a monthly investment advisory fee at the annual rate
of 0.25% of the average daily net
23 PROSPECTUS
<PAGE> 574
assets of each Fund. From time to time, Wells Fargo Bank may waive such fees in
whole or in part. Any such waiver will reduce the expenses of the Funds and,
accordingly, have a favorable impact on the Funds' yields and returns. From time
to time, the Funds, consistent with their investment objective, policies and
restrictions, may invest in securities of entities with which Wells Fargo Bank
has a lending relationship. For the year ended December 31, 1995, Wells Fargo
Bank was paid at an annual rate equal to 0.25% of the Funds average daily net
assets for its services as investment adviser.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
Wells Fargo Bank also serves as the Funds' custodian and transfer and dividend
disbursing agent. Under the Custody Agreement with Wells Fargo Bank, a Fund may,
at times, borrow money from Wells Fargo Bank as needed to satisfy temporary
liquidity needs. Wells Fargo Bank charges interest on such overdrafts at a rate
determined pursuant to the Custody Agreement. Wells Fargo Bank performs its
custodial and transfer and dividend disbursing agency services at 525 Market
Street, San Francisco, California 94105.
BANKS AND SHAREHOLDER SERVICING AGENTS
The Funds have entered into Shareholder Servicing Agreements with Wells Fargo
Bank and may enter into similar agreements with other Banks ("Shareholder
Servicing Agents"). Under such agreements, Shareholder Servicing Agents
(including Wells Fargo Bank) agree, as agents for their customers, to provide
shareholder administrative and liaison services with respect to Fund shares,
which include, without limitation, aggregating and transmitting shareholder
orders for purchases, exchanges and redemptions; maintaining shareholder
accounts and records; and providing such other related services as the Company
or a shareholder may reasonably request. For these services, a Shareholder
Servicing Agent is entitled to receive a fee at the annual rate of up to 0.20%
of the average daily net assets attributable to the Service Class shares owned
of record or beneficially by investors with whom the Shareholder Servicing Agent
maintains a servicing relationship. In no case shall payments exceed any maximum
amount that may be deemed applicable under applicable laws, regulations or
rules, including the Rules of Fair Practice of the National Association of
Securities Dealers, Inc.
A Shareholder Servicing Agent also may impose certain conditions on its
customers, subject to the terms of this Prospectus, in addition to or different
from those imposed by the Funds, such as requiring a minimum initial investment
or payment of a separate fee for additional services. Each Shareholder Servicing
Agent has agreed to disclose any fees it may directly charge its customers who
are shareholders of a Fund and to notify them in writing at least 30 days before
it imposes any transaction fees.
PROSPECTUS 24
<PAGE> 575
SPONSOR, ADMINISTRATOR AND DISTRIBUTOR
Subject to the overall supervision of the governing Board of Directors,
Stephens provides each Fund with administrative services, including general
supervision of the Funds' operation, coordination of the other services provided
to the Funds, compilation of information for reports to the SEC and the state
securities commissions, preparation of proxy statements and shareholder reports
and general supervision of data compilation in connection with preparing
periodic reports. Stephens also furnishes office space and certain facilities to
conduct each Fund's business, and compensates the Directors, officers and
employees who are affiliated with Stephens. For these services, Stephens is
entitled to receive a monthly fee at the annual rate of 0.05% of the Funds
average daily net assets. From time to time, Stephens may waive its fees charged
to a Fund in whole or in part. Any such waivers will reduce a Fund's expenses
and, accordingly, have a favorable impact on the Fund's performance.
Stephens, as the principal underwriter of the Funds within the meaning of the
1940 Act, has entered into Distribution Agreements with the Company pursuant to
which Stephens acts as agent for the Funds for the sale of their shares and may
enter into selling agreements with other agents ("Selling Agents") that wish to
make available shares of the Funds to their respective customers.
Stephens has established a non-cash compensation program, pursuant to which
broker/dealers or financial institutions that sell shares of the Company's funds
may earn additional compensation in the form of trips to sales seminars or
vacation destinations, tickets to sporting events, theater or other
entertainment, opportunities to participate in golf or other outings and gift
certificates for meals or merchandise.
Financial institutions acting as Shareholder Servicing Agents, Selling Agents,
or in certain other capacities, may be required to register as dealers pursuant
to applicable state securities laws which may differ from federal law and any
interpretations expressed herein.
FUND EXPENSES
From time to time, Wells Fargo Bank and Stephens may waive their respective
fees in whole or in part and reimburse expenses payable to others. Any such
waivers or reimbursements will reduce the Fund's expenses, and, accordingly,
have a favorable impact on the Fund's performance. Except for the expenses borne
by Wells Fargo Bank and Stephens, each fund of the Company bears all costs of
its operations, including its pro rata portion of Company expenses such as fees
and expenses of its independent auditors and legal counsel, compensation of the
Company's directors who are not affiliated with the adviser, administrator or
any of their affiliates; advisory, transfer agency, custody and administration
fees, and any extraordinary expenses. Expenses attributable to each fund or
class are charged against the assets of the fund or class. General
25 PROSPECTUS
<PAGE> 576
expenses of the Company are allocated among all of the funds of the Company,
including the Funds, in a manner proportionate to the net assets of each fund,
on a transactional basis, or on such other basis as the Company's Board of
Directors deems equitable.
TAXES
The Company intends to qualify each Fund as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), as long as such qualification is in the best interest of the Funds
shareholders. Each Fund will be treated as a separate entity for federal income
tax purposes and thus the provisions of the Code applicable to regulated
investment companies will be applied to the Funds separately, rather than to the
Company as a whole. In addition, net capital gains, net investment income, and
operating expenses will be determined separately for each Fund. By complying
with the applicable provisions of the Code, the Funds will not be subject to
federal income taxes with respect to net investment income and any net realized
capital gains distributed to their shareholders. Each Fund intends to distribute
substantially all of its net investment income and net realized capital gains
(if any) for each year.
Dividends from net investment income and net realized short-term capital gains
(the excess of net short-term capital gains over net long-term capital losses)
declared and paid by a Fund will be taxable as ordinary income to its
shareholders. Any capital gain distributions, attributable to a Fund's net
realized long-term capital gains (the excess of net long-term capital gains over
net short-term capital losses), will generally be taxable to shareholders as
long-term capital gain, regardless of the length of time that the Fund's shares
have been held. Such dividends and distributions will be taxable to shareholders
irrespective of whether the shareholder takes them in cash or has them
automatically reinvested in additional Fund shares. You may be eligible to defer
the taxation of dividend and capital gain distributions on Fund shares which are
held under a qualified tax-deferred retirement plan. The Funds do not expect
their dividends to qualify for the dividends-received deduction allowed to
corporate shareholders.
An investor must provide a valid taxpayer identification number ("TIN"),
generally the investor's social security or employer identification number, upon
opening or reopening an account. Failure to furnish a valid TIN to the Company
could subject the investor to penalties imposed by the IRS. In addition, the
Company may be required to withhold, subject to certain exemptions, at a rate of
31% ("backup withholding") on dividends, capital gain distributions, and
redemption proceeds (including proceeds from exchanges) paid or credited to an
individual Fund shareholder, unless the shareholder certifies that the TIN
provided is correct and that the shareholder is not subject to backup
withholding, or the IRS notifies the Company that the shareholder's TIN is
PROSPECTUS 26
<PAGE> 577
incorrect or that the shareholder is subject to backup withholding. Such tax
withheld does not constitute any additional tax imposed on the shareholder, and
may be claimed as a tax payment on the shareholder's federal income tax return.
Foreign shareholders may be subject to different tax treatment, including a
withholding tax. See "Federal Income Taxes -- Foreign Shareholders" in the SAI.
The foregoing discussion is based on federal tax laws in effect as of the date
of this Prospectus and summarizes only some of the important federal income tax
considerations generally affecting the Funds and their shareholders. It is not
intended as a substitute for careful tax planning; you should consult your tax
advisor with respect to your particular tax situation and the state and local
tax status of investments in Fund shares. Further federal tax considerations are
discussed in the SAI.
27 PROSPECTUS
<PAGE> 578
PROSPECTUS APPENDIX --
ADDITIONAL INVESTMENT POLICIES
FUND INVESTMENTS
Treasury Money Market Mutual Fund
The Treasury Money Market Mutual Fund may invest in the following:
(i) obligations issued or guaranteed by the U.S. Treasury such as bills,
notes, bonds and certificates of indebtedness, and in notes and
repurchase agreements collateralized or secured by such obligations (see
below);
(ii) certain repurchase agreements ("repurchase agreements")(discussed
below);
(iii) certain floating- and variable-rate instruments ("variable-rate
instruments);
(iv) securities purchased on a "when-issued" basis and securities purchased
or sold on a "forward commitment" basis or "delayed settlement" basis"
(discussed below);
(v) certain reverse repurchase agreements ("reverse repurchase agreements")
(discussed below); and
(vi) certain securities issued by other investment companies.
Prime Money Market Mutual Fund
The Prime Money Market Mutual Fund may invest in the following:
(i) obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, including government-sponsored enterprises, including
U.S. Treasury obligations ("U.S. Government obligations") (discussed
below);
(ii) certain repurchase agreements ("repurchase agreements") (discussed
below);
(iii) certain floating- and variable-rate instruments ("variable-rate
instruments);
(iv) securities purchased on a "when-issued" basis and securities purchased
or sold on a "forward commitment" basis or "delayed settlement" basis"
(discussed below);
(v) certain reverse repurchase agreements ("reverse repurchase agreements")
(discussed below);
(vi) certain securities issued by other investment companies;
A-1 PROSPECTUS
<PAGE> 579
(vii) negotiable certificates of deposit, fixed time deposits, bankers'
acceptances or other short-term obligations of U.S. banks (including
foreign branches) that have more than $1 billion in total assets at the
time of investment and are members of the Federal Reserve System or are
examined by the Comptroller of the Currency or whose deposits are
insured by the FDIC ("bank instruments");
(viii) commercial paper rated at the date of purchase Prime-1 by Moody's
Investors Service, Inc. ("Moody's") or "A1+" or "A-1" by Standard &
Poor's Corporation ("S&P") ("rated commercial paper");
(ix) commercial paper unrated at the date of purchase but secured by a
letter of credit from a U.S. bank that meets the above criteria for
investment;
(x) short-term, U.S. dollar-denominated obligations of U.S. branches of
foreign banks that at the time of investment have more than $10
billion, or the equivalent in other currencies, in total assets
("foreign bank obligations") (discussed below).
(xi) mortgage-backed securities (discussed below); and
(xii) certain other asset-backed securities (discussed below).
U.S. Government Obligations
U.S. Government obligations include securities issued or guaranteed as to
principal and interest by the U.S. Government and supported by the full faith
and credit of the U.S. Treasury. U.S. Treasury obligations differ mainly in the
length of their maturity. Treasury bills, the most frequently issued marketable
government securities, have a maturity of up to one year and are issued on a
discount basis. U.S. Government obligations also include securities issued or
guaranteed by federal agencies or instrumentalities, including
government-sponsored enterprises. Some obligations of agencies or
instrumentalities of the U.S. Government are supported by the full faith and
credit of the United States or U.S. Treasury guarantees; others, by the right of
the issuer or guarantor to borrow from the U.S. Treasury; still others, by the
discretionary authority of the U.S. Government to purchase certain obligations
of the agency or instrumentality; and others, only by the credit of the agency
or instrumentality issuing the obligation. In the case of obligations not backed
by the full faith and credit of the United States, the investor must look
principally to the agency or instrumentality issuing or guaranteeing the
obligation for ultimate repayment, which agency or instrumentality may be
privately owned. There can be no assurance that the U.S. Government will provide
financial support to its agencies or instrumentalities where it is not obligated
to do so. In addition, U.S. Government obligations are subject to fluctuations
in market value due to fluctuations in market interest rates. As a general
matter, the value of debt instruments, including U.S. Government obligations,
declines when market rates increase and rises
PROSPECTUS A-2
<PAGE> 580
when market interest rates decrease. Certain types of U.S. Government
obligations are subject to fluctuations in yield or value due to their structure
or contract terms.
Repurchase Agreements
Each Fund may enter into repurchase agreements wherein the seller of a
security to the Funds agrees to repurchase that security from the Funds at a
mutually agreed-upon time and price. The period of maturity is usually quite
short, often overnight or a few days, although it may extend over a number of
months. The Funds may enter into repurchase agreements only with respect to U.S.
Treasury obligations and other obligations that could otherwise be purchased by
the Funds. All repurchase agreements must be collateralized at 102% based on
values that are marked-to-market daily. While the maturities of the underlying
securities in a repurchase agreement transaction may be greater than 397 days,
the term of any repurchase agreement on behalf of the Funds will always be less
than one year. If the seller defaults and the value of the underlying securities
has declined, a Fund may incur a loss. In addition, if bankruptcy proceedings
are commenced with respect to the seller of the security, the Fund's disposition
of the security may be delayed or limited. The Funds will enter into repurchase
agreements only with primary reporting dealers and commercial banks that meet
guidelines established by the Board of Directors and that are not affiliated
with Wells Fargo Bank. The Funds may participate in pooled repurchase agreement
transactions with other funds advised by Wells Fargo Bank.
Floating- and Variable-Rate Instruments
Certain of the debt instruments that the Funds may purchase bear interest at
rates that are not fixed, but vary for example, with changes in specified market
rates or indices or at specified intervals. Certain of these instruments may
carry a demand feature that would permit the holder to tender them back to the
issuer at par value prior to maturity. The Funds may, in accordance with SEC
rules, account for these instruments as maturing at the next interest rate
readjustment date or the date at which the Funds may tender the instrument back
to the issuer, whichever is later. The floating- and variable-rate instruments
that the Funds may purchase include certificates of participation in such
obligations. The Funds may invest in floating- and variable-rate obligations
even if they carry stated maturities in excess of 397 days, upon compliance with
certain conditions of the SEC, in which case such obligations will be treated in
accordance with these conditions as having maturities not exceeding 397 days.
The investment adviser to the Funds will monitor on an ongoing basis the
ability of an issuer of a demand instrument to pay principal and interest on
demand. Events affecting the ability of the issuer of a demand instrument to
make payment when due may occur between the time a Fund elects to demand payment
and the time payment is due, thereby affecting the Fund's ability to obtain
payment at par. Demand instruments whose
A-3 PROSPECTUS
<PAGE> 581
demand feature is not exercisable within seven days may be treated as liquid,
provided that an active secondary market exists.
Securities Loans
The Prime Money Market Mutual Fund may also lend its portfolio securities in
order to increase income to broker-dealers and other institutional investors
pursuant to agreements requiring that the loans be continuously secured by
collateral equal at all times in value to at least the market value of the
securities loaned plus accrued interest. Collateral for such loans may include
cash, U.S. Treasury securities or other U.S. government securities or an
irrevocable letter of credit issued by a bank which meets the investment
standards of the Fund. Such loans will not be made if, as a result, the
aggregate of all outstanding loans of the Fund exceeds one-third of the value of
its total assets. There may be risks of delay in receiving additional collateral
or in recovering the securities loaned or even a loss of rights in the
collateral should the borrower of the securities fail financially.
When-Issued, Forward Commitment and Delayed Settlement Securities
Each Fund may purchase securities on a "when-issued" basis and may purchase or
sell securities on a "forward commitment" basis. The Funds may also purchase or
sell securities on a "delayed settlement" basis. When-issued and forward
commitment transactions, which involve a commitment by a Fund to purchase or
sell particular securities with payment and delivery taking place at a future
date (perhaps one or two months later), permit the Funds to lock in a price or
yield on a security it owns or intends to purchase, regardless of future changes
in interest rates. Delayed settlement describes settlement of a securities
transaction in the secondary market which will occur sometime in the future.
When-issued, forward commitment and delayed settlement transactions involve the
risk, however, that the yield or price obtained in a transaction may be less
favorable than the yield or price available in the market when the securities
delivery takes place. A Fund's forward commitments, when-issued purchases and
delayed settlements are not expected to exceed 25% of the value of the Fund's
total assets absent unusual market conditions. The Funds do not intend to engage
in these transactions for speculative purposes but only in furtherance of their
investment objectives.
Other Investment Companies
The Funds may invest up to 10% of their assets in shares of other open-end
investment companies that invest exclusively in the high-quality, short-term
money market instruments in which the Funds may invest. The Treasury Money
Market Mutual Fund may only invest in shares of other investment companies that
are structured to seek an investment objective that is similar to the Fund's
investment objective. The investment
PROSPECTUS A-4
<PAGE> 582
companies can be expected to charge management fees and other operating expenses
that would be in addition to those charged to a Fund; however, the Funds'
adviser has undertaken to waive its advisory fees with respect to that portion
of the Fund's assets so invested. The Funds may invest in shares of other
open-end investment companies up to the limits prescribed by the 1940 Act.
Foreign Obligations
The Prime Money Market Mutual Fund may invest up to 25% of its assets in high-
quality, short-term (thirteen months or less) debt obligations of foreign
branches of U.S. banks or U.S. branches of foreign banks that are denominated in
and pay interest in U.S. dollars. The Prime Money Market Mutual Fund may also
invest in U.S. dollar-denominated obligations issued or guaranteed by foreign
governments or any of their political subdivisions, agencies or
instrumentalities. Such obligations include debt obligations of supranational
entities. Supranational entities include international organizations designated
or supported by governmental entities to promote economic reconstruction or
development and international banking institutions and related government
agencies.
Investments in foreign obligations involve certain considerations that are not
typically associated with investing in domestic obligations. There may be less
publicly available information about a foreign issuer than about a domestic
issuer. Foreign issuers also are not subject to the same uniform accounting,
auditing and financial reporting standards or governmental supervision as
domestic issuers. In addition, with respect to certain foreign countries, taxes
may be withheld at the source under foreign income tax laws, and there is a
possibility of expropriation or confiscatory taxation, political or social
instability or diplomatic developments that could adversely affect investments
in, the liquidity of, and the ability to enforce contractual obligations with
respect to, securities of issuers located in those countries.
Mortgage-Backed And Other Asset-Backed Securities
The Prime Money Market Mutual Fund may purchase asset-backed securities, which
are securities backed by mortgages, installment sales contracts, credit card
receivables or other assets. The average life of asset-backed securities varies
with the maturities of the underlying instruments, and the average life of a
mortgage-backed instrument, in particular, is likely to be substantially less
than the original maturity of the mortgage pools underlying the securities as
the result of mortgage prepayments. For this and other reasons, an asset-backed
security's stated maturity may be shortened, and the securities' total return
may be difficult to predict precisely. Such difficulties are not, however,
expected to have a significant effect on the Fund since the remaining maturity
of any asset-backed security acquired will be thirteen months or less.
Asset-backed securities
A-5 PROSPECTUS
<PAGE> 583
purchased by the Fund may include collateralized mortgage obligations ("CMOs")
issued by private companies.
INVESTMENT POLICIES AND RESTRICTIONS
Each Fund's investment objective, as set forth under "How the Funds Work --
Investment Objectives and Policies", is fundamental; that is, it may not be
changed without approval by the vote of the holders of a majority of the Fund's
outstanding voting securities, as described under "Capital Stock" in the SAI. In
addition, any fundamental investment policy may not be changed without such
shareholder approval. If the Company's Board of Directors determines, however,
that a Fund's investment objective could best be achieved by a substantive
change in a nonfundamental investment policy or strategy, the Company's Board
may make such change without shareholder approval and will disclose any such
material changes in the then-current prospectus.
As matters of fundamental policy, each Fund may: (i) borrow from banks up to
20% of the current value of its net assets only for temporary purposes in order
to meet redemptions, and these borrowings may be secured by the pledge of up to
10% of the current value of its net assets (but investments may not be purchased
by a Fund while
any such outstanding borrowing in excess of 5% of its net assets exists); and
(ii) not invest more than 25% of its assets (i.e., concentrate) in any
particular industry, excluding, U.S. Government obligations and, with respect to
the Prime Money Market Mutual Fund, the obligations of U.S. banks and certain
U.S. branches of foreign banks.
These investment restrictions are applied at the time investment securities
are purchased. As a matter of nonfundamental policy, the Funds may make loans of
portfolio securities or other assets, although neither Fund intends to do so
during the current fiscal year.
As a matter of nonfundamental policy, neither Fund may: (i) purchase
securities of any issuer (except for U.S. Government obligations, for certain
temporary purposes and for certain guarantees and unconditional puts) if as a
result more than 5% of the value of its total assets would be invested in the
securities of such issuer, except that a Fund may invest up to 25% of its assets
in the highest-rated obligations of any one issuer for a period of up to three
business days, or if a Fund would own more than 10% of the outstanding voting
securities of such issuer; and (ii) invest more than 10% of the current value of
its net assets in securities that are illiquid by virtue of the absence of a
readily available market or legal or contractual restrictions on resale or that
have maturities of more than seven days. With respect to item (i), it may be
possible that the Company would own more than 10% of the outstanding voting
securities of an issuer. Also, as a matter of non-fundamental policy and in
accordance with the current regulations of the SEC, the Prime Money Market
Mutual Fund intends to limit its investments in the obligations of any one
non-U.S. governmental issuer to not more than 5% of its total
PROSPECTUS A-6
<PAGE> 584
assets at the time of purchase, provided that the Fund may invest up to 25% of
its assets in the obligations of one non-U.S. governmental issuer for a period
of up to three business days. For purposes of item (ii), repurchase agreements
that do not provide for payment to the Funds within seven days after notice are
subject to this 10% limit, unless the Company's Board of Directors or the Funds'
investment adviser, pursuant to guidelines adopted by the Board, determines that
a liquid trading market exists. Illiquid securities shall not include (a)
securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933 (the "1933 Act") that have been determined to be liquid by the adviser,
pursuant to guidelines established by the Company's Board of Directors, and (b)
commercial paper sold under Section 4(2)of the 1933 Act that (i) is not traded
flat or in default as to interest or principal and (ii) is rated in one of the
two highest categories by at least two NRSROs and the adviser, pursuant to
guidelines established by the Board of Directors, has determined the commercial
paper to be liquid; or (iii) is rated in one of the two highest categories by
one NRSRO and the adviser, pursuant to guidelines established by the Company's
Board of Directors, has determined that the commercial paper is of equivalent
quality and is liquid, if by any reason thereof the value of its aggregate
investment in such classes of securities will exceed 10% of its total assets.
A-7 PROSPECTUS
<PAGE> 585
SPONSOR, DISTRIBUTOR AND ADMINISTRATOR
Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
INVESTMENT ADVISER,
TRANSFER AND DIVIDEND
DISBURSING AGENT AND CUSTODIAN
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
LEGAL COUNSEL
Morrison & Foerster LLP
2000 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
FOR MORE INFORMATION ABOUT THE FUNDS,
SIMPLY CALL 1-800-222-8222, OR WRITE:
Stagecoach Funds, Inc.
c/o Stagecoach Shareholder Services
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
STAGECOACH MONEY MARKET MUTUAL FUNDS:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- are NOT FDIC insured
- are NOT deposits or obligations of Wells Fargo Bank
- are NOT guaranteed by Wells Fargo Bank
- involve investment risk, including possible loss of
principal
- seek to maintain a stable net asset value of $1.00 per [LOGO]
share, however, there can be no assurance that either
fund will meet this goal. Yields and returns will vary
with market conditions.
</TABLE>
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<PAGE> 586
[STAGECOACH FUNDS LOGO]
P.O. Box 7066
San Francisco, CA 94120-7066
STAGECOACH MONEY MARKET MUTUAL FUNDS:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- are NOT FDIC insured
- are NOT deposits or obligations of Wells Fargo Bank
- are NOT guaranteed by Wells Fargo Bank
- involve investment risk, including possible loss of
principal
- seek to maintain a stable net asset value of $1.00 per [LOGO]
share, however, there can be no assurance that either
fund will meet this goal. Yields and returns will vary
with market conditions.
</TABLE>
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[STAGECOACH FUNDS LOGO]
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PROSPECTUS
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MONEY MARKET TRUST
SEPTEMBER 6, 1996
<PAGE> 588
STAGECOACH FUNDS(R)
MONEY MARKET TRUST
Stagecoach Funds, Inc. (the "Company") is an open-end management investment
company. This Prospectus contains information about one fund of the Stagecoach
Family of Funds -- the MONEY MARKET TRUST (the "Fund").
The MONEY MARKET TRUST seeks to provide investors with current income and
stability of principal.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A
CONSTANT $1.00 NET ASSET VALUE PER SHARE.
Please read this Prospectus before investing and retain it for future reference.
It is designed to provide you with important information and to help you decide
if the Fund's goals match your own. A Statement of Additional Information
("SAI"), dated September 6, 1996, containing additional information about the
Fund has been filed with the Securities and Exchange Commission ("SEC") and is
incorporated by reference into this Prospectus. The Fund's SAI is available
without charge by writing to Stagecoach Funds, Inc., c/o Stagecoach Shareholder
Services, Wells Fargo Bank, N.A., P.O. Box 7066, San Francisco, CA 94120-7066 or
by calling 800-222-8222.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THESE AUTHORITIES PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
FUND SHARES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR ISSUED, ENDORSED OR
GUARANTEED BY, WELLS FARGO BANK, N.A. ("WELLS FARGO BANK") OR ANY OF ITS
AFFILIATES. SUCH SHARES ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT,
THE FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"), THE FEDERAL RESERVE BOARD OR
ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN THE FUND INVOLVES CERTAIN RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
WELLS FARGO BANK IS THE INVESTMENT ADVISER AND IS COMPENSATED FOR PROVIDING
THE FUND WITH CERTAIN OTHER SERVICES. STEPHENS INC. ("STEPHENS"), WHICH
IS NOT AFFILIATED WITH WELLS FARGO BANK, IS THE FUND'S SPONSOR,
ADMINISTRATOR AND DISTRIBUTOR.
PROSPECTUS DATED SEPTEMBER 6, 1996
PROSPECTUS
<PAGE> 589
TABLE OF CONTENTS
-------
<TABLE>
<S> <C>
PROSPECTUS SUMMARY 1
SUMMARY OF FUND EXPENSES 3
FINANCIAL HIGHLIGHTS 5
HOW THE FUND WORKS 6
THE FUND AND MANAGEMENT 9
INVESTING IN THE FUND 11
DIVIDENDS 13
HOW TO REDEEM SHARES 13
MANAGEMENT FEES 15
TAXES 16
PROSPECTUS APPENDIX - ADDITIONAL
INVESTMENT POLICIES A-1
</TABLE>
PROSPECTUS
<PAGE> 590
PROSPECTUS SUMMARY
The Fund provides investors with a convenient way to invest in a portfolio of
securities selected and supervised by professional management. The following
provides summary information about the Fund. For more information, please refer
specifically to the identified Prospectus sections and generally to the Fund's
Prospectus and SAI.
Q. WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
A. The Money Market Trust seeks to provide investors with current income and
stability of principal. The Fund pursues its objective by investing its
assets in high quality U.S. dollar-denominated money market instruments
with remaining maturities not exceeding 397 days (13 months).
See "How the Fund Works -- Investment Objectives and Policies" and
"Prospectus Appendix -- Additional Investment Policies" for further
information on investments.
Q. WHAT ARE SOME OF THE POTENTIAL RISKS ASSOCIATED WITH THIS TYPE OF INVESTMENT?
A. Investments in the Fund are not bank deposits or obligations of Wells Fargo
Bank and are not insured by the FDIC, nor are they insured or guaranteed
against loss of principal. Therefore, investors should be willing to accept
some risk with money invested in the Fund. Although the Fund seeks to
maintain a stable net asset value of $1.00 per share, there is no assurance
that it will be able to do so. The Fund may not achieve as high a level of
current income as other mutual funds that do not limit their investment to
the high credit quality instruments in which the Fund invests. As with all
mutual funds, there can be no assurance that the Fund will achieve its
investment objective.
Q. WHO MANAGES MY INVESTMENTS?
A. Wells Fargo Bank, as the Fund's investment adviser, manages your investments.
Wells Fargo Bank also provides the Fund with transfer agency, dividend
disbursing agency, and custodial services. In addition, Wells Fargo Bank is
a shareholder servicing agent and a selling agent for the Fund. See "The
Fund and Management" and "Management and Servicing Fees."
Q. HOW DO I INVEST?
A. Qualified investors may invest by purchasing Fund shares at the net asset
value per share without a sales charge ("NAV"). Qualified investors include
customers who maintain qualified accounts with the trust division of a Wells
Fargo Bank. Customers may include individuals, trusts, partnerships and
corporations. Purchases are effected through the customer's account with a
Wells Fargo Bank under the
1 PROSPECTUS
<PAGE> 591
terms of the customer's account agreement with the Bank. Investors wishing
to purchase Fund shares should contact their account representatives. See
"Investing in the Fund" for additional information.
Q. ARE EXCHANGES TO OTHER FUNDS PERMITTED?
A. Yes. The exchange privilege enables you to exchange Fund shares for shares of
another fund offered by the Company, or shares of certain other funds
offered by other investment companies in the Stagecoach Family of Funds, to
the extent such shares are offered for sale in your state of residence.
Exchanges are effected through the customer's account with the Institution
under the terms of the customer's account agreement with the Institution.
See "Exchanges."
Q. HOW MAY I REDEEM SHARES?
A. You may redeem your shares at NAV, without charge by the Company. Fund shares
held by an Institution on behalf of its customers must be redeemed under the
terms of the customer's account agreement with the Institution. Institutions
are responsible for transmitting redemption requests to the Company and
crediting its customers' accounts. The Company reserves the right to impose
charges for wiring redemption proceeds. See "Investing in the Fund --
Redemption of Shares."
Q. HOW WILL I RECEIVE DIVIDENDS AND ANY CAPITAL GAINS?
A. Dividends from net investment income of the Fund are declared daily, paid
monthly and automatically reinvested in additional shares of the Fund at
NAV. Shareholders may also elect to receive dividends in cash. Any capital
gains are distributed at least annually in the same manner as dividends. See
"Dividends" for additional information.
PROSPECTUS 2
<PAGE> 592
SUMMARY OF FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of
offering price).............................................. None
Sales Charge Imposed on Reinvested Dividends................... None
Sales Charge Imposed on Redemptions............................ None
Exchange Fees.................................................. None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<S> <C>
Management Fee (after waivers or reimbursements)(1).......... 0.00%
Rule 12b-1 Fee............................................... 0.00%
Other Expenses............................................... 0.20%
----
TOTAL FUND OPERATING EXPENSES (after waivers or
reimbursements)(2)......................................... 0.20%
----
</TABLE>
- -------------------------------
(1) Management Fees (before waivers or reimbursements) would be payable at a
maximum annual rate of 0.25%.
(2) Total Fund Operating Expenses (before waivers or reimbursements) would be
0.45%.
Note: The table does not reflect any charges that may be imposed by Wells Fargo
Bank or another Institution directly on certain customer accounts in
connection with an investment in the Fund.
3 PROSPECTUS
<PAGE> 593
EXAMPLE OF EXPENSES
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following
expenses on a $1,000 investment in
a Fund, assuming a 5% annual return
and redemption at the end of each
time period indicated:
Money Market Trust............. $2 $ 6 $11 $ 26
</TABLE>
EXPLANATION OF TABLES
The purpose of the above tables is to help a shareholder understand the
various costs and expenses that an investor in the Fund will bear directly or
indirectly.
SHAREHOLDER TRANSACTION EXPENSES are charges incurred when an investor buys or
sells Fund shares. Shares of the Fund are sold with no shareholder transaction
expenses imposed by the Company. However, the Company reserves the right to
impose a charge for wiring redemption proceeds.
ANNUAL FUND OPERATING EXPENSES for the Fund are based on applicable contract
amounts and derived from amounts incurred during the most recent fiscal year for
the predecessor portfolio, the Money Market Trust of Pacifica Funds Trust,
restated to reflect voluntary fee waivers and expense reimbursements that are
expected to continue to reduce expenses during the Company's current fiscal
year. Wells Fargo Bank and Stephens have agreed to waive or reimburse all or a
portion of their respective fees charged to, or expenses paid by, the Fund to
ensure that the Total Fund Operating Expenses do not exceed, on an annual basis,
0.20% of the Fund's average daily net assets through August 31, 1997. Any
waivers or reimbursements would reduce the Fund's total expenses. There can be
no assurance that waivers or reimbursements will continue after that time. For
more complete descriptions of the various costs and expenses you can expect to
incur as an investor in the Fund, please see "Management Fees."
EXAMPLE OF EXPENSES is a hypothetical illustration of the expenses associated
with a $1,000 investment over stated periods, based on the expenses in the above
tables and an assumed annual rate of return of 5%. The rate of return should not
be considered an indication of actual or expected performance of the Fund nor a
representation of past or future expenses; actual expenses and returns may be
greater or lesser than those shown.
PROSPECTUS 4
<PAGE> 594
FINANCIAL HIGHLIGHTS
The following information has been derived from the Financial Highlights in
the financial statements for the fiscal periods ended September 30, 1995 and
March 31, 1996 for the Money Market Trust of Pacifica Funds Trust, the
predecessor portfolio to the Fund. This information is provided to assist you in
evaluating the predecessor portfolio's performance for each of the periods
presented. The financial information for the four-month period ended September
30, 1995 was audited by the predecessor portfolio's independent auditors, whose
report on the financial statements for the period appears in the 1995 Annual
Report to Shareholders for the predecessor portfolio. This report and the
related financial statements are incorporated by reference into the SAI. The
unaudited financial information and related notes for the six-month period ended
March 31, 1996 appear in the semi-annual report to shareholders of the
predecessor portfolio, and the related financial statements are also
incorporated by reference into the SAI. The financial information for each of
the four years ended May 31, 1995 to 1992 and the period ended May 31, 1991 was
audited by the predecessor portfolio's former independent accountants. This
information should be read in conjunction with the related financial statements
and the notes thereto.
MONEY MARKET TRUST(1)
FOR A SHARE OUTSTANDING
<TABLE>
<CAPTION>
SIX-MONTH FOUR-MONTH FOR THE
PERIOD ENDED PERIOD ENDED FOR THE YEAR ENDED MAY 31, PERIOD ENDED
MARCH 31, SEPT. 30, --------------------------------------- MAY 31,
1996 1995(2) 1995 1994 1993 1992 1991
------------ ------------ -------- -------- ------- ------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value -- Beginning of Period....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from Investment Operations:
Net investment income...................... 0.03 0.02 0.05 0.03 0.03 0.05 0.05
Dividends and Distributions to Shareholders
Dividends from Net Investment Income....... (0.03) (0.02) (0.05) (0.03) (0.03) (0.05) (0.05)
------ ------ ------ ------ ------ ------ ------
Net Asset Value -- End of Period........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ====== ====== ======
Total Return (excluding sales load)........ 2.77% 5.70%(3) 5.05% 3.21% 2.94% 4.56% 6.48%(3)
Ratios/Supplemental Data:
Net Assets, End of Period (000)............ $894,244 $286,863 $290,483 $300,894 $74,375 $87,039 $113,141
Ratio of Expenses to Average Net Assets.... 0.19%(3) 0.19%(3) 0.17% 0.18% 0.46% 0.48% 0.69%(3)
Ratio of Net Investment Income to Average
Net Assets............................... 5.45%(3) 5.70%(3) 5.06% 3.21% 2.94% 4.56% 6.48%(3)
Ratio of Expenses to Average Net Assets
without Fee Waivers...................... 0.55%(3) 1.11%(3) 1.07% 1.02% 1.08% 1.04% 1.08%(3)
Ratio of Net Investment Income to Average
Net Assets without Fee Waivers........... 5.09%(3) 4.78%(3) 4.16% 2.37% 2.32% 4.00% 6.09%(3)
</TABLE>
- -------------------
(1) The predecessor portfolio to the Fund commenced operations initially as the
Money Market Fund of Westcore Trust on September 17, 1990 until its
reorganization as the Money Market Trust of the Pacifica Funds Trust on
October 1, 1995. During the periods shown, the Fund was advised by First
Interstate Bank of Oregon, N.A. In connection with the Fund's reorganization
on October 1, 1995, First Interstate Capital Management, Inc. assumed
investment advisory responsibilities for the Money Market Trust.
(2) The Money Market Trust changed its fiscal year from May 31 to September 30.
(3) Annualized.
5 PROSPECTUS
<PAGE> 595
HOW THE FUND WORKS
INVESTMENT OBJECTIVE AND POLICIES
The Money Market Trust seeks to provide investors with current income and
stability of principal. The Fund pursues its objective by investing in
high-quality U.S. dollar-denominated money market instruments with remaining
maturities not exceeding 397 days (13 months), as determined in accordance with
Rule 2a-7 under the 1940 Act. Permitted investments include U.S. Government
short-term obligations, obligations of domestic and foreign banks, commercial
paper, repurchase agreements and variable-and floating-rate instruments. As with
all mutual funds, there can be no assurance that the Fund, which is a
diversified portfolio, will achieve its investment objective. In seeking to
achieve its investment objective, the Fund invests in "money market" instruments
such as those described below and under "Prospectus Appendix -- Additional
Investment Policies". During normal market conditions, the Fund invests at least
80% of its assets in money market instruments.
The Fund may invest in bankers' acceptances guaranteed by U.S. commercial
banks having total assets at the time of purchase in excess of $1.5 billion, and
in certificates of deposit of domestic branches of U.S. banks, savings banks and
savings and loan associations that are members of the Federal Reserve System or
the Federal Deposit Insurance Corporation and have total assets at the time of
purchase in excess of $1.5 billion. The Fund may also make interest-bearing
savings deposits in commercial and savings banks in amounts not in excess of 5%
of its total assets.
In addition, the Fund may invest in U.S. dollar-denominated time deposits and
certificates of deposit issued by foreign branches of such U.S. banks and
savings and loan associations. Investments by the Fund in the obligations of
foreign branches of domestic banks will not exceed 25% of the value of the
Fund's total assets at the time of investment. Although time deposits made by
the Fund will normally mature within several days, the Fund may make time
deposits with longer maturities.
The Fund may invest in commercial paper (including variable- and floating-rate
instruments) and corporate bonds with remaining maturities of 397 days or less.
All securities acquired by the Fund will be U.S. Government obligations or other
"First Tier Securities" as defined under Rule 2a-7. First Tier Securities
generally consist of instruments that are either rated at the time of purchase
in the top rating category by one or more unaffiliated nationally recognized
statistical rating organizations ("NRSRO") or issued by issuers with such
ratings. The Appendix to the SAI includes a description of the applicable
ratings. Unrated instruments purchased by the Fund will be of comparable quality
as determined by the investment adviser pursuant to guidelines approved by the
Company's Board of Directors.
PROSPECTUS 6
<PAGE> 596
Commercial paper purchased by the Fund may include paper issued in reliance on
the so-called "private placement" exemption under Section 4(2) of the Securities
Act of 1933 ("Section 4(2) paper"). Section 4(2) paper is restricted as to
disposition under the federal securities laws and generally is sold to
institutional investors such as the Fund that agree that they are purchasing the
paper for investment and not with a view to public distribution. Any resale by
the purchaser must be in an exempt transaction. Section 4(2) paper normally is
resold to other institutional investors through or with the assistance of the
issuer or investment dealers that make a market in Section 4(2) paper. Section
4(2) paper will not be subject to the Fund's 10% limitation on illiquid
securities described above where the Board of Directors or the investment
adviser (pursuant to guidelines adopted by the Board) determines that a liquid
trading market exists.
The Fund may purchase asset-backed securities, which are securities backed by
mortgages, installment sales contracts, credit card receivables or other assets.
The average life of asset-backed securities varies with the maturities of the
underlying instruments, and the average life of a mortgage-backed instrument, in
particular, is likely to be substantially less than the original maturity of the
mortgage pools underlying the securities as the result of mortgage prepayments.
For this and other reasons, an asset-backed security's stated maturity may be
shortened, and the securities' total return may be difficult to predict
precisely. Such difficulties are not, however, expected to have a significant
effect on the Fund since the remaining maturity of any asset-backed security
acquired will be 397 days or less. Asset-backed securities purchased by the Fund
may include collateralized mortgage obligations ("CMOs") issued by private
companies. For additional descriptions of the types of securities and investment
practices used by the Funds, see "Risk Factors," "Prospectus
Appendix -- Additional Investment Policies" in this Prospectus and "Investment
Restrictions" and "Additional Permitted Investment Activities" in the SAI.
RISK FACTORS
Investments in the Fund are not bank deposits or obligations of Wells Fargo
Bank and are not insured by the FDIC, nor are they insured or guaranteed against
loss of principal. Therefore, investors should be willing to accept some risk
with money invested in the Fund. Although the Fund seeks to maintain a stable
net asset value of $1.00 per share, there is no assurance that it will be able
to do so. The Fund may not achieve as high a level of current income as other
mutual funds that do not limit their investment to the high credit quality
instruments in which the Fund invest. Illiquid securities, which may include
certain restricted securities, may be difficult to sell promptly at an
acceptable price. Certain restricted securities may be subject to legal
restrictions on resale. Delay or difficulty in selling securities may result in
a loss or be costly to a Fund. As with all mutual funds, there can be no
assurance that the Fund will achieve its investment objective.
7 PROSPECTUS
<PAGE> 597
The Fund, under the 1940 Act, must comply with certain investment criteria
designed to provide liquidity, reduce risk, and allow the Fund to maintain a
stable net asset value of $1.00 per share. Of course, the Fund cannot guarantee
a $1.00 share price. The Fund's dollar-weighted average portfolio maturity must
not exceed 90 days. Any security that the Fund purchases must have a remaining
maturity of not more than 397 days. In addition, any security that the Fund
purchases must present minimal credit risks and be of high quality (i.e., be
rated in the top rating category by the required number of NRSROs or, if
unrated, determined to be of comparable quality to such rated securities). These
determinations are made by Wells Fargo Bank, as the Fund's investment adviser,
under guidelines adopted by the Company's Board of Directors.
The Fund seeks to reduce risk by investing its assets in securities of various
issuers. In addition, the Fund emphasizes safety of principal and high credit
quality. In particular, the internal investment policies of the Fund's
investment adviser, Wells Fargo Bank, prohibit the purchase for the Fund of many
types of floating-rate derivative securities that are considered potentially
volatile. The following types of derivative securities are not permitted
investments for the Fund:
- capped floaters (on which interest is not paid when market rates move above
a certain level);
- leveraged floaters (whose interest rate reset provisions are based on a
formula that magnifies changes in interest rates);
- range floaters (which do not pay any interest if market interest rates move
outside of a specified range);
- dual index floaters (whose interest rate reset provisions are tied to more
than one index so that a change in the relationship between these indices
may result in the value of the instrument falling below face value); and
- inverse floaters (which reset in the opposite direction of their index).
Additionally, the Fund may not invest in securities whose interest rate reset
provisions are tied to an index that materially lags short-term interest rates,
such as "COFI floaters." The Fund may only invest in floating-rate securities
that bear interest at a rate that resets quarterly or more frequently and that
resets based on changes in standard money market rate indices such as U.S.
Treasury bills, London Interbank Offered Rate, the prime rate, published
commercial paper rates or federal funds rates. See "Prospectus Appendix --
Additional Investment Policies" and the SAI for further information about the
investment policies and risks.
PERFORMANCE
Fund performance may be advertised from time to time in terms of current yield
or effective yield. Performance figures are based on historical results and are
not intended to indicate future performance.
PROSPECTUS 8
<PAGE> 598
Yield refers to the income generated by an investment in the Fund over a
specified period (usually 7 days), expressed as an annual percentage rate.
Effective yield is calculated in the same manner but assumes reinvestment of the
income earned from the Fund. Because of the effects of compounding, effective
yields are slightly higher than yields.
In addition to presenting these standardized performance calculations, at
times, the Fund may also present non-standard performance figures, such as
30-day yields or, in sales literature, distribution rates.
Additional performance information is contained in the SAI under "Performance
Calculations" and in the Annual Report, which are available upon request without
charge by calling 1-800-222-8222 or by writing the Company at the address shown
on the front cover of the Prospectus.
THE FUND AND MANAGEMENT
The Fund is one fund in the Stagecoach Family of Funds. The Company was
organized as a Maryland corporation on September 9, 1991, and currently offers
shares of the following series: Aggressive Growth, Arizona Tax-Free, Asset
Allocation, Balanced, California Tax-Free Bond, California Tax-Free Income,
California Tax-Free Money Market Mutual, Corporate Stock, Diversified Income,
Equity Value, Ginnie Mae, Government Money Market Mutual, Growth and Income,
Intermediate Bond, Money Market Mutual, Money Market Trust, National Tax-Free,
National Tax-Free Money Market Mutual, Prime Money Market Mutual, Oregon
Tax-Free, Short-Intermediate U.S. Government Income, Small Cap, Treasury Money
Market Mutual and U.S. Government Allocation Funds. The Arizona Tax-Free,
Balanced, California Tax-Free Bond, Equity Value, Ginnie Mae, Growth and Income,
Intermediate Bond, Money Market Mutual, National Tax-Free, Oregon Tax-Free,
Prime Money Market Mutual, Small Cap and Treasury Money Market Mutual Funds each
offer three classes of shares. The Aggressive Growth, Asset Allocation,
California Tax-Free Income, Diversified Income, Short-Intermediate U.S.
Government Income and U.S. Government Allocation Funds each offer two classes of
shares. The California Tax-Free Money Market Mutual, Corporate Stock, Government
Money Market Mutual, Money Market Trust, and National Tax-Free Money Market
Mutual Funds each offer one class of shares. Most of the Company's funds are
authorized to issue multiple classes of shares, one class generally subject to a
front-end sales charge and, in some cases, a class subject to a
contingent-deferred sales charge, that are offered to retail investors. Certain
of the Company's funds also are authorized to issue other classes of shares,
which are sold primarily to institutional investors at NAV. Each class of shares
represents an equal, proportionate interest in a Fund with other shares of the
same class. Shareholders of each class bear their pro rata portion of a Fund's
operating expenses except for certain class-specific expenses (e.g., any state
securities registration
9 PROSPECTUS
<PAGE> 599
fees, shareholder servicing fees or distribution fees that may be paid under
Rule 12b-1) that are allocated to a particular class and, accordingly, may
affect performance. For information on another fund or a class of shares, please
call Stagecoach Shareholder Services at 1-800-222-8222 or write the Company at
the address shown on the front cover of the Prospectus.
The Company's Board of Directors supervises the funds' activities and monitors
their contractual arrangements with various service providers. Although the
Company is not required to hold annual shareholder meetings, special meetings
may be required for purposes such as electing or removing Directors, approving
advisory contracts and changing a Fund s investment objective or fundamental
investment policies. All shares of the Company have equal voting rights and are
voted in the aggregate, rather than by series or class, unless otherwise
required by law (such as when the voting matter affects only one series or
class). A shareholder of record of the Fund is entitled to one vote for each
share owned and fractional votes for fractional shares owned. A more detailed
description of the voting rights and attributes of the shares is contained in
the "Capital Stock" section of the SAI.
MANAGEMENT
Wells Fargo Bank serves as the Fund's investment adviser, transfer and
dividend disbursing agent and custodian. In addition, Wells Fargo Bank serves as
a shareholder servicing agent and as a selling agent for the Fund. Wells Fargo
Bank, one of the largest banks in the United States, was founded in 1852 and is
the oldest bank in the western United States. As of June 30, 1996, Wells Fargo
Bank provided investment advisory services for approximately $56 billion of
assets of individuals, trusts, estates and institutions. Wells Fargo Bank also
serves as the investment adviser or sub-adviser to the other separately managed
series (or the master portfolio in which a series may invest) of the Company,
and to five other registered, open-end, management investment companies which
consist of several separately managed investment portfolios. Wells Fargo Bank, a
wholly owned subsidiary of Wells Fargo & Company, is located at 420 Montgomery
Street, San Francisco, California 94104.
From October 1, 1995 until its acquisition by Wells Fargo & Company on April
1, 1996, Wells Fargo Investment Management Inc. ("WFIM") (formerly, First
Interstate Capital Management, Inc.) served as investment adviser to the
predecessor portfolio. WFIM, a wholly owned subsidiary of Wells Fargo & Company,
is located at 444 Market Street, San Francisco, California 94105. Prior to
October 1, 1995, First Interstate Bank of Oregon, N.A. served as the investment
adviser to the Fund.
Morrison & Foerster LLP, counsel to the Company and special counsel to Wells
Fargo Bank has advised the Company and Wells Fargo Bank that Wells Fargo Bank
and its affiliates may perform the services contemplated by the Advisory
Contract and this Prospectus without violation of the Glass-Steagall Act. Such
counsel has pointed out,
PROSPECTUS 10
<PAGE> 600
however, that there are no controlling judicial or administrative
interpretations or decisions and that future judicial or administrative
interpretations of, or decisions relating to, present federal or state statutes,
including the Glass-Steagall Act, and regulations relating to the permissible
activities of banks and their subsidiaries or affiliates, as well as future
changes in such statutes, regulations and judicial or administrative decisions
or interpretations, could prevent such entities from continuing to perform, in
whole or in part, such services. If any such entity were prohibited from
performing any such services, it is expected that new agreements would be
proposed or entered into with another entity or entities qualified to perform
such services.
Stephens is the Company's sponsor and administrator and distributes the Funds
shares. Stephens is a full service broker/dealer and investment advisory firm
located at 111 Center Street, Little Rock, Arkansas 72201. Stephens and its
predecessor have been providing securities and investment services for more than
60 years. Additionally, they have been providing discretionary portfolio
management services since 1983. Stephens currently manages investment portfolios
for pension and profit-sharing plans, individual investors, foundations,
insurance companies and university endowments.
INVESTING IN THE FUND
SHARE PRICE
The price of a Fund share is its "net asset value" or NAV. The NAV of shares
of the Money Market Trust is computed by adding the value of its portfolio
investments plus cash and other assets, deducting liabilities and then dividing
the result by the number of Fund shares outstanding. As noted above, the Fund
seeks to maintain a constant $1.00 NAV share price, although there is no
assurance that it will be able to do so.
Fund shares may be purchased on any day the Fund is open (a "Business Day").
The Fund is open on any day that either the New York Stock Exchange or Wells
Fargo Bank is open. Currently the holidays observed by both the New York Stock
Exchange and Wells Fargo Bank are New Year's Day, Presidents' Day, Martin Luther
King's Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day,
Veterans Day, Thanksgiving Day and Christmas Day (each, a "Holiday"). When any
Holiday falls on a weekend, the Fund typically is closed on the weekday
immediately before or after such Holiday.
Wells Fargo Bank calculates the Fund's NAV as of 12:00 Noon (Pacific time)
each Business Day. All transaction orders are processed at the NAV next
determined after the order is received.
The Fund's portfolio investments are valued on the basis of amortized cost.
This valuation method is based on the receipt of a steady rate of payment from
the date of
11 PROSPECTUS
<PAGE> 601
purchase until maturity rather than actual changes in market value. The
Company's Board of Directors believes that this valuation method accurately
reflects fair value.
HOW TO BUY SHARES
Shares of the Fund are sold without a sales load on a continuous basis to
customers ("Customers") who maintain qualified accounts with the trust division
of a Wells Fargo Bank. Customers may include individuals, trusts, partnerships
and corporations. All share purchases are effected through a Customer's account
at a Wells Fargo Bank through procedures established in connection with the
requirements of the account, and confirmations of share purchases and
redemptions are sent to the Wells Fargo Bank involved. A Wells Fargo Bank (or
its nominee) is normally the holders of record of Fund shares acting on behalf
of its Customers and reflects its Customers beneficial ownership of shares in
the account statements provided to its Customers. The exercise of voting rights
and the delivery to Customers of shareholder communications from the Fund is
governed by a Customer's account agreement with a Wells Fargo Bank. Investors
wishing to purchase shares of the Fund should contact their account
representatives.
Purchase orders for shares in the Fund must be received by the Fund by 12:00
Noon (Pacific time) on a Business Day. Payment for such shares must also be made
in federal funds or other funds immediately available to the Custodian no later
than 12:00 Noon (Pacific time) on the same Business Day that the purchase order
is received. Orders for the purchase of shares are executed at the NAV per share
(the "public offering price") next determined after receipt of both an order and
payment in proper order. The Fund has no minimum initial or subsequent
investment requirement, although Wells Fargo Bank may impose certain minimum
Customer account requirements.
Wells Fargo Bank is responsible for transmitting orders for purchases by the
Customers and delivering required funds on a timely basis. If funds are not
received within the period described above, the order will be canceled, notice
thereof will be given, and the Wells Fargo Bank will be responsible for any loss
to the Fund or its shareholders. A Wells Fargo Bank may charge certain account
fees depending on the type of account the investor has established. Payment for
shares of the Fund may, in the discretion of the investment adviser, be made in
the form of securities that are permissible investments for the Fund. For
further information see "Additional Purchase and Redemption Information" in the
SAI.
The Company reserves the right to reject any purchase order. Payment for
orders which are not received will be returned after prompt inquiry. The
issuance of shares is recorded on the books of the Fund, and share certificates
are not issued.
PROSPECTUS 12
<PAGE> 602
STATEMENTS AND REPORTS
If a Wells Fargo Bank is the recordholder for an investor's account, the Bank
sends the investor a monthly account statement after the end of each month in
which there has been a transaction that affects the share balance or Fund
account registration. A statement with tax information for each year is mailed
to investors by January 31 of the following year and also is filed with the
Internal Revenue Service ("IRS"). At least twice a year, investors receive
financial statements from the Fund.
DIVIDENDS
Dividends from net investment income are declared daily payable to
shareholders of record as of 12:00 Noon (Pacific time). If your purchase order
is received before 12:00 Noon on any Business Day, you begin earning dividends
on the day your purchase order is effective and continue to earn dividends
through the day prior to the date you redeem such shares. Dividends for a
Saturday, Sunday or Holiday are credited on the preceding Business Day. If you
redeem shares before a dividend payment date, any dividends credited to you are
paid on the following dividend payment date unless you have redeemed all of the
shares in your account, in which case you receive your accrued dividends
together with your redemption proceeds. The Fund distributes any capital gains
at least annually. The Fund does not make distributions from net realized
securities gains unless capital loss carryovers, if any, have been utilized or
have expired.
Dividends declared in a month generally are paid on the last Business Day of
that month. All dividends are reinvested automatically in additional shares of
the Fund at NAV or, at the option of the investor or paid in cash. Distributions
from net realized securities gains are declared and paid once a year, but the
Fund may make distributions on a more frequent basis. In all cases,
distributions will be made in a manner that is consistent with the provisions of
the 1940 Act.
HOW TO REDEEM SHARES
Redemption requests are effected at the NAV per share next determined after
receipt of a redemption request in good order by the Company. Shares held by a
Wells Fargo Bank on behalf of its Customers must be redeemed in accordance with
instructions and limitations pertaining to the Customer's accounts at the Bank.
A Wells Fargo Bank is responsible for transmitting redemption requests to the
Company and crediting its Customers' accounts with the redemption proceeds on a
timely basis. The redemption proceeds for Fund shares normally are wired to the
redeeming Bank the following Business Day after receipt of the request by the
Company. The Company reserves the right to delay the wiring of redemption
proceeds for up to seven days after it receives a
13 PROSPECTUS
<PAGE> 603
redemption order if, in the judgment of the investment adviser, an earlier
payment could adversely affect the Fund or unless the SEC permits a longer
period under extraordinary circumstances. Such extraordinary circumstances could
include a period during which an emergency exists as a result of which (a)
disposal by the Fund of securities owned by it is not reasonably practicable or
(b) it is not reasonably practicable for the Fund to fairly determine the value
of its net assets, or a period during which the SEC by order permits deferral of
redemptions for the protection of security holders of a Fund.
With respect to former shareholders of Westcore Trust or Pacifica Funds Trust
who do not have a relationship with a Wells Fargo Bank, Fund shares may be
redeemed by writing or calling the Company directly at the address or phone
number shown on the first page of the Prospectus. When shares are redeemed
directly from the Fund, the Company ordinarily sends the proceeds by check to
the investor at the address of record on the next Business Day unless payment by
wire is requested. The Company may take up to seven days to make payment,
although this will not be the customary practice. Also, if the New York Stock
Exchange is closed (or when trading is restricted) for any reason other than the
customary weekend or holiday closing or if an emergency condition as determined
by the SEC merits such action, the Company may suspend redemptions or postpone
payment dates.
To be accepted by the Company, a letter requesting redemption must include:
(i) the Fund's name and account registration from which the shares are being
redeemed; (ii) the account number; (iii) the amount to be redeemed; (iv) the
signatures of all registered owners; and (v) a signature guarantee by any
eligible guarantor institution. An "eligible guarantor institution" includes a
commercial bank that is an FDIC member, a trust company, a member firm of a
domestic stock exchange, a savings association, or a credit union that is
authorized by its charter to provide a signature guarantee. Signature guarantees
by notaries public are not acceptable. Further documentation may be requested
from corporations, administrators, executors, personal representatives, trustees
or custodians.
All redemptions of Fund shares are made in cash, except that the commitment to
redeem shares in cash extends only to redemption requests made by an investor
during any 90-day period of up to the lesser of $250,000 or 1% of the NAV of the
Fund at the beginning of such period. This commitment is irrevocable without the
prior approval of the SEC. In the case of redemption requests by investors in
excess of such amounts, the Board of Directors reserves the right to have the
Fund make payment, in whole or in part, in securities or other assets, in case
of an emergency or any time a cash distribution would impair the liquidity of
the Fund to the detriment of the existing shareholders. In this event, the
securities would be valued in the same manner as the Fund's securities are
valued. If the recipient were to sell such securities, the investor might incur
brokerage charges.
PROSPECTUS 14
<PAGE> 604
A redemption may result in a recognized gain or loss for federal income tax
purposes, irrespective of whether the redemption is paid in cash or in kind.
MANAGEMENT FEES
INVESTMENT ADVISER
Subject to the overall supervision of the Company's Board of Directors, Wells
Fargo Bank, as the Fund's investment adviser, provides investment guidance and
policy direction in connection with the management of the Fund's assets. Wells
Fargo Bank also furnishes the Board of Directors with periodic reports on the
Fund's investment strategies and performance. For these services, Wells Fargo
Bank is entitled to a monthly investment advisory fee at the annual rate of
0.25% of the average daily net assets of the Money Market Trust. From time to
time, the Fund, consistent with its investment objective, policies and
restrictions, may invest in securities of companies with which Wells Fargo Bank
has a lending relationship. During the Fund's last fiscal period ended September
30, 1995, all investment advisory fees were waived by the Fund's former adviser.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
Wells Fargo Bank also serves as the Fund's custodian and transfer and dividend
disbursing agent. Under the Custody Agreement, the Fund may, at times, borrow
money from Wells Fargo Bank as needed to satisfy temporary liquidity needs.
Wells Fargo Bank charges interest on such overdrafts at a rate determined
pursuant to the Fund's Custody Agreement. Wells Fargo Bank performs its
custodial and transfer and dividend disbursing agency services at 525 Market
Street, San Francisco, California 94105.
SPONSOR, ADMINISTRATOR AND DISTRIBUTOR
Subject to the overall supervision of the Company's Board of Directors,
Stephens provides the Fund with administrative services, including general
supervision of the Fund's operation, coordination of the other services provided
to the Fund, compilation of information for reports to the SEC and the state
securities commissions, preparation of proxy statements and shareholder reports,
and general supervision of data compilation in connection with preparing
periodic reports to the Company's Directors and officers. Stephens also
furnishes office space and certain facilities to conduct the Fund's business,
and compensates the Company's Directors and officers who are affiliated with
Stephens. For these services, Stephens is entitled to a monthly fee at the
annual rate of 0.03% of the Fund's average daily net assets.
15 PROSPECTUS
<PAGE> 605
Stephens, as the principal underwriter of the Fund within the meaning of the
1940 Act, has entered into a Distribution Agreement with the Company pursuant to
which Stephens is responsible for distributing Fund shares.
FUND EXPENSES
From time to time, Wells Fargo Bank and Stephens may waive their respective
fees in whole or in part and reimburse expenses payable to others. Any such
waivers or reimbursements will reduce the Fund's expenses and, accordingly, have
a favorable impact on the Fund's performance. Except for the expenses borne by
Wells Fargo Bank and Stephens, each fund of the Company bears all costs of its
operations, including its pro rata portion of Company expenses such as fees and
expenses of its independent auditors and legal counsel, compensation of the
Company's directors who are not affiliated with the adviser, administrator or
any of their affiliates; advisory, transfer agency, custody and administration
fees, and any extraordinary expenses. Expenses attributable to each fund or
class are charged against the assets of the fund or class. General expenses of
the Company are allocated among all of the funds of the Company, including the
Fund, in a manner proportionate to the net assets of each fund, on a
transactional basis, or on such other basis as the Company's Board of Directors
deems equitable.
TAXES
The Company intends to qualify the Fund each year as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), as long as such qualification is in the best interest of the Fund's
shareholders. The Fund is treated as a separate entity for federal income tax
purposes and, thus, the provisions of the Code applicable to regulated
investment companies are applied to the Fund separately, rather than to the
Company as a whole. In addition, net capital gains, net investment income, and
operating expenses are determined separately for the Fund. By complying with the
applicable provisions of the Code, the Fund will not be subject to federal
income taxes with respect to net investment income and any net realized capital
gains distributed to its shareholders. The Fund intends to pay out substantially
all of its net investment income and any net realized capital gains each year.
Dividends from net investment income and net realized short-term capital gains
(the excess of net short-term capital gains over net long-term capital losses)
declared and paid by the Fund will be taxable as ordinary income to its
shareholders. Any capital gain distributions, attributable to the Fund's net
realized long-term capital gains (the excess of net long-term capital gains over
net short-term capital losses), will generally be taxable to shareholders as
long-term capital gain, regardless of the length of time that the Fund's shares
have been held. Such dividends and distributions will be taxable to
PROSPECTUS 16
<PAGE> 606
shareholders irrespective of whether the shareholder takes them in cash or has
them automatically reinvested in additional Fund shares. You may be eligible to
defer the taxation of dividend and capital gains distributions on Fund shares
which are held under a qualified tax-deferred retirement plan. The Fund does not
expect its dividends to qualify for the dividends-received deduction allowed to
corporate shareholders.
An investor must provide a valid taxpayer identification number ("TIN"),
generally the investor's social security or employer identification number, upon
opening or reopening an account. Failure to furnish a valid TIN to the Company
could subject the investor to penalties imposed by the IRS. In addition, the
Company may be required to withhold, subject to certain exemptions, at a rate of
31% ("backup withholding") on dividends, capital gain distributions, and
redemption proceeds (including proceeds from exchanges) paid or credited to an
individual Fund shareholder, unless a shareholder certifies that the TIN
provided is correct and that the shareholder is not subject to backup
withholding, or the IRS notifies the Company that the shareholder's TIN is
incorrect or that the shareholder is subject to backup withholding. Such tax
withheld does not constitute any additional tax imposed on the shareholder, and
may be claimed as a tax payment on the shareholder's federal income tax return.
Foreign shareholders may be subject to different tax treatment, including a
withholding tax. See "Federal Income Taxes -- Foreign Shareholders" in the
Fund's SAI.
The foregoing discussion is based on tax laws in effect as of the date of this
Prospectus and summarizes only some of the important federal income tax
considerations generally affecting the Fund and its shareholders. It is not
intended as a substitute for careful tax planning; investors should consult
their tax advisor with respect to their specific tax situation and state and
local taxes. Further federal income tax considerations are discussed in the SAI.
17 PROSPECTUS
<PAGE> 607
PROSPECTUS APPENDIX --
ADDITIONAL INVESTMENT POLICIES
FUND INVESTMENTS
Money Market Trust
The Money Market Trust may invest in the following:
(i) obligations issued or guaranteed by the U.S. Government, its agencies
or instrumentalities, including government-sponsored enterprises ("U.S.
Government obligations") (discussed below);
(ii) negotiable certificates of deposit, fixed time deposits, bankers'
acceptances or other short-term obligations of U.S. banks (including
foreign branches) that have more than $1 billion in total assets at the
time of investment and are members of the Federal Reserve System or are
examined by the Comptroller of the Currency or whose deposits are
insured by the FDIC ("bank instruments");
(iii) commercial paper rated at the date of purchase P-1 by Moody's Investors
Service, Inc. ("Moody's") or "A-1+" or "A-1" by Standard & Poor's
Corporation ("S&P") ("rated commercial paper");
(iv) commercial paper unrated at the date of purchase but secured by a
letter of credit from a U.S. bank that meets the above criteria for
investment;
(v) certain floating and variable rate instruments ("variable rate
instruments") (discussed below);
(vi) certain repurchase agreements ("repurchase agreements") (discussed
below); and
(vii) short-term, U.S. dollar-denominated obligations of U.S. branches of
foreign banks that at the time of investment have more than $10
billion, or the equivalent in other currencies, in total assets
("foreign bank obligations") (discussed below).
U.S. Government Obligations
U.S. Government obligations include securities issued or guaranteed as to
principal and interest by the U.S. Government and supported by the full faith
and credit of the U.S. Treasury. U.S. Treasury obligations differ mainly in the
length of their maturity. Treasury bills, the most frequently issued marketable
government securities, have a maturity of up to one year and are issued on a
discount basis. U.S. Government obligations also
A-1 PROSPECTUS
<PAGE> 608
include securities issued or guaranteed by federal agencies or
instrumentalities, including government-sponsored enterprises. Some obligations
of agencies or instrumentalities of the U.S. Government are supported by the
full faith and credit of the United States or U.S. Treasury guarantees; others,
by the right of the issuer or guarantor to borrow from the U.S. Treasury; still
others, by the discretionary authority of the U.S. Government to purchase
certain obligations of the agency or instrumentality; and others, only by the
credit of the agency or instrumentality issuing the obligation. In the case of
obligations not backed by the full faith and credit of the United States, the
investor must look principally to the agency or instrumentality issuing or
guaranteeing the obligation for ultimate repayment, which agency or
instrumentality may be privately owned. There can be no assurance that the U.S.
Government will provide financial support to its agencies or instrumentalities
where it is not obligated to do so. In addition, U.S. Government obligations are
subject to fluctuations in market value due to fluctuations in market interest
rates. As a general matter, the value of debt instruments, including U.S.
Government obligations, declines when market rates increase and rises when
market interest rates decrease. Certain types of U.S. Government obligations are
subject to fluctuations in yield or value due to their structure or contract
terms.
The Fund may also purchase "stripped securities," which include participations
in trusts that hold U.S. Treasury obligations (such as TIGRs and CATS) and
interests in U.S. Treasury obligations reflected in the Federal Reserve-Book
Entry System which represent ownership in either the future interest payments or
the future principal payments on the U.S. Treasury obligations. Stripped
securities are issued at a discount to their "face value" and may exhibit
greater price volatility than ordinary debt securities because of the manner in
which their principal and interest are paid to investors.
Other Investment Companies
The Money Market Trust may invest in shares of other open-end investment
companies that invest exclusively in the high-quality, short-term money market
instruments in which the Fund may invest. Such investment companies can be
expected to charge management fees and other operating expenses that would be in
addition to those charged to the Fund; however, the Fund's investment adviser
has undertaken to waive its advisory fees with respect to that portion of the
Fund's assets so invested. In no event may the Fund, together with any company
or companies controlled by it, own more than 3% of the total outstanding voting
stock of any such investment company, nor may the Fund, together with any such
company or companies, invest more than 5% of its assets in any one such
investment company or invest more than 10% of its assets in securities of all
such investment companies combined.
PROSPECTUS A-2
<PAGE> 609
Floating- and Variable-Rate Instruments
Certain of the debt instruments that the Fund may purchase bear interest at
rates that are not fixed, but vary for example, with changes in specified market
rates or indices or at specified intervals. Certain of these instruments may
carry a demand feature that would permit the holder to tender them back to the
issuer at par value prior to maturity. The Fund may, in accordance with SEC
rules, account for these instruments as maturing at the next interest rate
readjustment date or the date at which the Fund may tender the instrument back
to the issuer, whichever is later. The floating- and variable-rate instruments
that the Fund may purchase include certificates of participation in such
obligations. The Fund may invest in floating- and variable-rate obligations even
if they carry stated maturities in excess of 397 days, upon compliance with
certain conditions of the SEC, in which case such obligations will be treated in
accordance with these conditions as having maturities not exceeding 397 days.
Wells Fargo Bank, as investment adviser to the Fund, will monitor on an
ongoing basis the ability of an issuer of a demand instrument to pay principal
and interest on demand. Events affecting the ability of the issuer of a demand
instrument to make payment when due may occur between the time the Fund elects
to demand payment and the time payment is due, thereby affecting the Fund's
ability to obtain payment at par. Demand instruments whose demand feature is not
exercisable within seven days may be treated as liquid, provided that an active
secondary market exists.
Repurchase Agreements
The Fund may enter into repurchase agreements wherein the seller of a security
to the Fund agrees to repurchase that security from the Fund at a mutually
agreed-upon time and price. The period of maturity is usually quite short, often
overnight or a few days, although it may extend over a number of months. The
Fund may enter into repurchase agreements only with respect to U.S. Government
obligations and other obligations that could otherwise be purchased by the Fund.
All repurchase agreements must be collateralized at 102% based on values that
are marked to market daily. While the maturities of the underlying securities in
a repurchase agreement transaction may be greater than 397 days, the term of any
repurchase agreement on behalf of the Fund will always be less than one year. If
the seller defaults and the value of the underlying securities has declined, the
Fund may incur a loss. In addition, if bankruptcy proceedings are commenced with
respect to the seller of the security, the Fund's disposition of the security
may be delayed or limited. The Fund will enter into repurchase agreements only
with primary reporting dealers and commercial banks that meet guidelines
established by the Board of Directors and that are not affiliated with Wells
Fargo Bank. The Fund may participate in pooled repurchase agreement transactions
with other funds advised by Wells Fargo Bank.
A-3 PROSPECTUS
<PAGE> 610
Letters of Credit
Certain of the debt obligations, certificates of participation, commercial
paper and other short-term obligations which the Fund is permitted to purchase
may be backed by an unconditional and irrevocable letter of credit of a bank,
savings and loan association or insurance company which assumes the obligation
for payment of principal and interest in the event of default by the issuer.
Letter of credit-backed investments must, in the opinion of Wells Fargo Bank, be
of investment quality comparable to other permitted investments of the Fund.
Foreign Obligations
The Fund may invest up to 25% of its assets in high-quality, short-term debt
obligations of foreign branches of U.S. banks or U.S. branches of foreign banks
that are denominated in and pay interest in U.S. dollars. Investments in foreign
obligations involve certain considerations that are not typically associated
with investing in domestic obligations. There may be less publicly available
information about a foreign issuer than about a domestic issuer. Foreign issuers
also are not subject to the same uniform accounting, auditing and financial
reporting standards or governmental supervision as domestic issuers. In
addition, with respect to certain foreign countries, interest may be withheld at
the source under foreign income tax laws, and there is a possibility of
expropriation or confiscatory taxation, political or social instability or
diplomatic developments that could adversely affect investments in, the
liquidity of, and the ability to enforce contractual obligations with respect
to, securities of issuers located in those countries.
When Issued, Forward Commitment and Delayed-Settlement Securities
The Fund may purchase securities on a "when-issued" basis and may purchase or
sell securities on a "forward commitment" basis. The Fund may also purchase or
sell securities on a "delayed settlement" basis. When-issued and forward
commitment transactions, which involve a commitment by the Fund to purchase or
sell particular securities with payment and delivery taking place at a future
date (perhaps one or two months later), permit the Fund to lock in a price or
yield on a security it owns or intends to purchase, regardless of future changes
in interest rates. Delayed settlement describes settlement of a securities
transaction in the secondary market which will occur sometime in the future.
When-issued, forward commitment and delayed settlement transactions involve the
risk, however, that the yield or price obtained in a transaction may be less
favorable than the yield or price available in the market when the securities
delivery takes place. The Fund s forward commitments, when-issued purchases and
delayed settlements are not expected to exceed 25% of the value of the Fund s
total assets absent unusual market conditions. The Fund does not intend to
engage in these transactions for speculative purposes but only in furtherance of
their investment objectives.
PROSPECTUS A-4
<PAGE> 611
Reverse Repurchase Agreements
The Fund may borrow monies for temporary purposes by entering into reverse
repurchase agreements in accordance with the investment restrictions described
below. Pursuant to such agreements, the Fund would sell portfolio securities to
financial institutions and agree to repurchase them at an agreed upon date and
price. At the time the Fund enters into a reverse repurchase agreement, it will
place in a segregated custodial account, liquid assets or high grade debt
securities having a value equal to or greater than the repurchase price and the
investment adviser will continuously monitor the account to ensure that the
value is maintained. The Fund would only enter into reverse repurchase
agreements to avoid otherwise selling securities during unfavorable market
conditions to meet redemptions. Reverse repurchase agreements involve the risk
that the market value of the portfolio securities sold by the Fund may decline
below the price of the securities the Fund is obligated to repurchase. Interest
paid by the Fund in connection with a reverse repurchase agreement will reduce
the Fund s net investment income. Reverse repurchase agreements are considered
to be borrowings under the 1940 Act.
Short-Term Trading
The Fund may attempt to increase yields by trading to take advantage of
short-term market variations. This policy could result in high portfolio
turnover but should not adversely affect the Fund since it does not ordinarily
pay brokerage commissions on the purchase of short-term debt obligations.
INVESTMENT POLICIES AND RESTRICTIONS
The Fund's investment objective, as set forth under "How the Fund Works --
Investment Objective and Policies", is fundamental; that is, it may not be
changed without approval by the vote of the holders of a majority of the Fund's
outstanding voting securities, as described under "Capital Stock" in the SAI. In
addition, any fundamental investment policy may not be changed without such
shareholder approval. If the Company's Board of Directors determines, however,
that the Fund's investment objective could best be achieved by a substantive
change in a nonfundamental investment policy or strategy, the Company's Board
may make such change without shareholder approval and will disclose any such
material changes in the then-current prospectus.
As matters of fundamental policy, the Fund may: (i) borrow from banks up to
10% of the current value of its net assets only for temporary purposes in order
to meet redemptions, and these borrowings may be secured by the pledge of up to
10% of the current value of its net assets (but investments may not be purchased
by the Fund while any such outstanding borrowing in excess of 5% of its net
assets exists); (ii) not make loans of portfolio securities or other assets,
except that loans for purposes of this restriction will not include the purchase
of fixed time deposits, repurchase agreements,
A-5 PROSPECTUS
<PAGE> 612
commercial paper and other short-term obligations, and other types of debt
instruments commonly sold in a public or private offering; and (iii) not invest
more than 25% of its assets (i.e., concentrate) in any particular industry,
excluding, (a) U.S. Government obligations, and (b) obligations of domestic
banks (for purposes of this restriction, domestic bank obligations do not
include obligations of foreign branches of U.S. banks and obligations of U.S.
branches of foreign banks).
As a matter of nonfundamental policy, the Fund may not: (i) purchase
securities of any issuer (except for U.S. Government obligations, for certain
temporary purposes and for certain guarantees and unconditional puts) if as a
result more than 5% of the value of its total assets would be invested in the
securities of such issuer or the Fund would own more than 10% of the outstanding
voting securities of such issuer and (ii) invest more than 10% of the current
value of its net assets in securities that are illiquid by virtue of the absence
of a readily available market or legal or contractual restrictions on resale and
fixed time deposits that are subject to withdrawal penalties and that have
maturities of more than seven days.
With respect to item (i), it may be possible that the Company would own more
than 10% of the outstanding voting securities of an issuer. For purposes of item
(ii), repurchase agreements and time deposits that do not provide for payment to
the Fund within seven days after notice, and securities that are not registered
under the Securities Act of 1933 (the "1933 Act") but that may be purchased by
institutional buyers under Rule 144A, are subject to this 10% limit, unless such
securities are variable amount master demand notes with maturities of nine
months or less or unless the Board or investment adviser, pursuant to guidelines
adopted by the Board, determines that a liquid trading market exists. Illiquid
securities shall not include securities eligible for resale pursuant to Rule
144A under the 1933 Act that have been determined to be liquid by the adviser,
pursuant to guidelines established by the Company s Board of Directors, and
commercial paper that is sold under Section 4(2) of the 1933 Act that (i) is not
traded flat or in default as to interest or principal and (ii) is rated in one
of the two highest categories by at least two NRSROs and the adviser, pursuant
to guidelines established by the Company s Board of Directors, has determined
the commercial paper to be liquid; or (iii) is rated in one of the two highest
categories by one NRSRO and the adviser, pursuant to guidelines established by
the Company s Board of Directors, has determined that the commercial paper is of
equivalent quality and is liquid, if by any reason thereof the value of its
aggregate investment in such classes of securities will exceed 10% of its total
assets.
PROSPECTUS A-6
<PAGE> 613
SPONSOR, DISTRIBUTOR AND ADMINISTRATOR
Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
INVESTMENT ADVISER, TRANSFER AND
DIVIDEND DISBURSING AGENT AND
CUSTODIAN
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
LEGAL COUNSEL
Morrison & Foerster LLP
2000 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
FOR MORE INFORMATION ABOUT THE FUND, SIMPLY CALL 1-800-222-8222, OR WRITE:
Stagecoach Funds, Inc.
c/o Stagecoach Shareholder Services
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
STAGECOACH MONEY MARKET FUNDS:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- is NOT FDIC insured
- is NOT deposits or obligations of Wells Fargo Bank
- is NOT guaranteed by Wells Fargo Bank
- involves investment risk, including possible loss of
principal
- seeks to maintain a stable net asset value of $1.00 per [LOGO]
share, however, there can be no assurance that the fund
will meet this goal. Yields will vary with market
conditions.
</TABLE>
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<PAGE> 614
[STAGECOACH FUNDS LOGO]
P.O. Box 7066
San Francisco, CA 94120-7066
STAGECOACH MONEY MARKET FUNDS:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- is NOT FDIC insured
- is NOT deposits or obligations of Wells Fargo Bank
- is NOT guaranteed by Wells Fargo Bank
- involves investment risk, including possible loss of
principal
- seeks to maintain a stable net asset value of $1.00 per [LOGO]
share, however, there can be no assurance that the fund
will meet this goal. Yields will vary with market
conditions.
</TABLE>
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